Getting money back from a collection agency? Good luck with that!
By Erica Sandberg | Published: September 23, 2009
Dear Opening Credits,
A friend of mine wanted to join the Coast Guard, but had a run of bad luck and unemployment. In order to get into the Coast Guard, she had to pay off $6,000 in bad debt to collection agencies, and I agreed to pay it off for her. These debts were paid 23 days ago. Since then, due to other circumstances, she cannot go into the Coast Guard. Although she signed a note to pay me back the $6,000 at $750 a month for eight months -- based on her what was to be her Coast Guard wages -- she now has a minimum wage job and will not be able to pay me back the $6,000.
Is there a way I can retrieve the money I paid to the collection agencies? One debt was paid by credit card, the others by electronic check. I heard it was possible if I requested the money back within 30 days. If so, I need to act on this as soon as possible. If I can retrieve the money, would you please let me know the best method and verbiage to use? Thank you. -- Jim
In all my years of credit advising, I've never heard of someone paying a collection account, then attempting get the money back after changing his mind. And 30 days to renege on the deal? Another new one.
It makes sense that your friend wanted to mop up her mess before approaching the U.S. Coast Guard. According to Petty Officer Donald Scott, Coast Guard recruiting command reservation supervisor, good credit is indeed a prerequisite for joining. "We do a credit check on every person," says Scott, who explains that money problems can distract from the mission and affect security. All collection accounts must be satisfied, and "if debt payments add up to more than 30 percent of their paycheck, they're disqualified until they get it taken care of."
But what's not sensible, Jim, is bailing out a person who has proven herself to be a serious financial risk. Now you want to know if you can get the money back, and if so from whom? Let's explore the possibilities:
The collection agencies: After who knows how long, the collectors finally got paid, and I can't imagine them cutting you a check because you regret your decision, no matter how eloquently you word the letter. (Though I'd love to see their faces after reading it.) As for that "legal" time frame, I took the question to top consumer law expert Stephen Turner, attorney and partner at the Los Angeles firm Lewis, Brisbois, Bisgaard & Smith. "There is no 30-day rule," says Turner. "There is no collection agency that exists that will give the money back."
The credit card company: Because you charged a portion of the sum, you may wonder if you have recourse with your credit card company. After all, federal law stipulates that cardholders can dispute and possibly reverse some charges, including those for items that were never sent to the correct address, unauthorized charges and goods and services that were faulty or not what you ordered. Clearly, your situation doesn't fit these parameters, so this road is also a dead end.
The bank: You sent the rest of the money to collectors via electronic check, so can you cancel the transfer that went though? No, because those collection agencies already have the money in their hands and, again, have every right to keep what was lawfully due them. It doesn't matter if you sent paper or electronic checks, dollar bills or gold bullion. You're out of luck with the bank, too.
The friend: And now we come to the final possibility for redemption: your pal herself. Ask her to cough up the money. She's working a minimum wage job, making large installment payments unlikely, but perhaps she has a car, boat, furniture, musical equipment or something else of value. If she does, suggest she sell some and repay you. If you can't work that out and she doesn't find some other way to pay, you can take her to court. You're not in a bad position, as you even have a signed promissory note. You may be aware of such a contract's value to the judge if you've ever watched one of those TV small-claims-court programs. Still, warns Turner, if your friend's assets and income are spare today and prospects for her having more in the future are slim, you could just "wind up with a pocket full of air."
So Jim, where does this leave you? Unfortunately, you're $6,000 in the hole, with a relationship that may not be worth continuing and a few important lessons learned:
- Avoid lending money to friends, especially those with a poor credit history.
- Don't believe everything you hear about credit and the law. Go to a trusted source.
- Collection agencies, credit card companies and banks are not in the business of helping out friends who help out friends.
Oh, and No. 4: If you want to join the U.S. Coast Guard, you better make sure your financial affairs are shipshape first.
See related: Law eases debt burden for active military, Active military personnel protected from APR hikes, 11 tips for dealing with debt collection and collectors, Debt collection sample letters, Cash advance for friend goes unpaid, To co-sign or not to co-sign?, Allowing friends to use your credit card? Mistake
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