Can charged-off debts be bought and pursued again?

[Gary_Robson]

@DrDeth

However, it’s 7 years from the time where you missed your payment/went late and thus SOMETIMES a credit grantor will try to “restart” the 7 years all over again if you start paying a very old debt.

I ran this question by the vice president of our local branch of a large (American) bank. He said that it’s actually fairly common for a collection company to resell a charged-off debt a few months before the 7 years runs out. The new company then makes an attempt to collect, and reports it to the credit agencies as a new debt, starting the 7-year clock over again. The 7-year period, according to him, is from the last “activity” on the account.

[Gfactor]

@InvisibleWombat

I ran this question by the vice president of our local branch of a large (American) bank. He said that it’s actually fairly common for a collection company to resell a charged-off debt a few months before the 7 years runs out. The new company then makes an attempt to collect, and reports it to the credit agencies as a new debt, starting the 7-year clock over again. The 7-year period, according to him, is from the last “activity” on the account.

Sadly, he is wrong.

© Running of reporting period.

(1) In general. The 7-year period referred to in paragraphs (4) and (6)(2) of subsection (a) shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.

http://www4.law.cornell.edu/uscode/html/uscode15/usc_sec_15_00001681---c000-.html

The statute was amended in 1997 to prohibit just this type of thing.

@FTC Opinion Letter

2. Is the reporting period extended if (A) the original creditor sells or transfers the account to another creditor, (B) the consumer responds to post-chargeoff collection efforts by making a payment on the debt, or © the consumer disputes the account with a CRA? Does it matter whether the 7-year period has expired when any of these events occurs?

   No. In enacting the new provisions discussed above, Congress intended to establish a date certain – 180 days after the start of the delinquency that led to the chargeoff – to begin the obsolescence period. It did so to correct the often lengthy extension of the period that resulted from later events under the original FCRA. Enclosed are two staff opinion letters (Kosmerl, 06/04/99; Johnson, 08/31/98) that discuss the impact of these provisions, and the legislative history relating to their enactment, in more detail. Because the commencement of the seven year period is now described with some precision by the statute, it is our opinion that none of the subsequent events you listed – sale of the charged off account by the creditor, or a payment on or dispute about the account by the consumer – changes the allowable period for a CRA to report a chargeoff.

http://www.ftc.gov/os/statutes/fcra/amason.htm

The seven year period begins 180 days after the delinquency that led to the chargeoff. It does not restart.

[Gary_Robson]

@Gfactor

The statute was amended in 1997 to prohibit just this type of thing.

He must have been going from obsolete information. Thanks much.

[DrDeth]

@Gfactor

Sadly, he is wrong.

15 U.S. Code § 1681c - Requirements relating to information contained in consumer reports | U.S. Code | US Law | LII / Legal Information Institute

The statute was amended in 1997 to prohibit just this type of thing.

http://www.ftc.gov/os/statutes/fcra/amason.htm

The seven year period begins 180 days after the delinquency that led to the chargeoff. It does not restart.

However, some creditors do try this, and Experian *et al * won’t do anything about it unless you dispute the “derog”. Another reason why you have to check your credit report every so often!

[Mr.Slant]

DrDeth is dead on. Some collectors DO illegally report incorrect dates in their reporting. They open themselves up to civil litigation by doing so. I reckon all you have to do is prove that their improper reporting of said tradeline stopped you from getting a lower-rate refi on your mortgage, and sue for the difference in interest payments over thirty years.