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.

If you have found this blog helpful to you, please consider donating as a sign of your appreciation for information I have freely given to you.  The "Donate" button is on the right side bar.  Thank you for your generosity.