Often times in an attempt to collect a debt, collectors will threaten to report accounts to the credit reporting agencies if you refuse to pay. Debt collectors use this threat as a scare tactic and it usually works as many consumers have a great deal of concern for their credit standing. There are both permissible and impermissible circumstances in which a collector can and cannot report your debt.
Is it permissible under the Fair Debt Collections Practices Act (“FDCPA”) for a debt collector to report charged-off debts to a consumer reporting agency during the term of the 30-day validation period detailed in Section 1692g? A debt collector may accurately report a debt to a consumer reporting agency within the thirty day validation period. Under the FDCPA, you are allowed to request validation of this debt and the collection agency must show proof that the debt is valid and that you owe the debt. During this time the agency must mark the account as disputed to the credit reporting agencies and if unable to validate must actually order a deletion of the account on your report.
When a collection agency receives a debt to collect from the original creditor, it has the right to report that debt to the credit bureaus. Reporting the debt on your credit report is viewed as collection activity and the reporting may have a significant effect on your credit score. In some cases, you can prevent a collection agency from reporting your debt to a credit reporting agency. The first way to avoid the collector from reporting is by agreeing to pay the debt. As previously explained debt collectors use the threat of reporting the account on your report as a tool to negotiate payment. By agreeing to pay you may avoid damage to your credit, but you must ensure, usually in writing, that the collector will hold up its end of the bargain and not report.
If you do not owe the debt, either because it does not belong to you or because it is inaccurate, you may dispute the debt in writing pursuant to the FDCPA. If the dispute is within the original 30 days period as described above, then until the collection agency provides you with the requested information, it cannot conduct any form of collection activity– including reporting the debt to the credit bureaus. If the 30 day period has passed, you can still write a dispute to the collector, and the collector must report that the account is disputed on your credit report.
The final situation in which a collector cannot report a debt on your report is when it is past the time allowable for reporting the debt under the Fair Credit Reporting Act (FCRA). The “FCRA” states that delinquent accounts can appear on your credit report for 7 to 7 and a half years from the date you defaulted on the original account. If a collection agency threatens to report a debt on your credit report beyond the legally permissible amount of time, you may have a claim under the FCRA for violating your rights.