Debt Buyers & Your Credit Report

When you have an old debt such as a credit card, hospital, or utility bill, it's 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 limit that a creditor or bill collector has to sue you) has expired. So, the debt buyer can't legally sue you for the debt. But just because a debt buyer can't sue you, that doesn't mean it can't try to get you to voluntarily pay up.

Also, if a debt buyer can't sue you on an old debt, it might 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. 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 might be because a debt buyer parked the debt on your report or re-aged the status of your debt. These debt collection practices might be illegal.

"Parking" Old Debt On Your Credit Report

When a debt buyer re-ages a debt, 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 might think that you're currently having trouble paying your bills.

Why This Might Be Illegal: The Fair Credit Reporting Act

The federal Fair Credit Reporting Act (FCRA) requires consumer reporting agencies (CRAs), 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.

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. So, 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 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.

Dispute the old debt with the CRA following FCRA dispute procedure. File a dispute with the three major CRAs: TransUnion, Experian, and Equifax. Be sure to include all supporting documentation. The CRAs must then either reinvestigate the dispute or remove the negative information about the old debt from your credit report.

Talk to a Lawyer

If, after you follow one of these dispute procedures, the debt buyer or CRA fails to comply with its obligations, you might be able to sue for violations of the FCRA. If successful, you might get actual damages, punitive damages, and attorneys' fees and costs. To get more information about filing a suit against a debt buyer for violating the FCRA, talk to an attorney.