Tough Financial Hardship CC Situation

[TheDeansClub]

Trying to help a friend and thought I'd pose the question to the board as I do research here on best course of action.  I'm having a little trouble deciding on the best advice to give here...

 

Backstory:  Financial hardship going back years.  Besides making some poor choices, extenuating circumstances exist... 

 

~3.5 years ago, 2 things converged - debtor decided to take highest balance and highest APR CC, and get Cap1 to zero-out the APR via 60-90 day late (thought that was the only way to get the offer).  Right before that ball rolled, Cap1 sold the account to a theretofore unknown CC Co.  Debtor decided to stick with the plan and on day 80-whatever, got the financial hardship, closed account 0% APR with the new CC Co.  Balance was $7K.  Fast-forward 3 years, this company supposedly sent 2 letters saying the financial hardship plan was expiring.  Debtor received no communication from them in the mail.  Received no email.  Company is claiming they sent them.  Company is saying the payment plan the account is under is no longer available and they've reinstated the original APR but did not reopen the account (at least to the debtor's knowledge they have not).  Debtor will not be able to manage under the reinstated APR (26%), balance is now ~$5K.  Debtor was under the impression that the payment plan was there until the account was paid to 0, as they closed the card - does not recall receiving any written confirmation of the payment plan terms, and it will take some time to dig through files (if they did provide something in writing, it is saved somewhere in a file).  Calling the company was bush league - seemingly no financial hardship department, agents who didn't seem to understand what options were available for financial hardship, could not answer whether the account was currently open or still closed, request to speak with a supervisor has so far gone unheeded - no returned phone call.

 

What I'm trying to determine firstly is - what rights does the debtor have here if any?  Is there any recourse for not receiving notification of this expiration?  Currently there is no option to transfer the balance.  I'm unsure whether to advise for a flat "withhold payment and settle."  But perhaps it has come to this.  By all accounts there are no professionals to speak with via phone for this CC Co.  Maybe this is just a strategy of "best of bad options to dump this creditor and move on." 

 

Appreciate help in brainstorming... 

[hdporter]

In my experience, any hardship payment terms have a limited term.  I can't imagine any company would extend a 0% APR repayment agreement without some type of periodic review of the favorable terms.  For all they might know, the account holder might have successfully attained a high paying job, or possibly marry into "money".   (btw, it's safe to say the account hasn't been reopened.)

 

While it's not necessary information in order to comment on this situation, it would be helpful to know the identity of the new account owner.  It's possible that someone with prior experience with this issuer (such as a hardship situation, or other account negotiation) might be able to cast light on how best to work with the issuer.

 

From a legal perspective, I don't think that failure to receive the communications noted change much.  That would be a different situation if the new owner had changed something previously agreed to with the hardship arrangement.  However, as I have suggested, I think it's unlikely that they terminated the arrangement early.  (If anything, it's possible that they extended it longer than intended.)

 

Bottom line, my take is that your friend (YF, hereon) has no leverage in this situation.  Well, YF does have the option you cite of withholding payment and then seeking to settle the balance for a lesser amount.  Or, of course, stiffing them entirely.  I suggest either possibly involve adverse consequences that are mostly undesirable.

 

Reviewing the history, in paying down about $2k of the balance over 3 years, that suggests a monthly hardship payment of approximately $60/mo.  Had the hardship agreement stayed intact, it would have taken another 7 years to repay the $5000 remaining balance.  Hypothetically, @ 26% apr, it would now take a monthly payment of approx. $130 to now pay off the account within those 7 years.

 

You don't relate YF's financial and credit situation, other than a suggestion that his credit is impaired in not having any viable option by which to transfer the balance at a lesser rate to another lender.

 

I don't want to be excessively presumptuous.  However, I'd suggest tightening up YF's budget by $20/week is warranted temporarily to start meeting the new payment terms of the account, with a medium term goal of securing lower cost financing (perhaps within a 2 year window).  The greater goal here should be ultimate strengthening of YF's credit history such that options by which to refinance this debt at a markedly lower rate open up.  Closing out this account in an adverse status (or if the tradeline currently has an adverse status, with a notation that the account wasn't satisfactorily paid) would be counter to that goal.

 

If a higher monthly payment can't be afforded for any reason, YF's greater financial picture is definitely due a review.  Again, I don't know YF's situation, but bankruptcy might be an appropriate option, if that provides a "reset" that permit YF to regain control over his/her financial circumstances.

[TheDeansClub]

Yeah sure. The new CC Co is Mercury.  I had never heard of them, and do not recall ever seeing them mentioned here before (have not looked them up here as of yet). 

 

YF (I'm rolling with it ;) was on track for a 5-yr payoff of this TL until covid happened and then payments went to a lower amount...

 

I've suggested BK - it's no use, YF won't budge there... Basically this TL was targeted to be the fall guy that allowed higher payments on the other TLs to get out of debt altogether.  Everything was working to that end and then the world turned upside down last year.  Besides BK, it appears this TL still needs to be the fall guy.  It doesn't appear that YF will avoid some rough waters.

[Anubis]

If I understand YF's situation from your description, other than the one 90-day late prior to the agreement all subsequent payments are reported as on-time?

 

If that's the case and their other accounts are all current I agree they need to find a way to at least keep up with the payments under the 26% APR as hdporter suggested, and I would additionally suggest they try to find a way to accelerate paying down the debt such as a part-time job.

 

The longer payments continue to reported as current, the older and less impactful that 90-day late will become and eventually should start opening up opportunities to re-finance the debt with more favorable terms.

 

I had a friend in a similar situation last year who finally took my advise and got a part-time job as a cashier at a local gas station for 16 hours/week which gave him an additional ~$600/mo to use towards paying down debt.  His debt started at over $10K and is already nearly cut in half.  YF in a similar situation could have the debt paid off in around a year instead of 7.

[TheDeansClub]

Edit: Original creditor was Barclays, not Cap1.

 

 

[TheDeansClub]

5 hours ago, Anubis said:

If I understand YF's situation from your description, other than the one 90-day late prior to the agreement all subsequent payments are reported as on-time?

 

If that's the case and their other accounts are all current I agree they need to find a way to at least keep up with the payments under the 26% APR as hdporter suggested, and I would additionally suggest they try to find a way to accelerate paying down the debt such as a part-time job.

 

The longer payments continue to reported as current, the older and less impactful that 90-day late will become and eventually should start opening up opportunities to re-finance the debt with more favorable terms.

 

I had a friend in a similar situation last year who finally took my advise and got a part-time job as a cashier at a local gas station for 16 hours/week which gave him an additional ~$600/mo to use towards paying down debt.  His debt started at over $10K and is already nearly cut in half.  YF in a similar situation could have the debt paid off in around a year instead of 7.

 

Thanks for the interest.

 

There was either a 30 + 60 day late, or 30, 60, 90 day late on this one TL.  But you understand correctly - everything else is current.  The snag with your suggestion lies in the extenuating circumstances.  Any and all extra income go to other expenditures that won't be rerouted - think special needs child territory.  I can suggest to move extra income towards the debt, but I suspect it would not be heeded, frankly.  In a no nonsense way, I am attempting to give straightforward advice about all the repercussions if throwing in the towel on this creditor ends up being the chosen route because I think my friend needs to hear that before pressing that button.  With that said, I have no experience with calling a creditor and being unable to get basic straightforward account information and having to deal with really incompetent personnel.  If I couldn't transfer the balance, I can't say I wouldn't be tempted at the nuclear option either.  If I were to put myself in those shoes, I understand the fatigue at this juncture.  Life and its complications outweigh a credit score, no question. 

 

Trying to present the mindset of this friend as best I can, here.

Edited February 20 by TheDeansClub
grammatical edit

[TheDeansClub]

An overlooked option is suggesting a debt management program.  Can anyone comment if you can still do debt management by including, say, 2 cards only?

[legaleagle2012]

Who is Mercury? They come up as a debt collector, not a buyer. I never heard of a buyer by that name. That aside, you have some leverage ..... Barclay's has private arbitration. Do you think they'll spend 5-6K in startup fees to argue an interest rate? I know I wouldn't. 

[hdporter]

6 hours ago, legaleagle2012 said:

Who is Mercury? They come up as a debt collector, not a buyer.

 

Mercury isn't an entity; it's a credit card brand issued by First Bank & Trust, who presumably purchased a subset of Barclays Arrival+ accounts, issuing new cards to the former Barclays account holders under the Mercury brand.

 

https://www.mercurycards.com

 

More relevant info: 

 

Edited February 22 by hdporter

[hdporter]

On 2/20/2021 at 12:35 PM, TheDeansClub said:

An overlooked option is suggesting a debt management program.  Can anyone comment if you can still do debt management by including, say, 2 cards only?

 

Understand that a debt management program is handled by a non-profit who negotiates on your behalf to find longer term repayments terms for a client's credit card debt that are sustainable.  This can involve reduced minimum payments and reduced interest rates.  It's traditionally a "holistic" approach.  Creditors have little interest in entering into long-term DM agreements if all of the client's outstanding debt isn't being addressed.  (A creditor might be willing to work one-on-one with a cardholder for a short 6-mo period without regard to other debt, but won't find it in its interest to make longer term concessions while the cardholder engages with other issuers without such concessions.)

 

With the limited, but informative, information presented re YF, it doesn't seem that a debt management program would be desirable.

[hdporter]

Follow up to @TheDeansClub: 

 

This topic has been brewing over the weekend without much forward motion.  I'll observe that an obstacle is that an ultimate objective and priorities haven't been clearly established.

 

Ultimately, YF must decide whether it's more important to try and resolve this without impairing credit, or if its better to seek an exit from this payment and accept any collateral damage to his/her credit.  There isn't likely a middle ground.

 

One option on the table would be what you initially suggested:  withhold payment and settle.  Although I might advise missing 2 payments (3, if necessary) and seeing who reaches out to determine whether they're more willing to put a reduced payment plan back on the table.  Just understand that the delinquencies reported in the interim might put any open accounts in good standing at risk of adverse action.

[centex]

There should have been SOME manner of written acknowledgment of a change in material terms...whether it was via email or regular mail likely depends on how the consumer was receiving their notices.  As others note, very few of these short-term reductions are 'until paid' except and unless the account was going to be zeroed out inside of six to twelve months. 

 

With a reduction to zero percent, how is there still ongoing payments on a balance that was only $7K to begin with that would produce a balance worth screwing the reports up even further?  In almost three years, there should have been more than $2K of the balance paid off. 

 

Unless the consumer wants to deal with more damage to the report, I would highly recommend a visit to the small, local bank they should have a relationship with and discuss with a lending officer.  The money won't be free, but it keeps further delinquency off of the report.  While a 60-90 day late is troubling, it is NOTHING compared to charge off notations AND a third-party purchaser making an appearance. 

[hdporter]

4 hours ago, centex said:

With a reduction to zero percent, how is there still ongoing payments on a balance that was only $7K to begin with that would produce a balance worth screwing the reports up even further?  In almost three years, there should have been more than $2K of the balance paid off. 

 

Unless the consumer wants to deal with more damage to the report, I would highly recommend a visit to the small, local bank they should have a relationship with and discuss with a lending officer.  The money won't be free, but it keeps further delinquency off of the report.  While a 60-90 day late is troubling, it is NOTHING compared to charge off notations AND a third-party purchaser making an appearance. 

I've presumed that the hardship payment amount (not specified) was approx $60/mo., which would repay about $2k over a year period.

 

Generally speaking, I have similar sentiments.  A $5k isn't something to take a credit smack down over.  Of course, we're not privy to the full extenuating circumstances, nor have any idea of other existing financial commitments, much less what flexibility is inherent in the current situation.  A comprehensive remedy to the current straits will review the entire picture, not this single debt.

 

There are signs of additional adverse credit circumstances.  The original post states that a balance transfer of the debt isn't an option.  That suggests at least one transfer card had been applied for and denied.  That may indicate that a local bank may not be an option on tap.  (Besides, given cited cash constraints, it's very unlikely that a term loan is a feasible alternative, given a likely monthly payment that may be in the ballpark as the new minimum on the existing card.)

 

Again, with the information at hand, my recommendation continues to be to undertake whatever measures are necessary to pay the higher minimums of the existing card.  Continue to improve overall credit standing until such time as YF can qualify for a 0% BT card.

 

Crash and burning this debt will likely set YF back by at least 2-4 years in future credit qualification (and likely have added costs beyond that). 

[Anubis]

On 2/20/2021 at 10:10 AM, TheDeansClub said:

 

Thanks for the interest.

 

There was either a 30 + 60 day late, or 30, 60, 90 day late on this one TL.  But you understand correctly - everything else is current.  The snag with your suggestion lies in the extenuating circumstances.  Any and all extra income go to other expenditures that won't be rerouted - think special needs child territory.  I can suggest to move extra income towards the debt, but I suspect it would not be heeded, frankly.  In a no nonsense way, I am attempting to give straightforward advice about all the repercussions if throwing in the towel on this creditor ends up being the chosen route because I think my friend needs to hear that before pressing that button.  With that said, I have no experience with calling a creditor and being unable to get basic straightforward account information and having to deal with really incompetent personnel.  If I couldn't transfer the balance, I can't say I wouldn't be tempted at the nuclear option either.  If I were to put myself in those shoes, I understand the fatigue at this juncture.  Life and its complications outweigh a credit score, no question. 

 

Trying to present the mindset of this friend as best I can, here.

I'm always dubious of claims that there were no written communications from a creditor regarding significant changes to an account, and while I've had my share of head-shaking phone calls with "customer service" reps across many industries, follow-up and/or escalation calls usually yield some level of resolution (even if the customer disagrees).

 

From the outside looking in, I get the impression that YF is so laser-beam focused on their belief that they should be permitted to continue making payments at 0% that they've let that belief cloud their entire handling and understanding of the situation.  Maybe that genuinely was the original agreement, but without written verification it's their word against the creditor, and guess who usually wins that argument?

 

Kudos to you for trying to be supportive of a friend in a tough spot, but it sounds like YF is committed to putting themselves in a no-win situation.  The only remaining suggestion I have that hasn't been mentioned is for them to try appealing to the CEO/executive relations team with a heartfelt letter that doesn't point fingers or make accusations but simply explains their hardship and asks for relief.

[ladyran]

write a dispute in error letter asking for the complete file to include any payment plans that were ever made on the account.  it is hard to fight when you don't know what the terms were and them saying is like asking the rattle snake if he will bite you. 

 

additionally check the credit reports against each other and see if there are reporting the same or if they are lacking in areas of reporting such as any history.  a credit report dispute may be in order to find the solution to this problem.