[Calloway]

I was conversing with a friend who’s a mortgage broker. He was in the midst of getting lender approval for a long time client and was surprised by the following problem:

A leasing company, who had not done business with the client in 9 years entered a recent payment on this old derogatory account, thereby converting it from a dead account to a current derogative account. The result was that her “over” 700 fico score plunged below 600. She did NOT make any payments to this company in the entire 9 years. This could have been a mistake, but seems it is most likely a lie. Since she’s in the midst of financing now, she does not have the time to go through the process of contacting the creditor/bureaus in effort to get this mistake corrected.

If the statute of limitations regarding suits on revolving credit in a given state is 4 years, then approximately 4 years from the date of last payment, a collection agency may file suit, but the case would be dismissed when/if the debtor brought it to the court’s attention that the statute of limitations had expired. However, if the debtor makes a payment on the account, the clock starts over. The debtor may now be sued on the account, it can be reported as a recent collection (smashing your score), and additionally take another 7 years from the date of that payment (assuming no other payments are made) to drop off your credit report. (more if judgment is obtained)

This brought a thought to mind;
Anyone can make a payment to an account even if it is not their account provided they put the account information in the memo section of the check or money order. Just the same, you can walk into a bank and deposit money in anyone’s account if you fill the deposit slip out with the account number.

I wonder how hard it would be to obtain a copy/micro fish of the instrument of payment used (if there really was one) in the case of my friend's supposed recent payment dilemma?

[rubyruby27]

Read the fcra they can't re age it legally. Once the account is dead its dead, no code 19.

The date of the delinquency is from the 1st 30 days late that lead to a negative action.

then they have 90 days to report that date and then its 71/2 years for the first delinquency. once it is dead any payment can't revive it but it happens as you can see.

She needs to write the CRA's and tell them to delete and then she needs to write the leasing company and say remove it now or pay me.

[centex]

Review the situation carefully to determine whether this is consumer debt or business debt. There are different rules that are applicable to non-consumer debt.

And, as to consumer debt, a charge-off can certainly be updated, but in this instance, if the DOFD was truly more than nine years ago, then it should not appear in the consumer report. Beyond that, not enough information in the original post to give more specific guidance...

[jlynn]

A payment on an old derogatory cannot change the DOFD, nor can it extend the 7 year reporting period. As far as renewing the SOL for a lawsuit, the rules vary from state to state, so a payment may or may not restart the lawsuit clock

[E. Normis Debtor]

Originally Posted by Calloway

This brought a thought to mind;
Anyone can make a payment to an account even if it is not their account provided they put the account information in the memo section of the check or money order.

In a state where a payment would toll or "restart" the SOL for suit, mere record of a payment is not sufficient. The payment would need to be made by, or with the consent of, the debtor. And, the creditor bears the burden of proving that a payment was made, on what date, and that the payment was made by the debtor or with their consent.

[jlynn]

Originally Posted by Calloway

This brought a thought to mind;
Anyone can make a payment to an account even if it is not their account provided they put the account information in the memo section of the check or money order. Just the same, you can walk into a bank and deposit money in anyone’s account if you fill the deposit slip out with the account number.

You know, your friend is not the first victim of a phantom payment scheme. If you can get the name of the company - you might want to do some searching to see if there is more than one incident with them trying this. As Centex likes to explain, sometimes a phone conversation with the company's General Counsel can get matters taken care of overnight - but again, all details need to be verified for accuracy before hand.

Also, for underwriting - if your friend has an old report, showing the actual dates, that might just satisfy them enough to sign off on the mortgage. There is also a thing called Rapid Rescoring, which takes about 24 hours. If your friend has proof that this account has been reaged (again regardless of a payment if the debt occurred 9 yrs ago it shouldn't be on the reports) they need to check with their mortgage broker and see if they are familiar with the process, and if that process might work in this situation.

[Hedwig]

I agree. I was thinking of the rapid rescoring myself.

[Calloway]

There is also a thing called Rapid Rescoring, which takes about 24 hours. If your friend has proof that this account has been reaged (again regardless of a payment if the debt occurred 9 yrs ago it shouldn't be on the reports) they need to check with their mortgage broker and see if they are familiar with the process, and if that process might work in this situation.[/quote]


Thanks to all of you,
I had forgotten about rapid re-scoring. From what I remember, it's around $100.- Seems 1st efforts (considering time not being a luxury) might be best focused on a call to the company's gen counsel as suggested, then a rapid re-score (assuming the call was effective). Will see if I can find out about where the phantom payment came from and post the info.

- FYI, I don't know this to be fact, but I have heard that 3rd party CA's purchase old debt, and if they manage to obtain 4 consecutive monthly payments from the debtor, they can re-sell the paper as current debt.


FYI - I have to say - You guys are unparalleled in knowledge and suggestions. I've perused appx 5 other sites similar in concept in the past several weeks... None compare. Hope I can add a little value here and there.
Thanks again.

[hannah]

Originally Posted by Calloway

- FYI, I don't know this to be fact, but I have heard that 3rd party CA's purchase old debt, and if they manage to obtain 4 consecutive monthly payments from the debtor, they can re-sell the paper as current debt.

When debt is purchased by JDB's or CA's, it can never be brought current as it is defaulted debt which can never be brought current because the credit that goes along with such a debt is no longer valid. They would have to reestablish the debt as a new debt with a new contract with the debtor. In most states this is required in writing regardless of how many consecutive payments a misguided debtor may make unless it is valid under their own state contract statute and caselaw. I don't profess to know contract law from all 50 states so in some it may be possible but not in any that I have seen. If you have evidence that this is going on, I smell a class action.

[jlynn]

Originally Posted by hannah

When debt is purchased by JDB's or CA's, it can never be brought current as it is defaulted debt which can never be brought current because the credit that goes along with such a debt is no longer valid. They would have to reestablish the debt as a new debt with a new contract with the debtor. In most states this is required in writing regardless of how many consecutive payments a misguided debtor may make unless it is valid under their own state contract statute and caselaw. I don't profess to know contract law from all 50 states so in some it may be possible but not in any that I have seen. If you have evidence that this is going on, I smell a class action.

Hannah, I got the impression that he was referring to something more along the lines of inside the industry lingo. I don't think he meant the debt was "current" as we know the term to mean, but rather, a CA could sell it for nickles rather than pennies on the dollar as the debtor is attempting some sort of repayment.

[E. Normis Debtor]

It's what's referred to in the industry as "performing paper".

You have to be careful as there is a distinction between default and delinquent.

A CA collecting or buying a debt that is merely delinquent, rather than in default, wouldn't necessarily be subject to the FDCPA.

Absent a state statutory or common law definition of "default," it could be the OC's call as to whether or not the account is in default or merely delinquent.

[centex]

Originally Posted by E. Normis Debtor

Absent a state statutory or common law definition of "default," it could be the OC's call as to whether or not the account is in default or merely delinquent.

Many of the T&C documents stipulate the conditions that create a default status...in the eyes of most major issuers, a default has occurred at the first missed payment. However, the question is whether it is a non-performing account as defined by the FDIC.

[E. Normis Debtor]

Originally Posted by centex

Many of the T&C documents stipulate the conditions that create a default status...in the eyes of most major issuers, a default has occurred at the first missed payment. However, the question is whether it is a non-performing account as defined by the FDIC.

In some instances it will be the agreement itself that defines default, and some of those agreements leave it to the discretion of the lender.

Absent controlling law, the wording of the agreement could exempt a collector from the FDCPA as the act uses the term "default" rather than delinquent.

The CA industry use of the term "performing paper" has nothing to do with the term as used by the FDIC.