Friday, March 21, 2014

Collection Agencies Have NO Right To Inquire Or Furnish Information To Credit Bureaus!

It is my opinion, based on consumer protection laws, that collection agencies have no right at all to inquire on anyone's credit report nor furnish their bogus information on anyone's credit report.  It may be kind of a bold statement, but its the truth.

For today's topic, I'm going to show you why, based on real laws, they actually are not allowed to inquire or furnish information to credit bureaus.  There is one exception that I can think of, that is still sort of iffy, and I'll explain that as well. We are going to concentrate on mainly two laws, which you should be familiar with by now, the FDCPA and the FCRA.  I will also bring in my fav for 3rd party debt collector scumbags, good ol' 73 American Jurisprudence (AmJur) 2nd, Sect. 93.

I want to state that just because they don't have any legal right to be anywhere on someone's credit report, doesn't mean the law prohibits them from attempting to collect from consumers.  But, just because they can sleazily attempt to collect (and I mean that in the sweetest, kindest way), it never means anyone owes them squat.  Let's go over 73 AmJur 2nd, Sect. 93 first.

Oh, I just love this. It says, in case you haven't read it at least 5 times before on this blog, "The right of subrogation does not exist for a stranger to the transaction."  In normal everyday, non bar-attorney speak, it means there's no right to "substitute" (subrogate) yourself into or onto a contract (transaction), if you weren't originally and specifically named in the contract (a "stranger").  Do you understand what this is saying?  A 3rd party collector is NOT named on the original contract between the consumer and the "creditor", so they cannot claim that anyone owes them anything.

What if they bought an alleged debt from an original creditor and claim the purchase included all rights of interest and assignment?  Hmmm, does that mean that they are now owed something? Hah! Look at the previous paragraph again.  Its pretty clear.  It doesn't matter if they bought it, they were assigned it, they traded something of value (or not) for it, or however they acquired it and got their greedy corporate hands on it, if they were not on the original contract, no one is obligated to pay them a dime!  With NO VALID CONTRACT, they also can't validate, verify, nor may they place info on the credit reports.

Now, take a look at the FDCPA. This law is called the Fair Debt Collection Practices Act. I personally see very little need for this law, except to reiterate how collectors should treat people and to let consumers know that debt collectors don't really have the rights they try to claim they have.  FDCPA Section 805(b) says: 
          COMMUNICATION WITH THIRD PARTIES. --Except as provided in Section 804, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.

I underlined the last part where it says "if otherwise permitted by law". Why do they say "otherwise"?  Could it be that they know that they are trying to trick you by the way its worded, into believing that it is permitted by law? If you took out the part that is underlined, then it would be saying it is permitted by law.  Read it that way and see for yourself.  By adding that last little section of the statement what they are saying is, "its not permitted by law, but if you can find a law that permits a debt collector to communicate with a credit reporting agency in connection with the collection of a debt, then hey, we'll also allow it."  I'm telling you, and I ran this by my trusted and expert mentor (who happens to be a legal genius, Pr. Atty Gen. and super close friend) and a whole hosts of credit industry professionals, and they concurred.  The FDCPA is saying debt collectors are not allowed to furnish information regarding alleged debts on consumers' credit reports.

How about the FCRA?  The FTC has already concluded and published opinion letters from their legal staff that state reporting on credit reports is a communication.  Case law such as Heintz v. Jenkins came to that conclusion also.  FCRA Section 603 says:
     (o)  EXCLUDED COMMUNICATIONS. A communication is described in this subsection if it is a communication
(5) with respect to which
     (A) the consumer who is the subject of the communication
          (i) consents orally or in writing to the nature and scope of the communication, before the collection of any information for the purpose of making the communication;
          
The FCRA also doesn't allow 3rd party collectors to inquire on consumers' credit reports. Hopefully you've heard the term "Permissible Purpose."  I'm going to show you how this absolutely never gives collectors the right to inquire on credit reports. They never have "Permissible purpose."  FCRA Section. 604 says:
     § 604. Permissible purposes of consumer report
a) In general. Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other:
    (3) To a person which it has reason to believe
    (F) [otherwise] has a legitimate business need for the information
         (i) in connection with a business transaction that is initiated by the consumer; or
        (ii) to review an account to determine whether the consumer continues to meet the terms of the account

*(I crossed out the word otherwise so it doesn't confuse you without reading the rest of that section)


Each of these laws says the same thing. Unless the consumer authorizes it prior to them taking action, it is illegal for them to inquire or furnish information. There is no doubt in my mind that what the law says is exactly what it means.  The sad thing is that credit bureaus fail to require compliance with the law, which means they also are violating the law, because they put profits before consumers' rights. They put money before obeying the law. Its a sad shape this industry is in when all of them don't sweat it or worry at all about breaking the law because they make so much dirty money, they can pay off whoever they need to, whether it is a consumer that wins a lawsuit against them or maybe the courts, judges, lawyers, CFPB, FTC, ...you get what impression I'm getting by their bad behavior.

Okay, I said I'd tell you the one exception that I still believe is sort of iffy. That would be when a consumer pays a 3rd party collector for an alleged debt that they probably wouldn't have paid had they known better.  Just because someone pays a collector does not mean that the collection agency will or has to remove it from the credit report. And, the act of paying them establishes a business relationship with them. The reason why I say its still "iffy", is because the transaction was NOT initiated by the consumer.  It was initiated by the collection company because in most cases, the payment was extorted by the collection company that guilted the consumer or harassed the consumer into paying them.  I'm somewhat jaded, to put it mildly, but that's my opinion on why most consumers who give any money to a collection company do so.

But look at the law again. Regardless of the business relationship established by the payment to the collection company, the law says that the business transaction has to be Initiated by the consumer. I reiterate that it is my opinion, that consumers do not go out looking to transact with 3rd party collectors and therefore, collectors have not met the conditions required by either the FDCPA nor the FCRA for inquiring or furnishing information on consumers' credit reports.

I hope you've enjoyed the information I've presented in this post and I hope if you are working on getting your credit report as accurate as possible and as derogatory free as possible, that it will help you reach your goals.  If you would like experienced expert assistance to help you manage your credit data, please contact me.  My contact info is up on the top right hand side of the page. I love helping people and believe that I can help you achieve the results you are looking for.

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20 comments:

  1. Thanks for a share about Repair Your Bad Credit With Future Ficol.
    Man can also get Credit Profile Number

    ReplyDelete
  2. Thanks!!!! As always great info! I have gotten all negatives removed from Transunion, (4) removed from Equifax, and still fighting with Experian by using the methods I learned from your blogs.

    ReplyDelete
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    ReplyDelete
  4. Todd Murphy. AWESOME!! I love reading your information Shannon

    ReplyDelete
  5. What about this can you help me understand it.
    FCRA
    § 604 - 15 U.S.C. § 1681b
    11
    (3)
    To a person which it has reason to believe
    (A)
    intends to use the information in connection with a credit trans
    -
    action involving the consumer on whom the information is to be
    furnished and involving the extension of credit to, or review or
    collection of an account of, the consumer; or

    ReplyDelete
    Replies
    1. David, this is regarding permissible pull of the credit reports. It also describes in that section that the transaction must be initiated by the consumer. A collection account is not initiated by any consumer.

      Delete
  6. I am not trying to be argumentative this is instructions to credit reporting agency's for permissible pull of the credit report it states clearly that it can be released for the collection of an account. I don't see it stating that it must be initiated by the consumer as you have stated. Has anyone ever challenged this and won against a collection agency? Thanks for your reply

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  7. FDCPA Section 805(b) "if otherwise permitted by law" This looks like it is referring to FCRA
    § 604 - 15 U.S.C. § 1681b.Permissible pull of the cr.

    ReplyDelete
    Replies
    1. Let's just focus on the little part "collection of an account." NO ONE has an account with a 3rd party collector. An account MUST be initiated by the consumer. You apply for an account with an original creditor, you don't ever do that with a 3rd party collector.

      Do I know if anyone has challenged it and won? No I don't know that because there are plenty of other ways to fight than this section. I don't even care much about inquiries and permissible pulls.

      "If otherwise permitted by law", could mean any law, not just the FCRA. Initiated by a consumer is found in FCRA 604(a(3)(F).

      Delete
  8. Hi Shannon I agree "NO ONE has an account with a 3rd party collector" But in most credit agreements it includes the following "We may transfer your Account and this Agreement to another company or person without your permission and without prior notice to you. They will take our place under this Agreement. You must pay them and perform all of your obligations to them and not us"
    They then become party to the original creditor agreement by my agreeing to the credit agreement don't they?

    ReplyDelete
    Replies
    1. 73 Am Jur 2nd, sections 90 & 93 are clear that a 3rd party cannot be substituted onto any agreement without the request from the consumer to act on their behalf.

      This means that they cannot buy a debt from an OC so that the account is paid off and then come tell you to pay them. They have to have an agreement from you requesting their services.

      i would love for someone to show me the law that says someone can force you to contract with them when you have no desire to do so. No contract naming the specific parties and no signatures means no obligation to do business with them.

      Delete
  9. Thank you Shannon for your clarity about this it has been very helpful. This topic has given me motivation to re-read the FCRA and understand it better. Thanks

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  10. So how do you state this in a letter to a credit agency ... I.e , how do you make the argument to them that it's illegal for them to report on your credit report and that they need to remove it

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    Replies
    1. Hi F Randall,

      In your validation demand letter, in your list of items they need to provide to validate, tell them to send a copy of the signed authorization by you allowing them to collect information and make any communication about you to the credit reporting agencies. They won't send it because they don't have it. They don't have most of what you request from them, which is why they really never can fully validate.

      If you're wanting to use it in a bureau dispute, I would say something like: "I have never authorized this company to collect or share any information about me. I have no contract with this company and have never requested any money nor services from them. They have no legal right to be on my credit report. Delete this now or provide the proof."

      Delete
  11. Has anyone tried this method since this method lately? If so, how did it turn out?

    ReplyDelete
    Replies
    1. Yes Choclit honee,

      I use it all the time. It is one of the items I demand that they produce when they attempt to validate. How does it turn out? Just as expected. They don't produce it because they don't have it.

      Delete
  12. Ms. Lopez,

    Do you know of any cases where a collection agency has sued a consumer for debt they bought and the consumer used the Am Jur 2nd, sections 90 & 93 as a defense and won? I am looking at my options. I see that a collection agency has filed a lawsuit against me however, I have not been served yet. Thanks in advance.

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    Replies
    1. Hi Shabae,

      Yep. First hand. I've done the paperwork for many, many lawsuits brought by 3rd party collectors. I've used it in every single case in my affirmative defenses and exhibits. Never lost a case yet.

      3rd party collectors do not have personal jurisdiction. You need to also challenge that as the only party that can bring a lawsuit is the aggrieved party. They've not lent anything. They aren't aggrieved. But if you don't challenge jurisdiction, you waive it or grant it, actually. Once challenged, the plaintiff cannot move forward without proving it. Obviously they can't prove squat.

      The court is not your friend and will not look out for your best interest. They expect you to know the law if you're going to fight back. You are interrupting the income stream by fighting back and winning. However, usually the court doesn't have to do much because if you write things properly, hit them hard during discovery, they collector will dismiss the case on their own after failing to get you to agree to a settlement.

      Delete
  13. Shannon, You're still awesome as Hell. Keep up the great work. I check in to see what new stuff you have every now and then. I'm always pleased at what I see.

    ReplyDelete
    Replies
    1. Thanks Todd. Give me a call sometime. We'll catch up. Real nice to hear from you!

      Delete

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