My Experience Settling a Credit Card Debt with Citibank: Paid, was a charge-off

If you are looking for information on settling a credit debt with Citi, then you are probably familiar with the following:

“The above referenced account has placed with our company for collection. We’ve tried to reach you in an effort to discuss the account but have been unsuccessful in that effort. Your account however, remains in an active collection status…”

You are also probably trying to find out the best way to proceed in this situation, so I thought I’d post my personal experience here. In fact, I should have done what you are doing right now, I should’ve researched before I tried to settle this debt. Unfortunately I didn’t.

Citi’s Platinum Select Master Card, was my first credit card. I got it when I was a struggling college student and as you now can imagine, I didn’t handle credit wisely back then. I’m now trying to clean up this mess as much as possible. Hopefully, my experience will shed some light on what you should or should not do when calling a collection agency.

This debt had been haunting me for a long time. When I finally called to settle, my card had been delinquent for more than a year and a half. I had received a letter by a collection agency called Protocol Recovery Service, Inc., in which they proposed four different settlement offers: one reduced lump sum payment or three different monthly payment plans (ranging from 2 months to 10 months). The 10 month payment option was the longest but also the most expensive, four times more than the lump sum option. The lump sum amount was 50% less than what I think I originally owed Citi (I say “think”, because after all this time I was not sure anymore exactly how much I owed, though I had an idea).

Initially, I started by calling Citi Cards to see if I could deal with them directly and avoid dealing with a collection agency. Unfortunately it was too late for this, my debt had been sold to “Protocol Recovery Service”. So, I gave them a call. I did what all the articles that I read later on recommend NOT TO DO: I didn’t negotiate the amount to be paid, I didn’t ask for a permanent deletion of my debt from my credit files, I didn’t ask for anything in writing and I paid over the phone by check. As I was about to pay, they informed me there was an extra charge because the settlement offer they had sent had already “expired”, and I fell for it. I said ok and paid. I was told I was going to receive a letter stating that I had settled this debt, but I never received anything.

I was anxious to just get this over with and was glad that I was able to pay off my debt. I chose to pay the lump sum, which in the end was the cheapest option. Not a bad deal, but knowing what I know now, I would’ve been glad to pay in full in order to get the collection off my report altogether. The account now shows on my report as “Current Closed” and “Paid, was a charge-off” (a charge-off is one of the worst things that can be on your credit report, a paid charge-off looks a little better, but still nothing to rave about). If I had known, I would’ve tried to have the “charge-off” deleted from my files, though from what I’ve read, most people say that Citi will never agree to this. I was not aware there were other options, I guess you’ll never know unless you try. Months later and after finally doing some research, I tried calling this collection agency back, but of-course I wasn’t able to convince them to take the charge-off from my report. Too late, they already had my money.

UPDATE: I’ve been able to successfully remove two other delinquent accounts from my reports by negotiating with the respective collection agencies, so I can confirm this is possible (a “Pay for Delete” as some people call it).

So, what should you try to do when calling a collection agency to settle a debt? Here’s what a lot of experts recommend:

• Get a copy of your credit report from one of the three credit bureaus and find out which collection agency is reporting your debt.
• Before you attempt to settle a debt, check how old your debt is. A negative mark on your your credit report will disappear after seven years.
• It’s usually best to negotiate with collection companies via regular mail, so you have written proof of all your actions.
• Negotiate the amount to be paid, most companies pay literally pennies on the dollar for the debts on which they are trying to collect.
• Ask for a permanent deletion of the debt from your credit report (a deletion is possible, but that doesn’t mean all creditors will agree to it).
• Get everything in writing. If you don’t have it in writing, it’s like it never happened!

Don’t forget to keep researching about this until you are ready to make a move, here are a couple of good articles on this subject: How to settle with a debt collector and Debt Settlement Advice. Also, don’t forget to leave me a comment with your story or progress on this!