If you have been through financial trouble, chances are that some accounts on your credit report are being reported as “charged off.” There seems to be a lot of confusion as to what exactly a “charge-off” means. Let me try to explain it.
First, a “charge Off” is not a legal term, but an accounting term. A charge off is a “term that a retail creditor uses to describe a non-performing loan that it considered a loss.” Eisberner v. Discover Prod., Inc. (E.D.Wisc. 2013). Basically, a charge-off means that the account has been closed and is considered a non-performing asset. They’ve given up on getting money from you for the time being. Usually sent to internal collections, a collection agency, or sold to a junk debt buyer.
The most important thing for most consumers to understand is that even though an account is charged off, they can still collect the debt. This is a VERY common area of confusion about charge offs. A lot of people think that a charge off means that the debt is no longer owed, but that is just not true. Even if they’ve sent you a 1099-C cancellation of debt form. They may have written it off for tax purposes, but that doesn’t extinguish the debt itself. You still must deal with it somehow.
On a credit report, the charge off date is the date that the account was written off by the creditor. It signals to potential lenders that the account is no longer considered active and open. Needless to say, a charge-off is a negative mark on your credit.
The biggest concern with charge-offs on credit reports is how they affect the length of time that the account can be reported against you. In the credit reporting business, we call this “obsolescence.” Generally, they can report a delinquent account for 7 years and 180 days from the date of the first uncured delinquency. Banks and credit card companies have a duty to accurately report the date of delinquency, even if the creditor didn’t charge the account off until later. One common error that sometimes occurs with charge-off dates is that when a debt buyer or subsequent assignee of an account purchases or acquires the account, they screw up the dates of delinquency. Sometimes they will report the “first delinquency” as being the date they took over the account, not the date it was first delinquent. This is called re-aging. And it’s illegal. Re-aging like this becomes a problem years down the road, when accounts that are older than 7 1/2 years delinquent are still being reported against you. If this has happened, it is crucial to send a written dispute to the credit reporting agencies to tell them that the account is obsolete, and should be deleted.
Also, I believe that for credit cards, they have to continue sending you statements if they are charging you interest. Usually a charge-off means that interest is no longer accruing, which is good. But sometimes a debt collector or other creditor will continue to report higher and higher balances, chalking it up to interest, which requires a written statement. If they’re not sending written statements with each billing cycle where interest is charged, they could be violating the Truth in Lending Act and its regulations.
Bottom line, if you have accounts that were charged off, then you still have to deal with the underlying debt, and they can still be reported against you, as long as they aren’t reported inaccurately or longer than 7 1/2 years from the date of delinquency.
If they’re reporting it incorrectly, call us at 251-272-9148 and we can help you fix the problems or take legal action to recover damages.