Can My Credit Report Have More Than One Collection for the Same Debt?

Which collector should you pay?

Here's a horror story for you: You let a debt fall delinquent and the creditor sells it to a collection agency. Two years later you pull your credit report and discover not one, not two, but three collection accounts on your credit report for the same debt. Needless to say, your credit scores are in the toilet. This may sound farfetched, but multiple collections are a relatively common result of sheer carelessness.

Just as original creditors eventually sell unpaid debt to debt collectors, collection agencies also sell "uncollectable" debts to other debt collectors. The problem debtors often run into is this: debt collectors, like original creditors, often report their company's accounts to the credit bureaus. This results in a collection tradeline appearing on your credit report.

When the collection agency sells the debt, the new collection agency may also report the debt to the credit bureaus. If the previous debt collector doesn't bother to delete its tradeline from your credit report when it sells the account, your credit report will eventually contain several different collections for the same debt.

Multiple Credit Report Entries for the Same Debt Are Against the Law

It's perfectly normal to have two entries on your credit report for the same debt if those entries are the original creditor's account and the resulting collection account. Any further entries for the same debt are prohibited--even if each tradeline contains different account numbers (which they almost inevitably will). This isn't in the interest of protecting you, but rather in the interest of protecting future creditors.

Your credit scores are based on the most accurate portrayal possible of your past financial history. Multiple collections for the same account deal a devastating blow to your credit scores--making you appear to be a much higher lending risk than you actually are. By ensuring that multiple collection accounts can't appear on your credit report for the same debt, federal regulations protect lenders from making judgment errors that could ultimately affect their profit margins.

Prohibiting multiple collection accounts also protects the collection agency's interests. If you see a plethora of collection accounts on your credit report, you'll probably be confused about whom you should pay. This could lead to you paying off an account with a collection agency that no longer owns the debt. Unfortunately, that payment can "vanish" into thin air. The collection agency that actually owns the debt will continue to demand payment and the collector that actually received the payment may conveniently have no record of receiving it. This cheats both the debt's actual owner and the consumer.

How Long Can These Multiple Collections Stay on Your Credit Report?

Federal law restricts collections to only seven years on your credit report. This seven-year clock begins on the date the debt first falls 180 days' delinquent. This generally coincides with the date that the original creditor charges off the debt and sells it to a collection agency.

All the collection accounts that appear on your credit report for the same debt must fall off when the original creditor's tradeline falls off. This means that some collection accounts may only remain on

After 7 years, all collections must come off.

your credit report for a few years---if that. For example, if a debt collector reports a debt six months before the credit reporting period expires, its tradeline won't stick around for a full seven years. In order to comply with the Fair Credit Reporting Act, the company must delete the tradeline in six months.

Is There Any Way to Remove Multiple Collections for the Same Debt?

I plan on making a more in-depth post about this soon and providing a step-by-step guide to help you get rid of any clone collections. For now, however, just know that you aren't stuck with these tradelines forever. The Fair Credit Reporting Act, which governs credit reporting practices in the U.S., provides you with a dispute process.

You aren't limited to only disputing incorrect information. You can also dispute information that is obsolete, such as multiple collections or accounts that appear on your credit report for longer than the credit reporting period allows. You can dispute via mail, over the phone, or even online. Just be sure that you dispute multiple collections as multiples. If your dispute goes into the system as an accuracy complaint, the collection agencies in question are a lot more likely to validate the accounts and they won't get removed.

Long story short, you aren't alone. It's very common for consumers who've had financial difficulty and ended up with several delinquent debts to discover that their credit reports reflect more than one collection account for the same debt. As tempting as it may be to ignore the hassle, removing any additional collections will help you maintain the best credit scores possible until the credit reporting period expires.

Related Posts:

How Much Do Medical Collections Affect Your Credit Score?

Improving Credit Scores After Collections

Removing Re-Aged Collection Accounts From Your Credit Report

Q&A: Can I Open an Account in Another State to Avoid Collector's Bank Levy?

I have a question. I am trying to resolve my credit issues and recently my account was levied by a debt collector. Can I open an account in other State and avoid this levy again.Will they find the bank.How can the collectors get the info.

Thanks!

 Y 

Y,

Unless the collector is collecting a government debt, such as a defaulted student loan or unpaid taxes, the company must have a civil judgment against you before it can levy your bank account. The right and proper way to stop a bank levy is to successfully contest the judgment that created the levy in the first place. You don't mention which state you're in, but state laws vary on how long you have to contest a judgment after its filed.

If you're still within the time frame to contest the judgment, you'll need to have grounds to do so. Once again, acceptable grounds for this will vary by state, but in general you can contest a judgment for the following reasons:

• The original debt doesn't belong to you
• You had a death in the family, were hospitalized or have another valid reason for missing court. 
• You were never notified of the lawsuit (improper service) and therefore couldn't defend yourself
• Clerical errors in the judgment paperwork
• The statute of limitations in your state expired before the lawsuit was filed

Of course, getting rid of the judgment isn't always an option. In that case, you have the legal right to open up a new bank account in another state, but there's no guarantee the debt collector isn't going to find it. Out-of-state and online banks are also subject to a collection agency's levy--but only if the debt collector knows where you bank.

Let's say you hypothetically stop using your current bank account and open a new one. It isn't going to take long for the debt collector to realize you've stopped depositing money into your account and have probably switched banks. If the debt collector can figure out where you're banking, it can simply serve the new bank with a writ of execution and levy the new account. If it can't figure out where you bank, it can get the information via a post-judgment interrogatory.

If the debt collector petitions the court for a post-judgment interrogatory, you'll be called back into court and forced to disclose the location of your hidden assets. In this case, they'll simply force you to tell them where you're banking. If you refuse, you could be charged with contempt and possibly even face jail time.

The collection agency could also decide that, if it can't get the money from your bank account, it will get the money by garnishing your paycheck. Unless you live in South Carolina, a debt collector with a judgment has the right to garnish a certain percentage of your paycheck. All the collector needs to know is where you work, and that's a lot easier to figure out than where you bank. Judgment creditors may also have the right to seize other assets, such as investments, and certain forms of property--depending, of course, on your state's judgment enforcement laws.

As far as your question about how collectors get their information goes, they can get information about you a variety of different ways. A post-judgment interrogatory provides the debt collector with whatever information it needs. Your credit report contains valuable information about you, such as your address, Social Security number, whether you're paying other creditors on time and, sometimes, your employer. Collection agencies have also been known to stalk debtor's social media profiles for information. If a collection agency can't find you, federal law says it can call your loved ones and ask for your location.And, of course, who could forget the age-old process of skip-tracing? You'd be surprised how easy it is for a collection agency to gather information about you.

Legally, I am not allowed to tell you how to avoid paying a judgment because I can't give a debtor advice on how to commit fraud. What I can tell you, however, is that a good attorney is worth his/her weight in gold here. Legal help is pricey, but hiring a lawyer is probably a heck of a lot cheaper than continuing to allow the debt collector to levy your bank account.

Hiring an attorney may be beneficial but it isn't a requirement. If you have valid grounds to contest the judgment but can't afford an attorney, you can file a motion with the court on your own. Just make sure that you read up on the legal process and your state's specific rules and procedures. You may also qualify for legal aid, depending on your location and your income.

Oh, one more thing: certain forms of income are exempt from garnishment. If you have exempt income in your bank account, the debt collector may seize it anyway unless you fill out an exemption form from your bank and officially declare the funds exempt. See Funds Exempt from Garnishment for more information on which forms of income are exempt and how to declare your exemptions in order to legally escape your bank levy.


Best of Luck,
Lee

Q&A: Collection Agency Sent Bills to Wrong Address

Hi Lee,

My name is Melissa and I came across your page form a google search. I am hoping you might be able to provide some guidance. 

In April, I received an email notifying me that there was a change to my credit report. There was a debt from 2010 (an ambulance ride to the ER) that was added. After some digging, turns out the account was sold in July 2010 to the collections agency. The agency is telling me they never received it until March 2011. Initial bills were sent to an address I haven't lived at in years, also had two other addresses on file, places I never lived, nor know anyone that lived or lives there. I have since began the dispute process. 

I am getting statements printed out from my bank from that time to see if there were any payments made to make sure this is in fact an unpaid debt. 

My question: Am I responsible after all this time? This is clearly an error on their part. At the time, I asked the hospital representative if all bills were set up on a payment plan and she verified that they were and I made monthly payments. If this was left off, why did it take 4 years for it to come to my attention? I live in NJ, however I am in the process of moving to NYC. The bill is for something that happened in Florida.

Any insight, recommendations or information would be greatly appreciated. Thank you!

--
Melissa 

Melissa,

The statute of limitations (which is the amount of time a creditor or debt collector can sue you for a debt) differs by state. In Florida, the statute of limitations is four years. In New Jersey and New York, its six years.

If you lived in Florida until July of 2014, the statute of limitations would expire and you would be free to move to another state without fear of getting sued--even if the new state's statute of limitations is much longer than Florida's.

The problem that arises here is that, if you move before the statute of limitations expires, the SOL is "tolled" in your original state of residence. That means that, as soon as the collection agency discovers that you are no longer living there, the clock on the statute of limitations just stops ticking. When and if you move back, the statute of limitations goes back into effect and begins to time out from where it left off when it was tolled.

If the collection agency was not aware that you moved out of Florida until now (and you didn't give them the date that you moved when you spoke with them) its very possible that the statute of limitations was never tolled and simply timed out on its own. That would mean you're safe no matter which state you move to. If the addresses the collection agency was sending letters to were in Florida and you didn't disclose your new address until after July 2014, you should be safe from a lawsuit.

If, however, the collection agency is aware of the fact that you moved, they can generally opt to go by the SOL in your current state. This is advantageous to the collector, since they'd have until July of 2016 to collect the debt. Now, this part is important, so listen well:

The date that the collection agency originally received the debt is irrelevant. The only date that matters is the date you made your last payment (or, if you never made any payments, the date that your payment was originally due). It makes no difference whatsoever that the collector didn't get its hands on the account until 2011. The SOL and the credit reporting period are calculated using the dates from the original account.

 If a collection agency could use its own dates to determine the statute of limitations and the credit reporting period, no one would ever be free from collection lawsuits and bad debts would hang around on your credit report indefinitely. So don't worry about the date they bought the debt or first reported the debt. It just doesn't matter.

You mention that you are contacting your bank to determine if you made any payments on the debt. Normally making a payment on the debt restarts the statute of limitations from scratch. In Florida, however, you have to provide the creditor with a written promise to pay in order to restart the clock (Just for reference, the same is true in New York). So unless you promised to pay the debt in writing, the SOL was never interrupted and may have timed out in Florida.

The statute of limitations and the credit reporting period are two entirely different things. The credit reporting period begins 180 days after your last payment and lasts for seven years. As I stated above, the date the collection agency bought the debt or originally reported the debt doesn't matter. They have to remove it after the credit reporting period expires. The credit reporting period is the same no matter which state you live in.

Your responsibility for the debt is a gray area. Technically, if you took the ambulance ride and the debt is legitimate, you are responsible for paying the debt no matter how many errors the hospital or collection agency made when trying to collect it.

You said you spoke to a hospital administrator that assured you all bills were set up on a payment plan. If you have that in writing, that gives you grounds to fight this. You'll still be responsible for paying it, but you can probably use that statement to convince the hospital to pull the debt out of collections (and no matter what they tell you, they CAN pull the debt out of collections--even if the account was actually sold and the debt collector isn't working on a contingency) and remove it from your credit report. If all you have is someone's word, you lack proof that this was a legitimate error. It's also possible that the ambulance company bills separately from the hospital itself and that's what caused the issue.

If the ambulance company does not bill separately from the hospital and you have a statement in writing from the hospital noting that all of your debts have been added to a payment plan It could be argued that, if they hadn't made these errors, you would have paid the debt before it ever hit your credit report. In general, however, you aren't absolved from your responsibility to pay a debt simply because you didn't receive a bill.

If the statute of limitations has expired, you are no longer legally responsible for the debt and they can't force you to pay it. Keep in mind that the collection will remain on your credit report regardless of whether you pay the debt or not, and paying a collection account does not improve your credit scores. You do have the right to dispute the debt both with the collection agency itself and the credit bureaus.

If you have the funds to do so, you might consider hiring a consumer law attorney to help you. I don't know the full details of your case, but the original creditor obviously made some blatant billing errors that cost you your good credit rating. A good attorney should be able to help you straighten this out, even if it means filing a lawsuit or two to strong-arm the hospital into taking you seriously and recalling the debt.

One last thing, while you're disputing the collection you should also consider disputing those addresses on your credit report for places you never lived. You don't want another creditor to bill you at one of those addresses only to have this nightmare scenario repeat itself.

Best of Luck
Lee