Today’s Tidbit comes from a question from Joe down in Charlotte:
“Damon – I have a buyer whose report shows a collection for a Macys card, but this collection is being reported by three separate companies, all with balances. How can he owe money to three companies at once”?

In short? He can’t. Let’s break it down…when an account is charged off and passed on to a collector, the original creditor is supposed to update the balance to zero. The original creditor (in this case, Macys) has the right to report the item for 7 years, starting from the date of the last payment the client made to them. Once sold to a collection agency, only the collection agency OWNING THE DEBT may report it. This means that should the collection agency sell the debt or send the ownership of the debt to the original creditor, they no longer have the right to report it. This is intended to keep debtors credit reports from being hit multiple times for the same debt, but often times collection agencies knowingly and willfully violate this.

It is a violation of the credit reporting rules for a collection agency to report or try to collect on a debt that they do not own. I am sure that if you are a mortgage broker or Realtor, you see this kind of nonsense all the time. It is a perfect example of why it is important to have an expert examine the report carefully, and to hire a credit expert (like me!) to get these errors removed.