Correcting Re-Aged Debt

How to Dispute Re-aged Debt.

Re-aging a debt is the act of reporting an inaccurate date of first delinquency to a credit reporting agency, such as Equifax, Experian, or TransUnion. Re-aging a debt may or may not be illegal depending on whether the consumer consents to the date change and the creditor’s intent.

Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies (CRAs). The specific law is called the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer’s credit report for up to 7½ years. To determine when an account will be removed by the CRAs (TransUnion, Equifax, and Experian and others), add 7 years to the date of first delinquency. The date of first delinquency is shown in credit reports. Subsequent activity, such as resolving the debt or one debt collector selling the debt to another collector, is irrelevant to the 7-year rule.

Some debts have a reporting period longer than 7 years, including:

• Tax liens: 10 years if unpaid, or 7 years from the payment date
• Bankruptcy: 10 years from the date of filing (15 U.S.C. §1681c)
• Perkins student loans: Until paid in full (20 U.S.C. §1087cc(c)(3))
• Direct and FFEL loans: 7 years from default or rehabilitation date (20 U.S.C. §1080a(f)(1) and 20 U.S.C. §1087e(a)(1))
• Judgments: 7 years or the debtor’s state statute of limitations on judgments, whichever is longer

The FCRA 7-year rule is separate from state statutes of limitations for debt issues. Learn the lifespan of a judgment in your state at the Bills.com Statute of Limitations Laws by State page.

The start of the 7-year period begins at the date of first delinquency, or if no payments are made, when the first payment was due. Review your credit report carefully to make certain the dates of first delinquency are reported correctly. Unscrupulous collection agents reset the date of first delinquency to stretch out how long a derogatory account appears on consumer’s credit report. This is illegal under the FCRA.

Just because a debt does not appear on a credit report does not mean the statute of limitations for the debt has passed. The opposite is also true: The passing of a state statute of limitations on a debt does not mean the debt may not appear on a credit report. The federal FCRA and state statutes of limitations are separate and independent of each other.

Whether a debt appears on a credit report does not establish legal liability for the debt. The opposite is also true: You may have legal liability for a debt not reported to the credit reporting agencies. Credit reports are not legal records of every debt a person owes.

FCRA Compliance Date

The date of first delinquency is also known at the "FCRA Compliance Date." The credit reporting agencies tend to confuse consumers by reporting other dates on their credit reports that have no relationship to the date of first delinquency. Dates to ignore on a credit report include:

• "date opened"
• "date of status"
• "date reported"

The FCRA Compliance Date must be reported for each trade-line — which is industry jargon for a reported debt, such as a credit card account, vehicle loan, department store card, and so on — that is reported in a consumer’s credit report.

Why Re-Age a Debt?

There are three possible reasons a data furnisher, such as a collection agent or original creditor, will re-age a debt.

1. Preventing the debt from disappearing. As mentioned above, a derogatory account or trade-line must be removed from a credit report 7½ years after the date of first delinquency. Unscrupulous collection agents or original creditors often misreport the date of first delinquency on a debtor's account. They do so to keep the debt appearing on the consumer's credit report in an attempt to pressure the consumer to resolve the debt. Re-aging a debt for this reason is a FCRA violation. Violations of this provision may result in civil penalties of $2,500 per violation. One violator paid penalties of $1.5 million for misreporting delinquency dates.
2. Preventing the debt from being reported as charged-off. A consumer may become delinquent on their debts temporarily. An agreement to re-age the debt to prevent the debt from being reported as charged-off will prevent damage to a consumer's credit rating. A consumer might be especially sensitive to their rating if they plan to purchase a vehicle on credit, refinance a mortgage, or qualify for a mortgage. There is no violation of the FCRA when the consumer and the creditor both agree to re-age a debt.
3. Simple incompetence. Hanlon's Razor states, "Never attribute to malice that which is adequately explained by stupidity." This may appear as an overly cynical observation. However, credit reports are notoriously inaccurate. The General Accounting Office reports that of the 52 million free credit reports requested of the credit reporting agencies through AnnualCreditReport.com, 25% of those reports resulted in a dispute. Of those disputes, only 25% were verified as accurate. According to a 2004 Federal Reserve Board report, 79 percent of credit reports may contain some type of error and that about 25 percent of all consumer credit reports may contain errors that can result in the denial of access to credit.

The process for handling the first and third reasons are the same and are explained below:

Resolving An Illegally Re-Aged Debt: Part 1

The Federal Trade Commission lists the following steps as the appropriate method for resolving credit reporting inaccuracies. This is codified in § 632 of the FCRA, and 15 U.S.C. § 1681s-2.

Step 1: Get Your Credit Report

An amendment to the FCRA requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.

The three nationwide consumer reporting companies have set up a Web site, toll-free telephone number, and mailing address through which you can order your free annual report. To order, visit AnnualCreditReport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can print this FTC form (PDF). Do not contact the three nationwide consumer reporting companies individually.

You may order your reports from each of the three nationwide consumer credit reporting companies at the same time, or you can order from only one or two. The law allows you to order one free copy from each of the nationwide consumer reporting companies every 12 months.

Provide your name, address, Social Security number, and date of birth. If you have moved in the last two years, you may have to provide your previous address. To maintain the security of your file, each nationwide consumer reporting company may ask you for some information that only you would know, like the amount of your monthly mortgage payment. Each company may ask you for different information because the information each has in your file may come from different sources.

Step 2: Look for Errors

Review the report and compare the information it contains to information you know to be accurate. In particular, make sure the report contains your accurate:

1. Name
2. Social Security number
3. Address and previous addresses
4. Accounts and account numbers
5. Date of first delinquency

If any of the above information is inaccurate, the consumer credit reporting agency may have added incorrect information to your account accidentally. This is very common. If incorrect addresses or Social Security numbers appear, this may be evidence of someone using your identity.

Under the FCRA, both the consumer reporting agency and the information provider (i.e., the person, company, or organization that provides information about you to a consumer reporting agency) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting agency and the information provider.

Step 3: Correct the Errors

Tell the consumer reporting agency, in writing what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, "return receipt requested," so you can document what the consumer reporting agency received. Keep copies of your dispute letter and enclosures.

Consumer reporting agencies must investigate the items in question -- usually within 30 days -- unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information.

After the information provider receives notice of a dispute from the consumer reporting agency, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer reporting companies so they can correct the information in your file.

When the investigation is complete, the consumer reporting agency must give you the results in writing and a free copy of your report if the dispute results in a change. This free report does not count as your annual free report. If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider.

If you ask, the consumer reporting agency must send notices of any corrections to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.

If an investigation does not resolve your dispute with the consumer reporting agency, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting agency to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.

To obtain a sample of a dispute letter please visit the Bills.com Debt Self-Help Center.

The three major consumer reporting agencies also offer consumers the ability to dispute a credit listing online. See Experian’s Disputing Credit Report Errors, TransUnion’s Credit Disputes, and Equifax Online Dispute Web pages.

Resolving An Illegally Re-Aged Debt: Part 2

If the creditor (either a collection agent or an original creditor) verifies a re-aged date you know to be incorrect, then you should forward all of your evidence and a succinct letter describing the violation to the Federal Trade Commission and your state's Attorney General, which are tasked with enforcing the FCRA. If the credit reporting agency does not not investigate, or fails to correct the date of first delinquency after receiving evidence the date reported is inaccurate, then a consumer may have a cause of action to sue the creditor and consumer credit reporting agency.

Congress gave consumers several causes of action (legal reasons to file a lawsuit) and set limits on damages consumers can recover under the FCRA. (These limits are separate from any breach of contract or negligence claims under state law.)

Civil Liability For Willful Noncompliance

Below is the first of two relevant sections of the FCRA that give consumers damaged by creditors a cause of action:

1. In general. Any person who willfully fails to comply with any requirement imposed under this title with respect to any consumer is liable to that consumer in an amount equal to the sum of
   1. (A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000; or (B) in the case of liability of a natural person for obtaining a consumer report under false pretenses or knowingly without a permissible purpose, actual damages sustained by the consumer as a result of the failure or $1,000, whichever is greater;
   2. such amount of punitive damages as the court may allow; and
   3. in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney’s fees as determined by the court.
2. Not shown here because it is not relevant to this discussion
3. Attorney’s fees. Upon a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this section was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney’s fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper.
4. Clarification of willful noncompliance. For the purposes of this section, any person who printed an expiration date on any receipt provided to a consumer cardholder at a point of sale or transaction between December 4, 2004, and the date of the enactment of this subsection but otherwise complied with the requirements of section 605(g) for such receipt shall not be in willful noncompliance with section 605(g) by reason of printing such expiration date on the receipt. (15 U.S.C. § 1681n)

The next section is a bit more interesting because the damage limits are higher, and the description of the damaging actions is closer to what you described.

Civil Liability For Negligent Noncompliance

1. In general. Any person who is negligent in failing to comply with any requirement imposed under this title with respect to any consumer is liable to that consumer in an amount equal to the sum of
   1. any actual damages sustained by the consumer as a result of the failure; and
   2. in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney’s fees as determined by the court.
2. Attorney’s fees. On a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this section was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney’s fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper. (15 U.S.C. § 1681o)

Conclusion and Next Steps

If it is not clear from the discussion above, the most difficult part in proving a FCRA violation is gathering evidence. A smoking gun would be a series of credit reports that show a history of the date of first delinquency moving forward in time as the account in question nears the FCRA Compliance date. This, as discussed, is 7½ years from the date of first delinquency. The date of first delinquency may not change unless the consumer consents to the change!

If you have solid evidence of a collection agent re-aging an account, dispute the account as described above. If there is no change following an investigation by the consumer credit reporting agencies reporting the erroneous data, then forward your evidence to the FTC and your state attorney general. Find an attorney with experience in civil litigation or consumer law and talk with him or her about the possibility of filing a lawsuit against the collection agent or the consumer credit reporting agency.