What to do about merchant sending bogus charges to debt collection?
February 28, 2013 6:51 AM   Subscribe

A local business charged my credit card about $18 eight different times over the last three months without authorization, interspersed with another eight or so legitimate charges. After a month of back and forth over e-mail, they refused to explain, refund or reverse the charges, so I initiated a charge back. They got really angry, and now say they want all the money plus $25 per chargeback or they'll send the debt to collections and make reports to all the credit reporting agencies. What to do?

This was for laundry service, which was scheduled for pick-up and drop off every other week. I was happy with the service for several months. Over the holidays, I sent an e-mail that I wouldn't need service for one of my normal pick-up weeks, but that I would resume service at my next normal week. They acknowledged my request and said it'd be no problem. A week or two later, I noticed a charge for about $18 on the account for that week, which annoyed me, so I went ahead and checked my bill more thoroughly, and noticed that I had actually been charged several times for the "off" weeks, always for the same amount, which is less than the $25-30 they usually charge for my typical laundry load. I e-mailed them a polite request to check their records because I assumed it was some kind of automated billing error, but they brushed me off. I e-mailed several more times with extreme specificity about the dates of the charges, amounts, etc. The only response I could get from them was "we have not and would not make any unauthorized charges to your account". They refused to specify the dates that they did or did not charge, and would not address my point about only getting service every other week but getting charged every week. There was actually a three week period where I was charged four times, so I have no idea why that doesn't seem obviously wrong to them. I suspect that they don't keep any detailed records and just assume I'm making it all up or am crazy. They offered me a $50 "in good faith" even though they claimed there was no error. I accepted but wanted the balance of my charges returned.

So, after about a month of this, I initiated a charge back. I understand that this procedure is generally favorable to the cardholder, and I probably won't have to pay any of those charges. However, they're quite upset now, and say they will send my bill to collections and ding my credit report. I really don't know what my options are. My credit is excellent, and I want it to remain so, but I don't really need to apply for anything credit related for at least the next couple years.

Should I take them to small claims court? Do I wait and just deal with the credit agency? Assuming I haven't made some gross error in understanding what's going on (and I've checked again and again because it doesn't make sense to me why they don't see that the charges are invalid), shouldn't I have a clear case? Will that prevent any damage to my credit score if I can win a claim? It just seems that they could make up any amount of money and send me a bill, then ruin my credit if I don't pay it, that can't be the way it works.

Thanks, this is making me so frustrated and stressed out, I wish it would just go away but I'll be damned if I'm going to cave in and give this company cash for services they didn't provide and reasonably should know that they aren't owed. I'm going to try to talk to a lawyer this week but I can't really afford to spend hundreds of dollars to figure this out.
posted by skewed to Law & Government (14 answers total)
Tell your credit card company about the threats.
posted by zizzle at 6:53 AM on February 28, 2013 [11 favorites]

Have you just emailed them, or have you physically gone into the store and spoke to a manager? Bring the print outs of your credit card statement, with a copy of the emails stating when you did not need the service, and ask them to explain why they don't match up.
posted by billiebee at 6:57 AM on February 28, 2013 [1 favorite]

Definitely send all this information to your credit card company. They will not hold you responsible for these charges.
posted by ThePinkSuperhero at 6:59 AM on February 28, 2013

Response by poster: Just a quick note: I haven't been able to get into contact with the merchants in person, they're just not there during times I can go, or really ever that I've ever seen, I think they work very early mornings. Also, I'm not concerned about the credit card bill at this point, but rather the collections. I know that my cc company won't make me pay.
posted by skewed at 7:01 AM on February 28, 2013

Best answer: I thought this outline for how to address unfair/unexpected debt collections was pretty great. There might even be a way to intelligently apply this strategic verbiage to the merchant themselves. If they can't prove the debt, I don't see what they've got to sell to collections.
posted by juliplease at 7:05 AM on February 28, 2013 [1 favorite]

If they send it to collections, you can request verification of debt. They will have to produce authorization of those charges within 30 days before any "dings" on your credit report.

If you're still concerned, get a mortgage, new credit card, or a car loan now, the 3 most likely things affected by negative credit.
posted by Kruger5 at 7:09 AM on February 28, 2013 [1 favorite]

It is stupid to put yourself in a position where you could get denied for a mortgage over $100. It is stupid to hire a lawyer over $100.

I know you want to win but this is one of those Moby Dick scenarios where going too far only ends up hurting you. Either talk to them and get your money back or pay them and leave a bad review on yelp.
posted by tylerkaraszewski at 7:10 AM on February 28, 2013

Send a certified letter to them stating that you have a legitimate grievance and that if they fraudulently send your dispute to a collections agency that you'll sue them six different ways from Sunday.

What they are doing is just a threat, and it's a shitty one.

Propose that you settle the dispute for the amount you believe you owe. Advise them that you are willing to take it to court for a judge to mediate. At this point, the $100 we're talking about should become small potatoes to them, and they will drop it.

Insist on getting confirmation in writing.
posted by Ruthless Bunny at 7:27 AM on February 28, 2013 [1 favorite]

Best answer: Make a pile of all the threats made in the world to call debt collectors, call a lawyer, sue, etc. Now remove from that gargantuan pile all the ones that will turn into action and pile them in a thimble. Note how much space is still unfilled.

Just keep things in perspective and be calm. At the moment these morons/criminals are simply doing the things that are easy. They run a credit card charge, push back marginally, only stir into action when it might actually cost their bottom line. The odds that they are going to actually engage a debt collection agency are low. Actually report to one of the big three credit reporting agencies, almost zero.

Let's take this in order:

Zeroth: When you say you "initiated a charge-back" do you mean for EVERY charge? If so, that's somewhat inappropriate. It's stupid and annoying that you have to do what should be their job of correctly determining your obligations but if there were legitimate charges then you should be paying them. It's best not to over-reach.

However what's done is done. If these clowns had any sense they'da responded to this by determining the correct charges and providing documentation, after which your CC company would reverse the bad charges and leave the good ones and everyone could go on their way. Seems just as likely these idiots will just claim everything is good and you may have to have further back and forth over it. SO....

One, deal with this fraudulent/erroneous charge pattern.

First, build a timeline. Maybe you did something like this already for the chargeback paperwork your CC company asked for. If not, simply making a list of all the charges so you can easily demonstrate exactly how much of this is crap will be helpful at any stage.

01/02/2013: $18
01/09/2013: $18
01/14/2013: $18

etc. Stick at the header a brief description of your actual business relationship with them. If you have anything of theirs laying out this every-other-week arrangement or a past receipt saying "bi-weekly laundry service" or pickup tickets, whatever, great. Hi-light the inappropriate charges. Summarize the total.

Two, be prepared for the idiots to call you and be a pain in your ass. Unfortunately the FDCPA primarily if not entirely applies to debt collector actions, not original creditors. So if they want to call you daily and demand their (not-deserved) money then that's a harassment matter not a FDCPA actionable thing. You might want to see about how you can block their number. Don't let it get you too wound up; think of it like you would any charity calling to ask you for money: ignore it if it's minor, seek to block if it's aggressive.

Three, be prepared for the unlikely situation where these idiots turn this over to a debt collector. Mostly that involves having the above listing, but the first steps you always take with a debt collector are (1) demand all communication be exclusively in writing (2) request validation. Don't volunteer your listing of appropriate charges, just have it in your back pocket to use to refute if the creditor makes some shit up.

All communication - written, remember? - you do via return receipt requested signature required mail.

Four, if the debt collector DOES report to the CRAs, you contest it. There's a whole dance you do with this. I have stuff linked in my profile and you can find plenty on the internet.

As far as the laundry themselves, I'd wager they are not set up to report to the CRAs themselves. It's just not a minor thing to do and going through the hassle isn't something disorganized clowns like this do. It's not impossible but likely it's just a nonsense claim they throw around to take advantage of the fact that people worry about their credit score. Which, unless you're planning on getting a mortgage in the next few years, you need not do. A bad score is meaningless unless someone is extending you credit based on it, and a single collections item like this isn't that significant.

Get your free annual report and keep an eye on fraudulent junk but otherwise don't let crap like this worry you. There's a process for removing bad items. It can take a few months so you don't want to be starting it down right before a mortgage loan/refinance but it's not something you have to worry about on a constant basis.
posted by phearlez at 8:03 AM on February 28, 2013 [2 favorites]

Response by poster: Another clarification: I did chargebacks for 8 invalid charges, and not for the 8 or so valid charges. Since I already have the money from the chargebacks off my credit card and presumably that will be upheld, they basically owe me nothing. I would love to have them pay me for my time and anguish, or to punish them for their negligent/dishonest practices, but I'd rather have it all end at this point. The problem is that they say that I owe them around $200-300 (hasn't been completely clear yet). I've asked to speak to them in person, on the phone, but can't. I'll send future inquiries by registered mail. So their next step is either send to collections or just shut up I guess.
posted by skewed at 8:58 AM on February 28, 2013

I'll try to do some Googling later for confirming links (though I make no promises), but this is a classic scam usually perpetrated against restaurants and other small businesses which use laundry services, and often involving organized crime-- and I would say the anger you encountered is a bit of a tipoff that organized crime could be a factor here.

Contact the state attorney general.
posted by jamjam at 9:06 AM on February 28, 2013

Threatening your credit rather than making a good faith effort to justify their billing is a sign that you need to stand your ground. Everything I am about to say has been said by others, but I think this is a good summation of the steps you should be taking:

Contact your bank/credit card company to ensure that you are doing everything properly, contact the Better Business Bureau about this behavior (if it is a scam, you are likely not the only one it is happening to), and if it isn't resolved quickly and fairly, your state's Attorney General's office is the best place to go.
posted by 1367 at 9:36 AM on February 28, 2013 [1 favorite]

Response by poster: oh, it turns out they have 7 complaints with the BBB and a C- rating, which seems like a lot, even the local car dealerships around here only had 1-2 complaints. Thanks everyone for this suggestion, I didn't really know BBB did that sort of thing.
posted by skewed at 12:56 PM on February 28, 2013

Also, depending on your state, there may be consumer protection laws that could apply to your situation even if the Federal laws regarding debt collection and credit reporting will not (yet). Which is why your state AG (or consumer affairs office/agency) is a possible resource.
posted by snuffleupagus at 9:31 AM on March 1, 2013

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