The Fundamentals...

I'm not an expert by any means, but I've had cause to do a lot of research over the past year. I'll try and be concise as possible to conserve space, but will provide links to resources that I've found very valuable...

CREDIT REPORTING

As is commonly known by credit-saavy consumers, there are 3 major consumer credit bureaus: Equifax, Experian and TransUnion. All three bureaus keep a database of information acquired from companies that pay them a membership fee (their subscriber base). These can be companies like your mortgage lender, your credit card issuer, your utility company, or when things get bad financially - debt collectors.

It all starts out when you apply for credit. Most times a lender will want to pull a credit report from one or all three bureaus in order to gauge your "credit-worthiness". This report contains information on what kind of credit has been extended to you, what your payment history is like, how much you currently owe, or where you've been shopping for credit.

For those that have been unfortunate or irresponsible with their finances, it will also contain information on any bankruptcies, debt judgements and collection accounts. A collection account gets reported to a person's credit report after a debt goes into default and gets charged off by the original creditor. An outstanding debt can then either 1) be assigned to an internal collections company or a third-party collections company, or 2) be sold to a debt purchaser that makes a living by collecting on defaulted debt. But bear in mind that a defaulted debt purchaser is STILL a debt collector in the eyes of federal and most state laws (and supported by caselaw) and is subject to following those laws while reporting and collecting debts.

THE FAIR CREDIT REPORTING ACT

When reporting a debt on a consumer's credit report, debt collectors are considered "data furnishers" and must follow the mandates of the Fair Credit Reporting Act. This law regulates exactly how a credit report can be used, what types of information can be reported (and for HOW LONG), as well as stipulates exactly how a data furnisher should handle consumer disputes.

The law provides consumers with a measure of protection against inaccuracies and fraudulent credit reporting, by mandating accuracy in reporting and by giving consumers the right to sue the pants off of companies that violate the law.

THE FAIR DEBT COLLECTIONS PRACTICES ACT

When "collecting" on a debt, debt collectors must follow the mandates of the Fair Debt Collection Practices Act, which sets guidelines on exactly what a debt collector CAN and CAN NOT do while attempting to collect a debt.

Among the many mandates, a debt collector may not do things like: be untruthful with you or misrepresent themselves to you, harrass you, threaten you with actions that they can't legally take, or make inconvenient telephone calls to you at your home or work. It also stipulates that they have to provide you, in a timely fashion, with certain legal notices that inform you of your right to dispute the debt and how to go about doing it.

Here again, the law provides consumers with the right to sue violating companies in federal court.

STATE LAWS

Each state offers its own set of consumer protections that can govern such things as: when a consumer CAN and CAN'T be sued and made to pay an outstanding debt, called the Statute of Limitations; state licensure and bonding regulations; debt collection practices and credit reporting practices.

The list is far too vast to detail, but a great resource to start your research can be found at Lawdog.com.

Now on to the part where I show you how Sherman, LVNV and Resurgent violated these federal and state mandates...

Dealing with Equifax and Setting the Sherman Family Straight

Upon discovering the Sherman account on my credit report, I immediately wrote a letter to the credit bureau disputing the account. There was NO WAY that I was going to live with come company reporting an open account that was currently in default – I had worked too damn hard over the last few years to pay my bills on time and I was not going to let someone place something negative on my report that was not accurate.

I my dispute letter, I told Equifax that the account appeared to be a duplicate reporting of the original creditor’s account, as Providian (the credit card issuer) was still reporting a charge-off dating back to 1999. I put my letter in an envelope, sealed it, stamped it and placed it in the mailbox. I asked myself, "Now what do I do?"

I’ll tell you what I did…I got on the Internet again and started looking up anything and everything I could find on Sherman Acquisitions and LVNV Funding. I got some fabulous search results and spent hours combing through a wonderful website called ArtofCredit.com. Sadly, AOC.com is no more, but the information contributed by forum members lit a spark of indignation within me. Not only was I able to commiserate with people that were having the same problems, but I also found the answers I needed within their discussions about the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and the Texas Finance code.

I was immersed in federal law statutes, federal caselaw, news articles about debt collection practices, and scores of consumers just like myself that were trying to figure out exactly WHAT was going on with their credit report. I reached a point where the rumors about Sherman and LVNV prodded me to write another letter telling them EXACTLY what they were reporting incorrectly: an "Open" account, 120+days past due, and the fact that they were classifying themselves as a factoring company. Just in case a newbie is reading this – a factoring company is a company that purchases open accounts receivable from a company at a small discount. This gives the selling company fast cash and the factoring company the right to collect the full balance and make a small profit. The key to the factoring business is that the factor purchases CURRENT accounts with the expectation of getting paid promptly from the invoicee – and that is NOT what Sherman and LVNV did with my account.

My particular account was charged-off in 1999 by Providian and then sold after the charge-off to a debt purchaser called OSI Gulf State for a small fraction of the value. Apparently OSI held onto the account for a few years and then sold it again, to Sherman Acquisitions, who in turn held onto it for a few years themselves. Upon the formation of LVNV Funding (a "Sherman Family Company"), the ownership was transferred to the new entity. These post-charge-off owners are NOT factoring companies (with all of the inherent legal remedies that come with the purchase of a "good" debt) – they are what’s called Junk Debt Buyers, or JDB’s. The fact that they were reporting as a "Factoring Company" on my credit report gave them the appearance of an "innocent" purchaser and creditor, instead of the collection agency that they were.

Add all of this to the fact that they were not reporting at all like the other collection agencies that were appearing on my report, and you can imagine my righteous indignation.

I waited anxiously for a response confirming that they would correct or delete their account on my credit report.

To be continued...