Can A Creditor Report The Same Debt Twice?

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You are ready to purchase your first home and you pull a credit report so you can prepare for the mortgage process only to find that there are multiple collections on your credit report. Once you do some digging you find out that it is the same debt being reported by multiple collection agencies.

If you have a bad debt that is with a collection agency that goes unpaid, you are at risk for the same debt showing up more than once on your credit report. This can be called a double jeopardy tradeline. As the bad debt is sold from the original creditor to a new collection agency the original creditor stays on your credit report along with the new collection agency.

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How Many Times Can A Collection Be Reported On Your Credit Report

When you have a bad debt with a creditor, your debt can end up on your credit report multiple times. It is unlikely that you will see it more than two or three times but it is possible and it can be difficult to get removed from your report.

As the debt is resold between the credit collection agencies in auctions. Multiple credit collection agencies may have owned the debt and reported it to the credit bureaus. However, there are some rules to help protect consumers from multiple reporting of the same debt damaging your credit score.

If the original creditor, or any creditor, has sold the debt, then the creditor must be reporting the account as a zero balance. This will prevent the credit system from reporting a $500 debt as a $1000 debt because of duplicate entries. This often happens with medical debts that have been sold over and over.

It is legal for both entries to remain on your credit report as long as they are reporting the information accurately. The original debt must show a zero balance though once the debt has been sold.

Can A Collection Company Show An Old Debt As New?

No. A collection account is always to be considered an extension of the existing debt. It is against the law for a collection agency to report old debts or collection accounts as a new account when the debts are sold. If a collection agency keeps reporting the old debt as a new debt then you may be able to take legal action.

You can trigger an old debt to show a newer last activity date by making a payment. Since the clock starts at the time of default, making a payment can change your last activity.

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Collection agencies would harass a borrower and convince them to just put $10 towards their debt. Since the debt will be canceled off of the credit report after 7 years from your last activity, this can reset the clock. If you start payments and default again you will have reactivated the debt.

If you think about it, by making a payment, you are also confirming the debt is yours. Don’t create a second delinquency date! The clock starts with the last activity or the first time the payment was delinquent. If this is happening to you it may be time to get legal help!

A better strategy is to wait until you can pay the whole debt. You can negotiate a Pay To Delete offer. Either you or a reputable credit repair company can help with this.

This will have the debt deleted from your credit report in exchange for payment. If you just want the debt to be showed as paid there is a better way. You can negotiate the debt to a smaller amount. Usually, 50% if the debt is older.

How Many Times Can An Old Debt Be Resold?

Since you only have 7 years to collect a debt I rarely see more than a debt two or three times on a credit report.

Years ago. before the regulations that we have now, debt collectors would try to collect old debts. If the customer did not know the law they would often get duped into making a payment. I have not heard of this happening in more recent years. But it does not mean that it can not.

Why You Should Never Pay A Collection Agency

Unless a collection agency actually owns the debt, you should always try to pay the original creditor.

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Collection agencies will say many things to you to get you to pay a debt. It is important that you do not give them any information until the debt is verified. They can and will use this information against you in an effort to get their commission.

Tips For Dealing With A Collection Agency

You, as a consumer, are protected under the Fair Debt Collections Act. It is important that you understand your rights before engaging an aggressive debt collector. Because many consumers do not know their rights, debt collectors will take advantage of this. They will use unfair collection practices to get money out of you that you may not have.

Congress Found The Following Concerns with Debt Collectors.

(a) Abusive practices
There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.

(b) Inadequacy of laws
Existing laws and procedures for redressing these injuries are inadequate to protect consumers.

(c) Available non-abusive collection methods
Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.

(d) Interstate commerce
Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce.

(e) Purposes
It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.

Harassment or Abuse Laws FDCA

A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

(1) The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person.

(2) The use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.

(3) The publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of section 1681a(f) or 1681b(3)1 of this title.

(4) The advertisement for sale of any debt to coerce payment of the debt.

(5) Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.

(6) Except as provided in section 1692b of this title, the placement of telephone calls without meaningful disclosure of the caller’s identity.

Tips When Dealing With A Collection Agency

In the past, I have had consumers complain that they were screamed at with profanities or had their information used against them. Usually, that is when the collection agency calls your place of employment.

  1. Do not take their threats seriously or let them scare you.
  2. Tell them you know your rights under the Fair Debt Collections Act.
  3. Do not allow them to call you outside of the 8 AM to 9 PM local time frame.
  4. Never admit the debt is yours. Once you do that you may have a harder time disputing any inaccuracies.
  5. Understand that by creating a payment plan or agreeing to make a payment, may reactivate the debt.
  6. If you tell them they can not contact you by phone, they can not contact you by phone!
  7. Never give them any personal information like an updated address or email. They have what they have and it is not your job to help them in any way.
  8. Get any arrangements in writing. Seriously, GET IT IN WRITING! Preferably by fax! If they are not willing to do that then something is shady. You may have to give them your email for this one.
  9. Never pay over the phone or give them your account information. If this is the only way to pay them then use a credit card. Since you have it in writing then you can easily dispute a charge if they do something shady. Consumers have found their bank accounts wiped out.
  10. Always require proof that they own the debt and that the original creditor did not just hire them to collect.

Your goal should always be to pay your debts. After all, it is the moral and right thing to do. However, collection of those debts should be done in a lawful manner.

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Tricia Snow

Tricia Snow has worked in the banking and financial services industry for over 20 years. She has helped 1000's of clients obtain the financing they needed to purchase their dream home or start their own business.

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