Dear Debt Adviser,
I’m an avid reader of Bankrate and haven’t seen anything relevant to my particular situation. A few years ago, I climbed out of the hole that is debt. I have even started making progress in restoring my credit score. However, last week I received a letter stating I owe $300 on a credit card I had eight or nine years ago. I am certain I paid it, but have no proof since it was so long ago and I have changed banks multiple times since then. What do I do? Paying $300 isn’t out of the question (especially if that was the end of the story) but what if it comes back? And what about it returning to my credit report? I’d hate to have worked so hard to raise my credit score to see it drop due to an error. I’ve read that creditors sell old debts to collectors. I think there’s a good chance my creditor sold my old debt before they realized it was paid. But then why did it take so long for me to receive a letter? Any feedback would be appreciated.
— Dee W.
What you are experiencing is lovingly (OK, maybe not so lovingly) referred to in the industry as “phantom” debt collecting. These collectors try to get you to think that your debts are immortal and will never die, just like the legendary Phantom of old comic books. Why? Because debts that are old can often be purchased by debt collectors for pennies on the dollar. Even though in many cases the statute of limitation for collecting the debt using the courts has long since passed, a collector can still try to get you to pay. An aggressive collector may file with the courts and hope that you don’t appear or respond.
Suing or threatening to sue you to collect a debt that is beyond the statute of limitations is unlawful and unethical for debt collectors. Recent news reports suggest that, much like mortgage lenders with foreclosures, some debt collectors have been taken to task by courts for sloppy paperwork and other legal issues.
If you believe that a debt collector is violating the law, you have the right to sue in a state or federal court within a year from the date the law was violated. If you win, you stand to collect for the damages you suffered, plus an additional amount up to $1,000, plus court costs and attorney’s fees.
You can also fight collectors who are demanding money but not actually threatening to sue you. But you need to do so carefully to get these old debts retired once and for all.
First, send a written request to the collector for verification of the debt. Send the request certified mail, return receipt requested, and keep a copy of everything. Under the Fair Debt Collection Practices Act, collection activity stops until you are presented with verification of the debt. Often, the collector has very little information concerning the original creditor and amount owed, if anything at all. Without it, the collector cannot verify the debt.
But, just as you suspected, it may not end there. When presented with a consumer that knows her rights, the collector may just sell the debt to another collector and move on. That would leave you at the risk of beginning of the same cycle all over again.
If you have the money, I recommend using an attorney to send the collector a letter on legal letterhead that says you do not owe the debt and any further communication regarding the debt must be made through your attorney. To stop the debt from being resold, ask for a form or letter from the creditor or collector that releases you from further obligation.
As for the credit reporting or scoring implications, you shouldn’t have any problems. Your debt is only allowed to be shown on your credit report and included in your score for seven years, and yours is older than that.
Ask the adviser