NEW CASTLE —
(This is the first installment of “Dave Says,” a weekly column featuring the financial advice nationally syndicated radio host Dave Ramsey. His column is filled with timely, relevant questions and answers taken from actual letters and calls on Ramsey's radio program, “The Dave Ramsey Show.”)
Dear Dave: I have old credit card debt that goes back a few years. The account has been sold and re-sold to several collection companies. The limit on the card was $300, but with late charges and fees I now owe $1,500. Am I liable for the extra $1,200?
Dear Monica: You agreed to their terms, which included the right to charge fees and penalties. Legally, they can do this. The honorable thing would be to send the company you contracted with a check for the full amount.
However, that company no longer owns the debt, and they won’t get the money. They sold the debt. The present holder is just hoping to get something out of it. They buy debt in volume, dirt cheap, and whatever they can collect from any creditor is profit.
The current collection company would probably be thrilled to settle for a lot less than face value. Make them an offer, but start really low. You can probably meet them somewhere in the middle and settle this for around $500.
Do not give them any money until you have in your hand – on paper, in writing – a statement showing the amount for which they will settle, and do not give them electronic access to your bank account, either.
Once you have this in hand, send them a cashier’s check or money order, and keep a copy of that payment and the letter for the rest of your natural life!
Dear Dave: Your plan has been a real blessing to us. Last week, my mother-in-law told my husband they haven’t paid their property taxes yet. Three thousand dollars is due. I love my in-laws, but they’re big spenders. They’ve got plenty of money and love to take lots of trips. We make good money, too, and could help them out, but we’re afraid this may be just the tip of the iceberg. What’s your advice on handling this?