Can A Collection Agency Report An Old Debt As New?

Is It Possible for a Collection Agency to Report an Old Debt as New?

If you have old debts that were under collection many years ago, you may be wondering if the collection agency can bring the period of reporting your debts from the beginning by reporting your old debts as if they are new debts. Consumers who are already building their credit and are now asking why a past-due collection account is showing up on their credit report should know this is a common inquiry.

Additionally, guide collectors on the length of time a debt will be disclosed on the credit reference bureau and the extent of back-off they are allowed to document. It does not, however, imply that a collector cannot notify the credit bureaus of the initial delinquency date of an old account. Here is what you ought to know.

How Long Can A Collection Agency Report A Debt?

According to the FDCPA, the collection agency is allowed to report the debt to the credit bureaus for seven years and one hundred and eighty days from the initial time the debt went bad with the original creditor. This means the agency can report the actual delinquency date even if they only recently got the account.

For instance, consider a credit card that you had, and which you ceased to pay back from March 2015. The credit card company wrote off that amount and sold it to a collection agency in 2022, which is seven years after the initial default.

The collection agency can report that account to Equifax, Experian, and TransUnion as being delinquent starting in March 2015. Thus, even if they started with collection efforts in 2022, they can still go back to the original 2015 delinquency to prove it.

Resetting The Reporting Period

Even if a collector can report the actual first delinquency date even for an old debt, they cannot restart the seven-year reporting period when they purchase the account.

In other words, if the original creditor sold them a debt that is already five years old, the agency does not get another full seven years to report it. They can only report it for another two years of which it will be removed from the credit report.

The only way the clock restarts and one is freed from the seven years is if the original debtor pays even a dollar or communicates in writing that he or she owes. This brings the account current and in effect, it merely creates a new debt agreement out of it.

Nevertheless, collectors can attempt to mislead debtors into renegotiating this reporting period. They may request you to pay five or ten dollars every month and such alternative payments are referred to as token payments. What they fail to explain is that by making payments, you can extend the seven years’ timeframe that the negative information appears on your credit report.

Signs That Show That A Collector Has Restarted The Reporting Period

Even when a collection agency is seeking collections on accounts, they will look at the date when the account first became late. They will use this original delinquency date when reporting it to the credit bureau company.

You can verify this date from your credit reports. But you cannot rely on the “date opened” of the collection account alone. Rather, they are to be found lower in the report within the columns of “first reported” or “date of original delinquency”.

And if this date suddenly shifts several years forward, then you realize that the agency has just changed the reporting period with your help by making a payment or acknowledging the old debt.

Disputing Re-aged Debt On Your Credit Report

The FCRA also states that credit bureaus have to conduct reasonable investigations in cases where the consumer disputes the information in his credit report. According to the FCRA, collection agencies also have specific duties when reporting information about your accounts to the credit bureaus.

If you find out that a particular collection agency has re-aged one of your old debts to restart the reporting period, you should immediately start a dispute process.

First, review all the reports that come from Equifax, Experian, and TransUnion. This can be done by mail or through the online dispute portal that each bureau provides. Be sure to mention in your dispute letter that the debt is old and that the agency cannot alter the original delinquency date.

Request the credit bureaus to delete the account for violation of laws by the collector. Also, forward the dispute letter to the credit bureau where the collection agency has been reporting. According to FCRA regulations, they should be able to substantiate their claims or investigate your dispute within 30 days, if they fail in both then they must delete the account from the credit report.

Legal action against a collection agency for re-aged accounts

If challenging adverse entries in one’s reports does not yield a favorable outcome, the next course of action may be to sue the collection agency. This is prohibited under the FDCPA rules because it seeks to reinstate the statute of limitations that was previously in force on the debts.

According to the FDCPA act, you have the right to sue the collectors in state or federal court within one year from the date of the violation. If the court determines that the agency acted knowingly to change the delinquency date to continue the detrimental effect on your credit, you may be awarded up to one thousand dollars, plus additional amounts for attorney fees and costs of the suit.

To know if litigation is the best course of action, you should seek the services of a lawyer. If the cases of unfair collection practices are severe or if they have a recurrent nature, then legal action is the only solution. This can financially penalize the agency for their actions and discourage them from trying the trick again in the future.

Make it your responsibility to routinely verify your credit report concerning issues regarding collections accounts. If the old debts are presented with new dates, do not lose any time and initiate the dispute process to assert your consumers’ rights. However, with some determination and perseverance, it is possible to work on the credit and slowly rectify the situation in the future.

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