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Charge-off question

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New Member

Charge-off question

I have a charge-off from Credit One Bank with the balance listed as $0 on my Experian report. The account was apparently sold to LVNV Funding, who I've learned is owned by the same company. The account status is now current, as of 9/2020, and "derogatory" with a balance of over 500. I read somewhere if the original balance is charged off as $0 then there shouldn't be second, current account attempting to collect, that this would be a FCRA violation. Is this accurate or am I grossly misunderstanding? Are they taking advantage of a loophole by selling it to an agency under the same owner? Should I dispute the current account? Any help would be appreciated...and sorry if this something that's a faq.

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Legendary Contributor

Re: Charge-off question

When a creditor sells a delinquent debt, they are then required to promptly update the account current balance to $0, as the debt is no longer owed to the original creditor.  Update to $0 does not signify that the debt is paid or otherwise discharged, it only indicates that it is no longer owed to them.  Update to show $0 applies regardless of whether the delinquency is reported as days late, such as 120-late, or as CO.

 

The new owner can then immediately report their collection authorization to the CRAs, as the debt still remains delinquent and unpaid, and their ownership of the debt provides them with legitimate collection authority.

 

What you have read likely applies to a situation where update to $0 by the original creditor was done due to payment or settlement of the debt, and not based on sale of the debt.

If the debt balance was updated to $0 due to payment, there would no longer be a delinquent debt, and thus no collection could then be conducted or reported due to any assignment or sale of the debt after it was paid/settled.

The instant scenario does not involve an update to $0 based on payment of the debt.

 

As for whether a party who has some affiliation with the original creditor can qualify as a debt collector, and thus report their collection to a CRA, section 803(6) of the Fair Debt Collection Practices act (FDCPA) clearly defines any party who does business under a name that does not clearly identify it as being the creditor qualifies as a debt collector, even if affiliated with the original creditor.

I see nothing inappropriate with any attempts by them to conduct collection activities or report a collection to the CRAs.

 

 

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New Member

Re: Charge-off question

Thank you, Robert. Had a feeling I was misunderstanding. Wanted to get a definitive answer, though, before I took any sort of action and/or waste my time. I appreciate the prompt response and detailed explanation.

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