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Swede

How do I know when the 7 years are up?

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I've seen this question come up on board a lot lately so I decided to post some guidance to the topic here with some readings for ya'll.

Disputing an account, making a payment on an account, the transfer to a collection agency does not re-age the account.

The 7 years starts with the initial missed payment that led to the delinquency of the account+180 days. This applies to accounts added on file on or after Dec 1997. For accounts before this date, the 7 years stars when the creditor actually charged off the account. According to Federal Banking Laws, open ended accounts (credit cards, department store cards etc) must be charged off no later than 180 of non-payment. For closed-ended, it's 120 days.

FCRA

§ 605. Requirements relating to information contained in consumer reports [15 U.S.C. § 1681c]

© Running of reporting period.

(1) In general. The 7-year period referred to in paragraphs (4) and (6)(2) of subsection (a) shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.

(2) Effective date. Paragraph (1) shall apply only to items of information added to the file of a consumer on or after the date that is 455 days after the date of enactment of the Consumer Credit Reporting Reform Act of 1996.

FCRA Staff Opinion Brinckerhoff-Amason

February 15, 2000

Ms. Alaina K. Amason<

14155 Shire Oak

San Antonio, TX 78247

Dear Ms. Amason:

This responds to your letter concerning the time limitations imposed by the Fair Credit Reporting Act ("FCRA") on the reporting of chargeoff accounts by a consumer reporting agency ("CRA," usually a credit bureau). We list your inquiries on this topic below in italics, with our replies immediately following each item.

1. What reporting limits does the FCRA provide with respect to chargeoffs, and how long have they been in effect?

Section 605(a)(4), which has been in effect since the FCRA became effective in April 1971, has always prohibited CRAs from reporting chargeoffs that are more than seven years old.(1) Section 623(a)(5), which became law in September 1997, requires a creditor that reports a chargeoff to a CRA to notify the agency (within 90 days of reporting the account) of "the month and year of the commencement of the delinquency that immediately preceded" the chargeoff. Section 605©(1) provides that the seven year period begins 180 days from that date. Both provisions were part of the major revision to the FCRA that were enacted in 1996.

(2) 2. Is the reporting period extended if (A) the original creditor sells or transfers the account to another creditor, (B) the consumer responds to post-chargeoff collection efforts by making a payment on the debt, or © the consumer disputes the account with a CRA? Does it matter whether the 7-year period has expired when any of these events occurs?

No. In enacting the new provisions discussed above, Congress intended to establish a date certain -- 180 days after the start of the delinquency that led to the chargeoff -- to begin the obsolescence period. It did so to correct the often lengthy extension of the period that resulted from later events under the original FCRA. Enclosed are two staff opinion letters (Kosmerl, 06/04/1999; Johnson, 08/31/1998 ) that discuss the impact of these provisions, and the legislative history relating to their enactment, in more detail. Because the commencement of the seven year period is now described with some precision by the statute, it is our opinion that none of the subsequent events you listed -- sale of the charged off account by the creditor, or a payment on or dispute about the account by the consumer -- changes the allowable period for a CRA to report a chargeoff.

3. Since Sections 623(a)(5) and 605©(1) provide new rules for calculating the 7-year period that became effective in 1997, do chargeoff accounts now have different obsolescence periods depending on when the chargeoff occurred?

Yes. Section 605©(2) states that the section "shall apply only to items of information added to the (CRA) file of a consumer on or after" 455 days after enactment, or December 29, 1997. Therefore, a chargeoff reported to a CRA on or after that date is subject to the new commencement-of-the-delinquency method of calculating the obsolescence period set forth in Sections 623(a)(5) and 605©(1). On the other hand, a chargeoff reported to a CRA before December 29, 1997, is not covered by the new provisions, as discussed in one of the enclosed letters (Kosmerl, 06/04/99). If a credit account was reported as a chargeoff before that date, the Commission's view has been that it can be reported for seven years from the date the creditor actually charged it off.(3)

The opinions set forth in this informal staff letter are not binding on the Commission.

Sincerely yours,

Clarke W. Brinckerhoff

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1. Section 605(B) provides that there is no time limit applicable to a report made in connection with credit involving a principal amount (or insurance with a face amount) of $150,000 or more, or employment for a salary of $75,000 or more. Prior to September 1997, those amounts were $50,000 and $20,000, respectively.

2. The Consumer Credit Reporting Reform Act of 1996 (Title II, Subchapter D, of Public Law 104-280, signed into law on September 30, 1996), made many other changes to the FCRA.

3. Commentary on the Fair Credit Reporting Act, 16 CFR Part 600 Appendix, comment 605(a)(4)-2. 55 Fed. Reg. 18804, 18818 (May 4, 1990).

FCRA Staff Opinion Brinckerhoff-Johnson

August 31, 1998

Mr. Clifford A. Johnson

1917 Surrey Trail

Bellbrook, Ohio 45305

Re: FCRA §§ 605© and 623(a)(5) - "Commencement of the delinquency"

Dear Mr. Johnson:

This responds to your request for our views concerning the calculation of the period for which a consumer reporting agency ("CRA") is permitted to report accounts that have been charged off, placed for collection, or subject to similar action, under the amended Fair Credit Reporting Act ("FCRA"). You report that the following series of events occurred with respect to one of your credit accounts:

"My last payment was received by the creditor 12/96. My payments were due monthly and I missed the 1/97 payment and all subsequent payments culminating in a charge off. This creditor does not report to the credit bureau until the account is 90 days delinquent. . . . The creditor contends that the delinquency did not occur until 3/97 because that is when they first reported it."

Section 623(a)(5) requires a creditor that reports a chargeoff to a CRA to notify the agency (within 90 days of reporting the account) of "the month and year of the commencement of the delinquency that immediately preceded" the chargeoff. Section 605(a)(4) provides that the credit bureau may report the chargeoff for seven years. Section 605©(1) provides that seven year period begins 180 days from that date. In the scenario your reported, it is our view that the delinquency that led to the charge-off "commenced" in January 1997, the month the first payment was missed. Thus, that is the month and year that the creditor must report to the CRA, and that the CRA must use to calculate the time period dictated by Section 605.

We are not in accord with the contention that the date "when (the creditor) first reported" the chargeoff to the CRA constituted the start of the delinquency. Sections 605©(1) and 623(a)(5) were recently added to the FCRA to correct the ineffectiveness of the previous FCRA, under which the date that started the seven-year period was uncertain or under the control of the creditor.(1) The legislative history of these provisions makes it clear that they were designed to correct the often lengthy extension of the period that resulted from delayed creditor action:

Current law generally prohibits consumer reporting agencies from including in a consumer report accounts placed for collection or charged to profit and loss which antedate the report by more than seven years. The Committee is concerned that this seven year limitation is ineffective. In some cases, the ... action occurs months or even years after the commencement of the preceding delinquency. ... Consequently, the consumer report may contain such information even if the delinquency commences more than seven years before the date on which the report is provided to a user.

The Committee bill specifies that the seven-year period with respect to information concerning a delinquent account charged to profit and loss . . . may begin no more than 180 days after the commencement of the delinquency immediately preceding the ... action.

S. Rept. 104-185, 104th Cong., 1st Sess. 39-40 (emphasis added).

Thus, Congress intended to establish a date certain -- the start of the delinquency -- to begin the obsolescence period (now seven years, plus 180 days).(2) The alternate view stated to you (that the date of reporting controls) is at variance with both the plain language of these amendments, and the intent of Congress in enacting them.

In sum, we believe that the phrase "commencement of the delinquency that led to the action" in Sections 605©(1) and 623(a)(5) of the FCRA should be construed according to its normal meaning. If a consumer falls behind on an account and never catches up, the delinquency has its "commencement" when the first payment is missed. From that point on, the account is past due and thus delinquent.

The opinions set forth in this informal staff letter are not binding on the Commission.

Sincerely yours,

Clarke W. Brinckerhoff

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1. The Consumer Credit Reporting Reform Act of 1996 (Title II, Subchapter D, of Public Law 104-280, signed into law on September 30, 1996), made many other changes to the FCRA.

2. The additional 180 day period accords a measure of flexibility to credit bureaus whose furnishers may provide them with the wrong date. However, the expansion of the time period that Section 605 allows chargeoffs and similar actions to be reported accents the desirability of treating the "commencement" of the delinquency as the first missed payment -- not some later date that would further extend the period.

FCRA Staff Opinion Brincherhoff-Kosmerl

June 4, 1999

Mr. Jeff Kosmerl

949 Ormewood Terrace

Atlanta, Georgia 30316

Dear Mr. Kosmerl:

This responds to your request for our views concerning the calculation of the period for which a consumer reporting agency ("CRA") is permitted to report accounts that have been charged off or placed for collection, under the amended Fair Credit Reporting Act ("FCRA").

Section 623(a)(5) requires a party that "furnishes information to a (CRA) regarding a delinquent account being placed for collection, charged to profit or loss, or subject to any similar action" to notify the agency (within 90 days of reporting the account) of "the month and year of the commencement of the delinquency that immediately preceded" the creditor's action. Section 605(a)(4) provides that the CRA may report the information for seven years, in most cases.(1) Section 605©(1) provides that the seven year period begins 180 days from the "commencement of the delinquency" date. Section 605©(2) provides that the section applies "only to items of information added to the file of a consumer on or after the date that is 455 days after the date of enactment of the Consumer Credit Reporting Reform Act ."

Specifically, you ask (1) how the date is determined if there are multiple obsolescence dates where "you have several delinquencies preceding a collection or charge off (8/91 60+, 9/91 60+, 10/91 30+, 11/91 account closed by creditor)" and (2) if "adverse information listed on a report prior to 9/30/97 is exempt from" the procedure set forth in Section 605©(1) .

1. As explained in the enclosed letter (Johnson, 8/31/98), it was Congress' intent in enacting Sections 605©(1) and 623(a)(5) to establish a single date -- the start of the delinquency -- to begin the obsolescence period on these accounts. This avoids the "multiple date" problem that arguably existed prior to the 1996 amendments. In the case you described, the date of the "commencement of the delinquency" that led to the creditor's chargeoff or collection action would be July 1991 or earlier (depending on how long the account was continuously delinquent before that). The seven year period would start no later than January 1992 (180 days later), with the result that the chargeoff or collection could no longer be reported in most cases beyond January 1999.

2. Section 605©(2) states that the section "shall apply only to items of information added to the (CRA) file of a consumer on or after" 455 days after the enactment of those amendments, or December 29, 1997.(2) We read this language to mean that a CRA is not required to use the commencement-of-delinquency date mandated by Section 605©(1) on an account where the chargeoff or collection ("item of information") was first reported to the CRA ("added to the ... file") prior to that date. Thus, adverse information such as collections or chargeoffs reported before December 29, 1997, are not subject to the new "commencement of the delinquency" provision.

The views set forth in this informal staff letter are not binding on the Commission.

Sincerely yours,

Clarke W. Brinckerhoff

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1. Section 605(B)(1) exempts credit transactions involving a principal amount of $150,000 or more.

2. Public Law 104-208, the legislation adding the FCRA provisions discussed in this letter, was signed into law on September 30, 1996. Section 605©(1) became effective 455 days after that date, as provided by Section 605©(2). Most of the provisions became effective 365 days after enactment.

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