Is this reporting under ACCOUNTS or COLLECTIONS?
Usually if you are seeing the 120 days late, you are being reported under ACCOUNTS. Midland and a few others seem to do this a lot, usually on Equifax for some reason.
They tend to call themselves a "factoring company" and report it as a purchased account rather than a true collection.
This is a technical gray area in the federal laws and is better sorted out in state laws, usually.
I can tell you this, that if it is reporting as an ACCOUNT, it is actually helping your FICO.
I had Midland Credit Management reporting an old telephone (was bogus) bill for SW Bell (now AT&T) on all three CRA's.
THE BIG DIFFERENCE is that they reported as COLLECTION on TU and EX. Therefore it had NO 120 days late marks. ON EQ it was under ACCOUNTS and had the 120 day late and even rated the account for 18 months, etc. just as you are speaking.
HERE IS THE BOTTOM LINE: With this being my last collection or derog and all other things being equal my scores were:
TU: 706
EX: 701
EQ: 806
My EQ was 100 points higher with the same reported debt. The difference being that EQ had it under ACCOUNTS rather than COLLECTIONS.
A collection is the worst thing for your FICO, short of various public records such as BK, Tax lien and judgments.
So, the ACCOUNTS issue is not hurting you, unless you have a lender complaining about it. Get it settled with PFD and deleted.
To answer your question: Can they do this? Well the law is pretty much gray and interpretive. And they can do it unless you want to take the time to sue and have it decided by a judge (though it wouldn't probably go that far).
This is the advantage a CA has. They can report first, and ask questions later (or never) as leverage against you. Focus on fixing the real problem, the collection on your CR in any form. Once deleted, it doesn't matter how it was reported.
Good luck!
