Quick question of credit and making claims against my credit.

[florida357]

I am probably going to research this, but I wanted to see if anyone knew the answer off the top of their head.

Here's the facts:  I signed a 1 year contract at Gold's Gym.  After one year the contract lapsed and I was month to month at that point; there was no clause that said if I didn't cancel it the contract was renewed.  So I paid month to month for another year and a half or so.  Then I moved out of town, I put in a form that said to stop charging my account.  However, I didn't trust them, as I have also heard that big corporations will just keep charging you when they have access to your bank account, so I withdrew my money and closed that account. 

Apparently they have some policy that says you must give them a months notice.  However, if I am month to month and not under contract, I don't think I can be held to that.  They tried to charge me another month's dues, as I suspected they would.  They turned the measly $40 alleged debt over to a collection agency.  Now the collection agency is saying I owe them $79.  They have already called me and I already told them to report it against my credit. 

Three questions:
1.  Once they call me and I refuse to pay and they hurt my credit rating, can they keep pursuing it?
2.  Can they keep raising and raising the amount?
3.  What recourse, if any, do I have against Gold's Gym and/or the collection agency?  I am thinking of contacting the Better Business Bureau, but I know that is non-binding weaksauce.


Thanks!

[jack24]

I work at a bank and I deal with this all the time.  Of course my advice isn't legal advice, and I'm just telling you what I've seen.


1- Yes.  They can take you to small claims court.  I was at small claims court last week and Golds Gym filed against 4 people that day.  I doubt they will file for such a small amount though.  They usually only file against people who are still in the middle of their contracts and haven't paid for months.
2- This depends on the contract.  They can charge you a $30 fee for every time they try to take the money from the closed account.  I've seen a gym try to pull every day for 20 business days and charge $600 in fees.
3- I don't know about this.  Just tell everyone you know that you've had a bad experience with Golds

And finally.. if you leave this collection unpaid on your credit it will make your life very difficult for years. If you have a paid collection on your credit, it will hurt your score for years but most lenders will have sympathy for something like this.  Most lenders won't lend you any money until you bring the account current though, so an unpaid collection is BAD.  Try to talk to someone in charge and see if you can get the fees reversed.  Ask them if they'll back off if you pay the original amount due. 

[florida357]

Jack24, thanks for the response.


I think it is out of Gold's Gym's hands because they have turned it over to a collection agency, so Gold's isn't charging me extra fees.


As of right now, am really not worried about my credit.  I have a great income, relatively low school debt, and have never had any other claim against me.  How much could one miniscule claim hurt me?  It also seems like I must have some kind of recourse, how can they just make any fraudulent claim and have any sway over me?  I wasn't even under contract. 

Now knowing that it will still look bad even if I pay it, I am definitely not going to.

[bossofyou]

I don't work at a bank.

I live in reality.  Reality is, that a collection agency has been seeking $31 from me since 1997 for a Sprint phone charge.  As recently as this year I have received a phone call seeking collection.  And, I tell them what you ought to tell them - fuk off!  I have acquired a few cars, a house, a condo, and just got approved for financing on a $350k duplex rental property - all after having the Sprint collection problem.  Point is, an isolated incident is nothing to worry about. 

You can contest bad debt (sample letter - http://www.nedap.org/resources/documents/DebtCollectionDispute.pdf).  Then burden shifts to collector to reestablish that the debt is owed.   

If you want the "fuk off!" message to stick, write a letter.  But, I never bothered and it never hurt me.  As for recourse...wtf?  You're going to sue the Gym...explain that suit on your C&F application and interview...?

Finally, if you buy real property, the title company will try to collect for the bad debt at the closing.  They will say some shhit like "you need to clear this up."  Tell them to fuk off! too - they are bluffing, let them know you will find another title company to close the deal.

[jack24]

You can file a dispute with the credit bureau, but they don't act as contract judges so they'll just put "account disputed by consumer"

Bossofyou, I'm glad your life has worked out so well, but you are the exception, not the rule. 

Florida, An UNPAID collection on your credit is bad.  It's not just that it screws the score up, but the majority of lenders will require you to pay it off before they will lend to you.  You can argue with them and say that it's just an isolated incident for a small dollar amount, and then they'll laugh behind your back.  If you want to buy a $300,000 house but you won't pay a $40-$100 collection off it really looks bad.  The lending market is getting tighter and I really don't see it loosening up in the near future.  It would suck for something that stupid to mess up your plans.

Good Luck with whatever you decide to do. Make sure you get a few more opinions and research your options. 

[florida357]

It seems suspiciously similar to an extortion racket. 

A company, without an evidentiary burden or factual support, can file a claim against you, the amount being unrelated to any amount actually owed (i.e. monthly dues), and you can't buy a home without paying them off? 

[jack24]

It seems suspiciously similar to an extortion racket. 

A company, without an evidentiary burden or factual support, can file a claim against you, the amount being unrelated to any amount actually owed (i.e. monthly dues), and you can't buy a home without paying them off? 

I don't want to tell you that you can't buy a home with a collection like that.  The fact is that it hurts your credit.  If you pay the collection it's like a late payment and the more time that goes by the less it matters.  Unpaid collections manage to hang around because they are currently reported late, and as a result your credit continues to be damaged.
You might still be able to get financing, it just won't be as good as it would be if you didn't have a collection.  Every time you apply for a loan you'll have to explain what happened.
Lets say that due to the collection your credit score is a 650 instead of a 700.  On a 15k car loan your monthly payment would be 296 instead of 282.  Over the course of 5 years that collection will cost you $840 bucks.   

I'm not telling you to just go pay the bill, but you shouldn't rule that out yet.  Don't just take my word for it.  Call a few banks in your town and ask the loan officers your questions. 

[florida357]

I got you.  Last question: given the fact that it is currently considered "late" and still damaging my credit, is there any way for me to dispute the underlying charge.  In other words, my point is that they never had the right to charge me to begin with.

[jack24]

You can use the form that bossofyou linked to, but I don't know how successful that will be.  Have you talked to the collections agency?  I would call them and ask them to provide you with documentation proving that the amount is owed, and inform them that you are disputing the entry.

Also, visit these links for information about disputing the collection.

http://www.equifax.com/answers/correct-credit-report-errors/en_cp

http://www.experian.com/disputes2/index.html

http://www.transunion.com/corporate/personal/creditDisputes.page

[Bulldog86]

In the future, and for others following this thread, I humbly suggest that a better course to follow would have been to not close the bank account and instead, if/when GG did the auto-debit, then dispute it with your bank. I know my bank (Wachovia) would probably have been sympathetic and at least worked out if I did, in fact, legally owe the debt or not. If I didn't, they would have put the money back in my account; if I did, well, all self-righteousness aside, I should've paid it to begin with so I couldn't complain too much.

Better yet, put it on a credit card that you pay off monthly. Credit cards are required by law to be pretty generous as far as disputing charges. I suspect AmEx telling Gold's to "fvck off" would be taken a little more seriously than you doing it...