A recent government panel has stated that 80% of all credit reports contain errors. This is a devastatingly high percentage at a time when credit scoring is so important to the consumer. A bad credit score can lead to the inability to purchase a home, become employed in certain industries or start a business. One of the main issues that were found to be wrong in these reports is the time limitations for reporting bad debt. Collection agencies often report a debt as new, instead of reporting them as a collection account. By reporting these accounts this way the bad debt remains listed on the report for many years after it should have been removed. New consumer protection laws went into effect in 2010 that limits the ability of collection agencies to report debt this way. However, it is important for consumers to understand these laws and take control of their own credit reports.
What Is The Debt Collection Statute Of Limitations?
Under the guidelines of the Fair Debt Collection Act, a bad debt cannot be reported on a credit report for more than 7 years after the last date of activity. This is the most important part of the law.
The last date of activity is defined as the last time the account issuer made contact or received a payment on the account. Credit issuers often consider the last date of activity as the last month before they turn the account over to collections. It is from this date that the seven year reporting period begins. However, many collection agents that purchase these debts several years later list the accounts as a bad debt using a beginning date of when they purchased the account. This is illegal, and it must be removed from your personal credit report.
For example: If a debt has a last activity date of Jan 2005 and a collection agent purchased it in 2010, the debt must be removed from the report in 2012 as it would with the original debt, not in 2017 as a new debt.
How Do I Enforce The Debt Collection Statute Of Limitations On My Report?
Everyone must pull a copy of their credit report at a minimum of once a year. It is important to request a copy from each bureau because each will contain different information. Carefully review your reports and determine if any of the following information is found:
- Entries from original creditors that are over 7 years old from the last date of activity
- Collection agency entries that do not match the last date of activity by the original creditor
- Multiple collection attempts by different agencies for the same debt
- Multiple entries by the same debt collector with variations in the account number
- Public records from lawsuits or bankruptcy that are older than 10 years old.
Once you have found these mistakes you must begin the dispute process. Disputes can be made online, through the toll free number or via snail mail. It is important to note that the online transmission will be a much faster process.
On the dispute form you will be asked why you are disputing the debt. Some of the agencies have a box to check off that refers to “old debt” others have a fill in box. Fill out this area with the information stating that the debt is past the required reporting date for original debts. For collection debts you must fill out that the last date of activity does not correctly match the original debt as it is required to do so under the Fair Debt Collection Act. Multiple listings by the same collection agency should be reported as fraudulent collections. Point out that there are different balance amounts or changes to the account number to make it a separate listing. Multiple attempts to collect by different agencies should be disputed to determine who owns the debt. Public records must be removed after ten years, regardless of their status.
By Enforcing The Debt Collection Statute Of Limitations Will Collection Activity Stop?
Unfortunately the enforcement of the statute of limitations will not make the collection activity stop. They must, however, comply with the rules listed in the Fair Debt Collection Act and refrain from reporting these debts on your credit report once the statute of limitations has run out. A new trend in the collection industry is to try and pursue old debt. Individuals are receiving notices for bills that are twenty or more years old. While this debt is in fact still a debt, it cannot be reported on your credit report at any time. This debt, nicknamed “zombie debt” is more of a nuisance than a threat to your credit report. If at any time one of these debts appear on your credit report you should immediately dispute it under the statute of limitations clause in the Fair Debt Collection Act.
