If an old unpaid balance that has been paid off and rendered satisfied in court is still being reported by your original creditor, it’s likely a mistake. But you are entitled to have your payment credited and reported to the bureaus in a timely manner.
Dear Keeping Score,
My wife paid off a judgment to a third party collector and the judgment was satisfied in the court. However, the original creditor is still reporting and adding interest to the debt. The increased balance pulls her credit score down each month.
We asked the credit bureaus to do an investigation and they sent back a report showing the creditor said it was correct. Have they not violated both the FCRA [Fair Credit Reporting Act] and the FDCPA [Fair Debt Collection Practices Act]? If so or not what can be done about the incorrect reporting? – Terrence
I am sorry to hear of your troubles. My experience dealing with financial companies is that they tend to move a lot faster when they are doing something that makes them money than they do when they are providing customer service.
This may be a result of poor management practices or backroom inefficiency, but rarely do the preceding issues rise to the level of consciously breaking the law. Don’t get me wrong, there are crooks out there to be sure, but they are widely outnumbered by honest but poorly run companies.
As a result, my first thought is how long the misreporting has been going on. We are increasingly used to making a transaction online and getting an instant receipt or acknowledgment in an email. It can seem unlikely that anything short of disaster could delay reporting by as much as a month or two. Yet that is the case with many creditors when it comes to updating records; some collectors are even worse.
This does not excuse the creditor in any way. You are entitled to have your payment credited and reported to the bureaus under the Fair Credit Reporting Act in a timely manner.
I’m not sure which “they” you are referring to when it comes to violations of the acts you mention. If it is the credit bureaus, you need to know that they can only go by the information they get from the creditors. The lender must determine whether the account information will be deleted, updated or remain as reported.
If the credit bureau makes a change proactively, it may be changed back by the lender when it next updates the account. So the lender has to do the reporting. But I suspect you mean the original creditor, so let’s clarify what the FCRA and the FDCPA are and how they can help consumers – and also how they cannot.
See related: Court judgments for debt: Your options after the gavel
Creditors aren’t supposed to report accounts sold to third-party collectors
First let’s talk about the Fair Debt Collection Practices Act. It applies to third-party debt collectors only, not original creditors. This act defines how third-party debt collectors may attempt to collect debts and specifically guards against abusive or unfair practices.
For instance, third-party collectors cannot lie to you or threaten you. This act also spells out the ways to stop harassment from a third-party collector. Unfortunately, the FDCPA will not help in your wife’s situation since the problem is with the original creditor.
As for the FCRA, you might have a point. The law was designed to protect how consumer information is reported. It was modified by the FACT Act (Fair and Accurate Credit Transactions Act) in 2003. The FACT Act was passed to help prevent identity theft and to allow consumers greater access to their consumer files than initially provided by the FCRA.
The FACT Act set new standards regarding what could be included in a consumer report. It also modified the process by which consumer disputes are handled. This includes removing incorrect information once the creditor has been notified.
Creditors are not supposed to report accounts that have been sold to third-party collectors, but mistakes do happen. Delinquencies are often bundled and sold and, in many cases, resold on the third-party collection market. It may be that what we have here is a simple failure to communicate.
See related: If I pay off an old debt, will it damage my rejuvenated credit score?
Contact the original creditor, and provide judgment documents
My advice is that you contact the original creditor directly, in writing, with a return receipt requested. You should let them know that you filed a dispute with the credit bureaus, who said that they (the creditor) had verified the account. Explain that the debt has been paid to a third-party collector through the court system.
You will need to provide documentation that the judgment was paid and satisfied in court. I suggest you also send a copy of everything to the three credit bureaus again. If you have before, include all the info you have on the judgment being satisfied and request another investigation.
That should correct at least the problem of interest being added to the account and your wife’s balance increasing on her credit report. One thing you need to know is that delinquencies will be reported for seven years on your credit report. Even though the debt has been repaid, the original delinquency remains. You don’t say when all this happened, but once the seven-year mark is met the account will drop off your wife’s reports.
Also, the more time that goes by the less the delinquency will count against her score. In your correspondence with the creditor you can certainly ask that the delinquency be removed since you have paid your obligation, but the FCRA doesn’t require them to do that. Some will and some won’t.
Be patient, and practice good credit behaviors in the meantime
I am confident that you will get this resolved if you can just be more patient than you think you should be. For my other readers experiencing similar delays in reporting it often takes 30 to 45 days for a status change to take place.
Many lenders report account updates about once a month. Some are faster, some are slower. If a payment is made at the beginning of a billing cycle, it may take more time for it to be reported. Credit file updates are often made by the lender at the end of a billing cycle.
It’s important to provide any documentation you have when lodging a dispute. The bureau will send any documentation you provide to the lender. Yes, they should have it, but sometimes they need your help to find it. The lender’s records drive the change in what is reported by the bureaus. So you should always include the lender in any dispute. That may expedite the update.
In the meantime, your wife will need to keep her credit nose clean by paying her bills on time and keeping the utilization percentage as low as possible on any credit cards she may be using. These are the two most important aspects of credit scoring and both are totally within the control of the consumer.
Remember to keep track of your score!