Credit Reporting Agency Changes means an End to Parking Debts on Credit Reports

The new credit reporting overhaul and changes means the end of parking debts on credit reports. The recent settlement agreement between the New York Attorney General’s office and the three major consumer credit reporting agencies—Equifax, Experian, and Trans Union—will result in many benefits for consumers. One benefit that’s not getting much discussion is that collections that have not been updated on a credit report in the past six months can be removed by the CRAs. This requirement should substantially curb the onerous practice of some debt collectors of parking debts on consumer credit reports.

          Debt collectors sometimes will “park” a debt on your credit report. This means that the debt collector will report negative information about you to credit reporting agencies but take no other action to collect the debt. This is particularly common with debts with small amounts. I often see debts to book clubs parked on credit reports.

          The debt collector’s strategy is to park the debt and wait for the consumer to discover the negative information in connection with some important event in the consumer’s life such as buying a home or applying for a job. At this point, the time for dealing with the debt will be short but the need to deal with it great. The debt collector can use the negative information and the time restraints as leverage to coerce payment from the consumer, regardless of whether the debt is actually owed or the amount is correct.

          With a six-month limit on furnishing negative credit information means that debt collectors will no longer be able to park debts, but, rather, must continue to update information. Additionally, debt collectors will also have to delete trade lines of collection debts that have been sold, transferred, or are no longer being worked by the collection agency.