Dear Real Estate Adviser,
I have a 3-year-old debt to a time-share company for a U.S. property and it's gone to collections. I'm willing to pay the debt and some interest, but a new collection company is trying to charge $1,000 in fees. Is this legal? What do I do?
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You'd be astonished at the huge volume of time-share owners who are stuck in the same black hole. Sadly, you're dealing with one of the most duplicitous industries to ever swamp the nation's phone banks. Can they legally charge huge fees? Not always. Do they anyway? Well, to quote Seinfeld's George Costanza: "There's no laws in this place. Anything goes. It's like Thunderdome!"
Instead of pouring good money after bad for years to come, it sounds like you may need to formulate a plan to exit this fee-intensive monster.
Read the contract
First, it sounds as if your original collection agency has resold your debt to a new agency that's socking you with its own processing fees atop the interest you already owe on missed payments, maintenance fees, late-pay penalties, etc. Technically, your contract (few time-share buyers thoroughly read these) will govern how much interest can be charged, and legally it can't be higher than what state law allows. Forty-one states have laws addressing this, though the remaining 9 remain silent. They are:
- South Dakota
Foolishness, then foreclosure
Whatever you've agreed to, it doesn't mean the collectors won't dance around state restrictions, often playing dumb. Some threaten to put a lien on the debtor's house (they can in many cases) or even take your Social Security (they can't). If you ignore them long enough, usually from 6 months to 2 years, they will file foreclosure, though they'll often agree to renegotiate terms because they'd still walk away with much more than in a foreclosure. In some cases, especially if the time share is in a desirable location, you can sign a warranty deed and give the unit back to the owner if you pay all related fees.
You could be sued, too
Other times, the owner simply gets sued. If you're sued, don't roll over. File an answer to the complaint so the collectors won't be awarded a default judgment. This will start a lengthy process of hearings and give you time to execute a renegotiation or exit strategy. A personal bankruptcy would wipe the slate clean, but that's a very high price to pay.
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A complaint might be in order
Now, if you were deceived or otherwise legally abused in the purchase, you can file a complaint against the seller. Each state has a different process so you'll have to contact your state's attorney general to determine the jurisdiction. Have a narrative of your complaint and a copy of your contract when filing. The agency will contact you if it finds a valid violation of real estate statutes (or sometimes banking statutes), especially if it involves deceptive sales practices. Collectors must legally back off in such under-dispute cases, though many don't.
Don't pay upfront
Then, there are those companies that say they'll rent or sell your time share for you, but they typically promise far more than they deliver. Don't give upfront money to any of them! Scads of scammers are out there preying on the already preyed upon. And yes, I'd be remiss to not suggest you visit a consumer-law lawyer versed in debt-collection cases.
By the way, consumer complaints about abusive debt collectors have nearly tripled in less than a decade, according to the Federal Trade Commission. They're exceeded only by identity-theft cases, says the FTC, which has sued about 200 collection companies since 2010. See a list of complaint cases against collectors, many of which have been banned from doing business:. The fee-happy collectors that are hounding you may be on it.
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