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#559343 - 05/27/06 07:50 PM Showing Paid on Accts with balances/fees
MikeD Offline
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Joined: Jul 2004
Posts: 30
Los Angeles
I don't know whether to ask this one on the Lending Compliance thread or here, but I'll try here. I work for a finance company that purchases (motor vehicle) conditional sale contracts on subprime consumers. As such, we frequently come to the end of a contract with late fees or some other small amount still owing. Because of this, we get complaints about derogatory credit reporting on these kinds of balances. Many companies simply waive a balance under a certain amount. I have two similar type questions:

1. If we report an account as PAID on the bureaus, is it then mandatory that we close the account internally and forgive any balances? I mean, suppose we had a $10,000 loan which now has a $50 balance remaining, and rather than show the account as a charge off, we show the account as paid, but internally we still have a $50 balance which must be paid before closing the account and releasing title. Can we do that, or must we send the title simply by virtue of having reported the account as paid to the bureau?

2. Same question, but this time let's say the principal balance is $0 but there are late/NSF fees owing. In this case, the contract amount is satisfied.

I know this is a sticky issue. Thanks for your response.

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#559344 - 05/28/06 01:40 PM Re: Showing Paid on Accts with balances/fees
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 79,935
Galveston, TX
I don't think that it is sticky at all. Your loan is not paid until all amounts owed under the contract are paid to you.

However, with that said, most banks waive a nominal amount of these fees ($100) as collection is more trouble than it's worth.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#559345 - 05/31/06 04:39 PM Re: Showing Paid on Accts with balances/fees
MikeD Offline
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Joined: Jul 2004
Posts: 30
Los Angeles
I guess my question is that if I report an unpaid loan as paid to the bureau (using the $100 example), but don't send title, then Mr. Consumer says that the fact I reported PAID on the bureau is evidence in and of itself that the loan is paid, and therefore I must give up any/all other rights, is Mr. Consumer right?

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#559346 - 06/01/06 12:13 AM Re: Showing Paid on Accts with balances/fees
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 79,935
Galveston, TX
I would have to say that they have a claim that you made an erroneous report to the credit bureau and they could dispute that accuracy - at which time you could change it to reflect the loan not paid and past due. The report to the credit bureau does not rise to the level of the satisfaction of a legal contract.

My question to you would be why would you ever report a loan paid and still be trying to collect money in the first place???
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#559347 - 06/02/06 07:40 PM Re: Showing Paid on Accts with balances/fees
MikeD Offline
Junior Member
Joined: Jul 2004
Posts: 30
Los Angeles
Well, we're not really trying to collect it, but I prefer not to just (in an auto loan) send the title out. We deal with a rather contentious group of clients, and I'd like to eliminate some issues. For example, many cannot (don't want to?) understand why they made 36 payments on a 36 month contract and still have principal balance remaining (because they paid late so consistently and additional interest accrued beyond the estimate). Well, our folks, by and large, aren't so sophisticated as to read the contract. When they do, then I get complaints as to why the finance charge on the contract is not equal to the APR times the amount financed.

Whatever it is, they want to file disputes with the bureus and/or file a suit and/or complain to everyone else in the world, and it's such an expense to deal with, that I'd just as soon give points for coming reasonably close to the target (this is subprime, after all), and close the account on the bureau. But I'd like to hold on to the balance...if they want their title, they can pay the balance, if not, then not.

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#559348 - 06/03/06 03:18 AM Re: Showing Paid on Accts with balances/fees
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 79,935
Galveston, TX
If your margins are that close in the subprime market - then you have some real problems. Is the hundred bucks here and there really worth all the trouble? It's a cost benefit analysis. When I managed a non-subprime operation we really never sweated this small change. It was never worth the hassle. After one or two tries for the difference we just released the title, reported it paid and released the title.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#559349 - 06/05/06 04:01 PM Re: Showing Paid on Accts with balances/fees
MikeD Offline
Junior Member
Joined: Jul 2004
Posts: 30
Los Angeles
I think you're right. If I don't care enough about an account to report it, then I should let it go. Thanks for clearing my head on this.

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