I am confused about how the statute of limitations with regards to debt applies to what is reported on an actual credit report from the 3 credit reporting agencies in the United States. Researching the issue on the Internet, I've found that at least 2 separate legal statues apply:
- The statute of limitations that places a time limit on when a creditor can actually sue you for repayment of a debt, and
- The statute of limitations on when a credit reporting agency (like Transunion, etc.) can actually report the existence of a debt.
It seems that (1) varies from state to state, while (2) is governed on a Federal level by the Fair Credit Reporting Act (FCRA), and that the statue of limitations for (2) is 7 years.
Okay, so I understand this so far. But I'm having difficulty finding a straight answer on what particular "report" the Fair Credit Reporting Act actually applies to. To explain what I mean: say you take out a credit card, charge $1,000 dollars, and then fail to pay it back. The creditor in this case would be the bank that issued the credit card. After the account remains delinquent for some time, say a few months, the bank will generally hire a third party - some external collection agency - to actually collect the debt. Now let's say some years pass, and the collection agency fails to recover the debt, so they sell the debt to some other collection agency, which continues to try to collect the debt.
After many years pass, the statue of limitations from the Fair Credit Reporting Act kicks in. But what is the starting point for the statute of limitations? Is it the day that the "original creditor" (i.e. the original issuing bank that gave you the credit card) reported the debt to Transunion/Equifax/Experian? Or is it the day that some third party collection agency reported the debt to the credit reporting agencies?
If it's the latter, couldn't the statute of limitations from the Fair Credit Reporting Act effectively never kick in, as the debt is passed from collection agency to collection agency - so that each time a collection agency reports the debt, the FCRA time limit effectively resets?
I would think that it be common sense to assume that the statute of limitations must apply to the date that the original creditor reports the debt. But this does not match my actual observations with a recent negative report on my credit report. It shows a collection agency reporting a debt, and says the debt was first reported ("placed for collection") in 2015. But the "original creditor" is a bank that I opened up an account with at least 10 or more years ago.
So my question is, how exactly does the FCRA apply? Does the statue of limitations always apply to the date that the original creditor reported the debt? Or can it effectively keep resetting every time the debt is passed to another collection agency?