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Alexia Esq.
Alexia Esq., Managing Attorney
Category: Legal
Satisfied Customers: 11714
Experience:  19 Years of Legal Practice Experience in this precise field.
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For ten years my thirty-year-old daughter has been trying to

Customer Question

For ten years my thirty-year-old daughter has been trying to pay off a debt which she has been managing online related to overdrafts. The interest is 35% on the US reserve line. Recently she stopped seeing the debt on her bank balance and ask about it. After a month and a half of phone calls to the bank, she was finally told she had to pay off the debt by July 31st even if she had to take out a loan with a lower interest rate. She has to pay $6,951.70 to US Bank Reserve line by July 1st. Please give us your best advice.

Our daughter is a hard worker and this debt is ruining her credit. My husband and I want to help her, but we can't come up with seven thousand dollars. Please, help us to figure out what to do?
Submitted: 1 year ago.
Category: Legal
Expert:  Alexia Esq. replied 1 year ago.
Hi, my name is XXXXX XXXXX I thank you for your inquiry. I have been practicing law for 19+ years and look forward to assisting you.

What is the banks name, who does she write the checks to, and what address does she send the checks to?
Customer: replied 1 year ago.

Here is the message from my daughter:


 


Hi Mummy,













After a month and half, I still never received the bill in full or a call letting me know that was not possible. I am finally on the phone with a manager at US Bank who is giving me the following instructions to be able to pay this off in full.

Pay off US Bank Reserve line

This pay off amount is good until July 31

Total amount

$6,951.70

Write check to "US Bank"

In memo portion of check, reference Acct # XXXXX

Check should be made for $6,951.70


The address to send check to:

Attention: US Bank Reserve Line Payment

PO Box 790288

St. Louis, MO 63179

Manager contact at US Bank who has service and access to this account and we can call her directly to check status once check is mailed and make sure we get this closed out.

Danita

XXX-XXX-XXXX

Alexia, I telephone Danita four hours ago and left a voice message. She has not returned my call. If she does, can I

try to negotiate with her? What do I do?








Expert:  Alexia Esq. replied 1 year ago.
How much did your daughter borrow?
And what interest rate did she agree to pay?
Customer: replied 1 year ago.

She didn't intentionally borrow any money. This is a debt that occurred from overdraft fees with an interest rate of 35% over a period of ten years.


 


She did not agree to any interest rate. When she signed up for her first bank account ten years ago she inadvertently signed up for overdraft protection. She didn't understand that it became a quickly escalating debt because of the 35% interest rate.

Expert:  Alexia Esq. replied 1 year ago.
Good morning! It sounds like what they did was give her the bank account, and then, a revolving credit account (like a credit card without the card) that would allow her to "cover" her mistake everytime she wrote a check when there was not enough money in the account to cover it. That offer of an overdraft revolving loan/credit account MUST come with terms as to interest rate - she may not have read it but agreed anyway, OR, they really didn't have her sign anything giving her notice, and THAT is what we need to hope for. But, in terms of blaming the high interest rate for the current debt load - it really sounds like she didn't treat it as an overdraft protection - rather, we mistakenly incurr an overdraft (i.e. our account was $10 short due to math mistake, when we wrote a check) and as soon as we are notified, we make sure it is covered, we don't keep a loan of it. Sounds like she may have made many "borrowings" of this credit under the guise of "overdraft protection. I suspect she used a debit card for her account, and regularly spent on it when she knew that money was not in her account effectively borrowing on that credit account to buy things. Read on.

Usually, when we write bad checks, we actually think that they are "good" and the only reason they "bounce" or get protected by overdraft, is because the money we deposited, close in time to that written check, hadn't sufficiently cleared. But when that happens, if we have overdraft protection, it is USUALLY by our OTHER bank account, so we are not borrowing money, just using our own to cover that check - i.e. "if this bank account can't cover, (for whatever reason) a check I write, please use my other account to make sure it does, so I don't get charged a "bounce" fee," which could be $30 from both her own bank and charged by the person she wrote the check to, making it $60 or more each time. Thus,having an overdraft arrangment is supposed to be a good thing. Here, it seems she didn't have it paid from her own 2nd account, but she borrowed money to pay the overdraft, meaning, she was writing checks she didn't have money for. Then, she didn't turn around and pay that "loan" each time she borrowed. Did she pay anything on it? If she erred, say, $100 over the course of time due to bouncing checks or not being well-versed in balancing her check book, the interest in year 1 of doing so, at 35%, would have been $35. If she paid that or more, and didn't continue to write bad checks, even at 35%, this would never have become near $7000, so something else must have occurred here. Can you learn what it was? Did she simply bounce checks all the time, ie overspending, and then not pay her loan used to pay for what she bought? Or not pay what she spent that month, plus the finance charge that month, so the amount got bigger? Finding out what she did or didn't do when she got that monthly bill would be a good start, because her explanation may hurt or help her. Now, that all being said, what if she didn't agree to 35%? What if they can't PROVE she did? She needs to look at all of her paperwork to see if the 35% was ever a part of her terms of doing business with that bank. Also, did she ever actually agree that they could LOAN her money for bounced checks, rather than pull the overage she unwisely spent from her OWN money account elsewhere? If she doesn't have those records anymore, she can try a few things:

1) She can sue the company for overcharging her (since she thinks she did not agree to 35% or someting else) - the company will have to prove that she did agree to that term. If they don't, she can feasibly get much of that interest back.

2) She can default and not pay them (which will impact her credit, but you say that is already happening), they will likely sue her, and she can defend on the basis that she never agreed to 35% if that is accurate.

3) If she can come up with SOME reasonable settlement (based on the amount of the debt, not suggesting that they are right and she should be paying anything), then she can offer to pay it on the spot IF they execute a Release saying all is settled and she has lived up to her contractual agreements. Sometimes companies will take 50% or less, but sometimes that is only after the person has demonstrated that they will not otherwise be paying. So, sometimes we actually have to default on that loan to get them to pay attention and work with us towards a do-able settlement. If this requires a second evening job or a weekend part time job to add to her schedule, that is often the best way if one doesn't have the money. It pays to work extra hours for a year or two than to have this bad credit issue hanging over one's head til we hit our grave.

If it was me and I didn't think that they'd pulled a fast one on the interest rate (i.e. no agreement), I'd probably opt for #3, since I'd lose on #1 and #2, most likely.

Lastly, if she actually hasn't made any payments on this debt in a long time (and that is why it is so big, due to late fees/penalties, etc), before I paid it, I'd check to see if the statute of limitations has run on the bank's ability to successfully sue me in court for a judgement. I'd then weight the benefit of NOT paying at all, let them grumble, let them try to sue, only to have me get it dismissed based on the SOL. Not paying, again, DOES hurt credit, but only for about 7 years from the breach. That time frame could have been run by now, if she hasn't paid in a long time.

I hope this helps! My goal is to provide you with excellent and accurate service – if you feel you have gotten anything less, please reply back, I am happy to address follow-up questions. Kindly rate me "excellent" when you are done. I look forward to assisting you in the future, should you have legal questions.

Sincerely,

Alexia Esq.

Customer: replied 1 year ago.

Under lastly, how do we find out if the statue of limitations has run out? She had been paying up until recently when the balance disappeared from her statement.

Expert:  Alexia Esq. replied 1 year ago.
Generally, CA has a 4 year statute of limitations (http://www.courts.ca.gov/9618.htm) on a written contract (2 on a verbal). However, that statute typically restarts when a consumer (the breaching party) makes a payment. So if you look at her last payment, that will likely be when the SOL begins to run. 4 years later, it is generally too late for the company to file a suit against her that can not be dismissed by a Motion made by her to the court.

I hope this helps! My goal is to provide you with excellent and accurate service – if you feel you have gotten anything less, please reply back, I am happy to address follow-up questions. Kindly rate me "excellent" when you are done. I look forward to assisting you in the future, should you have legal questions.

Sincerely,

Alexia Esq.


Alexia Esq., Managing Attorney
Category: Legal
Satisfied Customers: 11714
Experience: 19 Years of Legal Practice Experience in this precise field.
Alexia Esq. and 3 other Legal Specialists are ready to help you
Customer: replied 1 year ago.

We took your advice and my husband and I spent two hours on the phone being bounced around by US Bank. Our daughter gave us authorization to talk to them. Now they won't let us pay off half of her debt without her approval. Meanwhile, because she had asked them for a pay-off plan and we've been talking to them, she is about to go into default. The bank is threatening to ruin her credit even further, even it we pay off half of the debt.


 


Since she already has a bad credit rating, will our paying off half the debt make the credit rating much worse. If this were your daughter what would you do? We still cannot figure out how to solve the problem.


 


At the moment, we're learning toward now getting her to authorize our paying half the debt and having her credit made worse, so that she is a bit closer to paying it off. However now that she is suddenly in default her the interest on the debt has raised to 35%. So her monthly payment will be even harder to make than it was before. For ten years she has been paying this debt which has taken a quarter of her salary, now it will take over a third of her salary. What's the solution here?

Expert:  Alexia Esq. replied 1 year ago.
Good morning,

We took your advice I think you may be confusing my explanation of legal option provided by law with, perhaps, someone who gave you advice? I wasn't able to advise you or her, unfortunately, not knowing her file, the contract, etc.

 

and my husband and I spent two hours on the phone being bounced around by US Bank. Why did you decide to do that?

 

Our daughter gave us authorization to talk to them. Now they won't let us pay off half of her debt without her approval. That would make sense, since it is her legal contract, not yours, and paying off 1/2 does not negate the default she is in but does effect her rights, typically, as noted above.

 

Meanwhile, because she had asked them for a pay-off plan and we've been talking to them, she is about to go into default. You may want to speak to the lawyer that told you that. Asking for a potential pay off plan to consider entering into a settlement agree does not generally turn a non-defaulted contract into one that is defaulted upon. Maybe you misunderstood or, if your source of information is the potential plaintiff bank itself, perhaps the agent speaking on the banks behalf was seeking to scare her into paying up asap, with the threat of default. Default it when you don't pay according to agreement - it does not get caused by settlement negotiations.


The bank is threatening to ruin her credit even further, even it we pay off half of the debt. They can not ruin it further (at least not legally) - the can only make truthful statements to the credit bureaus. As such, they can not say she is defaulted if she is not defaulted. If they DID make false statements, she would potentially have a cause of action against them for defamation and violations of the FCRA (Fair Credit Reporting Act). Also, you mention ruin her credit even "further" - I think you are saying that she has, in fact, already defaulted. This means that every month she is not paid up according to contract, her credit report has a black mark for that particular month.



Since she already has a bad credit rating, will our paying off half the debt make the credit rating much worse. If her credit rating properly reflects her activities, paying of whatever amount, if she was near her statute of limitations, means that this is a new breach and that whatever they are reporting on this defaulted debt may likely continue to be reported for yet another 7 years.... That is why some financial experts suggest we think twice about restarting to pay if no payments or agreements to pay have occurred in many years (closer to 7 than to, say 1). But also remember, paying 1/2 does not make it "paid as agreed" unless she has a contract to that effect.

 

If this were your daughter what would you do? We still cannot figure out how to solve the problem. I noted what I would do above so I could get this in the black asap. If they were legally wrong, I'd sue them possibly. If not, because working 80 hours/week is not beneath me, when there is an important goal, me, my husband and my daughter would likely pick up extra work hours so we can come up with the pay off total sooner rather than later. I'd also consider, at the same time, using a different credit card to pay it off totally (so the default will become 'old' every month that goes by, as it will now be paid off), and stay on good track with the new credit card debt, so there is no bad paying debt on the credit report. I'd still pull the Over Time, as family, to help her. If 3 people work extra, that debt can likely be gone in 2,3,4 months.



At the moment, we're learning toward now getting her to authorize our paying half the debt and having her credit made worse, so that she is a bit closer to paying it off. Where did they get the idea that paying some would make her credit worse? I'm seeing no justification for that - again, unless she hasn't paid in a long time, which you have not clarified. (I'd also consider looking into a credit card with "0% interest for 12 months" - and pay it off within that time frame, at the very least. Usually you pay a fee for that privilege, like 3%...

 

However now that she is suddenly in default Suddenly? Are you saying she only JUST started not paying as agreed?

 

her the interest on the debt has raised to 35%. Oh, so I think you are saying it was a reasonable (??) rate before, perhaps, and the interest did not make it big, true borrowing (as noted above), made it high.


So her monthly payment will be even harder to make than it was before.Absolutely. Ergo, the overtime work for a few months, perhaps by all 3 of you.

 

For ten years she has been paying this debt which has taken a quarter of her salary, now it will take over a third of her salary. What's the solution here? That is her choice. She has options, as noted previously - it is whichever one she feels she has the energy or inclination to do. Do you see what I am saying?

Customer: replied 1 year ago.

Seven weeks ago she asked for a payoff plan because we wanted to help her. She kept calling and they kept saying ok, but it took until a week ago for her to get the amount and they gave her a cutoff date, which I told you about from the start. She only stopped paying when she asked them for the buy out.


 


Everyone we talk to gives us a different answer at US Bank, so as time goes by she is coming up to being two months behind.


 


She has $9,000 worth of other debts, one loan for $7,000 doesn't charge interest, so she has already started dealing with the debt. My husband and I are retired and unable to work. My daughter works a 14 hour job just to keep the job that she has, so having a second job wouldn't be possible. She also has two hours a day of commuting time.

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