Some people believe that collectors and creditors cannot legally refuse your payment or payment offer. Others believe that as soon as collectors and creditors refuse your “tender of payment” they forfeit the right to collect on the account and the debt is discharged.
The law that is often misquoted is called the Uniform Commercial Code (UCC) and, when it is misquoted, people are led to believe that if a payment offer is refused, the debt is wiped out. Using this logic, I could offer a $5 payment on a $10,000 debt and if the creditor or collector refused my offer, the debt is discharged. If this were the case, everyone would be making $5 offers and clearing their debt. Heck, if we all did that this country would be debt free in no time.
Here is the section of the UCC that is always misinterpreted:
U.C.C. – ARTICLE 3 – NEGOTIABLE INSTRUMENTS , PART 6. DISCHARGE AND PAYMENT
§ 3-603. TENDER OF PAYMENT.
(a) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument, the effect of tender is governed by principles of law applicable to tender of payment under a simple contract.
(b) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an indorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.
(c) If tender of payment of an amount due on an instrument is made to a person entitled to enforce the instrument, the obligation of the obligor to pay interest after the due date on the amount tendered is discharged. If presentment is required with respect to an instrument and the obligor is able and ready to pay on the due date at every place of payment stated in the instrument, the obligor is deemed to have made tender of payment on the due date to the person entitled to enforce the instrument.
From my research, this law does NOT apply to the cancellation of credit contracts. Article 3-603(b) refers to the tender of payments using negotiable instruments (checks, bank drafts, and so forth) and, if the payment is refused, the amount of the tender is discharged. So, even if this rule did apply, the only amount that is discharged is the face value of the negotiable instrument.
So, in my opinion anyone quoting this law as a means to discharge credit contracts are misinterpreting the law. Learn more here…
So what are my options when debt collectors refuse my payment offer?
First, you need to know that there is no law that compels collectors to accept your payments or payment offer or agreement letter.
Second, recognize that negotiate with collectors on the phone is difficult at best because they are trained to control the conversation. Unless you are a very skilled negotiator, you’ll only end up angry, scared or frustrated. See script for when bill collectors call.
Third, always check the Statute of limitations on debt collection BEFORE making any payment offer.
If you want to make a payment offer, PUT IT IN WRITING! That way you and the collector have a record of your “good faith” effort to resolve the issue.
Use these sample letters:
Debt Payment Agreement Letter
Use this letter when you want to make a payment offer.
Payment Termination Letter
Use this letter when you have been making regular payments and the collector suddenly demands more money.
Using letters becomes extremely important if you have to defend your actions in court. Judges want to see what you have done to take care of the debt and written payment offers are strong evidence of your good faith.
When collectors first attempt to collect they can be very aggressive and may refuse to cooperate! They are trained to only accept certain types of payments such as full payments, post-dated checks, electronic payments and so forth. Send your payment offer in writing and let them accept or decline your offer. If they accept, you’ll probably never receive anything in writing that says they accept your plan however, the sample letter covers this with a statement that says, “Please note that accepting (cashing) this payment constitutes a payment agreement between us according to the terms outlined above.”
KEEP ACCURATE RECORDS! Keep copies of every letter you send and everything they send including the envelopes.
What about creditors who refuse payments?
Most creditors will work with you if you call them BEFORE the account goes delinquent! Letting them know ahead of time shows that you care and helps maintain your credibility. Mind you that not all creditors will work with you regardless of your previous payment history. I’ve seen people miss a payment for the first time in 10 years and their creditor had no mercy.
Early intervention may get your creditor to: See these guidelines for negotiating with creditors
- eliminate late charges on your account.
- not report your delinquency to credit reporting agencies.
- permit you to make interest-only payments for awhile
- Prevent your utilities from being cut off.
- Not turn your account over to a collection agency
- Defer payments to the end of your contract.
Failing to contact your creditor is a big mistake but it happens and eventually they call demanding the full balance or payments much higher than you can afford. Keep in mind that, just like collectors, creditors are not compelled to accept your payment offer. The idea that they have to accept your payment or discharge the debt is a myth (see first paragraph).
When creditors refuse payments, it’s usually because company policy prohibits it. It can’t hurt to ask and if your first offer is declined, ask what they feel is an acceptable payment. You may have to negotiate for awhile and what ever you do, DO NOT agree to terms that you cannot afford. Agreeing to terms you cannot afford is dangerous and only leads to another broken promise down the road and ruins your creditability.
As a last resort if they refuse to work with you, send a written payment offer anyway. They may just accept it even after refusing your plan on the phone.