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Information about business debt on personal credit report
Question: I had a business that failed around 2001. It was a construction co. I had a bond on a project and the surety co ended up with attorneys fees. I personally guaranteed the bond. The surety turned the attorneys fees over for collection. The collection company has decided to enter a tradeline on my personal credit report. They are also reaging the accountand reporting the history innacurately. From what I read these are FCRA violations. The CA disagrees stating FTC statement "Commercial credit or insurance. A report on a consumer for credit or insurance in connection with a business operated by the consumer is not a consumer report", and the act does not apply to it". Is it even legal for them to list this item on my personal report?
Answer: Thanks for your question, Mike. Generally speaking, it is my belief the business accounts such as the one you mention in your question should not be reported on your personal credit reports. While you did personally guarantee the bond, this was essentially a business transaction, and you acted only as a guarantor in case the business defaulted. The bond was not taken out in your name, nor did the bond issuer consider your personal credit history when underwriting the bond. Therefore, the account should not be considered as part of your personal credit history. While there are varying interpretations of how business debts should be treated in regard to personal credit reports, in my past experience, most business accounts do not appear on personal credit reports, unless the account was actually a personal
account, such as those opened by sole proprietors. However, if the bonding company obtained a judgment against you personally, it would be appropriate for the judgment to appear on your credit report as a public record.
In regard to the FCRA, the collection agency is correct that the FTC has stated in its policy briefs that the FCRA does not apply to accounts opened primarily for business purposes. However, the FCRA?s non-application to the account in question does not mean that the account should appear on your personal credit report, nor that the collection agency has free reign to report whatever information it wants to report to the credit bureaus. You mention that the collection agency has been inaccurately reporting the delinquency date of the account; regardless of the fact that the FCRA does not apply to business accounts, the collection agency cannot arbitrarily change the dates on the account. You may have a cause of action against the collection agency for intentionally reporting inaccurate information about you to the credit bureaus, especially if its actions have harmed you in some way.
I encourage you to consult with an experienced consumer rights attorney regarding this debt to determine
the best course of action available to you to solve this problem. An attorney should be able to help you fully understand your rights under both Federal and State law, and what you can do to protect yourself. Your attorney may encourage you to file a lawsuit against the collection agency and the creditor. Or, he may enter into negotiations with the collection agency. For example, the collection agency may be willing to remove the account from your credit report if you begin making regular payments on the debt.
You may also wish to dispute this debt with the major consumer collection bureaus?Experian, Equifax, and TransUnion. The Federal Trade Commission offers a free guide to disputing accounts on your credit report, available at www.ftc.gov .
I also invite you to visit the Bills.com Credit Help page , where you can learn more about credit, credit reports, and credit scoring.
I wish you the best of luck in resolving this account, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com
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1. Posted by diana said on Thursday 7th February 2008 17:37
In 2005 I opened a business in Michigan as an INC.After 2 years I had to close it due to economical losses.My utilities bills were all full paid.In Jan 2008 I received a bill of $2200 from the gas company in which they state that the meter was broken for a long period of time and that now I am supposed to pay an estimate.The problem is thier estimate is huge ,so far away from reality.I disputed the bill ,asking them to adjust the bill and to recalculate the estimate on something close to the real usage from the previous years.Today I received a phone call from their collection department,to pay the $2200.I said that my bill is under dispute.The answer was that the dispute was closed ,the amount remaining the same.When did this happen or why they didn't notify me they said they didn't know.My question is:can they report me to the credit report agencies as an unpaid bill?(the account was on company name )I want to mention that I have a very good credit history. Thank you
2. Posted by Nithin on Friday 8th February 2008 16:33
Diana, as I am not sure about the structure of your previous incorporated business, I really cannot comment on you being responsible for the utility bill in question. In all probability, you may not personally be responsible for this debt. The best course of action is to check for the same on your personal credit report. If the said debt is not reported on your credit profile then you are not responsible to pay it back. If that is the case, then please visit www.ftc.gov, where you can find a wealth of information about your rights with regards to collection calls, and even report the creditor harassment.
3. Posted by jc on Tuesday 16th December 2008 10:59
My elderly father had a single owner business(SP) he got a phone call and since a letter from a collection agency/law firm for credit card debt in the business name the is more the 6 years old which he doesn't remember incurring. They are threatening to put the debt on his personal credit report, coming and taking his personal property for payment among other things. What are his options, is he covered under the FCRA as a SP isn't he covered as a consumer as well? Additionally Living in NM would the statue of limitations cover the business debt as well or being a SP would it be covered on the statue as consumer debt? Any help would be appreicated.
4. Posted by Bill on Tuesday 16th December 2008 11:46
In most States a single owner business would be construed as a sole proprietorship, which it basically is. In a sole proprietorship kind of a business the business owner is personally responsible for any debts in the name of the business. The best place for you to start is to get credit reports from all three bureaus to see if this account is already showing up there. If the account does show up, check to see what the last payment date is. The statute of limitations (SOL) starts ticking from the date of the last payment. since NM's SOL is 4 years, you should be safe. Don't get frightened by the creditors threats, as that is all they are. Ask them for a debt validation letter, that should buy you some time while you do your research. All the best!
5. Posted by Joe Rego on Friday 20th March 2009 12:35
Bill, I started up a "C" corporation in 2004 and did business as a franchisee until December 2008. I have three credit cards, one was sent to me even though I did not apply for a card or solicit for it. The other two I have no hard copy but may have applied for a business card under the corporation name. Unfortunately, the small print that one reads after you have received the card makes one liable to card payments even though no personal guarantee was signed. What rights do I have to fend off these debts (Discover has already reported two late payments to one of the credit bureaus)? I have offered 30 cents on the dollar but yet to get an acceptance. Discover countered with 60cents on the dollar. I am out of business, no steady income and don't want to file for bankruptcy. Will be grateful for any advice or suggestions. I have retained an attorney, whom I have paid about $900 so far and got nothing in return. Do you think I have the wrong attorney? I am wondering out loud!!! Thanks
6. Posted by Bill on Monday 23rd March 2009 01:33
Thanks for visiting Bills.com! Without knowing more about the terms under which these credit accounts were established, I cannot tell you if you are personally liable for these debts. For example, it is possible that you actually applied for these accounts in your personal name even though they were "business" accounts. If you are personally liable for the debts, you will probably need to resolve the debt either through a settlement, payment plan, or by filing for bankruptcy protection. You took the right step in hiring an attorney to review these accounts for you and advise you of your options, but if you feel that your attorney is not providing you with the information you need, you should not hesitate to call him and ask him the same questions you have asked me. If he cannot give you satisfactory answers, or if you do not feel comfortable with his representation, you may want to seek a second opinion from a different attorney. I wish you the best of luck!
7. Posted by Ndakalako Lebeus N on Thursday 26th March 2009 04:36
the answers you gave are not as adequate as i though it can be. in the other hand you never explain things in the understandable way, for example having the question on the top and then follows the answer to that. anyway i really appreciated highly your contribution to valuable question in accounting world. thank you very much on that.
8. Posted by Bill on Thursday 26th March 2009 08:01
sorry the answer was not adequate for your purposes, but we do try hard to respond to a VERY high volume of questions and concerns for free... so sometimes you get what you pay for :)