using my account to pay friend's debt

November 29, 2007 4:07 PM

using my checking accountt to settle a friend's delinquent bank fees, bad idea?

Hi everyone, a close friend of mine, whose finances are troubled at best, has worked out a deal with her creditor to settle a bunch of bank fees (overdrafts mostly) for $600. She formerly owed $1k. This account has been sold to another company, some collections firm that buys these up and hopes to reel in as much of the dough as possible, so it is not her local bank anymore. Anyway, they say they'll take $600 on the $1000 in fees (and then she'll be all squared up), if it is paid using an active checking account. She does not have a checking account (bad credit) but has $600 cash in hand, and will give it to me right away. But to pay the balance off she would need to use my checking account. I am not at all concerned that she would use my checking account info to steal from me or anything like that, but I guess my main concern is whether or not the debt collection firm would somehow either begin pestering me about something, or somehow take more from my checking account once they have my info. I'm happy to help her, and since she's giving me the cash, it's no big deal at all, but I'm mostly wondering if there's any risks in this for me....Thanks!

posted by Salvatorparadise to Work & Money (31 answers total)

use the cash to buy a cashier's check from your bank and send that to the collections agency. no one gets access to your account number or even your name. hurray!
posted by lia at 4:11 PM on November 29, 2007 [1 favorite]

Bad Idea. Don't ever give a collection agency access to a live account unless you intend to close it.

Some of them may be ethical, but never the ones I've dealt with.
posted by Megafly at 4:13 PM on November 29, 2007

Yeah, this sounds like bad news. She can just get a money order from the post office or western union or a bank check as lia suggests. I don't understand this requirement for an active checking account at all.
posted by otio at 4:14 PM on November 29, 2007

I'm not sure about what the creditor could do in terms of harassing you--some of the debt-collection agencies seem slimy at best, so I think you're right to be worried--but I think she should definitely ask them if they will accept a cashier's check or money order.

If they won't accept either, I'd be very suspicious of what the debt-collection agency wanted an active checking account for. It's a higher risk to them to accept a check rather than a money order/cashier's check, so I'd suspect nefarious motives.

In short: if it were me, I wouldn't do it. I'd try to get the company's offer in writing, as well as any refusal to accept cash, money order or cashier's check. (As far as I'm aware, companies can't actually refuse payment in cash--but IANAL, that's just my layman's understanding.)
posted by iminurmefi at 4:14 PM on November 29, 2007

Response by poster: hi folks - yes, i think what they'd like is acct + routing number

which basically gives them access to my account for whatever they want!!!
posted by Salvatorparadise at 4:15 PM on November 29, 2007

Don't do it. There has to be another method of electronic transfer.
posted by jerseygirl at 4:18 PM on November 29, 2007

Don't do it! They're trying to trick her into giving a good checking account's routing number and account number, so they can just take the whole amount.

Your friend should tell the collection agency that she is exercising her legal right to restrict them to contacting her exclusively in writing.
posted by evariste at 4:27 PM on November 29, 2007

There is no reason a settlement can't be done with a money order if it is legitimate. I'd say no and let her deal with her own problems. Seriously, it sounds fishy and she doesn't sound very responsible so let her figure out her own way out of that mess in a way that doesn't impact your checking account.
posted by 45moore45 at 4:37 PM on November 29, 2007

Nonsense. She can send the money Western Union. That's how most collection agencies prefer it, because it's instant and there's no way they can be screwed.
posted by padraigin at 4:39 PM on November 29, 2007

I am not a lawyer, accountant, or professional with training specifically relevant to this situation.

I could be way off, but I assume what they're trying to say is just that she can't use the checking account she owes charges on to pay them, i.e. it has to be someone else's, who isn't delinquent in overdraft fees. Also, I don't think they have much right to restrict what kind of payment you give them. She already owes them money, if she makes a bona fide effort to pay them, they can't turn her down without good reason. It would have to be something like not accepting some obscure credit card.
posted by gauchodaspampas at 5:02 PM on November 29, 2007

Actually, I take it back. Since they're saying she can pay $600 instead of the full $1000 she owes, I suppose they can say they'll only accept some specific form of payment for that deal. I also agree she should tell them only to contact her in writing, and if she talks on the phone with them, record it herself.
posted by gauchodaspampas at 5:05 PM on November 29, 2007

She could open a checking account... you don't need good credit to open a checking account... a checking account isn't a credit account...
posted by HuronBob at 5:16 PM on November 29, 2007

She could open a checking account... you don't need good credit to open a checking account... a checking account isn't a credit account...

This is not true. If you've burned a bank in the past, they'll put you in ChexSystems, and no other bank will touch you. When you try to open a new checking account, they'll check with ChexSystems and then tell you they can't let you open an account.
posted by evariste at 5:21 PM on November 29, 2007

And ironically, once she pays it off, she will likely get out of the Chexsystem's data base sooner.
posted by Monday at 5:33 PM on November 29, 2007

once she pays it off, she will likely get out of the Chexsystem's data base sooner.

That's not true either. You stay in ChexSystems for 5 years, rounding up to the next month. If you pay it off before the 5 years are up, that doesn't erase the entry. It just adds that it was paid. Many banks will still refuse to let you open an account. Others will only if it was more than two years ago.

It's like credit: if you screw a creditor and then finally pay them, that doesn't make the bad stuff on your credit report go away. Anyway, after 5 years it will drop off completely. Just like any other credit report, you're entitled to obtain a copy of your ChexSystems report if you're curious what's in it. You can order a copy here.
posted by evariste at 5:41 PM on November 29, 2007

Unlike a credit report, ChexSystems only contains bad stuff.

Anyway, to the original poster: this is a very bad idea. The collection agency is trying to pull a fast one on your friend, and on you. You will be fucked if you go along with this, and you will regret it. Furthermore, it sounds like your friend isn't very good with money, so if she ends up causing a thousand dollars to be taken out of your bank account and can't pay it back, it might put a strain on your friendship. Best not to go that route at all.

Furthermore: the collection agency probably bought your friend's debt for pennies on the dollar. $600 is way too much. Offer them $250. Even at that, they're likely making a large profit. They can actually get the whole thing if they want, but they have to sue your friend to do it, and garnish her wages. This is expensive. It certainly isn't worth it for such a trifling small debt. Take advantage of this knowledge, and make them an offer that makes more sense. $250 is plenty. Do you know they probably bought your friend's debt from the bank for $70-100? Why in the hell should she pay $600? Fuck that!

And let me re-emphasize that she should only allow them to communicate with her in writing from now on. If she gives them a chance to get on the phone with her, guilt her, bully her, harass her, play with her emotions and manipulate her, she won't obtain the optimum results.
posted by evariste at 5:47 PM on November 29, 2007 [1 favorite]

There are a million stories about shady collection agencies -- I nth "don't do it."
posted by salvia at 5:51 PM on November 29, 2007

Have your friend read this.
posted by evariste at 5:58 PM on November 29, 2007

They're trying to trick her into giving a good checking account's routing number and account number, so they can just take the whole amount.

This is totally illegal, of course.

if she ends up causing a thousand dollars to be taken out of your bank account and can't pay it back, it might put a strain on your friendship

That won't happen, of course, because she won't have to pay it back—the collection agency will. If there's a withdrawal you didn't authorize, you mark it as unauthorized or fraudulent, your bank bounces it, and the collection agency gets only the amount of the check you wrote them. If they alter your check or continue to attempt to fraudulently withdraw money from your account, you shut them down or put them in jail (which, if they do this, they rightly deserve).
posted by oaf at 6:08 PM on November 29, 2007

I apologize for my incorrect information...thanks for the correction folks.. I wasn't aware of that..
posted by HuronBob at 6:57 PM on November 29, 2007

Is there any way *you* could set up a separate checking account, put her $600 in it, give the collection agency that account number, and then never use the account again?
posted by Lucinda at 7:19 PM on November 29, 2007

Is there any way *you* could set up a separate checking account, put her $600 in it, give the collection agency that account number, and then never use the account again?

I thought of this too, since it takes like 5 minutes to setup a checking account. But if they scam for extra money, he could end up facing OD charges.
posted by Tacos Are Pretty Great at 7:26 PM on November 29, 2007

I can think of no good reason why they would want an "active checking account" over a cashier's check or western union. Nor why they would make that a condition, by definition if she is OD on her checking account she can't get a checking account and will have to get someone else's, this just screams scam to me. Don't do it and maybe call up the Better Business Bureau to see if there are any complaints against the collection agency. Maybe also call up your bank and ask them if this is common practice for a collections agency, I bet you anything it isn't.
posted by whoaali at 7:47 PM on November 29, 2007

But if they scam for extra money, he could end up facing OD charges.

Not if the debits were never authorized.
posted by oaf at 7:49 PM on November 29, 2007

Response by poster: oaf - obviously, in a best case scenario and in the long run i'm sure any illegal and unauthorized debits could be rectified with no long term damage to my finances or credit rating....

but the short term effect would be a nerve wracking pain in the ass!
posted by Salvatorparadise at 8:32 PM on November 29, 2007

I guess it depends on how much you hate them. I'd be willing to set up a new account and then watch them twist in the wind if they tried any unauthorized debits or messed up my credit report (the latter gets you $1000 every time they do it), but I probably have an unfounded dislike for unscrupulous collection agencies.
posted by oaf at 4:22 AM on November 30, 2007

This is highly suspect. There's no valid reason for an organization to insist on a checking account number rather than a cashier's check or money order.

oaf's faith in the legal system is admirable but he's wrong in his implication that you need to authorize bank transfers. A disreputable company - of which there are, sadly, many in the collections world - can use a routing and account number to empty your account.

You can likely eventually get this resolved, but really, how much consolation is that while you're without the money? The above linked article states the bank has 10 days after notification to to return your cash. Ask yourself how inconvenient - or outright catastrophic - it would be if every penny in your checking account disappeared for ten days? If all your automatic payments and any checking outstanding were to bounce between now and then?

Being eventually right is not as good as avoiding trouble entirely.

If you want to do this favor for your friend and there's no other way - though evarite is right * that this may be a monumental overpayment, considering - then go open a whole new checking account somewhere else if s/he can't. That's still not entirely without risk but at least you won't co-mingle your funds.

* Your friend NEEDS to get an iron-clad statement from them indicating that this payment will accomplish forgiveness of the remainder of the debt. It's not unheard of for these organizations to agree to take the money and not attempt to collect further... then sell the remainder of the debt to another agency for pennies on the dollar. Which, considering they paid between 0.5 and 5% of the face value, is a pretty sweet deal for them.

Unfortunately telling them to FOAD at this point may not be very doable if s/he has acknowledged the validity of the debt or made any partial or "good faith" payments. Before s/he completes the deal s/he should investigate the possibility that the statute of limitations has passed.

some of my past posts on the issue are linked in my profile.
posted by phearlez at 8:18 AM on November 30, 2007

A disreputable company - of which there are, sadly, many in the collections world - can use a routing and account number to empty your account.

If you can open an account solely for the purpose of writing this check, and put only the amount of the check in it, you're golden, then.

That article is...well, something. It mentions that checking numbers are often printed on checks. They always are if you want them to be accepted by most people and most banks.

Let's see here—if the account number is used to initiate a wire transfer, it can be traced back to the only other people who know the number, and they have a U.S. address, to which the check would have been mailed. If it's used to initiate an ACH transfer, you simply call up the bank and have them bounce the transfer. You have two months to do this.
posted by oaf at 3:40 PM on November 30, 2007

There's no reason the collector would insist on a bank account, unless they were trying to pull a scam. Don't do it.

Tell your friend to get a copy of her credit report. Find the date the item(s) were reported, and if it's 7+ years, tell the collector to FOAD. Beware of shady tricks like re-reporting the same item to illegally re-start the 7 years.

Your friend should send them a validation letter, first.
posted by Mr. Gunn at 12:09 PM on December 1, 2007

The seven year reporting period is NOT a basis for determining if you should tell the collector to piss off. Statute of limitations and the 7 year reporting limit have NOTHING TO DO WITH EACH OTHER.

It is entirely possible to have a debt that is past the reporting period which is still within statute and which you can be sued for. It is possible to be past statute and reporting still be possible, and, in fact, that's true in more states than not (when speaking of revolving credit - other types of loans have different SoL periods).

Places like debtorboards.com are a better place for concrete answers for exactly how to proceed on matter like that. AskMe is full of people who have no idea what they're talking about with regards to credit and even less awareness of how wrong they are.
posted by phearlez at 6:33 AM on December 3, 2007

phearlez, you've been around long enough to know that askers often don't give nearly enough info to do anything else than make a broad generalization. The OP wasn't talking about revolving debt, and we don't know the state, so as a broad generalization, my advice isn't that bad. It is true that an item generally can only be reported for 7 years, so your score won't get any worse if you tell them to FOAD.

I shouldn't have to mention that there are exceptions(wouldn't be a generalization otherwise), nor should I have to mention that no one should get their legal advice from anonymous internet strangers.

BTW, that's the advice they were giving out on debtorboards a couple years ago.
posted by Mr. Gunn at 9:50 PM on December 3, 2007