Thursday, September 2, 2010
Sunday, August 8, 2010
No. 03-1235. - JOHNSON v. MBNA AMERICA BANK NA LLC - US 4th Circuit
This court case represents how some collection agencies violate the FCRA by routinely performing "unreasonable" investigations when a consumer disputes an erroneous item on their credit report.
No. 03-1235. - JOHNSON v. MBNA AMERICA BANK NA LLC - US 4th Circuit
No. 03-1235. - JOHNSON v. MBNA AMERICA BANK NA LLC - US 4th Circuit
Thursday, August 5, 2010
The new Credit Card Act of 2010
The events of the 2008 credit crisis and its fallout will shape the economic landscape for decades to come. The latest credit card usage trends are not encouraging. Take a quick look at these statistics provided by Credit Cards.com -an online credit card statistics data base:
Total cards in circulation in U.S.
(Through year-end 2009)
Visa credit: 270.1 million, down 11 percent (Source: Visa.com)
Visa debit: 382 million, up 18 percent (Source: Visa.com)
MasterCard credit: 203 million, down 22 percent (Source: MasterCard.com)
MasterCard debit: 125 million, up 1 percent (Source: MasterCard.com)
American Express credit: 48.9 million, down 9 percent (Source: AmericanExpress.com)
Discover credit: 54.4 million, down 6 percent (Source: Discover.com)
TOTAL CREDIT CARDS: 576.4 million
TOTAL DEBIT CARDS: 507 million
Most general purpose credit cards in circulation in 2008
Chase - 119.4 million
Citi - 92 million
Bank of America - 80.2 million
Discover - 48 million
American Express - 46.5 million
Capital One - 46.3 million
HSBC - 38.8 million
GE Money - 27.2 million
Target - 23.4 million
Wells Fargo - 17.3 million
(Original source: Nilson Report, February 2009)
Better take a second look at that credit card bill!According to the venerable researchers at TransUnion- one of the three major Credit reporting bureas-analyzed information from a data base of 27 million consumer records illustrating consumer credit use and performance. Nationally, the average credit card debt rose 4.81% compared to the 3rd quarter of 2008 , to $1,694 per houshold. Yet, credit card offers through the mail and other media continue to increase. The high rates of debt and delinquencies can easily be attributed to the current economic crisis; job losses, lay-offs, mortgage foreclosures, etc.. No doubt the current White House administration is aware of these dismal and downright scary numbers. As part of a comprehensive financial reform package, President Obama recently signed into law the Credit Card Accountability Responsibility and Disclosure Act. Here is the official White House Press release:
THE WHITE HOUSE
Office of the Press Secretary
________________________________________________________
FOR IMMEDIATE RELEASE May 22, 2009
FACT SHEET: REFORMS TO PROTECT AMERICAN CREDIT CARD HOLDERS
President Obama signs Credit Card Accountability, Responsibility, and Disclosure Act
WASHINGTON – Today, President Obama signs the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, marking a turning point for American consumers and ending the days of unfair rate hikes and hidden fees.
Americans need a healthy flow of credit in our economy, but for too long credit card contracts and practices have been unfairly and deceptively complicated, often leading consumers to pay more than they reasonably expect. Every year, Americans pay around $15 billion in penalty fees. Nearly 80 percent of American families have a credit card, and 44 percent of families carry a balance on their credit cards. To tackle these problems, the Administration moved swiftly with the Congress to enact reforms.
"With this new law, consumers will have the strong and reliable protections they deserve. We will continue to press for reform that is built on transparency, accountability, and mutual responsibility – values fundamental to the new foundation we seek to build for our economy," President Obama said.
In the Senate and throughout the campaign, President Obama called for measures to strengthen consumer protection in the credit card market. This legislation was made possible by the leadership of Chairman Frank and Representatives Maloney and Gutierrez in the House, and Chairman Dodd, Ranking Member Shelby and Senator Levin in the Senate. It builds on the strong first step taken by the Federal Reserve toward improving disclosures and ending unfair practices.
Principles for Long-term Credit Card Reform
First, there have to be strong and reliable protections for consumers.
Second, all the forms and statements that credit card companies send out have to have plain language that is in plain sight.
Third, we have to make sure that people can shop for a credit card that meets their needs without fear of being taken advantage of.
Finally, we need more accountability in the system, so that we can hold those responsible who do engage in deceptive practices that hurt families and consumers.
The Administration applauds the legislative efforts of both the House and the Senate. By working closely together, the House Financial Services Committee and the Senate Banking Committee were able quickly to enact strong protections that the President signs into law today. Below we highlight the critical elements of reform in this new law:
Bans Unfair Rate Increases
Prevents Unfair Fee Traps
Plain Sight /Plain Language Disclosures
Accountability
Protections for Students and Young People
Key Elements of the Credit CARD Act of 2009
Bans Unfair Rate Increases: Financial institutions will no longer raise rates unfairly, and consumers will have confidence that the interest rates on their existing balances will not be hiked.
Bans Retroactive Rate Increases: Bans rate increases on existing balances due to "any time, any reason" or "universal default" and severely restricts retroactive rate increases due to late payment.
First Year Protection: Contract terms must be clearly spelled out and stable for the entirety of the first year. Firms may continue to offer promotional rates with new accounts or during the life of an account, but these rates must be clearly disclosed and last at least 6 months.
Bans Unfair Fee Traps:
Ends Late Fee Traps: Institutions will have to give card holders a reasonable time to pay the monthly bill – at least 21 calendar days from time of mailing. The act also ends late fee traps such as weekend deadlines, due dates that change each month, and deadlines that fall in the middle of the day.
Enforces Fair Interest Calculation: Credit card companies will be required to apply excess payments to the highest interest balance first, as consumers expect them to do. The act also ends the confusing and unfair practice by which issuers use the balance in a previous month to calculate interest charges on the current month, so called "double-cycle" billing.
Requires Opt-In to Over-Limit Fees: Consumers will find it easier to avoid over-limit fees because institutions will have to obtain a consumer’s permission to process transactions that would place the account over the limit.
Restrains Unfair Sub-Prime Fees: Fees on subprime, low-limit credit cards will be substantially restricted.
Limits Fees on Gift and Stored Value Cards: The act enhances disclosure on fees for gift and stored value cards and restricts inactivity fees unless the card has been inactive for at least 12 months.
Plain Sight /Plain Language Disclosures: Credit card contract terms will be disclosed in language that consumers can see and understand so they can avoid unnecessary costs and manage their finances.
Plain Language in Plain Sight: Creditors will give consumers clear disclosures of account terms before consumers open an account, and clear statements of the activity on consumers’ accounts afterwards. For example, pre-opening disclosures will highlight fees consumers may be charged and periodic statements will conspicuously display fees they have paid in the current month and the year to date as well as the reasons for those fees. These disclosures will help consumers make informed choices about using the right financial products and managing their own financial needs. Model disclosures will be updated regularly based on reviews of the market, empirical research, and testing with consumers to ensure that disclosures remain clear, useful, and relevant.
Real Information about the Financial Consequences of Decisions: Issuers will be required to show the consequences to consumers of their credit decisions.
Issuers will need to display on periodic statements how long it would take to pay off the existing balance – and the total interest cost – if the consumer paid only the minimum due.
Issuers will also have to display the payment amount and total interest cost to pay off the existing balance in 36 months.
Accountability: The act will help ensure accountability from both credit card issuers and regulators who are responsible for preventing unfair practices and enforcing protections.
Public posting of credit card contracts: Today credit card contracts are usually available only in hard copy and not in plain language. Now issuers will be required to make contracts available on the Internet in a usable format. Regulators and consumer advocates will be better able to monitor changes in credit card terms and evaluate whether current disclosures and protections are adequate.
Holds regulators accountable to enforce the law: Regulators will be required to report annually to the Congress on their enforcement of credit card protections
Holds regulators accountable to keep protections current:
Regulators will be required to request public input on trends in the credit card market and potential consumer protection issues on a biennial basis to determine what new regulations or disclosures might be needed.
Regulators will be required either to update the applicable rules, or to publish findings if they deem further regulation unnecessary.
Increases penalties: Card issuers that violate these new restrictions will face significantly higher penalties than under current law, which should make violations less likely in the first place.
Cleans Up Credit Card Practices For Young People at Universities. The act contains new protections for college students and young adults, including a requirement that card issuers and universities disclose agreements with respect to the marketing or distribution of credit cards to students.
So, with rising variable rates, deferred interest plans that leave the consumer worse off than when they initially accepted the card, and bogus advance notice rules, the consumer is once again fleeced and put out to air-dry in a cold market place. The best defense is to control how many cards you have in your wallet, control your spending, and get educated BY YOUR CREDIT CARD ISSUER regarding the small print of your credit card aggreement. It will save you a lot of money in the long run.
Total cards in circulation in U.S.
(Through year-end 2009)
Visa credit: 270.1 million, down 11 percent (Source: Visa.com)
Visa debit: 382 million, up 18 percent (Source: Visa.com)
MasterCard credit: 203 million, down 22 percent (Source: MasterCard.com)
MasterCard debit: 125 million, up 1 percent (Source: MasterCard.com)
American Express credit: 48.9 million, down 9 percent (Source: AmericanExpress.com)
Discover credit: 54.4 million, down 6 percent (Source: Discover.com)
TOTAL CREDIT CARDS: 576.4 million
TOTAL DEBIT CARDS: 507 million
Most general purpose credit cards in circulation in 2008
Chase - 119.4 million
Citi - 92 million
Bank of America - 80.2 million
Discover - 48 million
American Express - 46.5 million
Capital One - 46.3 million
HSBC - 38.8 million
GE Money - 27.2 million
Target - 23.4 million
Wells Fargo - 17.3 million
(Original source: Nilson Report, February 2009)
Better take a second look at that credit card bill!According to the venerable researchers at TransUnion- one of the three major Credit reporting bureas-analyzed information from a data base of 27 million consumer records illustrating consumer credit use and performance. Nationally, the average credit card debt rose 4.81% compared to the 3rd quarter of 2008 , to $1,694 per houshold. Yet, credit card offers through the mail and other media continue to increase. The high rates of debt and delinquencies can easily be attributed to the current economic crisis; job losses, lay-offs, mortgage foreclosures, etc.. No doubt the current White House administration is aware of these dismal and downright scary numbers. As part of a comprehensive financial reform package, President Obama recently signed into law the Credit Card Accountability Responsibility and Disclosure Act. Here is the official White House Press release:
THE WHITE HOUSE
Office of the Press Secretary
________________________________________________________
FOR IMMEDIATE RELEASE May 22, 2009
FACT SHEET: REFORMS TO PROTECT AMERICAN CREDIT CARD HOLDERS
President Obama signs Credit Card Accountability, Responsibility, and Disclosure Act
WASHINGTON – Today, President Obama signs the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, marking a turning point for American consumers and ending the days of unfair rate hikes and hidden fees.
Americans need a healthy flow of credit in our economy, but for too long credit card contracts and practices have been unfairly and deceptively complicated, often leading consumers to pay more than they reasonably expect. Every year, Americans pay around $15 billion in penalty fees. Nearly 80 percent of American families have a credit card, and 44 percent of families carry a balance on their credit cards. To tackle these problems, the Administration moved swiftly with the Congress to enact reforms.
"With this new law, consumers will have the strong and reliable protections they deserve. We will continue to press for reform that is built on transparency, accountability, and mutual responsibility – values fundamental to the new foundation we seek to build for our economy," President Obama said.
In the Senate and throughout the campaign, President Obama called for measures to strengthen consumer protection in the credit card market. This legislation was made possible by the leadership of Chairman Frank and Representatives Maloney and Gutierrez in the House, and Chairman Dodd, Ranking Member Shelby and Senator Levin in the Senate. It builds on the strong first step taken by the Federal Reserve toward improving disclosures and ending unfair practices.
Principles for Long-term Credit Card Reform
First, there have to be strong and reliable protections for consumers.
Second, all the forms and statements that credit card companies send out have to have plain language that is in plain sight.
Third, we have to make sure that people can shop for a credit card that meets their needs without fear of being taken advantage of.
Finally, we need more accountability in the system, so that we can hold those responsible who do engage in deceptive practices that hurt families and consumers.
The Administration applauds the legislative efforts of both the House and the Senate. By working closely together, the House Financial Services Committee and the Senate Banking Committee were able quickly to enact strong protections that the President signs into law today. Below we highlight the critical elements of reform in this new law:
Bans Unfair Rate Increases
Prevents Unfair Fee Traps
Plain Sight /Plain Language Disclosures
Accountability
Protections for Students and Young People
Key Elements of the Credit CARD Act of 2009
Bans Unfair Rate Increases: Financial institutions will no longer raise rates unfairly, and consumers will have confidence that the interest rates on their existing balances will not be hiked.
Bans Retroactive Rate Increases: Bans rate increases on existing balances due to "any time, any reason" or "universal default" and severely restricts retroactive rate increases due to late payment.
First Year Protection: Contract terms must be clearly spelled out and stable for the entirety of the first year. Firms may continue to offer promotional rates with new accounts or during the life of an account, but these rates must be clearly disclosed and last at least 6 months.
Bans Unfair Fee Traps:
Ends Late Fee Traps: Institutions will have to give card holders a reasonable time to pay the monthly bill – at least 21 calendar days from time of mailing. The act also ends late fee traps such as weekend deadlines, due dates that change each month, and deadlines that fall in the middle of the day.
Enforces Fair Interest Calculation: Credit card companies will be required to apply excess payments to the highest interest balance first, as consumers expect them to do. The act also ends the confusing and unfair practice by which issuers use the balance in a previous month to calculate interest charges on the current month, so called "double-cycle" billing.
Requires Opt-In to Over-Limit Fees: Consumers will find it easier to avoid over-limit fees because institutions will have to obtain a consumer’s permission to process transactions that would place the account over the limit.
Restrains Unfair Sub-Prime Fees: Fees on subprime, low-limit credit cards will be substantially restricted.
Limits Fees on Gift and Stored Value Cards: The act enhances disclosure on fees for gift and stored value cards and restricts inactivity fees unless the card has been inactive for at least 12 months.
Plain Sight /Plain Language Disclosures: Credit card contract terms will be disclosed in language that consumers can see and understand so they can avoid unnecessary costs and manage their finances.
Plain Language in Plain Sight: Creditors will give consumers clear disclosures of account terms before consumers open an account, and clear statements of the activity on consumers’ accounts afterwards. For example, pre-opening disclosures will highlight fees consumers may be charged and periodic statements will conspicuously display fees they have paid in the current month and the year to date as well as the reasons for those fees. These disclosures will help consumers make informed choices about using the right financial products and managing their own financial needs. Model disclosures will be updated regularly based on reviews of the market, empirical research, and testing with consumers to ensure that disclosures remain clear, useful, and relevant.
Real Information about the Financial Consequences of Decisions: Issuers will be required to show the consequences to consumers of their credit decisions.
Issuers will need to display on periodic statements how long it would take to pay off the existing balance – and the total interest cost – if the consumer paid only the minimum due.
Issuers will also have to display the payment amount and total interest cost to pay off the existing balance in 36 months.
Accountability: The act will help ensure accountability from both credit card issuers and regulators who are responsible for preventing unfair practices and enforcing protections.
Public posting of credit card contracts: Today credit card contracts are usually available only in hard copy and not in plain language. Now issuers will be required to make contracts available on the Internet in a usable format. Regulators and consumer advocates will be better able to monitor changes in credit card terms and evaluate whether current disclosures and protections are adequate.
Holds regulators accountable to enforce the law: Regulators will be required to report annually to the Congress on their enforcement of credit card protections
Holds regulators accountable to keep protections current:
Regulators will be required to request public input on trends in the credit card market and potential consumer protection issues on a biennial basis to determine what new regulations or disclosures might be needed.
Regulators will be required either to update the applicable rules, or to publish findings if they deem further regulation unnecessary.
Increases penalties: Card issuers that violate these new restrictions will face significantly higher penalties than under current law, which should make violations less likely in the first place.
Cleans Up Credit Card Practices For Young People at Universities. The act contains new protections for college students and young adults, including a requirement that card issuers and universities disclose agreements with respect to the marketing or distribution of credit cards to students.
So, with rising variable rates, deferred interest plans that leave the consumer worse off than when they initially accepted the card, and bogus advance notice rules, the consumer is once again fleeced and put out to air-dry in a cold market place. The best defense is to control how many cards you have in your wallet, control your spending, and get educated BY YOUR CREDIT CARD ISSUER regarding the small print of your credit card aggreement. It will save you a lot of money in the long run.
Friday, May 7, 2010
What is Debt Validation and does it actually work?
Most people who try to fix their own credit will sooner or later run across information on debt validation. The first mistake people make when trying to validate a debt is to confuse it with debt “verification.” Let’s get this confusion clarified before we actually get into what validation actually is and how it can be used to repair a credit report.
• Debt validation refers to the process of a COLLECTION AGENCY providing a consumer with proof that a debt actually belongs to that consumer.
• Debt verification refers to the process of a CREDIT REPORTING AGENCY verifying with an original creditor or a collection agency that a debt actually belongs to a consumer.
Now that we know who the debt validation process refers to – collection agencies and NOT CRA’s (credit bureaus), we can now find out how the process works with credit repair.
The debt validation process can be found in Section 803 of the Fair Debt Collection Practices Act (FDCPA). It provides:
Section 803 (b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.
Plus, they must show proof positive that you owe them this debt. It's not enough to send you a computer-generated printout of the debt. They must prove in writing that they actually purchased the debt from the original credit grantor. In addition to that, they must also foot the bill for the cost of obtaining the information from the original creditor.
One way of looking at it is like this: Suppose you borrowed $50.00 from your best friend Lisa, then her friend Brian came up to you and said he bought your debt from Lisa and you now owe him the money you once owed to Lisa. These might be some of the thoughts you would have:
1. How do you know that Brian is actually collecting for Lisa? What legal documents does Brian have to prove that he is legally authorized to collect?
2. How much is the actual debt? What payments have already been made on the account? Where is the accounting of the debt, including all interest and fees? Are these fees and interest amounts legit?
3. Do you really owe Brian the money? Or was it actually a third party, James? Where is the contract showing that you made a deal with Brian and not James?
4. How do you know if you pay Brian, Lisa won’t come back and ask for the money you originally owed her?
It works the exact same way when a collection agency sends you a letter stating that you owe them a debt you once owed an original creditor. They must prove you owe them the debt. Their word on official looking letter-head or a phone call is not enough. If the collection agency cannot provide legal proof, they are in violation of the FDCPA and can be sued. Further, they cannot continue to report the debt the CRA’s, who in turn cannot continue to list the debt on your credit report. The listing must be immediately deleted. You have this right as a consumer and the law is on your side should you choose to use it.
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• Debt validation refers to the process of a COLLECTION AGENCY providing a consumer with proof that a debt actually belongs to that consumer.
• Debt verification refers to the process of a CREDIT REPORTING AGENCY verifying with an original creditor or a collection agency that a debt actually belongs to a consumer.
Now that we know who the debt validation process refers to – collection agencies and NOT CRA’s (credit bureaus), we can now find out how the process works with credit repair.
The debt validation process can be found in Section 803 of the Fair Debt Collection Practices Act (FDCPA). It provides:
Section 803 (b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.
Plus, they must show proof positive that you owe them this debt. It's not enough to send you a computer-generated printout of the debt. They must prove in writing that they actually purchased the debt from the original credit grantor. In addition to that, they must also foot the bill for the cost of obtaining the information from the original creditor.
One way of looking at it is like this: Suppose you borrowed $50.00 from your best friend Lisa, then her friend Brian came up to you and said he bought your debt from Lisa and you now owe him the money you once owed to Lisa. These might be some of the thoughts you would have:
1. How do you know that Brian is actually collecting for Lisa? What legal documents does Brian have to prove that he is legally authorized to collect?
2. How much is the actual debt? What payments have already been made on the account? Where is the accounting of the debt, including all interest and fees? Are these fees and interest amounts legit?
3. Do you really owe Brian the money? Or was it actually a third party, James? Where is the contract showing that you made a deal with Brian and not James?
4. How do you know if you pay Brian, Lisa won’t come back and ask for the money you originally owed her?
It works the exact same way when a collection agency sends you a letter stating that you owe them a debt you once owed an original creditor. They must prove you owe them the debt. Their word on official looking letter-head or a phone call is not enough. If the collection agency cannot provide legal proof, they are in violation of the FDCPA and can be sued. Further, they cannot continue to report the debt the CRA’s, who in turn cannot continue to list the debt on your credit report. The listing must be immediately deleted. You have this right as a consumer and the law is on your side should you choose to use it.
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Time Limitations imposed by the Fair Credit Reporting Act
As a credit repair professional I have found it necessary to stay abreast of all the current laws, and new developments in the credit repair industry. Most of credit repair law is fairly straight forward and understandable to the laymen – after all, the laws were created for the consumer who desires to address their own credit issues without having to pay anyone to do it for them. However, as with any law, interpretation can be affected by situation, context and new litigation. There are as many wrong answers out there on the Internet as there are people writing about credit repair, so be careful!
I am a member of several credit repair blogs where the members have the opportunity to write about their personal experiences dealing with their credit issues. In some cases you can learn a great deal about credit repair by reading about the real-life experiences of others who are trying to do the same thing you are doing. If you look long enough, sooner or later you will come across a person who happens to be writing about a situation very similar to your own. A word of warning though, don’t take it as “gospel” just because someone on a blog says something is true. Do your own research; check other blogs, access the Federal Trade Commission’s website, Google your question in as many ways as possible to find answers to your questions. There is nothing more valuable than doing your own due diligence.
This article addresses time limitations imposed by the Fair Credit Reporting Act (FCRA) related to charged-off accounts. What I mean here is how long a charge-off can remain on your credit file after it has been reported by an original creditor or a collection agency. There appears to be much confusion about this issue and I hope this article will clear up some of that confusion.
Section 605 (a) (4) of the FCRA clearly prohibits credit reporting agencies (CRA’s) from reporting charge-offs that are more than 7 years old. Here’s how the seven year period is calculated: Section 623 (a) (5) of the FCRA, which became law in 1997 requires a creditor that reports a charge-off to a CRA to notify the agency (within 90 days of reporting the account) of the month and year of the commencement of the delinquency that immediately proceeded the charge-off. Section 605 (c) (1) provides that the seven year period BEGINS 180 days from that date. For example, if you miss your monthly car payment (an Installment Account) and that missed payment leads to the account becoming delinquent, the credit grantor must within 90 days report the exact date when they considered the account delinquent to the CRA. The CRA must then record that date as the start of the 180 day period, after which the seven year time limit begins. Here’s an example of how the process works:
1. You miss your last car payment
2. Account goes into delinquent status
3. Credit grantor must report to the CRA month and year account was considered delinquent
4. 180 days after that month and year, seven year clock commences
Contrary to popular opinion, no subsequent event or change of circumstances can interrupt the clock once it commences, whether it be the resale of the account to a collection agency, or even subsequent payments made on the account by the consumer. Nothing can reset the seven year limitation once it has commenced.
Share |
I am a member of several credit repair blogs where the members have the opportunity to write about their personal experiences dealing with their credit issues. In some cases you can learn a great deal about credit repair by reading about the real-life experiences of others who are trying to do the same thing you are doing. If you look long enough, sooner or later you will come across a person who happens to be writing about a situation very similar to your own. A word of warning though, don’t take it as “gospel” just because someone on a blog says something is true. Do your own research; check other blogs, access the Federal Trade Commission’s website, Google your question in as many ways as possible to find answers to your questions. There is nothing more valuable than doing your own due diligence.
This article addresses time limitations imposed by the Fair Credit Reporting Act (FCRA) related to charged-off accounts. What I mean here is how long a charge-off can remain on your credit file after it has been reported by an original creditor or a collection agency. There appears to be much confusion about this issue and I hope this article will clear up some of that confusion.
Section 605 (a) (4) of the FCRA clearly prohibits credit reporting agencies (CRA’s) from reporting charge-offs that are more than 7 years old. Here’s how the seven year period is calculated: Section 623 (a) (5) of the FCRA, which became law in 1997 requires a creditor that reports a charge-off to a CRA to notify the agency (within 90 days of reporting the account) of the month and year of the commencement of the delinquency that immediately proceeded the charge-off. Section 605 (c) (1) provides that the seven year period BEGINS 180 days from that date. For example, if you miss your monthly car payment (an Installment Account) and that missed payment leads to the account becoming delinquent, the credit grantor must within 90 days report the exact date when they considered the account delinquent to the CRA. The CRA must then record that date as the start of the 180 day period, after which the seven year time limit begins. Here’s an example of how the process works:
1. You miss your last car payment
2. Account goes into delinquent status
3. Credit grantor must report to the CRA month and year account was considered delinquent
4. 180 days after that month and year, seven year clock commences
Contrary to popular opinion, no subsequent event or change of circumstances can interrupt the clock once it commences, whether it be the resale of the account to a collection agency, or even subsequent payments made on the account by the consumer. Nothing can reset the seven year limitation once it has commenced.
Share |
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