Debt Buyers & Your Credit Report
When a debt buyer parks an old debt on your credit report or re-ages an account, it might be violating the FCRA.
If you discover that an old debt has reappeared on your credit report as a new account or contains inaccurate information about its age or status, it may be because a debt buyer "parked" the debt on your credit report, or re-aged the status of your debt. These debt collection practices may be illegal.
Read on to learn who debt buyers are, what it means when they park debts on your credit report or re-age accounts, and what you can do if this happens to you.
What Are Debt Buyers?
When you have an old debt such as a credit card, hospital or utility bill, it is not uncommon for the original creditor to sell that debt to a third party, called a debt buyer. Debt buyers purchase old debts, often for pennies on the dollar, and then try to collect from you.
In many cases, the account is so old that the statute of limitations (the time period the creditor or bill collector has to sue you) has expired. This means the debt buyer can no longer legally sue you for the debt. However, just because a debt cannot sue you, doesn't mean it can't try to get you to voluntarily pay up. (To learn more about collectors coming after you for old debt, see Debt Scavengers and Zombie Debt.)
“Parking” Old Debt On Your Credit Report
If a debt buyer cannot sue you on an old debt, it may try other ways to get you to pay. One common collection technique is to “park” your old debt on your credit report; it quietly reports an old debt as new on your credit report. This is also called “re-aging” a debt.
When the debt buyer does this, it often falsely reports new account activity, such as recent payment delinquencies, or it might alter the date of your account, such as changing the date you opened the account or last made a payment. This can be a problem because if you apply for a car loan or mortgage, for instance, the bank may think that you are currently having trouble paying your bills.
Why This May Be Illegal: The Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) requires consumer reporting agencies (also called credit bureaus) to maintain an accurate file of your credit information. The FCRA limits the amount of time that negative information can appear on your credit report. Generally, a delinquent account can show up on your credit report for up to seven years from the time your first delinquent payment was originally due on the account. If a judgment was taken against you on the old debt, it may also be reported for up to seven years from the date of judgment. For more information, see Nolo's article How Long Does Negative Information Stay on a Credit Report?
Some debt buyers try to get around this law by reporting an old debt as newer than it really is. But by lying about the age of the account is or the date of any delinquency, the debt buyer violates the FCRA.
The “Silent” Treatment is Illegal
Debt buyers often don't alert consumers that they've reported an old debt to the CRAs. This means that you might not find out about the reappearance of this debt until you apply for a new loan or credit card. You then feel pressure to pay the old debt in order to clear it from your credit report so that you can get the new credit or loan approval.
Because the FCRA requires debt buyers to notify you when they report negative information to a CRA, this practice violates the FCRA.
What You Can Do if Debt Buyers Report Old Debts
If you find an old debt on your credit report, resist the temptation to pay it. Instead, you should immediately dispute the debt by doing one, or both, of the following:
Dispute the old debt directly with the debt buyer. State the reasons you dispute the debt in writing and send it directly to the debt buyer. Once the debt buyer receives your written dispute, it is required to investigate the dispute and notify the CRA of your dispute. When appropriate, it must send corrected information to the CRA and request that the CRA remove the incorrect negative information. (To learn more, see How to Dispute Credit Report Items With the Creditor or Collector.)
Dispute the old debt with the CRA following FCRA dispute procedure. Put your dispute in writing and send it to at least the three major CRAs: TransUnion, Experian, and Equifax. Be sure to include all supporting documentation. The CRA must then either reinvestigate the dispute or remove the negative information about the old debt from your credit report. (To learn more, see How to Correct Errors on Your Credit Report.)
If, after you follow one of these dispute procedures, the debt buyer or CRA fails to comply with its obligations, you may be able to sue for violations of the FCRA. If successful, you might get actual damages, punitive damages, and attorney fees and costs. (To learn more, see Remedies for FCRA Violations.)