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Question: Does gaap apply to consumer debt?

(Posted by: zerbertkisses on 2007-10-02 11:07:25)

Does the GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) apply to consumer debt? In other words - The GAAP states that a Third Party Debt Collector cannot collect on an account that has been "Charged off " by the original lender... Is this true?

Posted by: Gem on 2007-10-02, 11:11:11

No, GAAP does not apply to consumer debt. It is common, and legal, for creditors/ lendors to give up and sell the debt to third parties. The Fair Credit Reporting Act, and the 2005 changes to the bankruptcy, usuary and credit laws are the things you need to consult.

Posted by: Adoptive Father on 2007-10-02, 13:56:28

GAAP is a set of American accounting rules. It does not govern efforts to collect debts. In this case, we know the debt is bad so the lender cannot show interest income from this receivable on the income statement. Once a lender collects a bad debt, it is accounted as a recovery, as opposed to interest income. Again, GAAP says how certain business transactions are accounted for. GAAP does not restrict the collection practices of a lender.

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