Collection agencies are known for persistent efforts to collect debts, but there are laws that govern their actions and protect consumers. It’s important to be aware of these regulations and your rights to prevent undue stress and financial impact. Below, we address some common concerns and provide clarity on dealing with collection agencies.
Collection Practices and Your Credit Report
A collection agency does NOT have the authority to legally report old debts as new collections accounts. If a collection agency continues to update your credit report with incorrect information, or the dates for your opening or date of first activity are wrong, you can legally dispute the information to either have it updated or removed from your report entirely.
Collection agencies cannot report old debt as new. If a debt is sold or put into collections, that is legally considered a continuation of the original date. It may show up multiple times on your credit report with different open dates, but they must all retain the same delinquency date.
The way that a collection agency makes a profit is by getting you to pay off the debt. These circumstances allow you to leverage a payment in return for the agency removing the collection from your credit report. You can go down the pay for delete route by contacting the collection agency or submitting a formal request letter, known as a pay for delete letter.
If a collection agency has been unable to recover money from you, it can resell the debt to another collection agency. However, the debt will retain the original delinquency date. Therefore, the collection agency cannot declare the old debt as new debt.
Legal Time Frames for Collecting Debt
Can a debt collector restart the clock on my old debt?
A debtor can ask for the written debt validation letter to identify the debt when getting debt collection calls from debt collectors. This will not reset the debt clock of old debts.
Prescribed debt is old debt written off by credit providers. Many consumers have watched credit scores suffer from debt collectors reporting old debts as new without realizing they can fight back and hold collectors accountable for violating rights.
To know if a collector illegally re-ages a debt, understand how long debts stay on credit reports. Three key dates are crucial to remember:
- Account open date when opened
- Date of first activity when first used
- Date of last activity – last payment or use
Negative information stays on credit reports for seven years maximum; nothing restarts this period. Some state statutes of limitations exceed seven years, so debts may still be reported or expired statutes.
If you’ve ever received a phone call from a debt collector asking about a credit card debt that you barely remember, you might be wondering just how long debt collectors can pursue an old debt. The answer is complicated. Each state has its own statute of limitations on debt, and after the statute of limitations has expired, a debt collector can no longer sue you in court for repayment.
Know Your Rights Under Collection Laws
Debt collectors are subject to the Fair Debt Collection Practices Act (FDCPA), which sets out strict rules about how they may collect a debt.
The FDCPA does not set a specific limit on how long a debt collector can legally pursue a debt. However, the statute of limitations, which is set by each state, does impose a limit on how long a creditor can sue a debtor for a debt. Generally, the statute of limitations for debt collection is between three and six years.
A skilled attorney can explain debt collection laws and consumer rights in different states. They can review options, including if bankruptcy enables permanent debt discharge.
In California, the statute of limitations for consumer debt is four years. This means a creditor can’t prevail in court after four years have passed, making the debt essentially uncollectable.
If a debt collection agency is illegally reporting an old debt as new, dispute the account by sending a dispute letter to the credit bureaus and your debt collectors. Making a payment might restart the statute of limitations on your debt, but it won’t restart the period that collections can stay on your credit report.