Served a summons by credit card company

[semerick]

What is the name of your state?What is the name of your state? TN

I joined a credit settlement service named Credit Solutions of America in January 2004. This was to settle existing credit card debt due to illness. I'm now on Social Security. I received a letter from a law firm in April stating they were representing one of the credit cards turned over to CSA. Upon receiving the letter, I faxed it to CSA and they faxed a Power of Attorney and Cease and Desist to the law firm. This law firm has ignored both of these documents by bringing a civil action against me in county court. I was served with a summons this past weekend.

Is the law firm breaking any laws by ignoring the Power of Attorney and Cease and Desist sent by CSA?

The law firm filed the suit in the county next to where we live. Can we be sued outside our county of residence?

I know we can file for exemptions to protect ourselves. But is there anything else I should be doing? I already sent this information to CSA, but I'm not sure yet what they'll do.

Thanks!

 

[olgethorpe]

No...

First, almost all "credit settlement services" are a scam. None of them do anything you can't do yourself, and most of them just take your money and do nothing.

Second, the lawyer suing you does not have to abide by the power of attorney and the C&D letter. The fact that they have brought suit leads me to suspect that your "settlement service" isn't really doing anything to help you. If its one of those that advises "just stop making payments, and we'll take care of it"...you're definitely being scammed. At most, the C&D letter would only prohibit the collection agency from calling you...not from continuing their collection efforts and even taking you to court.

Third, yes, according to the Fair Debt Collection Practices Act (FDCPA) the lawyer should have brought suit in the county in which you live. You may be able to delay their actions by filing a counter-claim based on the FDCPA.

You'll find a lot of useful information on how to deal with Collection Agencies atL

www.creditboards.com
www.creditinfocenter.com

Good luck...

 

[semerick]

Thanks for your response.

Actually, we've been very happy with Credit Solutions of America. They have a website, www.cs-america.com. They have successfully settled two of our accounts so far for approximately 40% of the original balance. They handled all correspondence for us, and even though they do charge quite a high fee, we've already made up for it with the first two settlements. We still have others to settle, and if they also settle between 40 and 50 percent, we will save a fair sum of money.

This is not something I would recommend for anyone just wishing to get out of debt, however. You have to give the credit card companies a good reason for not being able to fulfill your responsibility to pay them back and convince them to accept a lesser amount. I am disabled and now on Social Security. My income dropped over 80% in a matter of a year. With that kind of situation, the credit card companies are willing to talk to you about settlement.

Since sending my note, I've heard from the CSA litigation Dept. Rep. who will be handling our case. (I didn't even know we had a litigation rep. until now... that must have been in the fine print.) I'll be sure to pass along the info concerning the county the suit is filed in.

Again, thanks for your suggestions and for the Internet links.

 

[olgethorpe]

Just in case...

Paranoid that I am, I would suggest you...personally...get copies of your credit reports just to see how those "settled" accounts are being reported. Don't depend on Credit Solutions to give you the straight story. I'll be delighted for you if I'm wrong, but you do need to personally make sure that these creditors have been taken care of, and not just appeased for the moment.

 

[semerick]

Thanks! I appreiciate a little paranoia now and then and now is probably a good time. I just got an email from CSA's litigation dept. today saying they'll be talking to me on 11/8/04...only 10 days before our hearing date. I responded saying I hope this was a typo because 11/8/04 is a little late to be discussing options.

The good news is on the settled accounts, we have letters from both companies stating these accounts are settled. I have even spoken the the AMEX rep. to confirm it's a done deal. However, I do think CSA makes it sound a whole lot easier than it really is when it comes to getting this information off your credit report. CSA also never mentioned the possibility of being sued or the number of collection agencies we would be bombarded with. So there's also the issue of getting the collection agency entries off our credit report.

They make it sound easy, but I'm sure even if we settle all these accounts successfully, our credit report will be trashed for many years to come and not all resolved as easily as they say. Makes you wonder if bankruptcy isn't a better option?

 

[olgethorpe]

Bells going off..

Okay, now see that's where the bells start going off in my head. AMEX is particularly nasty when it comes to collections. They may have settled for less than the full amount you owed, but...

You will be getting a 1099 for the amount of the debt they wrote off...you'll have to pay income taxes on that. They may also turn around and sell the balance to one of the bottom feeder collection agencies who will continue to hound you for the rest of the money EVEN THOUGH AMEX SAYS YOU ARE PAID IN FULL. Also, you should not have received any calls from collection agencies if Credit Solutions was truly helping you...those calls should have gone to them.

The "Credit Fixers" only work if ALL your creditors participate. It only takes one to force you into court...perhaps bankruptcy is still on the horizon.

Will Credit Solutions charge you more for having their lawyer represent you? Are there any other hidden charges?

 

[olgethorpe]

Whoops..

I just did a google search on "Credit Solutions of America" and found a reference to them at:

http://www.creditinfocenter.com/debt/DebtConsolCompanies.shtml

I've come to trust the advice at creditinfocenter, so I'd be concerned that CSA is on their "do not use" list...

 

[Ladynred]

About that 1099 - all of the creditors you settle with could send you a 1099, and that 'forgiven' debt would be taxable income UNLESS you can prove you were insolvent at the time, then it would NOT be taxable at all.

As for 'settled for less than full amount' on your credit report - its a BIG negative and will trash your scores. Sorry to say that paying this way doesn't help you, it actually hurts your credit. Disputing the collections off is NOT going to be easy. Check out www.creditboards.com for info on what its going to take.

 

[semerick]

Thanks for all the info and the website links. I really wish we had asked these questions on this site back when we were considering signing up with Credit Solutions of America.

As for fielding phone calls, CSA did provide us with their hotline number to give to any creditors who called here. Although I have to say, many creditors complained to us they had not heard back from them. It also seemed like the creditors were not receiving the Power of Attorney or Cease and Desist like they were supposed to. Our CSA Rep. kept saying we've sent it to them, but we'll request it be sent again. We, of course, had no way of knowing if it was actually being sent or not. We were told by CSA this is just the way it works...creditors will keep after you and all you can do is file a complaint with the FTC. We did that for one account but we never heard from anyone.

I posed the questions concerning a 1099 and other credit collection agencies to my CSA rep., but I've heard nothing so far. We were definitely insolvent at the time. I was without an income for a year and a half after my long term disability company, MetLife and my employer, IBM, terminated by disability benefits. I was later approved for Social Security disability which is what I receive now. Do you think I'll be considered insolvent at the time?

One of CSA's sales pitches was that once an account is settled, it can be removed from your credit report and then your scores will start to go up again. We're they totally lying to us? If so, I really don't know what to do at this point. Any further suggestions would really be appreciated

 

[Ladynred]

Its not impossible to get tradelines off your credit report, but its not a walk in the park either, don't let them tell you it is either. A lot of these places literally spam the credit bureaus with disputes and some they do get deleted, but do it too often and the credit bureaus will 1 - accuse you of using a credit repair organization, and 2 - refuse to investigate by deeming the multiple disputes as frivolous and 'previously investigated'.

 

[semerick]

I called both companies we settled with, American Express and Chase, to ask if I will receive a 1099 and how my account will be reported to the credit bureaus. I also asked if any part of the remaining balance would be turned over to any other collection agency.

The answer was yes, I will receive a 1099 this year which is really bad news since I'm on social security. Both Amex and Chase said the account will be reported as a zero balance and paid satisfactorily and no other credit collection agency will be calling us.

The fact we get 1099's is probably in fine print somewhere in the Credit Solutions agreement and something they don't readily discuss. I guess I'll be calling a tax attorney next. I sent email and called CSA, but no response as of yet. In the meantime, I'm going now to read the CSA contract again to see what else I might have missed.

Thanks again for your input. It's helped tremendously.

 

[olgethorpe]

1099

The 1099 thing is actually part of the IRS Tax Code, and I would bet that CSA neglected to mention anything about that in your agreement.

And...are any of the collections agencies that are calling you, calling about the AMEX or Chase accounts? Unless the letters you received from them specifically state that no further collections will be attempted, I wouldn't be surprised if you hear from them again.

You can't trust anything a CC or CA tells you over the phone. Unless its in writing (or you've recorded the conversation) they'll just claim they never said that.

 

[semerick]

You're right...there is no mention of 1099's in any of the Credit Solutions documentation. They do have a disclaimer, however, which states "Client expressly acknowledges that CSA does not provide investment, tax or legal advice of any kind. If client needs legal advice, legal expertise or court filings, client should seek the adivce of an attorney." So much for help with the law suit from Citibank.

In the CSA Frequently Asked Questions documentation they state, "Law suits are far less common in debt matters than what most people think. Some people may fall behind and not make payments to their creditors for years, and never hear from a single attorney. Of course the bank has the right to sue you to recover their money. Generally, however, if you keep up dialogue with the bank through our settlement teams, the banks would much prefer to work out a solution rather than sue."

Some sales pitch, huh? I wonder if Citibank knows this. Can not mentioning the 1099's or leading people to believe banks don't sue be considered misrepresentation? They've really messed us up with the IRS this year not to mention cost us probably a lot of money in legal fees. Thanks!

 

[semerick]

Good news... I heard from the CSA Rep. today who said that I should qualify as insolvent and is working to get together the paperwork I will need to this. That should take care of the 1099's. She said they don't publicize this because not all companies send a 1099. They deal on a case by case basis.

As for the lawsuit, I spoke to the someone from the CSA litigation dept. who said Citibank sues everyone as a scare tactic. She said we should be able to settle before it gets as to the point of having a judgement filed against us. However, in the meantime, I need to file for a change of venue to correct the problem with being filed in the wrong county. In addition, CSA will prepare an answer to the summons for me to present the day I appear in court. She answered all my questions which so far alleviates the need for an attorney.

And she also told me that there was another Credit Solutions that had a bad reputation, but this is not the same company. This Credit Solutions is based in Texas. I'm not sure where the other one was.

Overall, now that my concerns have been answered, it's still not a bad experience. I will probably pay about 50% of my original debt even with the fees. How the credit report turns out remains to be seen, but American Express did say that will report a zero balance and paid satisfactorily so hopefully the others will do the same.

Thanks again to all who provided us with information and advice.

 

[jas5257]

Would you recommend CSA? I signed up with them as well and recently received an arbitration claim from my credit card company, which kind of freaked me out. My rep told me they usually advise not to respond to arbitration because either way I will get an award against me. She said they can then only make you pay the award if you get a judgment against you, which they aren't likely to do. She said it's mostly a scare tactic. Now, I'm wondering if I should just stick it out with them or try and pay the full amounts on my own. She said if I get a judgment on me it would stay on my record for 7 years. Once I get these settled, are they likely to affect my record that long anyway? I thought I did the research before I joined, but now I'm starting to get nervous, especially after reading the advice on here.

Thanks!