It’s bad enough when you can’t pay a debt and you know that it’s going to damage your credit for years to come. But what about when a single debt multiplies, turning into two, three or even more negative items on your credit reports? “I see these ‘double jeopardy’ tradelines all the time,” says Michael Bovee, founder of the Consumer Recovery Network. He goes on to explain how it works:
You fall behind on an account and your creditor charges off your account. Your credit report lists a charge off, which is very negative. Then the creditor sells the debt to a collection agency who also reports it as a collection account. Now you have two negative accounts on your credit reports. So that’s strike number two against you, but it’s not illegal. But if the original creditor sold the debt to a collection agency, then it should not continue to report a balance owed. “That’s double the damage and is not permitted,” he says.
One of our readers, I’ll call her “Trish,” fell behind on three credit cards a few years ago. Her credit reports now list fourteen collection accounts for those three debts. She says she’s spent countless hours trying to figure out who she owes, and how much she owes, so she can pay the balances and put this behind her. She’s not trying to avoid her debts, but she also doesn’t want to pay several different collection agencies for the same debt.
“I’ve never felt so held captive by anything in my life as I do with my credit,” she says.
If you want to see if you’re being affected by these “double jeopardy” tradelines, you should first pull your free annual credit reports at AnnualCreditReport.com and you can also check your credit scores for free on Credit.com to get a better idea of how to rebuild your scores.
Who’s Got My Debt?
Four consumer law attorneys with expertise in credit reporting and debt collection issues weighed in with advice for Trish, and for consumers with similar problems.
Step One: Request Validation of the Debts.
“My first suggestion would be to send validation letters (via certified mail or other confirmation delivery method) to each one of the debt collectors on her credit report asking them to identify the original creditor, current owner of the account, current balance and date of last payment,” says Jason M. Rapa, a Pennsylvania consumer law attorney.
Under the Fair Debt Collection Practices Act, debt collectors must send the consumer a written notice of the debt within 5 days of initial contact with you, adds William Howard, founder and managing partner of the consumer protection division at Morgan & Morgan. Then, the consumer has thirty days to request verification of the debt. If the consumer requests verification of the debt, the collection agency should provide enough information to establish that the debt is legitimate and accurate. “They shouldn’t give you some computer printout that doesn’t really tell you anything,” he adds.
Trish told me that she has requested verification of the debt from some of the collectors and received confusing information. One collector listed the original creditor as “Cache” — a name she doesn’t recognize. That’s not surprising to Howard. “A lot of these debt collectors will buy these debts but they don’t have documentation to back it up,” he warns.
Step Two: Dispute Collection Accounts That Don’t Appear Accurate.
Rapa recommends Trish sent dispute letters (again by delivery confirmation) to any of the debt collectors who have responded with information that doesn’t appear accurate or is unfamiliar. “The letter does not have to be fancy or detailed but must state that the individual disputes the debt,” he says. This dispute then requires the debt collector to list the account as disputed on the credit report, a notation that reduces the harmful effect of the trade-line on the consumer’s credit score. If the debt collector fails to mark the account as disputed, the consumer has a cause of action under the Fair Debt Collection Practices Act (FDCPA).”
Step Three: Go to the Source.
If these steps don’t help Trish figure out which collection agencies she should pay, she can talk to a consumer law attorney for help. Or she may want to try another approach, says Sonya Valentine, President of Financially Fierce, LLC — a company that provides financial education for companies, organizations and consumers. She suggests the following:
Do some quick research for the headquarters address for the original creditors. Send a letter to the Office of the President at the creditor’s headquarters address asking for help in determining if the creditor still owns the debt or if they sold the debt, what company did they sell it to. Instead of dealing with customer service, you will usually receive a response from management. This person usually has the authority to provide information and/or resolve your problem. Then you can either resolve your debt with the original creditor if they still own the debt or contact the collection agency that the debt was sold to.
Another option is to file a complaint with the Better Business Bureau and/or state attorney general’s office consumer protection division. “Most AG’s offices will assist you in dealing with the collection agencies and will often contact the collection agencies on your behalf,” Valentine explains.
If Trish can figure out which collectors she actually owes, and can resolve the debts with them, then she can send letters to the others explaining that she has paid the debt, adds Valentine.
Credit Report Repair
What about her credit reports, though? Even if Trish pays the debts she owes and tells the other collectors to take a hike, she’s still got 14 collection accounts on her credit reports when her reports should only list three. Is there any hope of getting all the others removed?
None of the attorneys I consulted thought she would just have to live with the situation. Robert Brennan, a Southern California consumer law attorney says that “if the same account is reported multiple times, that’s an FCRA violation.”
Trish can dispute the inaccurate collection accounts with the credit reporting agencies, says Howard. “Once you dispute it, then the crucial 30-day clock begins to tick.” He’s referring to the thirty days that the credit reporting agencies have to investigate and respond to a dispute under the Fair Credit Reporting Act (FCRA).
Rapa recommends Trish send dispute letters via confirmed delivery to the credit reporting agencies. She should identify the inaccurate information, explain why it is is wrong, provide any supporting documentation and state that it should be removed. “A copy of the same letter should be sent to the debt collector(s) via confirmed delivery,” he says. “If the information published on the credit report is demonstrably inaccurate and the debt collector fails to correct or remove the information the consumer may have a cause of action under the Fair Credit Reporting Act (FCRA).”
If she can’t clear this up on her own, she should consult a consumer law attorney. “If the debt collector has violated the FDCPA or FCRA successful litigation of the consumer’s claims will likely result in monetary compensation, including an award of damages and legal fees and costs, as well as the debt collector removing or correcting the trade-line,” Rapa says. Fortunately, Trish has been keeping good records of her efforts to resolve this. That’s a must-do.
But even if Trish is successful in correcting her credit reports and resolving these debts, she should still monitor her credit reports carefully. “Because of how ‘zombie debt’ changes hands from buyer to buyer, she needs to watch out to make sure new collection accounts don’t show up on her credit reports,” Bovee warns.
More on Credit Reports & Credit Scores:
- What’s a Good Credit Score?
- How to Get Your Free Annual Credit Report
- How Credit Impacts Your Day-to-Day Life