Re-Aged Debts Afflict South Florida Consumers
By Paul RizzoPayday Loan Writer
After going through bankruptcy a few years ago, Latoya Gibson thought it was safe to assume that debt collectors would never bother her again.
In her dreams. The 30-year old public housing counselor in Fort Lauderdale, Fla., had the kind of consumer debt that never dies. Zombie debt, some call it.
According to the South Florida Sun-Sentinel, this phenomenon takes place when your credit card company sells off its bad debts. The buyer pays a few pennies for every dollar you owe and tries to turn that investment into a few nickels. They track people down and demand payment.
Often, bad debt buyers or their collection agencies will do one more thing that is especially harmful to your credit rating. It often happens in secret, and is very much illegal: they "re-age" the debt. In other words, they report old debt to a credit bureau as a new obligation.
South Florida consumer advocates, attorneys and debt counselors say re-aging happens all the time, possibly pushing cash-strapped citizens to apply for payday loans and other high-risk alternatives in order to make ends meet. It happens to people who are late on their accounts, too — not strictly those who are delinquent or in bankruptcy.
The credit reporting system is supposed to offer consumers, even those who left bills unpaid, better protection than that. Negative marks such as bad credit card debt must be dropped from your credit report after seven years. If the debt is re-aged, the seven-year clock starts again.
"I was so upset I was shaking," said Gibson, herself a victim of re-aging.
She became aware of this fact only when the debt collector filed a lawsuit against her. The old debt was back on her credit report, even after it had been discharged through bankruptcy. Gibson went to a lawyer who quickly told the debt collector to erase it and to leave Gibson alone.
Re-aging hurts any consumer trying to apply for a Florida home loan or a car or even a new credit card. As long as a negative mark is on your credit report, it will lower your credit score, potentially adding hundreds of dollars a month to your mortgage interest or forcing you to pay a higher APR than you should for a credit card.
A zombie debt can even prevent you from buying a house until the creditor is satisfied.
"It's usually a week or so before closing. These people have been going through the qualifying process for three or four months. Then my company will run a final check," said Marilyn Gallington, a title company marketing representative in Fort Lauderdale. "That's when a debt will turn up and the client will say that he paid it off five or six years ago. But they put it back on to the credit report with a new date."
Re-aging was prohibited in 2003 through amendments to the Fair Credit Reporting Act. The practice "is illegal," says Clarke Brinckerhoff, an attorney at the Federal Trade Commission in Washington, D.C.
"That's the law. It doesn't make any difference when the credit or debt collection agency reports the account," Brinckheroff said.
A lot of families in South Florida and beyond are getting hurt, because these crooked debt buyers aren't getting caught. The consequences of being victimized by them could be disastrous. A bad credit score is one thing; a cycle of debt brought on by the repeated acquisition of no faxing payday loans is quite another.
"These bottom-feeders often really have no clue about a debt, when it's from. They're not really worried about the specifics," said Jon Sheldon, an attorney at the National Consumer Law Center in Boston.