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”
33 Responses to “Portfolio Recovery Associates debt collection scam”
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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
Thanks for the information. I wondered who they are and why they are calling me since I have great credit and no outstanding debts. Then I remembered that my mother passed away over 8 years ago and there were a couple of debts that had my name on but not as a co-signer. I will continue to ignore the calls as I have done over the past month or so.
Janice,
Thanks for your comment. One of things we are adamant about … do not ignore the calls/letters from the collection agencies. You have 3 issues here that you may not be aware of.
We suggest you have a 15 minute analysis with us about Portfolio or go to our ABOUT US for more options regarding Portfolio. You will need to take action to against the collection agency. Do not ignore this!
~Next Level Credit~
There are several issues which I have researched and found most useful. First of all if the debt is past the SOL you really do not need to do much other than ignore the collection agencies if it is just letters or tell them that it is past the SOL if they call and you know your rights. As far as issuance of 1099C that is also a gray area as to who can file it and there are time limitations on filing this also. According to the IRS 1. An identifyable event is “A cancellation or extinguishment when the statute of limitations for collecting the debt expires…” Form 1099-C instructions page 3 “When a debt is cancelled,” 2. The 1099-C must be issued within 12 months of the identifyable event. Form 1099-C instructions, page 2, “Who must file.” So if your debt say expired 2007 because of SOL then they would have to issue a 1099c in 2008. There are also penalties for not filing these on time of $5,000. Also Portfolio can not issue a 1099C for the full amount of your debt as first of all they did not pay or lose this amount of monies. The other issue is that principal and interest has to be defined and they do not have that information as it has to pertain to the original debt not what they have as a total. As it is almost impossible to do this with credit cards unless they were the original creditor.
There really is nothing to be gained by dealing or communicating with Portfolio Recovery unless they issue a bogus 1099c. Otherwise tell them to go pound sand or take you to court. They wont take you to court because they will lose because of the SOL defense and they know it. They prey on the weak who do not know their rights. If you are informed and tell them your rights they will stop harassing as they will move on to the next who does not.
All this information comes from personal experience with my own credit and dealing with this nonsense.
Alex,
Thanks for your comment. We always welcome information from consumers. You are very informed. Great to read. However, NO it is not wise to ignore SOL alleged accounts. The CAs will still sue and SOL is NOT a strong defense in the court. Yes the CA will take you to court. Happens all the time.
Portfolio and all other CAs do not care about SOL. Some of them specialize in SOL accounts. We do not know a lot about 1099 but it happens. And Portfolio does not care about the IRS. The CAs DO NOT FOLLOW RULES!
A consumer cannot ignore the CA. That is an ostrich mentality.
~Next Level Credit~
I just received a call from Portfolio Recovery Associates today about a debt from 2000 – past the SOL in my state – and decided to do some research on them. That’s how I came across your post here.
What I’m wondering is this: I am pretty sure the debt is legit, however it is past the SOL. I wouldn’t mind paying it to get it off my credit report (besides the obvious moral issues), but I cannot pay it in full any time soon. What step should I take first? Ask for validation or point out that it is SOL and ignore it until I can pay it in full?
Thank you for your suggestions in advance!
Bill,
Thanks for your comment. This is SOL. DO NOT PAY PORTFOLIO!!!
Write a letter use the SOL letter on our site. PORTFOLIO DOES NOT OWN THE DEBT.
If you would like more advice on PORTFOLIO and what to do next, you will need to sign in for a 15 min free analysis or one hour session (see ABOUT US page).
~Next Level Credit~
Thanks for the info. I don’t know who these ppl are but they are calling my cell phone 2 to 3 times per day. All of the calls come from different telephone numbers. I don’t for the life of me know how they got my phone number. I never pick the phone when they call. If a number is unfamiliar I don’t answer. I just left them a message in their General mailbox telling them I don’t know who they are and what they want. I don’t owe any money It’s just annoying. I told them to stop calling me and left my cell phone number. I hope it stops.
Kate,
Thanks for your comment. You need to ask PRA for a letter and then write back to them – challenge the validity. That’s it.
Go to our HOME PAGE and set up a 15 min free analysis with us if you have more questions for what to do with Portfolio.
~Next Level Credit~
Got a letter today from Portfolio Recovery. The letter states that they are trying to collect on a credit card debt from 1996. It shows an account number from Chase bank, for a VISA card. My credit reports from 2003-2004 show the Chase account as closed and written off as bad debt. After 2004, my credit report has been clean. My credit report from early 2010 shows my FICO score in the high 700’s. Should I just ignore the letter? Reading about the 1099’s that Portfolio issues kind of scares me.
Jamie,
Thanks for your comment. This is very old and SOL applies. This is normal for PRA. You should write back to them – don’t ignore. You can acquire the letter from our site and use that.
~Next Level Credit~
How old does your debt have to be before it goes away?
Krista,
Thanks for your comment. Your question is not specific enough for us to answer.
In general, if you are referring to your credit report, the charge off will come off your report in 7 years from the date of last payment.
If you have more questions, please go to our home page for a 15 min free analysis and we would be happy to answer more specifically.
~Next Level Credit~
I just received a letter from Portfolio for a nicor bill of $678.59 in my DAUGHTERS name!! first of all, my daughter just turned 18 in July and the name on the letter is her old name as my daughter has been adopted by my husband 7 yrs ago. second, she was a minor when they bought this info as the letter says they bought this account on 5/24/2007. I called Nicor they have no listing for her ss #. they also checked their database for what was sold to collections for her name and it showed nothing there either. The collection agency, Portfolio tells me they need to talk to my daughter as it is in her name and not mine! I have no info as to the date of the bill or address it was suppose to be racked up at…I did run her credit report and nothing on it from nicor at all. She has never had service in her name like I said as she is a minor…What to do??
Kelly,
Thanks for your comment.
We never heard of nicor but that does not matter. Portfolio is very big and very sleazy.
You still have to respond to PRA and they will stop attempting to collect. We realize it is not her account but understand that this is very corrupt.
Go to our home page and set up a 15 min analysis with us and we will direct you as to what you need to do.
~Next Level Credit~
Someone is watching for people that check their credit. I know, I know, yet . . .
I just had a phone call from an automated system which spoke a number too fast for my daughter to catch it but it was these guys.
This phone call comes just a couple of days after I did the free credit check with all three reporting outfits for the first time in like five years. I have not applied for any loans in the past several years and almost no one had looked at them and I was clean as the driven snow. My last run in with any collector was over ten years ago during my divorce.
Now this. Coincidence? I highly doubt it. I work with web applications and databases all day every day. Someone is watching who is watching and fishing based on that. It may even be legal.
My husband and I received phone calls from PRA in Jan/2009. We quickly responded with a letter stating our rights, etc. We never heard from them again. Now, we get a letter from the IRS saying PRA had turned in the amount as a cancellation of debt. Are we obligated to pay this or can we appeal? What would you suggest we do? Thank you for your time.
Megan
Thank for your comment. Get an attorney that specializes in collection debt defense and they can deal with the IRS with this. Do not pay PRA or IRS.
~Next Level Credit~
I just got a call from these people, naturally the # on my caller id shows to be a non-pub #, but the name on the id is portfolio.
They called about a debt, that isn’t even on my credit report any longer, in fact, it was a capitol one credit card, ex husband’s, and Capitol One’s collection agency, NCO, harrassed me so badly, that I found an atty who specializes in this sort of thing, and works on contingency, didn’t cost me a dime out of pocket. He sued, we won, $30,000.00 Thank you Dean Malone in Dallas!
If they call me again, I’ll be calling mr malone and we can sue again, I can always use the extra cash.
My credit is clean now, and if any of these bottom feeders put something on it, there will be big trouble, once a debt is off your credit, unless it’s reactivated by you being stupid enough to make a payment, it stays off.
Don’t let these people get to you, especially after the SOL runs out.
SOL stands for statute of limitations for you, and Sh1t out of luck for them.
Been being harassed Portfolio for well over a year now, 3-4 calls a day as early as 7am and late at night.
After google searching info on them I am truly amazed at how many other people are putting up with these lowlife third party con-artists trying to collect ancient debts that the statute if limitations has long past.
My question is how they continue to stay in business?
Joe
Thanks for your comment.
You will need to stop Portfolio unless you like the calls. You can stop them.
Go to our home page to sign in for an analysis this week for advice for what to do next.
~Next Level Credit~
I talked to Portfolio today for the first time. They called my son’s cell phone asking for me. I called them back, the lady was nice. Confirmed my name and address and told me it was for an account last paid in 2003. I told her it was my understanding that account was already taken care of and that I would have to look into it. She said ok have a nice day. What can I expect from them going forward?
RDI
Thanks for your comment. Portfolio will call and send letters to you most likely. If that happens, sign in to our home page for an analysis, we may be able to help. Not sure.
Do not talk to Portfolio or pay them!
~Next Level Credit~