What is a charge-off?

A charge-off is an accounting term used by lenders in the United States when a consumer debt is considered too delinquent and unlikely to be paid. In Washington, for example, a consumer debt can be considered a charge-off if the consumer does not make at least one payment within 180 days of the due date. A charge-off occurs when a creditor has written off a debt as uncollectable on their books and has reported this to the three major credit bureaus: Experian, Equifax, and TransUnion. The charge-off can remain on the consumer’s credit report for up to 7 years and can have a major negative impact on their credit score. In addition, the consumer may have to pay additional fees and interest, as well as late fees, until the debt is paid in full. In Washington, consumer debt defense law recognizes charge-offs as a legitimate accounting practice that enables lenders to accurately reflect their outstanding loans and debts on their books. This practice also allows them to pursue legal collection efforts against delinquent consumers to try and recoup their money. However, consumer debt defense laws also require lenders to adhere to strict consumer protection regulations to ensure that consumers are not unfairly harmed by charge-offs. These laws include, but are not limited to, disclosure of all fees and charges associated with the charge-off, restrictions on collection methods and reporting to the credit bureaus.

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What is a charge-off?

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