The instrument by which those terms are conveyed is called a restrictive endorsement. A restrictive endorsement is a document drafted by your attorney or yourself and attached to your payment or placed on the back of a check, to inform the creditor that by depositing your payment, he agrees to report the item as you have specified or delete it entirely from your file.
The good thing about this method is that it almost always gets the best initial settlement. As much as it rubs the creditor the wrong way, it is still hard for many of them to send the money back.
Fuel Cards
After all, they make money by collecting payments, not by maintaining your credit record. The disadvantage to using this method is that sometimes, the creditor will reject the whole deal and send it all back. Other times, he will go ahead and deposit the check with no intention of changing anything on your credit.
As a matter of fact, this happens quite often. The remedy for such action is to file suit in small claims court. As a general rule, mortgage lenders will not honor this form of payment.
This method is generally most effective with older accounts that have been reported on your file by a collection agency and accounts that have been charged-off. Most of these creditors have lost hope of collecting any funds and will consider this a windfall.
Restrictive endorsements can also work with newer accounts if the creditor “perceives” the account may be difficult to recover. Disclosing your terms is through incremental notification, settlement and credit reporting, then negotiating each one separately. This combines elements of both into an effective open dialog to reach an agreement on the front end.
A True Story: A friend of mine owed an older gas credit card bill. The account was being handled by a collection agency in New York City. My friend asked us what to do about this bill. It was for 0.00 and was almost (6) years old. Knowing that most folks that were in this business in New York City usually left their offices on Thursday afternoon to go up to the Catskills for a long weekend, we told David to send a check for 0.00 to the collection agency. He also placed this notation on the back of the check. Depositing of these funds constitutes payment in full on account #xxxxxxxx.
David mailed the check on Wednesday, knowing that it would get into the collection agency office in Friday’s morning mail. Guess who was running the office while the boss was playing golf? You guessed it. The, egotistical office manager that always wanted to assert her authority when the boss was gone.
When the mail came in Friday morning, she went through the checks like a beaver chewing on logs for a new dam. Her fingers were clicking that deposit stamp and a smile of “greed” came across her face as she totaled the deposits for Friday morning.
Well, lets just call her “Jane” for now. Jane couldn’t walk fast enough to get to the bank to make the deposit. Mind you, she never read the backs of the checks. She just stamped for deposit only. When the boss called from the resort, he asked his girl how much of a deposit was made? When he found out that she deposited over ,000 he was ecstatic. He could now brag to his golf buddies about how good his office manager was.
Comes, Monday morning and the boss is the first one in the office. He looks at the deposit slips, matches the amounts to the accounts and lo and behold, here is my friend David’s payment for 0. A notice of balance due was sent to David. He made a copy of the back of the check and sent it to the collection agency. When the boss saw this, he knew that instead of collecting 0.00 he only collected 0.00 and he could NOT do anything about it. Oh the power of knowledge.
Regards, Regis Sauger
A Restrictive Endorsement
Regis Sauger is a licensed Mortgage Broker in Florida, an author, lecturer on credit awareness. He have conducted seminars for underwriters, attorneys, mortgage lenders, realtors and the general public.
www.yurcredit.com