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"FACTORING COMPANY"

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I'd like to try to consolidate some of the great discussions about the issue of CAs/JDBs listing themselves as "Factoring Company" for collection accounts on credit reports. Hopefully this will reduce the hijacking of other threads onto this subject, which keeps cropping up again and again. And even more important: let's see if we can really pin down the LAW on this and answer once and for all whether CAs/JDBs *can* legally represent themselves as "Factoring Company" on consumer debt collection accounts.

 

Apologies in advance for the massive number of posts I am about to copy here in order to put this conversation into one cohesive starting point. I'm hoping that it will make it easier for everyone interested in this subject to follow the flow of information as I've seen it unfold in the following posts. Note: multiple quotes have been edited out to reduce space. I've made every attempt to put posts in an order that will make sense even with the editing.

 

Those with additional info and insight into this subject, please chime in! We especially need people who can decipher the UCC, accounting practices and principles, and anything else you find to be relevant to this topic.

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http://creditboards.com/forums/index.php?s...ndpost&p=984678

 

I'm a first time poster, but have been reading this board for quite awhile.  I'm a student working on a project regarding the FDCPA and FCRA.  I have been monitoring this case with great interest.  On RealtorKen's "Key Points" -- there are two that you may want to do some more research on -- the wrong amount (253 vs 253.37) and wrong account type (open).

 

There is an organization called the "Consumer Data Information Association".  It is a trade association of credit bureaus.  They publish the instruction guide on how the Metro 2 reporting requiremeents of the FCRA were to be implemented.  Under an affiliated group (Associated Credit Bureaus, Inc)the guide is published as "Credit Reporting Resource Guide".  You can buy it from their web site or may be able to find it in a college or public library.

 

Anyway, the items that I call your attention to are:

 

1.  The current balance is reported in field 21 of the "base segment" -- as defined in the guide, it is to be reported in "whole dollars only".

 

2.  It is possible that the phrase "open" that you are referring to is not an account type/status, but is rather the "Portfolio Type" (field 8 of the base segment).  The possible values for this field are:

              "C" -- Line of Credit

              "I" -- Installment

              "M" -- Mortgage

              "O" -- Open

              "R" -- Revolving

Under these definitions, I think the correct portfolio type for this account is in fact "Open".

 

I think your other points are quite solid, so for my two cents, I wouldn't water down the discussion with weaker points.

 

Welcome to th board...glad you're here...always good to have people well versed on FCRA/FDCPA...

 

I think you have a point as far as the amount goes...that's minor, but might as well pop that in there since he's filed anyway...the more violations the merrier...worst case, the judge tosses THAT count...

 

 

BUT....as to your second point...for one thing, the CA does NOT have an open account type with RealtorKen...if they did, then you'd have a point...regardless of the "portfolio type"...if the CA can't report correctly due to limitations of the Metro-2 format (which I don't buy, because I HAVE seen CAs list them correctly from this statndpoint), then they shouldn't report at all.

 

Also, even if what you say IS correct (which it may be, but I don't think so based upon my own experiences), the original account was NOT an "open" account type...so either way, he's got them on SEVERAL violations of FCRA and FDCPA in this particular case, for reporting as "open" and verifying it as such

 

There is an organization called the "Consumer Data Information Association".  It is a trade association of credit bureaus.  They publish the instruction guide on how the Metro 2 reporting requiremeents of the FCRA were to be implemented.  Under an affiliated group (Associated Credit Bureaus, Inc)the guide is published as "Credit Reporting Resource Guide".  You can buy it from their web site or may be able to find it in a college or public library.

 

 

 

Is this what you are talking about?

 

http://www.cdiaonline.org/pdf/Metro_2_Format_2003.pdf

 

Free!

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Hmm thats a good one...  I wonder if that is what he was referring to... If it is notice on Page 47 it shows the following:
17B Payment Rating

When the Account Status (Field 17A) contains 05,

13, 65, 88, 89, 94 or 95, this field must also be

reported.

The Payment Rating contains a code that properly

identifies whether the account is current, past

due, in collections or charged off within the

activity period being reported. Values

available:

0 = Current account

1 = 30 - 59 days past due date

2 = 60 - 89 days past due date

3 = 90 - 119 days past due date

4 = 120 - 149 days past due date

5 = 150 - 179 days past due date

6 = 180 or more days past due date

G = Collection

L = Charge-off

For example, if the account was paid in July 2003,

but the consumer was 30 days past the due date

in July prior to paying the account, report Account

Status Code = 13 and Payment Rating = 1.

 

 

Now if you notice THERE IS A PROPER CODE "G" that collection agencies should be reporting as the Payment rating.

 

 

And then if you continue to read through it shows the following :

 

#18 Payment History Profile

Contains up to 24 months of consecutive payment

activity for the previous 24 calendar months prior to

the activity date being reported. Report one month’s

payment record in each byte from the left to right in

most recent to least recent order. The first byte

should represent the previous month’s status.

Values available:

0 = 0 payments past due (current account)

1 = 30 - 59 days past due date

2 = 60 - 89 days past due date

3 = 90 - 119 days past due date

4 = 120 - 149 days past due date

5 = 150 - 179 days past due date

6 = 180 or more days past due date

B = No payment history available prior to this

time. A “B” may not be embedded within

other values.

D = No payment history available this month. A

“D” may be embedded in the payment

pattern.

E = Zero balance and current account

G = Collection

H = Foreclosure

J = Voluntary Surrender

K = Repossession

L = Charge-off

No other values are acceptable in this field.

If a full 24 months of history are not available for

reporting, the ending positions of this field should be

filled with Bs.

The Payment History Profile is intended to be used to

report monthly history, regardless of the Terms

Frequency.

Reporting of the Payment History Profile provides a

method for automated correction of erroneously

reported history.

Exhibit 5 provides examples of reporting payment

history.

 

 

Also, this is very interesting:

20 Compliance Condition Code

Allows the reporting of a condition that is

required for legal compliance; e.g., according

to the Fair Credit Reporting Act (FCRA) or Fair

Credit Billing Act (FCBA). Values available:

XA = Account closed at consumer’s request.

XB = Account information disputed by

consumer. (Meets requirements of the

Fair Credit Reporting Act)

XC = Completed investigation of FCRA dispute

— consumer disagrees.

XD= Account closed at consumer’s request

and in dispute under FCRA.

XE = Account closed at consumer’s request

and dispute investigation completed,

consumer disagrees. (To be used for

FCRA or FCBA disputes.)

XF = Account in dispute under Fair Credit

Billing Act.

XG = FCBA Dispute resolved — consumer

disagrees.

XH = Account previously in dispute — now

resolved, reported by data furnisher.

XJ = Account closed at consumer’s request

and in dispute under FCBA

XR = Removes the most recently reported

Compliance Condition Code.

Note: Do not use XR as a default

value.

The code should be reported one time and will

be deleted only when another code or the XR

(Remove value) is reported.

For example, if an account is reported with

Compliance Condition Code XB in July 1998,

and is then reported with Compliance Condition

Code XC in November 1998, the XB is replaced

with the XC. If the account is then reported in

January 1999 with code XR, the XC value is

removed.

Note: Compliance Condition Codes XA,

XD, XE and XJ, which refer to

accounts closed at consumer’s

request, apply to Portfolio Types

C (Line of Credit), O (Open) and Revolving

 

 

 

Then if you goto page 86 you find a very informative bit of information. You come to "Account Type Codes by Industry" CODE 48 is for Account Type- COLLECTION ACCOUNT.

 

OK EVEN MORE IMPORTANTLY!! PAGE 134!!!!!

 

This proves that a collection agency can once again NOT report it as an "OPEN" type of account because the collection agency did not extend any credit to the debtor.

 

Open

(Portfolio Type)

Credit extended to a consumer based on an estimate of

the general ability to pay. The entire balance is due

upon demand.

 

OK Just found some contradictory information, this is saying how a collection agency should report. Nonetheless, it shows that the Defendants did not follow a number of instructions:

 

THIRD PARTY COLLECTION AGENCY/DEBT PURCHASER/FACTORING

COMPANY REPORTING GUIDELINES

CREDIT REPORTING RESOURCE GUIDE | 10-3

Copyright 2003 © Consumer Data Industry Association

1. Consumer Account Number (Base Segment, Field 7)

• Report the individual’s complete and unique account number as extracted from

your file.

• If the account number changes, report the L1 Segment. See field definitions in the

Metro 2 Format.

Note: Notify your consumer reporting agencies the first time this situation occurs.

2. Portfolio Type (Base Segment, Field 8) — O (Open)

3. Account Type Codes (Base Segment, Field 9)

• 48 — Collection Agency/Attorney

• 77 — Returned Check

• 0C — Factoring Company Account (includes Debt Purchasers)

4. Date Opened (Base Segment, Field 10) — the date the account was placed/assigned

to the third party collection agency or purchased by the debt purchaser/factoring

company. When reporting returned checks, provide the date the check was written.

5. Highest Credit or Original Loan Amount (Base Segment, Field 12) — original assigned

amount as of the date placed, assigned or purchased. When reporting returned

checks, report the original amount of the check, excluding fees and interest.

6. Terms Duration (Base Segment, Field 13) — 001

7. Account Status Codes (Base Segment, Field 17A) — report only the following:

• 93 — Account assigned to internal or external collections.

• 62 — Paid in full, was a collection account.

• DA —Delete account.

Acceptable reasons for deleting accounts are:

• Accounts which have been canceled and returned to creditor.

• Accounts which have been forwarded or sold to another entity.

• Accounts reported in error.

Do not delete paid in full collection accounts.

8. Billing Date (Base Segment, Field 24) — master file activity date.

 

 

 

THIRD PARTY COLLECTION AGENCY/DEBT PURCHASER/FACTORING

COMPANY REPORTING GUIDELINES

CREDIT REPORTING RESOURCE GUIDE | 10-4

Copyright 2003 © Consumer Data Industry Association

9. FCRA Compliance/Date of First Delinquency (Base Segment, Field 25) — the date of

the first delinquency with the original creditor that led to the account being placed

for collection or sold. If this date is not available, use the date the account was

opened with the original credit grantor.

Example:

Credit Grantor Reports:

Status

Code Definition Activity Date

Date of First

Delinquency

11 Current January Zero-fill

71 30 days past the due date February 02/28/2003

78 60 days past the due date March 02/28/2003

80 90 days past the due date April 02/28/2003

82 120 days past the due date May 02/28/2003

83 150 days past the due date June 02/28/2003

 

Account is assigned to collection agency or sold to debt purchaser/factoring company.

Collection Agency/Debt Purchaser/Factoring Company Reports:

Status

Code Definition Activity Date

Date of First

Delinquency

93 Collection August 02/28/2003

93 Collection September 02/28/2003

Consumer agrees to a

repayment plan. First

payment is received by

collection agency/debt

purchaser/factoring company

or credit grantor’s internal

collection department.

93 Collection October 02/28/2003

Consumer continues to make

payments. Balance amount Is

reported as decreasing.

62 Paid collection account November 02/28/2003

Balance amount is reported

as zero.

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Should a collection account ever be code as installment? when I have never made arrangements for it to be or even if I did?

 

I would say according to this it would be NO...

 

They are telling collection agencies Exactly how they should be reporting the accounts.

 

This raises the question: Does the FCRA treat JDB's the same as CA's? I know the FDCPA does, but is there ANY way that the "debt purchaser" is able to evade the laws governing CA's when it comes to FCRA vs FDCPA?

 

There are ways to drag them back into being considered a CA/JDB.  I have come across many many tidbits of info one could use.  However, since I dont have the time to organize everything I have read that didn't pertain to my specific case.  To answer your question...the only way a CA/JDB would skate through would be if the OC owns the collection department.  Which then would bring up other issues as we know.

 

Thanks Ken. I figured you must have run across this issue a bit. I've been approaching this with the perspective that since the FTC clearly identifies JDBs as CAs when it comes to the FDCPA, then the FCRA would follow the same premise. However, the impressively consistent pattern of violations (listing as Installment, Open, etc) sometimes makes me wonder.  :angry:

 

ANY furnisher of information, be it JDB, CA, OC, court (which doesn't report anyway), anotehr CRA, or the man in the moon is bound by the FCRA

 

Yes of course they are bound by the FCRA - and they violate anyway. But the question is whether the JDB *must* report as a CA, or if they're allowed to report as a "creditor" in any way. It appears that they ARE allowed to report as "Factoring Company" according to the codes posted above, and the "Open" account is possibly questionable. I'm not saying they should be allowed to report like that, the problem is that this info indicates that they are. So where's the disconnect? Obviously the info isn't consistent.  I'm trying to figure out why.

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Factoring Company - The funding source for the client. The company purchasing accounts receivable (invoices) from the client. (Also known as the Factor.)

 

Factoring - The selling of a company's accounts receivable to a third party, in order to obtain funding.

 

Factoring Agreement – The document containing terms and provisions of a factoring relationship.

 

Factors Acknowledgment Form - A form sent to the client's customer by the Factor, confirming that the client's invoice does exist and that the customer will remit the payment due under that invoice to the Factor.

 

Factor's Advance - The initial amount of money the Factor sends to a client, after the verification process is complete and before the Factor receives its money from the client's customer. The advance is calculated as a percentage of the face value of the factored invoices.

 

Factor's Charge-Back - An amount of money that is owed to the Factor and is deducted or Charged-Back from the reserve to an agreed upon non-payment clause in the Factoring Agreement.

 

Factor’s Client - The business which sells its Accounts Receivable to the Factor.

 

Factors Reserve - A deposit maintained by the factor to guard against disputes between the client and the customer and to guard against bad debt losses due to customer non-payment. This is the money retained by the factor when the advance is sent to the client. The Reserve is sent to the client after the customer has paid the Factor the money due on the invoice. <==pay atention to this..see the debts being factored are not in defauilt.....

 

Factors Reserve Release - The amount of money released from the Factors Reserve once payment has been received and credited. The Reserve Release may be less any charge-back or fees associated with the services.

 

Factors Services – Factoring companies normally provide services that include Credit Analysis, and Collection Management.

 

Factors Verification - Process by which the Factor verifies that the product or service provided by the client was received and accepted by the customer, and that the customer intends to pay the factor the money due under the invoice. This process takes place before the Factor sends the advance to the client

 

Chapter 12 -

To factor or not to factor

 

Just sell your accounts receivable; that way you don’t have to collect the money owed to you.” It’s an enticing pitch, but don’t get caught taking the easy way out unless you absolutely need to and you understand all the ramifications. Each situation is unique, and you must fully understand what you are getting into before choosing to factor.

 

What is factoring?

Factoring is the process of selling your accounts receivable to a third-party financing source. Typically, you will bill the shipper and then turn over a copy of the invoice to a factoring company. At that point, the factoring company will advance you 80 percent of the gross amount of the invoice less a percentage kept by the factoring company. The factoring company is now responsible for collecting the amount on the invoice from the shipper. When the amount is collected, the factoring company will send you the remaining amount of the invoice, minus another fee, perhaps.

 

The concept of selling accounts receivable has become more popular recently after years of being considered taboo. Just because it has become more popular, however, doesn’t mean it’s for you.

 

Should I factor?

Most factoring situations are necessary for emergency cash when all other disciplined accounting practices and financing options have been exhausted. Later in this chapter, we will compare traditional financing with factoring.

 

Pros

 

    * Instant cash – The biggest advantage to factoring is availability of instant cash. You could receive up to 80 percent of your invoice in as little as three hours after the actual delivery.

    * Faster collections – In effect, factoring nominally speeds up a percentage of your collections. If a crisis arises, you can accelerate your collections to meet immediate cash requirements. If a large shipper declares bankruptcy, you either will lose its accounts receivable or see a severe delay. You can accelerate your other shippers’ accounts receivable to make up for the shortfall from your troubled customer.

    * Reduced bad debt – After you factor your accounts receivable “without resource” and receive your 80 percent, it’s now the factoring company’s responsibility to collect the balance. If you factor “with recourse,” you still will be slammed with the bad debt. Make sure you know which type applies. If the factoring company pays you without recourse, it’s more expensive, but you have greater security.

    * Credit checks – Factoring companies generally accept invoices only for your customers with good credit. If your factoring company denies an invoice, this might be a warning that you should stop serving this shipper.

    * Professional collection – Factoring companies are pros at collecting debt; it’s their business.

    * No balance sheet effect – Done without recourse, factoring is not recorded on your balance sheet. If third parties use your balance sheet to evaluate other financing opportunities, factoring will not adversely affect your balance sheet. But realize that these receivables can no longer be used as collateral for other loans.

    * Cash for growth – Factoring provides cash necessary to expand your company, especially if you have been trying to expand and just can’t get to the critical size you’ve been shooting for.

 

Cons

 

    * Instant cash (but it costs you) – How much cash would you receive? Remember, you may never receive the other 20 percent of the invoice. The factoring company’s fees depend on how quickly it collects the invoices. More than 60 days could cost you up to 10 percent of the total amount. With 6 percent profit margin, this could put you in the red. The factoring company will take a certain part of the fee immediately from the 80 percent that it forwards to you in some cases.

    * Faster collections are temporary – The immediate source of cash is only temporary. What happens next week or month if you factor a large part of your accounts receivable and receive cash for your immediate disbursements? If you have lost a customer, have slow-paying customers or just need cash, the cause has not gone away. You have treated only the effect, not the cause.

    * Won’t automatically reduce bad debt – Most factoring companies won’t accept credit-unworthy invoices anyway. At first you may slip in one or two customers, but not for long. The factoring company wants the invoices that you don’t have any problem collecting now.

    * Credit checks are easy to obtain – Factoring companies will perform credit checks because they don’t want bad customers either. This is a function you should perform anyway. Credit checks are easy and don’t require a factoring company. Don’t pay for services that are free or for information you already should know.

    * Is professional collection necessary? – If you are screening your customers, you won’t need professional collections. You will, from time to time, encounter a problem shipper even with a customer screening system, but do you really need to pay up to 10 percent of the invoice to collect late payments? Remember, very few factoring companies will accept an invoice more than 90 or 120 days past due.

    * Other financial-statement effects – Factoring is not recorded on the balance sheet, but it definitely will affect your P&L statement. Factoring costs 2 to 9 percent of your factored revenue, depending on invoice age.

    * Cash for growth, not for profit – Cash for growth is one of the most commonly touted reasons for factoring. Factoring companies often show how they can improve your net profit by helping you grow. Don’t assume that cash will help you grow enough to improve your net income. Also, many factoring companies use 2 percent as the example of factoring costs. This percentage is the fee for receivables collected in less than 30 days. Factoring these accounts is not necessary.

 

Example of factoring

Suppose that your receivables average 50 to 60 days. If the factoring company can’t improve this average, your cost of factoring will be enormous.

 

As you can see in Table 12-1, CCU Trucking had no growth at all; factoring simply added approximately $400,000 in expenses to outsource the billing-and-collections function. There might be some significant internal cost savings to offset some of this, and you should obtain a good estimate. But by using a revolving bank loan line of credit and installing and maintaining good internal accounting controls, your similar bank loan interest cost might be $300,000 or more less than the cost of factoring. You should consider further savings in factoring costs if the factoring company can improve your collection period days.

 

While these examples may be extreme, they illustrate the decision process you must undertake to compare apples to apples in deciding between bank financing or factoring.

 

In the end, factoring makes sense if you (a) can’t or don’t want to invest in tight internal accounting systems and competent personnel or ( B ) want to grow dramatically and outsource your receivables functions.

 

I have a BS in accounting and a factored account is only done and available for "CURRENT" non-charged off accounts as a way to raise capital/cash Flow without awaiting for the 'terms" of the invoice to become due. They are sold at a discount and VERY rigid accounting rules apply also..esp for tax purposes. So way I see it a "factoring" CA could actually get a OC maybe into tax troubles if they have written off the debt, but the CA is listing it as a"factored" account meaning or making it look like the OC didnt "write" it off as a loss.

 

My view on that one..it is wrong anywyas for a Charged off account to be listed as a factored account, esp if no goods under the UCC changed hands that fall into the factored status....

 

BG

 

BG

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ANY furnisher of information, be it JDB, CA, OC, court (which doesn't report anyway), anotehr CRA, or the man in the moon is bound by the FCRA

 

Yes of course they are bound by the FCRA - and they violate anyway. But the question is whether the JDB *must* report as a CA, or if they're allowed to report as a "creditor" in any way. It appears that they ARE allowed to report as "Factoring Company" according to the codes posted above, and the "Open" account is possibly questionable. I'm not saying they should be allowed to report like that, the problem is that this info indicates that they are. So where's the disconnect? Obviously the info isn't consistent. I'm trying to figure out why.

 

(Pryan)

I must have missed that part of this thread...they are NOT a creditor, any more than a CA is...they did NOT issue you credit...

 

I'm gonna have to look into this though

 

 

I used to work for a company that factored it's AR's. We sent them to the factoring company the day we invoiced...NOT SIX MONTHS LATER WHEN THE ACCOUNT WAS IN DEFAULT.

 

They're using this term incorrectly and it is horribly inaccurate.

 

 

I used to work for a company that factored it's AR's. We sent them to the factoring company the day we invoiced...NOT SIX MONTHS LATER WHEN THE ACCOUNT WAS IN DEFAULT.

 

They're using this term incorrectly and it is horribly inaccurate.

 

 

It would seem that the CDIA is quite possibly opening themselves up to be named as co-defendants in cases. They are telling the collection industry how they should be reporting and its wrong. Not only that they are utilizing definitions that are not applicable for this kind of use.

 

 

EXACTLY what caught my eye and made me ask, Ken. Where the hell do they get the idea that a debt purchaser CAN report as a Factoring Company?

 

BlueGhost and CargoJon, thanks for the additional info re factoring co's. I'm adding it to my Keeper File. It's been my understanding for a long time that factoring is done on current accounts, not those in default. So I nearly got whiplash reading what Ken had posted earlier where the CDIA says "Debt Purchasers" can list as "Factoring Company". :angry:

 

You know... I was just thinking, could you imagine a Class Action Suit against CDIA. They have to be atleast partially liable for companies improperly reporting tradelines to the CRA. Thus damaging peoples credit

 

 

Actually a debt purchaser can list on a CR a Factoring company....but ONLY on Current Debt they purchased. As purchaser's of "current" Invoices are in fact buying a debt owed but not in default....and allowed to report as anyother Creditor if they so decide IMO.

 

But the buying of old charged off accounts in default are not factored accounts and should not be listed as so.

 

BG

 

 

What we need is the actual locations of those definitions. We need actual facts whether it be from the IRS, Business Law, whatever. We need actual definitions from a location we can cite.

 

I'll try to dig out some of my Accounting stuff, but I think the Board Of Accountancy may be one place to start as well as the Tax laws maybe...

 

BG

 

Yeah I think the Council for Accounting Standards or whatever the heck they're called might contain an accurate, admissible definition on that term.

 

Jeez...I just had that class last year too, I should frickin remember that better...

Edited by IDare

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The following posts are from AAAngels2003 thread:

 

Response from CA to Me for Complaint to AG, Tell me what you think.

 

"Attached please find and Affidavit of Sale and copies of numerous statements pertaining to this account for your review.

 

Regarding your concerns that our company's trade line is listing this account as "open" on your credit report, our company is required by law to use the METRO II Credit reporting guidelines which state that the open date for a factoring company's account is to be listed as the date the company purchased the account from the seller.

 

If you have any additional information you wish to be reviewed in reference to this account, kindly forward these materials to my office no later than September 15,2005 so that the investigatin related to this account can be closed in a timely manner."

 

I just got this today (10th) and their material is dated (6th), that doesn't sound fair there either.

 

Thoughts please.

 

ETA that the "copies of numerous statements" is just a computer printout, not actuall statements.

 

I'm not up enough on the metro-2 format to advise but I know MarvBear is. Why don't you send him a PM and ask him to look at this for you. He'll be back later tonight.

 

There was a great discussion of some of this in RealtorKen's thread recently: http://creditboards.com/forums/index.php?s...ndpost&p=984678

 

Also, if they purchased this debt AFTER it was charged off, they are NOT a factoring company either!

 

"Attached please find and Affidavit of Sale and copies of numerous statements pertaining to this account for your review.

 

Regarding your concerns that our company's trade line is listing this account as "open" on your credit report, our company is required by law to use the METRO II Credit reporting guidelines which state that the open date for a factoring company's account is to be listed as the date the company purchased the account from the seller.

 

If you have any additional information you wish to be reviewed in reference to this account, kindly forward these materials to my office no later than September 15,2005 so that the investigatin related to this account can be closed in a timely manner."

 

I just got this today (10th) and their material is dated (6th), that doesn't sound fair there either.

 

Thoughts please.

 

ETA that the "copies of numerous statements" is just a computer printout, not actuall statements.

 

 

It's a durn GUIDELINE

 

It ain't LAW!

 

They are required to report ACCURATE and COMPLETE information if they do report however.

 

Also, if they purchased this debt AFTER it was charged off, they are NOT a factoring company either!

 

Yup I have a letter that they admit that they purchased the account after it was charged off. But the thing is I'm not admitting ownership of this account cause It aint mine and they have no proof it is.

 

Do they have the FCRA Compliance/Date of First Delinquency reporting properly?

 

Bet NOT!

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Please forgive my formatting

 

GENERAL REPORTING GUIDELINES

A Third Party Collection Agency is a company or individual who specializes in collecting

outstanding debts for other businesses or individuals. A Debt Purchaser/Factoring

Company is a company or individual who purchases accounts with the intent of collecting

debts owed.

Report data in the standard Metro 2 Format, including the Header Record.

Report at least on a monthly basis.

Report the complete name, address and social security number of the legally liable

consumer(s), using J2 Segments for reporting secondary names.

The first time you report to the consumer reporting agencies, report your entire file.

On subsequent updates, report the entire file, or at a minimum, newly opened

accounts, paid accounts, and accounts which have had changes since the previous

reporting period.

Report paid in full collection accounts before purging the accounts from your internal

collection system.

Do not delete paid in full collection accounts,

Acceptable reasons for deleting accounts are:

-Accounts which have been canceled and returned to creditor.

-Accounts which have been forwarded or sold to another entity.

-Accounts reported in error.

All parties reporting credit information must comply with the Fair Credit Reporting Act

(FCRA), Fair Debt Collection Practices Act (FDCPA), any applicable state laws and

regulatory authorities.

The Date of First Delinquency is used to comply with FCRA sections 605 and 623

(obsolescence period). See page 10-4 of this document for detailed reporting

requirements.

 

THIRD PARTY COLLECTION AGENCy/DEBT PURCHASER/ FACTORING

COMPANY REPORTING GUIDELINES

.

The Creditor Classification 02 must be reported in the Kl Segment to identify medical

debts to comply with FCRA sections 605 and 623.

In the Identification Number field, report the internal code that identifies the third

party collection agency/debt purchaser/factoring company where information is

verified.

All parties reporting credit information must respond to consumer inquiries

Note: The guidelines in this document are specific to your industry and should

be used in conjunction with the specifications in the Metro 2 Format. Refer

to the Metro 2 Format for detailed information on segments and field

information.

CREDIT REPORTING RESOURCE GUIDE 10-2

 

THIRD PARTY COLLECTION AGENCy/DEBT PURCHASER/FACTORING

COMPANY REPORTING GUIDELINES

1 Consumer Account Number (Base Segment, Field 7)

.

Report the individual's complete and unique account number as extracted from

your file.

If the account number changes, report the Ll Segment. See field definitions in the

Metro 2 Format.

Note: Notify your consumer reporting agencies the first time this situation occurs,

2. Portfolio Type (Base Segment, Field 8) -a (Open)

3 Account Type Codes (Base Segment, Field 9)

...

48 -Collection Agency/Attorney

77 -Returned Check

DC -Debt Purchaser (a/k/a Factoring Company)

4. Date Opened (Base Segment, Field 10) -the date the account was placed/assigned

to the third party collection agency or purchased by the debt purchaser/factoring

company. When reporting returned checks, provide the date the check was written.

5 Highest Credit or Original Loan Amount (Base Segment, Field 12) -original assigned

amount as of the date placed, assigned or purchased. When reporting returned

checks, report the original amount of the check, excluding fees and interest.

6 Terms Duration (Base Segment, Field 13) -001

7, Account Status Codes (Base Segment, Field 17A) -report only the following:

93 -Account assigned to internal or external collections

62 -Paid in full, was a collection account

DA -Delete account

.Collection Agencies must delete accounts that have been canceled and returned

to the creditor.

.Debt Purchasers/Factoring Companies must delete accounts that have been

forwarded or sold to another entity.

.This value should also be used for accounts reported in error.

Do not delete paid in full collection accounts.

CREDIT REPORTING RESOURCE GUIDE 10-3

 

THIRD PARTY COLLECTION AGENCy/DEBT PURCHASER/FACTORING

COMPANY REPORTING GUIDELINES

8. FCRA Compliance/Date of First Delinquency (Base Segment, Field 25) -the date of

the first delinquency with the original creditor that led to the account being placed

for collection or sold.

Example:

Credit Grantor Reports:

Status

~

11

71

78

80

82

83

Date of First

Delinguenc¥

Zero-fill

02/28/2004

02/28/2004

02/28/2004

02/28/2004

02/28/2004

Activity Date

January

February

March

April

May

June

Definition

Current

30 days past the due date

60 days past the due date

90 days past the due date

120 days past the due date

150 days past the due date

Account is assigned to collection agency or sold to debt purchaser/factoring company

Collection Agency/Debt Purchaser/Factoring Company Reports:

Status

.cQQ§

93

93

Date of First

Delinguenc¥

02/28/2004

02/28/2004

Activity Date

August

September

93 October 02/28/2004

62 November 02/28/2004

Definition

Collection

Collection

Consumer agrees to a

repayment plan. First

payment is received by

collection agency/debt

purchaser/factoring company

or credit grantor's internal

collection department.

Collection

Consumer continues to make

payments. Balance amount Is

reported as decreasing.

Paid collection account

Balance amount is reported

as zero.

Notes: The FCRA Compliance/Date of First Delinquency does not change due

to subsequent repayment agreements.

When reporting returned checks, report the date the check was returned for

insufficient funds. If not available, report the date of the check.

CREDIT REPORTING RESOURCE GUIDE 10-4

 

THIRD PARTY COLLECTION AGENCy/DEBT PURCHASER/FACTORING

COMPANY REPORTING GUIDELINES

FCRA Compliance/Date of First Delinquency (continued)

Effective March 31, 2004, the FCRA1 states that "provided that the consumer does not

dispute the information, a person that furnishes information on a delinquent account

that is placed for collection, charged for profit and loss, or subjected to any similar

action, complies with this paragraph, if -

(i) the person reports the same date of delinquency as that provided by the

creditor to which the account was owed at the time at which the commencement of

the delinquency occurred, if the creditor previously reported that date of

delinquency to a consumer reporting agency;

(ii) the creditor did not previously report the date of delinquency to a consumer

reporting agency, and the person establishes and follows reasonable procedures to

obtain the date of delinquency from the creditor or another reliable source and

reports that date to a consumer reporting agency as the date of delinquency; or

(iii) the creditor did not previously report the date of delinquency to a consumer

reporting agency and the date of delinquency cannot be reasonably obtained as

provided in clause (ii), the person establishes and follows reasonable procedures to

ensure the date reported as the date of delinquency precedes the date on which

the account is placed for collection, charged to profit or loss, or subjected to any

similar action, and reports such date to the credit reporting agency.ff

9. Report Compliance Condition Codes (Base Segment, Field 20) and Special Comments

(Base Segment, Field 19) in conjunction with Account Status Codes to further define

the accounts.

Examples:

Compliance Condition Code XB (Account information disputed by consumer) could be

reported with Account Status Code 93.

Special Comment AU (Account legally paid in full for less than the full balance) could

be reported with Account Status Code 62.

10. Current Balance (Base Segment, Field 21) -balance amount, which may include fees

and interest, depending on state and federal laws. If payments are made, the Balance

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This is how it appears on my TU report:

 

Dumbutt CA #XXXXXXXXXXXX

Address

Balance = $2,613

Date Verified = 8/2005

High Balance = $2,613

Collateral = Sears National Bank

Past Due = >$2,613< *(note below)

Pay Status = >Collection Account<

Account Type = Open Account

Responsibility = Individual Account

Date Open = 07/2001

Date Closed = 02/2000

Loan Type = Factoring Company Account

Remarks = Acct Info Disputed By Consumer

Estimated date that this item will be removed = 03/2006

 

*(this amount also changed this month to $1,313, I still haven't recieved the officail results from TU in the mail yet but expect them any day now)

 

Angel did you see this?

Check this out:

 

http://www.invoicebankers.com/faq.html

 

Q. Can I factor my consumer receivables?

A. Unfortunately, no. Although most consumers are credit-worthy, our legal system simply doesn't provide a method for successfully factoring consumer receivables. Factoring is suitable only for businesses that have other businesses as customers.

 

IF we could find the laws they are referring to, this could be monumental.

 

"Q. Will you collect my old accounts for me?

 

A. We generally factor current accounts and accounts that are not past due. Unfortunately, factors are not a substitute for a good collection agency or attorney."

 

This seems to suggest that a CA is not a factoring company.

 

http://www.invoicebankers.com/factoring_services.html

 

That definately rules out CA's as Factoring Companies.

 

...our legal system simply doesn't provide a method for successfully factoring consumer receivables. Factoring is suitable only for businesses that have other businesses as customers.

 

So how could it be a factoring account unless it was a BUSINESS account? Consumer debt can't be factored!

 

...our legal system simply doesn't provide a method for successfully factoring consumer receivables. Factoring is suitable only for businesses that have other businesses as customers.

 

So how could it be a factoring account unless it was a BUSINESS account? Consumer debt can't be factored!

 

 

Not to throw a monkey wrench in the stew pot.....

 

but

 

consumer recievables can be factored.

 

I do sell off blocks of recievables from time to time to a factoring company.

 

It is a simple matter of cash flow from a business perspective.

 

Marv,

 

Can you explain further? I've been looking for the laws that the statement I'd found had be referring to, but unable to find them.

 

By the way, you factor CURRENT accounts, right?

 

On those accounts that the dealership holds the note, for the purposes of cash flow, we will sell blocks of accounts to a factoring company.

 

Some of the blocks will be current accounts.

 

Some of the blocks will be past due accounts.

 

I don't ever sell the entire portfolio at any one time.

 

but, when they purchase delinquent accounts, they're not acting as a factoring company, they're acting as a CA...

 

I sell those accounts to manage money more productively for the company.

 

Many of the captive lenders sell off blocks of accounts from time to time.

 

The blocks of accounts will contain both current and past due accounts recievables.

 

I seldom make my decision regarding whether just the account is current or not, it is based mostly on an age factor.

 

I usually sell, based on that factor (age) alone.

 

For instance, my SO has a current MMCA account that as of last month has been sold for the 3rd time.

 

I have no idea of the legal ramnifications of a company reporting as a factoring company, but both the CDIA and Equifax, Experian, and TransUnion have established guidelines for Debt Collection/Factoring Companies.

 

 

but, the guidelines don't trump FCRA...the past due accounts are NOT bought as factored accounts...they're bought by a CA

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What I've gathered from my reading so far is that whether an account can be factored or not depends on whether it's an account governed by the UCC or not.

 

I've been following up on Pryan's earlier post about factoring companies being covered by UCC Article 9:

 

a little light reading...

 

http://straylight.law.cornell.edu/ucc/9/overview.html

 

Article 9 of the UCC is what "factoring companies" are based upon

 

also, for REAL factoring companies:

 

http://www.factoring.org/documents/commerc...factor04-04.pdf

 

Marv, are your accounts under the UCC?

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Some more notes from my file:

 

http://creditboards.com/forums/index.php?s...ndpost&p=792371

 

I'm not taking credit for all this. I ran around finding it and putting it together. Anyhow "factoring company" violations:

 

15 USC 1692e(12) -  The false representation or implication that accounts have been turned over to innocent purchasers for value

 

15 USC 1692e(2)(A) - Falsely characterizing the account as a "factoring company" account.

 

15 USC 1692e(8) - Communicating credit information which is known or which should be known to be false, by reporting the account as a "factoring company" account

 

15 USC 1692e(10) - Using any false representation or deceptive means to collect or attempt to collect any debt by reporting the account as a "factoring company" account

 

15 USC 1692e(12) -Alleging that the account was a "factoring company" account resulting in the false representation or implication that accounts have been turned over to innocent purchasers for value.

 

15 USC 1692e(2)(A)- by falsely reporting the legal status of the account as not in default

 

15 USC 1692f - Using unfair or unconscionable means to collect or attempt to collect any debt by reporting the account as a "factoring company" account to deceive current and potential creditors and to negatively impact my credit scores.

 

 

http://creditboards.com/forums/index.php?s...ndpost&p=794248

 

First do a "not mine"...if they verify...hit them with everything I wrote and demand they delete. Don't use too many words. Just the facts...or in this case the "factoring".

 

I think they'll get the message....trust me.

 

 

BTW: before you listen to me or anybody else, do your homework. Do you know what a factoring company is? hmmmm.

 

Answer: a factoring company buys debt...yes they do....BUT....it is receivables they buy. In other words, say a small businessman does not wish to do his own collecting, the account is "open" there are receivables due. He will sell to a factoring company at a discounted rate. This takes the burden away from him to collect AND he has a cash flow...win, win.

 

NOW: is that the defination of a JDB? Hit them hard.

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:) My pleasure. I guess we all have our hot buttons, and finding this "factoring company" nonsense on my CR immediately became one of mine :unsure: I decided I had to get to the bottom of this, one way or another.

 

I've been quietly researching and reading on this subject ever since my last post. I have yet to locate a factoring company site that claims to factor consumer credit card debt. You can bet they'd all be doing it if it was legal to do so. In any case, if factoring is controlled strictly by Article 9 of the UCC, then factoring must be restricted to the kinds of secured transactions (goods and services) and accounts governed by the UCC. Consumer credit card debt is specifically excluded. Accounts transferred strictly for the purposes of collection are also excluded.

 

Here is the section of Article 9 that describes specific exclusions:

http://straylight.law.cornell.edu/ucc/9/9-104.html

 

U.C.C. - ARTICLE 9 - SECURED TRANSACTIONS; SALES OF ACCOUNTS AND CHATTEL PAPER

..PART 1. SHORT TITLE, APPLICABILITY AND DEFINITIONS

 

--------------------------------------------------------------------------------

 

§ 9-104. Transactions Excluded From Article.

 

This Article does not apply

 

(a) to a security interest subject to any statute of the United States, to the extent that such statute governs the rights of parties to and third parties affected by transactions in particular types of property; or

( B ) to a landlord's lien; or

( C ) to a lien given by statute or other rule of law for services or materials except as provided in Section 9-310 on priority of such liens; or

(d) to a transfer of a claim for wages, salary or other compensation of an employee; or

(e) to a transfer by a government or governmental subdivision or agency; or

(f) to a sale of accounts or chattel paper as part of a sale of the business out of which they arose, or an assignment of accounts or chattel paper which is for the purpose of collection only, or a transfer of a right to payment under a contract to an assignee who is also to do the performance under the contract or a transfer of a single account to an assignee in whole or partial satisfaction of a preexisting indebtedness; or

(g) to a transfer of an interest in or claim in or under any policy of insurance, except as provided with respect to proceeds (Section 9-306) and priorities in proceeds (Section 9-312); or

(h) to a right represented by a judgment (other than a judgment taken on a right to payment which was collateral); or

(i) to any right of set-off; or

(j) except to the extent that provision is made for fixtures in Section 9-313, to the creation or transfer of an interest in or lien on real estate, including a lease or rents thereunder; or

(k) to a transfer in whole or in part of any claim arising out of tort; or

(l) to a transfer of an interest in any deposit account (subsection (1) of Section 9-105), except as provided with respect to proceeds (Section 9-306) and priorities in proceeds (Section 9-312).

 

As amended in 1972.

 

(emphasis added by poster)

 

Next I need to look more closely at the laws governing the consumer credit industry. I think there may be more details that I would want to know in there. But keep in mind too that once any account goes into default, the FDCPA and many state laws would distinguish between what may be factored vs what must be considered a collection account.

 

Marv is (of course!) correct that automobile financing can be factored, and most of the big factoring companies that I've researched do indeed accept accounts that are 30, 60, 90 and up to 120 days past due. Those companies usually have an actual in-house collection branch, and sometimes they have a right of recourse agreement with the OC if the account is uncollectible. I've not seen one that accepts accounts more than 120 days past due, so maybe there's a legal cut-off point in there that puts even a genuinely factorable account into the "collection" category and thus excluded from factoring.

 

The point that will affect most people on this subject, though, is that if CONSUMER CREDIT CARD debt can NOT be factored and COLLECTION ACCOUNTS can't be factored, then listing these type of accounts as FACTORING COMPANY ACCOUNTS has to be in blatant violation of the sections of FCRA and FDCPA quoted in above posts.

Edited by IDare

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thanks idare for this..just sent off a dispute with equifax disputing a so called factoring account monday..wish i would have be able to have read this before..but that is ok if they come back verified again i will definitely have alot to hit them with ..

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:grin: That's the thing, Zoe. I want to give people the ammo to blow this baloney off of their reports. Besides the damage done to your score by this misrepresentation as a current, open debt with a company that could be considered an OC (if it were a true factoring company account) I'm pretty sure that this bogus "factoring company" claim is used by these JDB's to confuse consumers and the courts as to which laws apply. I know this is an issue in my state. The only way it's going to be stopped is by consumers learning the laws and how to apply them.

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you know this is exactly some of what i am going to demand in my next letter to this ca..demanding that they send me copies of the laws that

gives them the authority to classify themselves as a factoring company

and report that my defaulted charged-off account is considered as a factoring account....heck they want even send validation of the debt

so this is pretty much because they do not have any..so why can they report this bogus factoring notation..if they bought my account when it was current to claim as being a factoring account then they would have proof to send me proofing the debt is mine correct??

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Exactly, Zoe. I think this is a *perfect* opportunity to use the approach PsychDoc described in his seminar last week. It sets up the ideal trap: either they provide the proof that they've violated the law, or they'd better take their toys off of your report and go home :dntknw:

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well they have until oct 8th to respond..if not then they will be getting a letter pertaining to this..i just sent another dispute to equifax stating to them that i do not have an account with this company and if i have no account with this company then how can i have a factoring account with them..and demanded deletion..this will be the 3rd time if it gets verified..

 

so i guess the next letter trip will be sent to the compliance mgr.and like i said demand copies of laws that give them the right to

classify them as a factoring company...

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So let me see if I understand correctly.. Listing as a Factory Company allows the JDB to list the debt as "opened" when they purchased it, instead of when the OC account opened. In doing this, the scores are artifically lowered as a motivation to get the creditor to pay.

 

 

sb

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Yes, from what I've read *real* factoring companies are allowed to list accounts as opened at the time they purchase them. After all, that's when the accounts are opened with them. (I'll post the source for that if I can find it again :glare: ) However, it's also my understanding that a CA can list an account "date opened" as the date they acquired the account, so I don't see a real difference there.

 

But according to other discussions of this in the past here, since the JDB is listing as a "factoring company" instead of a "collection agency" and placed in the accounts section instead of in the collections section of your CR, it apparently hits your score a lot harder. And yes, by "poisoning" your CR as much as possible they're obviously hoping to make you desperate enough to pay them to go away. Not like they care about LAWS. All they're interested in is your money, of course.

 

Even more important though is to watch out for re-aging, which seems to be another favorite tactic of these JDBs. The key date really would be the date of first delinquency leading to charge off, as required by the FCRA to determine the obsolescence date, and which *must* be the same date as the OC's. I keep seeing that some like to change the delinquency date to the date they purchased the account, which is a DEFINITE no-no. That would not only brutalize your score, it would cause the account to stay on your report longer than allowed by federal law. :angry:

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Next I need to look more closely at the laws governing the consumer credit industry. I think there may be more details that I would want to know in there. But keep in mind too that once any account goes into default, the FDCPA and many state laws would distinguish between what may be factored vs what must be considered a collection account.

 

<snip>

 

 

Found what I was looking for. Copying it here, since I posted it into a different thread in answer to another question earlier:

 

If a JDB tries to claim they bought your open-ended credit account while it was in good standing, you can show the judge the FDIC regulations that abolished the Holder-in-Due Course Doctrine:

 

http://www.fdic.gov/regulations/laws/rules/6500-2600.html

 

{{2-28-02 p.7161}}

 

FEDERAL TRADE COMMISSION TRADE REGULATION RULE CONCERNING THE PRESERVATION OF CONSUMERS' CLAIMS AND DEFENSES

 

Amongst other things, that rule prohibits the factoring of open-ended credit. Your CC account can't be sold to a factoring company. Period.

 

If the JDB admits they bought the debt after charge off, then they admit that they can NOT be a factoring company. The FTC is very clear on this: no matter what kind of account it was, if it's purchased after charge off, it's a collection account and it can't be factored. The End.

 

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Well I've read and tried to sort through this post, but I'm new to all this and not certain I "get it" all. How do I know if my account listed as "factoring" was purchased prior to charge off? I'm not 100% certain when the orig account was CO'd, but the date opened of the factoring account is 8/2005. The last update of the OC was also 8/2005. I'm going to guess they sold it as open then did the CO...not sure???

Is Sherman LNVN considered a JDB, factoring company, or both.?

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