'Charge off Account' on statement - what does it mean?

[andrew1]

I have an old statement I received after a CCA request showing the following on a credit card:

 

Balance Brought Forward £2855

Charge Off Account £2744CR

Refund of interest £111 CR

 

This account was sold to a DCA can anyone tell me exactly what this terminology means please?

 

 

Thanks

 

Sarah

[Mistermind]

I have an old statement I received after a CCA request showing the following on a credit card:

 

Balance Brought Forward £2855

Charge Off Account £2744CR

Refund of interest £111 CR

 

This account was sold to a DCA can anyone tell me exactly what this terminology means please?

 

Thanks

 

Sarah

 

Hi Sarah.

 

Nowadays, when asked an outlandish question, always google. I did, with the results as follows.

 

I understand that Egg has written off £2744 of your o/s balance as Egg assets lost, i.e. they have deducted that much from company assets, not expecting to collect. If they do eventually collect a portion thereof via the DCA (whether upfront or upback), then fine, they will add something back into the company balance sheet, but under a different accounting category.

 

They have also written off £111 as interest. This is probably interest they have already levied on your account on paper, but which they now do not expect to be paid by yourself. I suggest they have written off this interest item separately, for reasons of lightening tax liability.

 

Best regards,

 

Mistermind

 

http://www.stretcher.com/stories/03/03aug25c.cfm

Can you describe or define what the term "charge off" means concerning credit cards and credit reports? I am seeing it quite often and do not quite understand what it signifies. Thanks for your help.

Patty in Louisiana

 

Patty's right. You are seeing the term "charge off" more frequently. That's because about 1% of all credit card debt is ultimately charged off. And, whether you struggle to make credit card payments or you have a perfect credit history, charge offs will effect your finances.

 

Let's begin by finding out what a charge off really is. Wachovia Bank offered a good definition on their website "The removal of an account from a credit card issuer's books as an asset after it has been delinquent for a period of time, usually 180 days. When an account is charged off, the credit card issuer absorbs the outstanding balance as a loss."

 

For those of you who don't speak "financialese" that means that a "charge off" or "write off" is really just an accounting entry. The lender is saying that they don't expect to collect the debt and are not willing to claim it as an asset of the company any longer.

 

But it will not affect whether the borrower still owes the money. A charge off does not free you from the debt. Think of it this way. Suppose you borrowed $100 from Joe. After a year passes, he doesn't really expect to get his money back. Mentally he's "written off" the loan. He doesn't believe that your IOU has value any more. But, that doesn't mean that you don't still owe Joe $100. You do.

 

In fact, in the world of credit card debt, it's possible that it will be harder to avoid paying the debt after it has been written off. That's because the original lender often sells those debts to a third party when they write them off. And the third party, often a collection agency, gets to keep any money that they collect. So they will work very hard to collect as much as they can. Even if that means using questionable pressure tactics.

 

Note that it's the lender who gets to decide whether to write-off a debt as being uncorrectable. You may have lost your job six months ago and not made a payment since. But you really plan on making one next month. That doesn't prevent the lender from writing off the debt.

 

On the other hand, in approximately 50% of the cases, charge offs occur when a borrower declares bankruptcy. Between one and 1.5 million people declare bankruptcy each year. Their bankruptcy triggers the charge off.

[andrew1]

Hey, thanks for that, it's not actually Egg, I just stuck it on here because I didn't want my card holder to see me asking the question ( too many MIB's!) but that explains it. It's not so much a point of not wanting to pay it back, but quite how the mechanics behind it work I'm more interested in. A DCA has bought this and asking for more than the balance showing on the last statement from the Card company before they bought it some 3 years ago. I'd like to reconcile the difference between what they paid for it, what the Card company say is owed and what the DCA are now asking for. I know what they paid for it is of no business of mine, it was a commercial transaction, but I'm a fully fledged member of the Cabot Fan Club and NO stones are left unturned.. They haven't come up with an Agreement yet, long way to go before they get a cent out of me...

 

 

Sarah

[Mistermind]

Some card companies continue to charge monthly debit interest after card closure, and some DCAs add on arbitrary one-off collection charges. Not sure what the precise legal position is, but many try it on, not all.