Reader: Collection Agency Out of Business, But Still on Credit Reports

What happens when a negative item on your credit reports is from a company that is no longer around? That’s what one of our readers wants to know. She asks:

A collection agency is listed on my credit report several times. I went online trying to find a way to contact them to make payments but the Better Business Bureau says they are no longer in business. Given that they are no longer around, is there a way to get the credit bureaus to remove the information from my credit reports?

You’re likely in luck here, at least as far as your credit reports go. Under the Fair Credit Reporting Act, you have the right to dispute an item on your credit report(s) if you believe it is inaccurate or incomplete. The credit reporting agencies (CRAs) generally have thirty days to investigate your dispute and either confirm the information with the source, or remove it from your reports. While the law doesn’t specifically state that you can dispute an account because the company furnishing the information is defunct, the fact that you can’t pay these accounts and get the balances updated to zero seems like a reasonable reason for challenging them. Since the company is out of business, it’s not going to respond to a request for reinvestigation from a CRA, and the collection accounts will likely end up being removed from your reports.

I’d recommend you:

Make sure you have fairly recent copies of your credit reports from all three major credit reporting agencies: Equifax, Experian and TransUnion.
Dispute these accounts in writing with each of the CRAs that are reporting them. I’d suggest you do it in writing rather than online because you’ll have better records of your disputes. Send your dispute letters by certified mail.

Chances are the CRAs will respond by telling you the information has been removed. If not, then you’ll have to challenge the findings of their “investigation,” but I really doubt it will come to that. Keep copies of your credit reports, and all the correspondence involved, indefinitely.

Also keep in mind this debt may be bought by another collection agency, so it may not be the last time you hear about it. By law, collection accounts may only be reported for seven and a half years from the date you first fell behind with the original creditor. That’s true, regardless of whether you pay them or not.

Image: Jasoon, via Flickr