Arrow Financial Services ripoff-Collection Agency Niles Illinois

This was published on MSN Money 3/11/04.

There's a hot new growth industry: companies that buy bad debts for pennies and squeeze you to pay in flagrant violation of federal law. Here's how to get them off your back... Lets say Debbie made a mistake when she was in college. As a student in Forth Worth Texas, she maxed out a Citibank credit card with a $300 limit and never paid the bill. Debbie said Citibank charged off the debt sometime between 1987 and 1989, and the liability has long since disappeared from her credit report.

Besides that, the statue of limitations -- the amount of time a creditor can sue over an old debt -- expired in the early 1990's. Both her old home state of Texas and her current state of California generally prohibt creditors from suing once a debt is more than 4 years old.

That's why she was stunned when a collection agency called her last summer, demanding she pay the 17-year-old bill. The calls have continued off and on since then, along with monthly bills listing varying amounts that the collection agency wants her to pay.

"The last time [they called], I told them the statue of limitations had run out on the debt and to stop harrassing me," Debbie said. "They said it hadn't. I finally had to hang up on the man."

There's Money In Old Debt !!
A decage ago, most poeple who reneged on debts could rest easy after several years passed, since few creditors tried to collect on old bills, in particularly for small amounts.

Today, however, collections on old debts is a rapidly expanding industry. Aggressive companies can buy charged-off credit card accounts from the original lenders for pennies on the dollar. Then, they use credit scoring and other new technologies to identify which debtors are most likely to pay. The players in this "junk debt" market range from fly-by-night outfits to well-established companies funded by Wall Street Investors.

It's a business that barely existed 10 years ago. In the last 3 years, it's been growing at a 30% annual rate, according to credit industry analyst Sean McVity of Keefe, Bruyette & Woods. Among the signs of the industry's maturity:

Four debt-buying companies have gone public in recent years including Asset Acceptance of Warren, Michigan., which had its $150 million IPO in February. Some buyers have attracted major funding from investment banks such as Bear Stearns and Goldman Sachs. Last year, more than $75 billion in old debts were sold.

The biggest debt buyers are: Sherman Financial Croup, Risk Management Aalternatives, Arrow Financial Services, Asset Acceptance, OSI Portfolio Services.

The amount that companies pay for bad debt depends on the type of account and its age. Debts that have recently been charged off: 6-7 cents on the dollar. Accoutns that are slightly older and on which a collection agency or two has already taken a whack: 1.5 - 2 cents on the dollar. Years-old, out-of-statue debts: A penny or less.

A growing number of companies are discovering that these very old accounts, once thought to be uncollectable, are just the opposite. Squeezing even a small payment from these debts can make collection activities worthwhile.

Opportunity Frequently turns into abuse ! "I don't advocate people not paying their bills," said Shreveport, La., Lawyer David Szwak, who specializes in consumer law. "But there's an element of the debt collections field that is rabid." Some collectors, he said, "will go to any lengths to harass people and defraud them."

Suing or threatening to sue over debts even though the statue of limitations has long expired. Illegally "re-aging" debts on credit reports. The collections tell credit bureaus that an old debt is, in fact, a new one. The goal, to extend the 7-year limit on reporting negative items and put more pressure on the consumer. Promising to delete a negative mark from the consumer's credit report in exchange for a token payment. Not only does the collector fail to follow through, but the payment can REVIVE the status of limitations and lead to a lawsuit. Even if the collector does back off, the unpaid debt could be sold to another company that might renew collection activity. Bait and switch credit cards. Some credit card companies have offered borrowers low-rate credit cards and then tacked old, charged off debts -- often purchased from other lenders--onto the balance. The card issuers typically insist they disclose that the old debts would come with the cards, Szwak said, but the borrowers say no such disclosure was made. Verbally abusing and harassing consumers. My readers have reported being cursed, berated and called repeatedly despite requests to stop -- ALL VIOLATIONS OF FEDERAL LAWS !!!

This report goes on and on. However -----
Sometimes, it's smarter just to hang up....... Consumer advocates say this is exactly the kind of behavior Congress and Sate lawmakers were trying to prevent when they put curbs on collection behaviors such as statues of limitations, the seven-year credit reporting limit and prohibitions against abusive collection practices. "We don't have debtors' prisions," Szwak sais. "We have laws to protect people from being harassed by debt collectors for the rest of their lives." In fact paying these old debts --- or even TALKING TO THE COLLECTION AGENCY ABOUT THEN -- CAN MAKE A BAD SITUATION WORSE !!! As mentioned above, the smallest payment can revive the statue of limitations in some states, leading to more aggressive collections and lawsuits. Even ACKNOWLEDGING that the debt is yours can RESTART THE CLOCK IN SOME JURISDICTIONS!

Paying off can hurt youer credit score.... What's more, paying an old debt potentially can wreak havoc on a consumer's credit score, as I discussed in "When paying bills can hurt your credit." Such a payment can update a delinquency so that it looks more recent and takes a heavier tol on a credit score. Paying the debt is also no guarantee that the nightmare will stop. The collector may decide that if you're willing to pay at all, you could be made to pay more. Settling a debt for a smaller amount than the collectors says you owe could result in another agency trying to collect the unpaid portion.

So, I hope this information is helpful to you. This article went on for an additional 2 pages in what to do and not to do with credit bureaus and collection companies......

Just giving you a heads up on Arrow Financial Services....... Beware........