Historically, consumers have sometimes been harassed or even intimidated by debt collectors. However, federal guidance and actions against creditors in recent years has led many debt collectors to adopt more consumer-friendly approaches, including the fairly recent concept of “pay for delete.”
What is pay for delete?
This usually refers to a situation when a debt collector agrees to remove a collection account from your credit reports when you’ve completed a payment agreement. While it may sound like a ploy, it is a legitimate change in credit reporting policy for three of the largest debt buyers. So, what is a debt buyer? Essentially, they’re debt collection companies that actually buy delinquent debt accounts from creditors rather than being paid by those creditors to collect debts. Midland Credit Management (MCM), Portfolio Recovery Associates (PRA) and Cavalry Portfolio are the three large companies we’re referring to.
These companies’ pay-for-delete policies can apply to your account whether you negotiate a settlement, set up a payment plan or pay in full. However, because there are some differences in each of the companies’ policies, it’s important to understand the specifics for the one you may be dealing with.
How these 3 debt buyers approach pay for delete
Like other large debt buyers and collectors, MCM is generally willing to negotiate a settlement – either for less than the full value of the debt, or through the establishment of a payment plan. However, they set themselves apart from their competitors in October 2017 when they began offering a “grace period” during which they do not report newly acquired accounts to the credit bureaus.
In their updated reporting policy, MCM states that if a consumer begins payment against a debt within three months of the initial notice by mail and continues to make monthly payments until the debt or settlement is satisfied, MCM will not report the account to the credit bureaus. This is a unique practice in the industry according to Michael Bovee, co-founder of Resolve. For consumers, this means negotiating a settlement and protecting your credit is easier than ever – if MCM is the collector on your account.
Keep in mind, though, that MCM’s policy is not as consumer friendly as some of its competitors. If you don’t start payments within the initial three months, MCM will begin reporting your account to the credit bureaus. It will only stop reporting when you pay the account in full (or complete payments on a negotiated settlement) once it is more than two years since the date of delinquency for your account.
For example, PRA does not offer a grace period like MCM. Instead, PRA may work with you to negotiate a settlement or payment plan, but once your account is paid, PRA will contact the credit bureaus to request that the account be removed from your reports, regardless of the age of the debt. According to the company website, PRA contacts the credit bureaus about 30 days after your final payment posts.
Likewise, Cavalry Portfolio began a pay-for-delete approach early this year. Like PRA, Cavalry requests that credit reporting bureaus remove accounts from a consumer’s credit reports that are settled or paid in full – regardless of the debt’s age – about 30 days after the final payment posts.
How to benefit from pay for delete
Most creditors charge off an account when it is 180 days past due. This means that your original creditor records your debt as a loss. In most cases, once your original account is charged off, and sold, it is reported by the creditor to the credit bureaus and appears as a charge off with zero balance. This remains on your credit report for seven years. While there has been a notable shift in this approach with a few creditors very recently, where some have enacted a policy to have delinquent accounts removed from credit reports upon sale of those accounts, it is in your best interest to not also have a collection account on your report.
To avoid this, your first step is to find out if your debt has been purchased, and if so, by whom. If it is MCM, settling quickly before they begin reporting your account to the credit bureaus may be in your best interest. If PRA or Cavalry is the buyer, you may have a bit more time to determine how and if you are able to settle or set up a payment plan.
To learn more about debt buyers and the specifics for dealing with them, read “What is a debt buyer and why should you care?” Additionally, you may want to learn about debt settlement to help you understand your options for negotiating.
Need help figuring out what to do about your debt? You can access the Resolve financial management platform and receive guidance from our experts for free. Get started here.