Portfolio Recovery Associates debt collection scam
Filed Under: Collections
Filed Under: Collections
Apr 16 · by Next Level Credit
This collection agency is located in Virginia and known for buying very old worthless debt as far back as the 1990’s. So you ask why are they buying debt that is over ten years old? Number one – they could send them to consumers who are convinced they need to pay it. Number two – creative accounting tactics (per Bud Hibbs). Look this word up on wikipedia…”at the root of accounting scandals”.
Here is the mentality of PRA: The debt is expired and legally outside the SOL. The consumer knows this and will not pay PRA. However, what if you have to pay the IRS when PRA sends the consumer a 1099C? Madness!!! Then Portfolio Recovery Associates receives a tax deduction too. Madness!!!
Technically this would not be a dunning letter which is normally sent to the consumer. If you EVER receive a 1099C from PRA or any other collection agency, contact a tax professional. Also, send PRA a VOD letter.
Asset Acceptance Corporation has been using this scheme for a long time. The “alleged” account needs to be validated regardless of what type of notice you receive. How is PRA going to send a 1099C if they are not able to validate the debt? Contact your Attorney General and report a complaint and fight back.
NEXT LEVEL CREDIT
“Taking Your Credit to the Next Level”
Comments RSS 
sweet info, I really enjoyed your post. Keep up the good work
Now that is an awesome post. I will be sure to come back and tell others about your site. Keep up the good work.
If you owe someone a debt, and that someone discharges the debt and writes it off, they CAN issue you a 1099-C no matter what you think. A 1099-C is NOT for your employer to send you something for your wages. A 1099-C is exactly the form that is used to report to the IRS that a company has forgiven a debt – it’s even titled “Cancellation of Debt”.
This IS reportable income, and it IS taxable, and it more than likely will affect your income tax return, unless you don’t make enough to file taxes.
I’m not a collections attorney, nor a litigation attorney, but your company, giving legal advice stating that a company writing off debt is not legally able to send the debtor a 1099-C is completely inaccurate. The validation part is correct – if you ask for validation, they do have to validate it. But once validated, they CAN send you a 1099-C. If you don’t agree with their validation, file a lawsuit against them for doing things you claim is illegal. But don’t tell people that creditors cannot issue 1099-C’s for canceled debt because you’re giving incorrect legal information.
Vegas Atty,
Thank you for your comment. We did not write about the 1099 for employees in this article. The 1099 is for an independant contractor.
Please understand how this is being used with junk debt buyers. It is not being used for “cancellation of debt”. It is being used to attempt to collect an alleged debt. The junk debt buyer is not writing off the debt. We did not write that creditors cannot issue 1099Cs. This is strictly about junk debt. This is a scam tactic.
Also, we are not giving legal advice. We have a disclaimer on our contact page.
Hopefully, this clarifies the 1099c and why junk debt buyers do this.
~Next Level Credit~
Re: Next Level Credit
The particular line I was referring to was the following, and I quote:
“Asset Acceptance Corporation has been using this scheme for a long time. This cannot be reported as INCOME on a 1099C. Madness!!! You did not work for the debt collector. MADNESS!!!”
I read that to understand that you are saying the Asset Acceptance Corp (one of the big offenders in my book) cannot report the difference between what the debtor owes and what the debtor settles for, on a 1099-C. If I misunderstood that then I apologize. But if I did not, then that assertion is incorrect. If you owe $10,000.00 and they settle with you for $2k, then they can, and often will, report the $8k difference using a 1099-C, and they have the legal right to do it – settlement or not. Your advice to contact a tax attorney is a good one, I’m not a tax attorney (can’t stand the IRS personally) but I know that, just like lawsuits, ignoring the IRS doesn’t make them go away!
The statute of limitations on enforcing a written contract in your state only has to deal with whether the company can file a lawsuit to compel the courts to enter a judgment against the debtor enabling them to force collection via wage garnishments and other methods. If a debt it past the SOL then it does not mean the creditor cannot settle it with you and it does not mean that they cannot ‘dunn’ you for the difference via a 1099-C requiring you to pay income tax on the difference. So saying AAC cannot issue a 1099-C because ‘you did not work for the debt collector’ is, in itself, an incorrect blanket statement. It would be true if AAC did not own the debt and if the debtor had already received a 1099-C, otherwise, if AAC owned the debt and had not 1099-C’d the debtor, then they would have the legal right to issue a 1099-C, regardless of whether the debtor worked for the debt collector.
Vegas Atty,
Please understand that Asset Acceptance is not using 1099C as an independant contractor basis. Nor are they using it for cancellation of debt. Also, a consumer should not settle with a junk debt buyer for any amount. (Judgment excluded.)
You are correct in the fact that the 1099C can be used with an original creditor.
However, the collection agency is not using this in the legal manner as it should be used. AAC is corrupt and is a junk debt buyer. Yes one of the worst in this country.
In regards to the SOL and the 1099, it is not possible to enforce collection and render a judgment against the consumer. If the account is past the SOL, it means that the collection is not enforceable. The “collection account” remains but the 1099 would not make a difference to collect or not. Of course, if there is a judgment ruled, that is an entire different situation.
The statement about “working for the debt collector” has to be changed because that is written in the aspect of an independant contractor.
~Next Level Credit~
People at PRS continue to call me to collect a debt from someone with a similar, but not exact name as I. The residence history is different too. When I tell them this, they accuse me of lying. Very aggressive, threatening and interrogate like the KGB. After checking them out on the internet, it is apparent that they are predators that prey on poorer and unsophisticated people that can’t fight back. Wealthy people have attorneys to deal with this stuff. They need to be shut down! Since it operates across state lines, it is a Federal thing. Contact your Senator and Congressman and demand action! Obama is for the little guy so send emails to the Whitehouse too. Let get it done!
Received CP2000 from IRS that Portfolio Recovery Associates had submitted Form 1099C for cancelled debt to IRS and “provided me a copy.” Never heard of them and the notice form IRS gives only their (PRA) name and amount of cancelled debt. Thus I owed money for my 2008 income. Merry Christmas
I just got a letter from Portfolio Recovery Associates, LLC. The debt and company (Cellular One) were unfamiliar to me, so I called the number on the letter thinking that maybe it was an identity theft problem. They informed me that they were collecting for Cellular One for a debt owed from 1992 for $756.07!
I told them I had no idea what debt they were talking about. I had a cell phone at that time, but don’t recall owing them money. Never has anything from Cellular One shown up on my credit report. I have never heard anything about owing them money until now 18 years later.
I have excellent credit and own 2 businesses. I don’t want them screwing around illegally with my credit. I am not going to pay them a dime and will report them to whomever I need to.
Any thoughts? This is a first for me.
Doug,
Thanks for your comment. This account falls outside the statute of limitations due to the age. It is too old for a collector to collect upon. However, they will attempt.
This matter can be quickly eliminated with a letter.
Go to our home page http://nextlevelunlimited.net and enter your number for an analysis as soon as possible.
~Next Level Credit~
FORM 8-K
PORTFOLIO RECOVERY ASSOCIATES, INC.
ANNUAL BONUS PLAN
June 4, 2010
Purposes of the Bonus Plan
To bypass IRS Code 162(m) which limits the Company’s federal income tax deductibility of compensation paid to the Chief Executive Officer Steven D. Fredrickson and the three other most highly compensated officers unless such compensation qualifies as “performance-based compensation” under Code Section 162(m).
The Bonus Plan
At the 2010 Annual Meeting, Company shareholders also approved the adoption of the Portfolio Recovery Associates, Inc. Annual Bonus Plan (the “Bonus Plan”), which was adopted by the Board on March 19, 2010, subject to shareholder approval.
The Compensation Committee of the Board of Directors (or a subcommittee thereof) will administer the Bonus Plan and, subject to the terms thereof, has the sole discretion to determine the amounts, terms and conditions of each award; however, the maximum amount payable to a participant in respect of any award under the Bonus Plan in any 12-month period is $2,000,000.
CEO Steven D. Fredrickson and any other executive officer of the Company or of any affiliate may be selected by the Compensation Committee to receive an award under the Bonus Plan for any year, and any such selection generally must occur prior to the expiration of 25% of the applicable “performance period” (i.e., the fiscal year or portion thereof that will be used for measuring actual performance).
For each such performance period, the Compensation Committee will establish
(a) the performance goals based on business and financial criteria and
(b) a formula for calculating a participant’s award based on actual performance as compared to the pre-established performance goals.
The Bonus Plan is designed so that the awards made there under will satisfy the requirements for “performance-based” compensation within the meaning of IRS Code 162(m).
3.1. Eligibility Only CEO Steven D. Fredrickson or officers chosen by the compensation committee consisting of “outside directors” David Nathan Roberts and John E. Fuller. John Fuller is the COB at Dealer Services Corporation where he also sits with David N. Roberts, the UFO.
4.5. Maximum Award – $2,000,000 in any 12-month period.
5.2. Section 162(m) of the Code. Unless otherwise determined by the Committee, the provisions of this Plan shall be administered and interpreted in accordance with Section 162(m) of the Code to ensure the deductibility by the Company of the payment of Awards.
The purposes of the Plan are to advance the interests of the Company and its stockholders and assist the Company in attracting and retaining executive officers of the Company and its Affiliates who, because of the extent of their responsibilities can make significant contributions to the Company’s success by their ability, industry, loyalty and exceptional services, by providing incentives and financial rewards to such executive officers.
http://www.sec.gov/Archives/edgar/data/1185348/000129993310002302/exhibit2.htm