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The Master Understanding SOL and 7 Year Reporting Thread
funkiehouse posted a topic in Credit ForumThe Master Understanding SOL and 7 Year Reporting Thread There is often much confusion on SOL, restarting SOL, and the 7-year/ 7.5-year rule for reporting. Hopefully, this thread can be of some help and answer some of your questions. I will discuss SOL and Credit Reporting separately, so some of your questions not answered in the first part may be answered in the second. This info in this thread is generally aimed at credit card debt, but the basics may apply to other debts. If there is anything I missed please feel free to add to the thread and if you find that I made a mistake, please let us know and please try to provide information (sources) about the correction, if possible. Statute of Limitations Sol (Statute of Limitations) - This refers to the amount of time a creditor or debt collector has to legally sue you for the debt. The SOL starts from the month of the Date of First Delinquency (DOFD) (usually a 30 date late) that leads to the charge-off (CO) of the account. The SOL varies from state to state and varies by type of debt. The Terms and Conditions of agreements and some state’s Tolling laws can also affect the SOL. The SOL does not refer to the amount of time something can stay on your reports. We’ll discuss reporting timelines later on. Can the SOL change? Yes. The SOL can change if you have made a payment towards the debt or if you agreed to a payment plan (usually in writing). This can very by state and is too detailed for this thread. Can a debt owner sue me after the SOL has past? Yes, but it’s unlawful. If a creditor or debt collector sues you after the SOL has past, you can go to court and use the SOL as a affirmative defense in that case. You may also hear the term “Time-Barred” when it comes to using the SOL affirmative defense. A creditor or debt collector can still sue you and obtain a judgment against you after SOL, if you do not show up in court and present your defense. There are ways to fight that but we will not discuss that here. You should always consider contacting an attorney if you have been sued before or after SOL. Per the CFPB: “It's against the law for a collector to sue you or threaten to sue you on a time-barred debt. If you think a collector has broken the law, file a complaint with the FTC and your state Attorney General, and consider talking to an attorney about bringing your own private action against the collector for violating the FDCPA.” https://www.consumer.ftc.gov/articles/0117-time-barred-debts You can read more about Time-Barred, Tolling, SOL and resetting SOL here: http://www.nolo.com/legal-encyclopedia/time-barred-debts-when-collectors-29805-2.html How to respond to a lawsuit that has been filed beyond SOL for credit card debt (open accounts): http://whychat.5u.com/answer.html Debt collection laws by state: https://www.privacyrights.org/fs/fs27plus.htm Does the furnisher of information to the credit reporting agencies (CRA) have to delete a Tradeline (TL) when the SOL runs out? No. If the TL is within the FCRA reporting statutes, but past the SOL, it can still remain on your credit reports. We’ll discuss this more later. Will paying a debt that is past the SOL improve my credit score or remove the negative information from my reports? Probably not and no (but keep reading). The SOL does not have any affect on the way a TL is reported on your credit reports. Paying a debt after an SOL has passed can often make your credit score drop because you have made the TL activity more recent. In other words, it makes the negative information appear more recent. The only way to ensure that negative information is removed from your reports after SOL has passed is by negotiating it’s removal by both parties agreeing to a Pay-for-Delete (PFD); by waiting for the TL to fall off your reports; or if the information is being reported incorrectly and you successfully dispute it. If your PFD is not in writing, then consider that you don’t have an actual agreement for it to be removed. Never pay a debt after SOL without this agreement and try to also negotiate for this if you pay before the SOL has past. Credit Reporting Credit reporting statutes (what can be reported on your credit reports and for how long) is determined by the Fair Credit Reporting Act (FCRA). How long can negative information related to a Charge Off (CO) be reported on my credit reports? To help answer this let’s first look at part of the FCRA, which can be found at this link starting on page 29 section 605: http://www.miller-law.net/pdfs/FCRA.pdf © Running of reporting period (1) In general - The 7-year period referred to in paragraphs (4) and (6) of subsection (a) of this section 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. What this means is that negative information that lead led to a charge off (the 30-180 day lates) can be reported for 7.5 years and the charge off can be reported for a maximum of 7 years. This is why you hear about the 7-year and the 7.5 year debate. Read this for more detailed information: http://consumercreditwatch.wordpress.com/2012/09/28/fcra-time-limitations/ Let me provide a detailed example that will attempt to put all of this together for you. It may help if you write down dates and events on paper to get a clear picture. This example involves a charged off credit card debt for someone living in California, where the SOL for open accounts is 4 years. Say you opened a credit card in Jan 2008 and your first missed payment (30 day late) was reported Jan 2010 (in other words your last payment was made in December and a 30 day late appeared on your reports in Jan). You never made another payment and the card was charged off in June 2010 (about 180 days later). Your date of first delinquency would be Jan 2010 and that can't change. Since the SOL (to file suit) for California is 4 years, the OC or the CA has until Jan 2014 to be able to file suit to force you to pay. Let's say the OC sold the debt to a CA in Jan 2012, the CA is still bound by the same SOL as the OC as long as you haven’t made a payment or entered an agreement to pay. If the CA doesn't sue you before Jan 2014, then they can't legally sue you for it, BUT they can still report it and try to collect from you. The CA can still report a balance and the trade line until June 2017, which is 7.5 years after the DOFD. The OC can also still report the trade line, with a zero balance if sold to the CA, until June 2017. (I’ll go over this again after this example.) Just because the CA bought the debt in Jan 2012 doesn't mean that the SOL has been reset and they have 4 years from the day they bought it to sue you. They still only have until Jan 2014 to legally sue. Just because they bought it on Jan 2012 doesn't mean that they can report it for 7.5 years from that date. They are still bound by the reporting limit of 7.5 years from the original DOFD of Jan 2010. If a CA, OC or CRA were to continue to report it after June 2017, you could sue them for FCRA violations. If the CA bought the debt in Jan 2012, as mentioned earlier, and in Jan 2013 you made a payment to them for the debt (even $1), agreed to a payment plan, or you agreed that the debt is yours; then you could have reset the SOL. If your actions reset the SOL, it would mean that they now have until Jan 2017 (a new 4 years). The new 4 years starts on the day you made the payment or agreement to pay (again this can vary by law and what may have caused the Sol to restart). Even if this happens, they can't continue to report the debt past the original DOFD, which is still June 2017. Can the SOL extend beyond the reporting period allowed for a charge off? Yes. One reason is that your state has a longer SOL than the 7.5-year reporting period. Some examples are: Montana (8), Wyoming (8), Iowa (10), and West Virginia (10); however, this could vary according to the card agreement and case law for that state. More info on credit card SOL by state: http://www.creditcards.com/credit-card-news/credit-card-state-statute-limitations-1282.php Another reason is in this example: Don’t read this part if you don’t understand the example above because it may confuse you further. Just to throw a wrench into the mix, it is possible to extend the SOL so it goes past the allowed reporting period of 7.5 years. How? If you agreed to a payment plan as a resident of California say at the 3 year-11 month mark, and paid on it for 6 months, you could be potentially be sued after the 7.5 year reporting date because you reset the SOL to the month of your last payment under the payment plan agreement. Even though you may have extended the SOL they still can’t report the CO after the 7.5 mark from the original DOFD. If you’re sued after this reporting period has passed, but within SOL, they can place a judgment on your report, if awarded by the court. Judgments have their own reporting guidelines. So the thing to take from this is that you can be sued for something that is no longer being reported on your credit reports and the last payment made in a repayment plan (if you didn’t complete the plan) restarts the SOL at the month of the last payment. Can the DOFD change? No. Even if a debt is sold to a collection agency (CA) or a junk debt buyer (JDB) the DOFD from a CO does not ever change. Can the DOFD change if I make a payment on the debt? No. Again, once the DOFD is set, it can’t be changed by the OC, a CA, or a JDB. Paying on a debt effects the SOL, not the DOFD of a charge off. Can a CA and the OC both report negative information about the same tradeline? Yes. What varies is how it’s reported. If an OC has assigned a debt to a CA, either in-house or third party, both the CA and the OC can report the TL and both can report a balance. Why? Because the OC did not sell the debt to the CA, the CA is working to collect on behalf of the OC and not themselves, although they make money off of the collection. The amounts reported by each in this situation can be different because the OC can only report the original CO amount and the CA can report the CO amount, as well as fees and interest. If the OC sold the debt to the CA, the OC must report a zero ($0 or blank) balance and can continue to report until the 7.5-year mark from the DOFD. Once sold by the OC, the Sol no longer applies to the OC TL but can still apply to the CAs right to sue. Once a debt is sold, the OC is completely out of the picture. Can I get a negative TL removed before the end of the 7.5-year reporting period? Potentially. There may be several ways but the main one I will discuss is an Obsolete dispute. An obsolete dispute can be attempted up to 6 months before the expected fall-off date; however, they are usually more successful about 2-3 months before that date. This type of dispute can be successful because the CRAs don’t want to be caught reporting a TL past the 7.5-year mark, which is a violation of the FCRA. They would rather delete than risk going over that mark just in case the furnisher made an error in the date. This is not everything you need to know about SOL and FCRA reporting guidelines but it should get you started.