This is a common question at my law firm. A potential client calls and says that they have defaulted on a credit card or some other type of account. After I explain what their options are, many inevitably ask “Can’t I just send them $10 per month? If I do that, then they cannot sue me, right?” Wrong! This is a myth of the highest proportions. I’ve found that consumers often believe that it is better to send something, no matter how small, on an account that they have defaulted on, rather than make the collection agency prove their case. They believe that a “good faith” effort to pay will either prevent the collection agency from suing, or, it will look good in the eyes of the Judge. Neither of these beliefs is true.
In my opinion, mailing in a small check to a collection agency is one of the worst mistakes that you can make on a defaulted credit card account. What these individuals fail to realize is that making that sort of gesture may do much more harm than good. Frankly, I’m not sure that it does any good whatsoever.
Let’s look at the facts: The individual has defaulted on a credit card or some other account. The original creditor has given up on collection and sold the account to a collection agency or “junk debt buyer”. We don’t know when the default occurred, so time is of most importance. Often these accounts haven’t had any payments made on them for years. Making a payment, or an effort to pay, might be a large mistake for a number of reasons.
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The first reason is that you are acknowledging that you owe a debt to the collection agency. I would never recommend that a client do that. I prefer that the collection agency prove that a debt is owed, and to further prove that they are entitled to collect. First and foremost, they have to prove that they are the rightful party to collect from you. In other words, they have to prove that they own your account. Don’t do their work for them! The second possibility of harm in sending such a payment is that it removes the Statute of Limitations defense if you get sued. The Statute of Limitations is a law (which varies from state to state) which sets forth the amount of time that one has to file a lawsuit on a particular claim. In Pennsylvania the Statute of Limitations for Credit Card debt is 4 years in most cases.
You can imagine the scenario where Johnny Client defaults on a credit card in the year 2015. He fails to make payments for 5 years and the account ends up with a collection agency. The collection agency threatens to file a lawsuit, and Johnny Client sends in a $10 check. Not only is Johnny acknowledging that he owes a debt to collection agency, he has effectively terminated his argument of Statute of Limitations (which in this case would have prevailed in a court of law). Further, the collection agency (or anyone who sues you) is not obligated to accept anything other than payment in full of whatever amount it is that they are owed. Sending in the $10 payment is of no use in my opinion and does substantial harm in many cases. It is not a “good faith” payment. There is no such thing. If you can only afford to send in $10 or some other nominal amount, then the money is more important to you than it is to the collection agency. Don’t mail small checks to them!