Last week I received the following question from a DisputeSuite Member via email. It has to do with the legality of re-reporting derogatory items to the credit reporting agencies after they have been removed, at least once, from a consumer’s credit reports. Here is the question.
“I have a client that has a large number of collections on his credit reports. I’ve been working with him for several months and have been very successful getting about half of his collections deleted through the dispute process. Here’s the problem, two of the previously deleted collections have either been re-reported by the collection agencies or the credit bureaus have chosen to place them back on my client’s credit reports. Is this legal? I thought if an item was not verified within 30-45 days it had to be permanently removed.”
Yes, the DisputeSuite Member is correct…items that cannot be verified by the credit reporting agencies must be removed, normally within 30 days of the filing of a dispute. But, just because an item has been removed by the credit bureaus it doesn’t mean that the deletion is permanent.
Most derogatory items have to be permanently removed from your credit reports when they turn seven years old. Of course there are some exceptions to that rule. Bankruptcies, liens and unpaid student loans can remain longer than 7 years. Collections, as in your example, are capped at seven years and no more. In fact, nothing that you do (payment, settlement, dispute) can cause the collection to remain longer than seven years.
If the item was removed but was not seven years old then it can be re-reported to the credit reporting agencies even after 30 days has passed. But, if it’s reinserted the credit bureaus have to notify the consumer AND the item has to actually be accurate. You can’t reinsert something that you know to be incorrect.
My guess is collections at question were removed because they were not verified by the credit bureaus within 30 days. That’s a requirement, but not a permanent action.
However, and this is the answer to your question, if the item is verified after day 30 and after the collections have been removed, the credit reporting agencies can reinsert the item on the consumer’s credit reports, legally.
Regarding the notice of reinsertion, this is a requirement of the Fair Credit Reporting Act. The notice of reinsertion has to be in writing and it must be sent to the consumer within 5 business days after the collection has been reinserted. If the item was reinserted and the credit bureaus never provided a notice of reinsertion then that’s likely a Fair Credit Reporting Act violation.
If the item was deleted initially because it was incorrect, yes the credit bureaus and their data furnishers (normally financial service companies or a collection agency) can make mistakes, then the item cannot be re-inserted. Having said that, mistakes can happen as the credit bureaus are dealing with thousands of disputes each day and billions of pieces of information. If an item that was previously removed because it was erroneous was reinserted then that’s another arguable Fair Credit Reporting Act violation.
In most cases the Fair Credit Reporting Act is pretty forgiving when it comes to errors on credit reports. There is no private right for legal action against a credit bureau unless the consumer first disputes the item and gives the credit bureaus an opportunity to correct it. However, in a scenario where an item was disputed, verified as inaccurate and subsequently removed it would be harder to argue that the credit bureaus were not already aware of the data’s inaccuracy.
Some states have laws that do not give the credit bureaus safe harbor if a dispute has not been filed. For example, California’s version of the Fair Credit Reporting Act has language that a credit reporting agency violates their law if they knew or should have known something was incorrect.
The bottom line is this, if the collection account was accurate then it can be reinserted, and a notice from the credit bureau is required. If the collection item was removed because it was deemed to be incorrect per the investigation, it cannot be reinserted legally.