Complaint Review: Consumer Recovery Associates - Virginia Beach Virginia

Bottom line is they are breaking the law.  They cannot use threats to collect the debt.  If they  say they are going to sue or go to the IRS that is what needs to happen.  Next time record them which is legal because of their pre-reocorded message of this call maybe record etc..... ( so it goes both way..at least in CA) It is very clear under the FTC the threats are not allowed to collect a debt.  Send them a letter in writing asking for proof that the debt belongs toyou  and request to only be contacted by writing and they can legally no longer call you.

There are a few, I think four, allowable reasons for someone to pull a copy of your credit report without your authorization.

Investigation connected to the collection of a debt is one of these allowable reasons.

If your primary concern is a corresponding drop in your credit score, don't worry. While this is an "inquiry" into your report, it does not adversely affect your credit as would an inquiry in connection with an application for credit.

You stated that the debt they are collecting is not showing up on your credit report. This is because the debt is from 2001. It's past the allowable reporting period which, in most cases, is seven years.

The IRS angle the collector is speaking of is referred to as "imputed income." Imputed income is income in the form of goods or services that are received at no charge. Usually it arises in the context of employment fringe benefits.

For example, if my company provides me with a vehicle for personal use, the value of the use of that vehicle is imputed income. If I were in such a scenario, I would probably look to what people pay per year to purchase such a vehicle. If it would cost $200 per month to finance the vehicle, the IRS says I should claim $2400 of imputed income.

Imputed income can also arise from the forgiveness of debt.

Consider this: if you loan me $200, I am not legally required to claim that money as income. This is because even though it is extra money in my pocket right now, there is a corresponding obligation to repay the money, so my overall "wealth" has not increased.

However, if you decide, out of the kindness of your heart or otherwise, that I do not have to repay the $200, my wealth has increased, because now there is extra money in my pocket that I don't have to pay back. I could, potentially, be required to report the $200 as income.

So their IRS threat is potentially viable. And here's how it would work. Even though the debt is too old to be reported, and probably too old to collect in a legal action, it should still be considered a liability in the eyes of the IRS at this point.

However, if the creditor (assuming that this is actually a legitimate debt) decides that it is going to forgive the debt, you no longer have the corresponding liability that went along with the money, goods, or services that you received but didn't pay for. So what once was a debt is now income that you may have to claim on your tax return.

But questions would still remain of how much income you would have to claim, and at what point in time it converted from debt to income.

Does interest on the debt have to be claimed, or just the principle? I don't know.

Is it considered income at the time the debt is forgiven, or do you have to go back to when the debt originated? Again, I don't know.

If you have to claim the income retroactively, in which case you would have to modify your 2001 tax return, and this results in an increase of taxes owed for that year, do you have to pay interest? I don't know. Penalties? Probably not.

At any rate, why would it ever be in the creditor/collector's best interest to forgive the debt? At this point, all they can really do is call you and send you letters, and a simple cease and desist letter could put a stop to that.

They could take you to court, but you probably have a solid statute of limitations defense. Plus, they can't legally do any damage to your credit report.

But they can still hold out some hope that you will pay the debt voluntarily. So why would they forgive it? Revenge? Not likely.

Long story short: I can't see anything illegal with what they are doing, and the IRS threat is potentially viable. But I really don't think you have a whole lot to worry about.

It sounds like you're dealing with a junk-debt buyer (a company that purchases the right to collect old debt, that isn't likely to be paid, for pennies on the dollar). If a junk-debt buyer was in the habit of forgiving debt, he would soon find himself out of business.

I would advise sending a cease and desist letter and seeing what they do. If they send you a 1099, and if its for any significant amount of money, you will want to have an accountant or (and preferably) a tax attorney review the situation.

Best regards!