Why are Collection Agencies Pursuing Five Year Old Debts?
Collection agencies consistently rank within the top 10 of
industries with the most complaints with the Better Business
Bureau. They can be assertive, aggressive and even rude to
collect on a debt. Although some enforce strict behavior
guidelines for their collectors, most intentionally let their
collection agents harass and intimidate you.With all of the scrutiny, government investigations and fines,
it is a wonder that many collection agencies are able to get
away with unscrupulous collection activities. The reason is that
most consumers do not know their rights.
The Fair Debt Collection Practices Act specifically forbids
collection agencies from harassment, calling you at times known
to be inconvenient and threatening to take actions that they do
not intend to take. What this means is that if you request no
more telephone calls, they legally must comply or you can sue
them for damages. Additionally, a collection agency cannot
threaten you with legal action unless they actually plan to
pursue legal action, such as a judgment.
Since the mid 1990s, a trend has developed where more collection
agencies are interested in purchasing debts that are over 5
years old. Because these debts are usually beyond the statute of
limitations (meaning they can no longer legally force you to
pay), these come very cheap. Additionally, it is much harder for
the collection agency to track you down after 5 years.
These debts are often purchased for less than 1% of the original
debt, meaning that the only real cost for the agency is the time
tracking you down and the collection efforts that they
undertake. Since most of their agents depend heavily on
commissions for income, much of what you pay to a collection
agency is pure profit.
Most consumers do not realize that because these debts are
usually beyond the statute of limitations, that they no longer
have a legal liability to pay them. The statute of limitations
for each state is easily found on the internet.
Also, these debts will readily fall off of your
credit report once the account has aged seven years beyond the
date of last activity. This means that the only way the debt can
legally be kept on your credit report beyond this time is if you
reset that date of last activity. This typically occurs when you
send in a payment or even acknowledge that you owe the debt.
Once this occurs, that seven year clock can start all over
again. That negative record will affect your credit for that
much longer.
This can also happen when a collection agency sells your account
to another collection agency. Legally, the seven year clock
cannot be reset, but collection agencies have been known to do
this to further coerce you into paying on an old debt. Many
people pay on accounts that should have already fallen off of
their credit report. If this does happen, you should report the
activity and, if you are prepared to sue, retain all documents
and record the details of all conversations you have had with
the collection agencies.
In 2004, NCO Financial Systems was fined $1.5 million for
violating the terms of the Fair Credit Reporting Act. The FTC
charged that NCO reported accounts using later-than-actual
delinquency rates, causing negative information to remain on
consumer credit reports longer than seven years. If this sounds
familiar, contact your state's attorney general office and
consumer protection bureau. You may file a formal complaint with
the FTC. Also, dispute the record with the three main credit
bureaus.
If you incurred a debt, you should always take responsibility
for it and pay it if possible. However, you should also
understand your rights and never let an unscrupulous collection
agency take advantage of you. If they are breaking the law and
trampling your rights, then they don't deserve a dime! Better
yet, they may owe you!
See
Articles: Handling Collection Agencies and Old Accounts
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