Reader Question: Disputing Re-aged Debt With Collection Agency

Hi Lee,

I wrote last December regarding an old $250 collection. I had contacted the CA to attempt a PFD and all they did at the time was verify the debt. It seems the mortgage company overlooked it (the rest of my credit is excellent) and I closed on a mortgage in April.

I applied for a business line of credit with my bank a month ago and it was declined and it turns out the reason is the the CA re-aged the debt and rather than showing the original date of April 2007, they are showing a much more recent date in conjunction with another date in 12/2011 when I contacted them regarding the PFD.

My understanding is that re-aging is illegal and I can take action to remove it from my credit report. Do you have any advice if I should contact the credit bureaus directly or contact the CA again?

Thanks so much for all of your advice,
Sheryl

Sheryl,

I remember that, and I am extremely happy for you that you found a good mortgage company that didn't bat an eye at your collection. It's okay to name names here, and having the name of the collection agency would be helpful since I try to keep an eye on which major collectors participate in which types of collection activity, but regardless of who it was re-aging collection accounts is illegal. Period.

Here's what I think may be happening: You're probably looking at the "date reported" or "date last reported" or however it may appear on your report. The company can update their reports at any time. Each time they update information with the credit bureaus, the date of the update appears on your credit report. This is normal and perfectly legal. It has no impact on the date of first delinquency. The collection account must be removed seven years from that date. 

Unfortunately, I have noticed that, over the past few years, more and more collection accounts just don't show the date of first delinquency. The only dates that appear are the date the account was most recently reported and the projected removal date. This is infuriating to me because not only does it confuse consumers, it makes it nearly impossible to tell whether or not a collector is re-aging its reports. 

I think what happened is that, when you inquired about a PFD, you resuscitated the collection agency's interest in you. In their eyes, if you were offering to make a deal, that means you have the money to pay! Hooray! And the first thing they do is update your account with the credit bureaus. This hurts you and they know it. The more recently an account, any account, is updated, the more impact it has on your credit scores. Recent items have the greatest influence. As an entry ages, so too does its importance decline in the credit scoring formula. When you contacted the collection agency about making a payment, the collector immediately went into guerrilla mode and updated your credit report. This hurt your credit scores and resulted in your credit application being denied.   

Now, what I want you to do is to look at your recent copy of your credit report. If it says "Report date" or something of that nature, the account likely was just updated rather than re-aged. If your credit report shows a "removal date" on the right hand side and in the upper corner of the tradeline, that's the date you want to focus on. Compare the removal date from your previous report to your current one. If the dates are the same, your account has just been updated, it hasn't been re-aged. 

If the removal date has changed, however, then your account has been re-aged and its time to play hardball. 

I can't give you legal advice, but I can tell you what *I* would do in this situation. If I knew for a fact a debt of mine had been re-aged by a collection agency I would not go crying to the credit bureaus –not yet. The credit bureaus are always a last resort. 

The first thing I'd do is make a copy of the sheet of both my current and previous credit report. I would then black out all of the information on the page other than the collection agency's tradeline. Granted, they have the right to access your credit report anyway but still, why help? I would then circle the questionable dates and send the collection agency a letter stating that re-aging debt beyond its original reporting period is a violation of federal law per Section 605 of the Fair Credit Reporting Act. I would also point out that I am well within my rights to file a lawsuit for the violation and demand that the collection agency remove the entry within 30 days of receiving my letter lest I do just that. I'd then keep a close eye on my credit records to make sure they comply. 

And for a measely $250, they'd be crazy not to. 

If they didn't comply, I'd visit my friendly neighborhood attorney and pay him whatever his going rate is to draft a letter (last time I checked this ran around $30, but that could vary depending on the attorney and the area) notifying the collection agency, again, that it is in violation of federal law and must remove the offending report lest it face legal action. Semi-threatening letters on an attorney's letterhead have a way of getting noticed. 

If the collection agency still did not comply, I'd send the same information to the credit bureaus (no need to black out info this time) and a letter notifying the credit bureaus that this account has clearly been re-aged, is in violation of Section 605 of the Fair Credit Reporting Act, and must be removed. Always cite the laws. Take my word for it that the majority of representatives working the phones and doing customer service work for the credit bureaus have very limited knowledge, if any, regarding the actual laws they are supposed to be enforcing. 

Because disputes are reduced to a code and fed through a computer system, I might also include this in my credit bureau letter: 

This is not a dispute. This is a report of illegal activity and a request for removal of said illegal report. 

After all, the credit bureaus are about as competent with consumer disputes as a kindergartner is with cooking dinner. They can do it, but you have to walk them through it and supervise every step of the way. Oh, and never, ever forget to send everything CRRR. Credit bureaus and collection agencies alike love to pretend they never received things – especially if those things would require them to take more action than merely the touch of a button. 

Sheryl, I sincerely hope that if your account has been illegally re-aged by the collection agency you don't have to take this many steps. Keep me posted as to how this works out for you. I am genuinely curious. 

Best of Luck,

Lee