How do disputed debts work on credit reports?
There is a company that believes I owe them money. I disagree, and they've hired a debt collector. I know how about my rights per the Fair Debt Collection Practices Act, and in particular that I should contact the collector in writing within 30 days to dispute the debt. As far as I can tell, though, the debt collector can still report the item to the credit reporting agencies, and the best I would be able to do in that case is to get those agencies to mark the item as "disputed." (The FDCPA doesn't mention this topic, the Fair Credit Reporting Act is vague on the matter, and I haven't found anything directly relevant elsewhere on the internet.)
How I would expect it to work is that, if I tell the debt collector in writing that I don't owe anything, it shouldn't affect my credit report unless a court rules for the creditor. That doesn't seem to be the case, however, as best as I can tell. Am I missing anything?
It is probably relevant that I have actually had a business relationship with the original creditor, and that the claim isn't unfounded; it's just wrong (in my assessment). As such, it doesn't seem like credit reporting agencies would remove a hypothetical entry on the topic as "inaccurate": I wouldn't expect them to adjudicate the matter in detail the way a court would.
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If you tell the collector that the claim isn't valid, they're obliged to go back to the creditor to verify it. Sometimes that gets a real person, instead of their automatic billing system, to look at the claim, and if you're right, they'll drop it.
You're not missing anything. Consumer protection in the US is very basic and limited, if at all. So if someone claims you owe them something, it would be really hard for you to prove otherwise unless you actually drag them to court. Especially if there actually was a relationship, and there probably is some paperwork to substantiate the claim. I suggest talking to a consumer issues attorney.
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