Complete explanation
of the negative credit reporting time
This is one of the most
talked about topics in the credit world, especially by consumers
afflicted with bad credit. After a couple of years, consumers start
to realize the impact of bad credit and that the
7 year period starts seeming like it will never end. It's almost
like you have gone on, had kids, changed jobs, got married etc..
and that bad credit mark is still there! That's when people start
asking "how long?" We'll hopefully answer that for you
in layman's terms yet give you the backup documentation of the statute
to validate our opinion. You also should read the FCRA
plus your own state statute to determine
state specific rules because the federal
statute (FCRA) doesn't always outweigh the state statute.
When a debt becomes seriously
delinquent it is important to consider the time limitations for
how long the debt is allowed to be reported on your credit
reports. The FCRA has
been around since the 1970's but the provisions were amended in
September 1997. Therefore it is important to take into consideration
if your debt was charged off before 1996 or after.
Prior to 1997 any account activity could extend the reporting
period so creditors and collectors took advantage of this loophole
to keep negative items on a consumer's report for many
years. Remember however that each state
has its own statute so those statute's
do apply to the actual reporting time.
In General: We
are going to use California statute as an example here. To get the
exact statute to figure reporting time for your state go here
and click on your state. Once there click on civil code and look
under "Obligations of a Consumer Credit Reporting Agency."
You will find the statute's that apply to your particular state.
State Rule
Reporting time: Section 1785.13. of the Calif. Civil Code
-Good credit stays for
10 years and then it is aged off but can stay longer.
-Bankruptcies that, from
the date of adjudication, (means decision) antedate (means predate)
the report by more than 10 years.
-Collection accounts
and charge offs remain for 7 years from first serious delinquency
or charge off date. (NOT the last date of activity.)
-Suits
and judgments that, from the date of entry or renewal, antedate
(predate) the report by more than seven years or until
the governing statute of limitations
has expired, whichever is the longer period.
-Paid tax liens that,
from the date of payment, antedate the report by more than seven
years. (Paid tax liens are reported for 7 years from date
paid not filed! So pay them quickly!)
-Records of arrest, indictment,
information, misdemeanor complaint, or conviction of a crime that,
from the date of disposition, release, or parole, antedate the report
by more than seven years. These items of information shall no longer
be reported if at any time it is learned that in the case of a conviction
a full pardon has been granted, or in the case of an arrest, indictment,
information, or misdemeanor complaint a conviction did not result.
-Any other adverse information
that antedates the report by more than seven years.
-The seven-year period
specified in paragraphs (5) and (7) of subdivision (a) shall commence
to run, with respect to any account that is placed
for collection (internally or by referral to a third party, whichever
is earlier), charged to profit and loss, or subjected to any similar
action, upon the expiration of the 180-day period beginning on the
date of the commencement of the delinquency that immediately preceded
the collection activity, charge to profit and loss, or similar action.
Where more than one of these actions is taken with respect to a
particular account, the seven-year period specified in paragraphs
(5) and (7) shall commence concurrently for all these actions on
the date of the first of these actions. (What this means is that
the creditor must report the charge off date truly and no-reage
it or attempt to extend it).
-A consumer credit report
shall not include any adverse information concerning a consumer
antedating the report by more than 10 years or that otherwise
is prohibited from being included in a consumer credit report.
-Consumer credit reporting
agencies shall not include medical information in their files on
consumers or furnish medical information for employment or credit
purposes in a consumer credit report without the consent of the
consumer.
-Child support: A consumer
credit reporting agency shall include in any consumer credit report
information, if any, on the failure of the consumer to pay overdue
child or spousal support, where the information either was provided
to the consumer credit reporting agency pursuant to Section 4752
or has been provided to the consumer credit reporting agency and
verified by another federal, state, or local governmental agency.
-Every consumer credit
reporting agency shall maintain reasonable procedures designed to
avoid violations of this statute and to limit furnishing of consumer
credit reports to the purposes listed under Section 1785.11
That is an excerpt from
the California Code on credit reporting time limitations and if
you live in California that would be the code you would review.
The federal code always rules
unless it offers less protection to the consumer than state.
You should review your state code then review federal and see if
there are any major differences and if there are, the one with the
best consumer protection would rule.
Federal rule on credit reporting
timelines § 605. Requirements relating to information contained in
consumer reports [15 U.S.C. § 1681c]
(a) Information excluded
from consumer reports. Except as authorized under subsection (b)
of this section, no consumer reporting agency may make any consumer
report containing any of the following items of information:
(1) Cases under title
11 [United States Code] or under the Bankruptcy Act that, from the
date of entry of the order for relief or the date of adjudication,
as the case may be, antedate the report by more than 10 years.
(2) Civil suits, civil
judgments, and records of arrest that from date of entry, antedate
the report by more than seven years or until the governing statute
of limitations has expired, whichever is the longer period.
(3) Paid tax liens which,
from date of payment, antedate the report by more than seven
years.
(4) Accounts placed for
collection or charged to profit and loss which antedate the report
by more than seven years.
(5) Any other adverse
item of information, other than records of convictions of crimes
which antedates the report by more than seven years. (b)
Exempted cases. The provisions of subsection (a) of this section
are not applicable in the case of any consumer credit report to
be used in connection with;
(1) a credit transaction
involving, or which may reasonably be expected to involve, a principal
amount of $150,000 or more;
(2) the underwriting
of life insurance involving, or which may reasonably be expected
to involve, a face amount of $150,000 or more; or (3) the employment
of any individual at an annual salary which equals, or which may
reasonably be expected to equal $75,000, or more.
(c) Running of reporting
period.
(1) In general. The 7-year
period referred to in paragraphs (4) and (6)(2) of subsection (a)
shall begin, with respect to
any delinquent account that is placed for collection (internally
or by referral to a third party, whichever is earlier), charged
to profit and loss, or subjected to any similar action, upon the
expiration of the 180-day period beginning on the date of the commencement
of the delinquency which immediately preceded the collection activity,
charge to profit and loss, or similar action.
(2) Effective date. Paragraph
(1) shall apply only to items of information added to the file of
a consumer on or after the date that is 455 days after the date
of enactment of the Consumer Credit Reporting Reform Act of 1996.
(d) Information required
to be disclosed. Any consumer reporting agency that furnishes a
consumer report that contains information regarding any case involving
the consumer that arises under title 11, United States Code, shall
include in the report an identification of the chapter of such title
11 under which such case arises if provided by the source of the
information. If any case arising or filed under title 11, United
States Code, is withdrawn by the consumer before a final judgment,
the consumer reporting agency shall include in the report that such
case or filing was withdrawn upon receipt of documentation certifying
such withdrawal.
(e) Indication of closure
of account by consumer. If a consumer reporting agency is notified
pursuant to section 623(a)(4) [§ 1681s-2] that a credit account
of a consumer was voluntarily closed by the consumer, the agency
shall indicate that fact in any consumer report that includes information
related to the account.
(f) Indication of dispute
by consumer. If a consumer reporting agency is notified pursuant
to section 623(a)(3) [§ 1681s-2] that information regarding
a consumer who was furnished to the agency is disputed by the consumer,
the agency shall indicate that fact in each consumer report that
includes the disputed information.
You can see that the
state statute above does not conflict with the federal and both
offer pretty equal protection therefore you can cite either because
there is no direct conflict. **Also see our
statute of limitations page to find out if your debt has expired
to be legally collected. Collection time
and reporting time are different.
Further Proof.... Here is an opinion from the FTC
on this exact issue and should really clear up any concerns about
re-aging debts or a payment extending the reporting time.
TIME LIMITS 1. What reporting limits does the FCRA provide with respect
to chargeoffs, and how long have they been in effect?
Answer: Section 605(a)(4),
which has been in effect since the FCRA became effective in April
1971, has always prohibited CRAs from reporting chargeoffs that
are more than seven years old.(1) Section 623(a)(5),
which became law in September 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 preceded" the charge off.
Section 605(c)(1) provides that the seven year period begins 180
days from that date. Both provisions were part of the major revision
to the FCRA that were enacted in 1996.(2)
2. Is the reporting period
extended if (A) the original creditor sells or transfers the account
to another creditor, (B) the consumer responds to post-charge off
collection efforts by making a payment on the debt, or (C) the consumer
disputes the account with a CRA? Does it matter whether the 7-year
period has expired when any of these events occurs?
Answer: No. In enacting
the new provisions discussed above, Congress intended to establish
a date certain -- 180 days after the start of the delinquency that
led to the charge off -- to begin the obsolescence period. It did
so to correct the often lengthy extension of the period that resulted
from later events under the original FCRA. Here are two staff
opinion letters (Kosmerl,
06/04/99; Johnson,
08/31/98) that discuss the impact of these provisions, and the legislative
history relating to their enactment, in more detail. Because
the commencement of the seven year period is now described with
some precision by the statute, it is our opinion that none of the
subsequent events you listed -- sale of the charged off account
by the creditor, or a payment on or dispute about the account by
the consumer -- changes the allowable period for a CRA to report
a charge off.
3. Since Sections 623(a)(5)
and 605(c)(1) provide new rules for calculating the 7-year period
that became effective in 1997, do charge off accounts now have different
obsolescence periods depending on when the charge off occurred?
Answer: Yes. Section
605(c)(2) states that the section "shall apply only to items
of information added to the (CRA) file of a consumer on or after"
455 days after enactment, or December 29, 1997. Therefore, a charge
off reported to a CRA on or after that date is subject to the new
commencement-of-the-delinquency method of calculating the obsolescence
period set forth in Sections 623(a)(5) and 605(c)(1). On the other
hand, a charge off reported to a CRA before December 29, 1997, is
not covered by the new provisions, as discussed in (Kosmerl,
06/04/99). If a credit account was reported as a charge off before
that date, the Commission's view has been that it can be reported
for seven years from the date the creditor actually charged it
off.
Reasonable Procedures
for CRA: Whenever a consumer credit reporting agency prepares a consumer
credit report, it shall follow reasonable procedures to assure maximum
possible accuracy of the information concerning the individual about
whom the report relates. These reasonable procedures shall include,
but not be limited to, permanent retention by the consumer credit
reporting agency in the consumer's file, or a separately individualized
file, of that portion of the data in the file that is used by the
consumer credit reporting agency to identify the individual consumer
pursuant to paragraph (1) of subdivision (a). This permanently
retained data shall be available for use in either a reinvestigation
pursuant to subdivision (a) of Section 1785.16, an investigation
where the consumer has filed a police report pursuant to subdivision
(k) of Section 1785.16, or a restoration of a file involving the
consumer.
If the permanently retained
identifying information is retained in a consumer's file, it shall
be clearly identified in the file in order for an individual who
reviews the file to easily distinguish between the permanently stored
identifying information and any other identifying information that
may be a part of the file. This retention requirement shall not
apply to data that is reported in error, that is obsolete, or that
is found to be inaccurate through the results of a reinvestigation
initiated by a consumer pursuant to subdivision (a) of Section 1785.16.
Credit Reports: What Information
Providers are responsible to do
Many consumers believe
that the time of reporting can be extended by the furnisher of information
(creditor). Often, consumers are told that the account can be reported
for say, 7 years, then later they are told the account was re-aged
or had some type of activity that led to a longer reporting time.
Not true, it cannot be extended! To solve this dispute, below is
the Federal Trade Commissions' view on the responsibility of these
furnishers.
The Fair Credit Reporting
Act (FCRA) is designed to protect the privacy of credit report information
and to guarantee that information supplied by consumer reporting
agencies (CRAs) is as accurate as possible. If you provide information
to a CRA, such as a credit bureau, be aware that amendments to the
law spell out new legal obligations. These amendments were effective
September 30, 1997.
Does the FCRA Affect
Me?
If you report information about consumers to a CRA, you are considered
a "furnisher" of information under the FCRA. CRAs include
many types of databases -- credit bureaus, tenant screening companies,
check verification services, and medical information services --
that collect information to help businesses evaluate consumers.
If you provide information to a CRA regularly, the FCRA requires
that the CRA send you a notice of your responsibilities.
What Are My Responsibilities?
The responsibilities of information providers are found in Section
623 of the FCRA, 15 U.S.C. §1681s-2, and are explained here.
Items 2 and 5 apply only to furnishers who provide information to
CRAs "regularly and in the ordinary course of their business."
All information providers must comply with the other responsibilities.
1. General Prohibition
on Reporting Inaccurate Information - Section 623(a)(1)(A) and Section
623(a)(1)(C).
You may not furnish information that you know -- or consciously
avoid knowing -- is inaccurate. If you "clearly and conspicuously"
provide consumers with an address for dispute notices, you are exempt
from this obligation but subject to the duties discussed in Item
3. What does "clear and conspicuous" mean? Reasonably
easy to read and understand. For example, a notice buried in a mailing
is not clear or conspicuous.
2. Correcting and Updating
Information -- Section 623(a)(2).
If you discover you've supplied one or more CRAs with incomplete
or inaccurate information, you must correct it, resubmit to each
CRA, and report only the correct information in the future.
3. Responsibilities After
Notice of a Consumer Dispute from a Consumer --Sections 623(a)(1)(B)
and 623(a)(3).
If a consumer writes to the address you specify for disputes to
challenge the accuracy of any information you furnished, and if
the information is, in fact, inaccurate, you must report only the
correct information to CRAs in the future. If you are a regular
furnisher, you also will have to satisfy the duties in Item 2. Once
a consumer has given notice that he or she disputes information,
you may not give that information to any CRA without also telling
the CRA that the information is in dispute.
4. Responsibilities After
Receiving Notice from a Consumer Reporting Agency -- Section 623(b).
If a CRA notifies you that a consumer disputes information you provided:
You must investigate
the dispute and review all relevant information provided by the
CRA about the dispute. You must report your findings to the CRA.
If your investigation shows the information to be incomplete or
inaccurate, you must provide corrected information to all national
CRAs that received the information. You should complete these steps
within the time period that the FCRA sets out for the CRA to resolve
the dispute -- normally 30 days after receipt of a dispute notice
from the consumer. If the consumer provides additional relevant
information during the 30-day period, the CRA has 15 days more.
The CRA must give you all relevant information that it gets within
five business days of receipt, and must promptly give you additional
relevant information provided from the consumer. If you do not investigate
and respond within the specified time periods, the CRA must delete
the disputed information from its files.
5. Reporting Voluntary
Account Closings -- Section 623(a)(4).
You must notify CRAs when consumers voluntarily close credit accounts.
This is important because some information users may interpret a
closed account as an indicator of bad credit unless it is clearly
disclosed that the consumer -- not the creditor -- closed the account.
6.
Reporting Delinquencies -- Section 623(a)(5).
If you report information about a delinquent account that's placed
for collection, charged to profit or loss, or subject to any similar
action, you must, within 90 days after you report the information,
notify the CRA of the month and the year of the commencement of
the delinquency that immediately preceded your action. This will
ensure that CRAs use the correct date when computing how long derogatory
information can be kept in a consumer's file.
How do you report accounts
that you have charged off or placed for collection? For example:
A consumer becomes delinquent
on March 15, 1998. The creditor places the account for collection
on October 1, 1998. In this case, the delinquency began on March
15, 1998. The date that the creditor places the account for collection
has no significance for calculating how long the account can stay
on the consumer's credit report. In this case, the date that must
be reported to CRAs within 90 days after you first report the collection
action is "March 1998."
A consumer falls behind
on monthly payments in January 1998, brings the account current
in June 1998, pays on time and in full every month through October
1998, and thereafter makes no payments. The creditor charges off
the account in December 1999. In this case, the most recent delinquency
began when the consumer failed to make the payment due in November
1998. The earlier delinquency is irrelevant. The creditor must report
the November 1998 date within 90 days of reporting the charge-off.
For example, if the creditor charges off the account in December
1999, and reports this charge-off on December 31, 1999, the creditor
must provide the month and year of the delinquency (i.e., "November
1998") within 90 days of December 31, 1999.
A consumer's account
becomes delinquent on December 15, 1997. The account is first placed
for collection on April 1, 1998. Collection is not successful. The
merchant places the account with a second collection agency on June
1, 2003. The date of the delinquency for reporting purposes is "December
1997." Repeatedly placing an account for collection does not
change the date that the delinquency began.
A consumer's credit account becomes delinquent
on April 15, 1998. The consumer makes partial payments for the next
five months but never brings the account current. The merchant places
the account for collection in May of 1999. Since the account was
never brought current during the period that partial payments were
made, the delinquency that immediately preceded the collection commenced
in April 1998 when the consumer first became delinquent.
