“Zombie Debt” Can Eat Away at Debtor Efforts to Improve Credit

“Night of the Living Dead,” “Dawn of the Dead” “The Walking Dead,” what do these have in common with debt collection?

Irritating zombies. Some consumers’ credit ratings are being consumed by zombie debt. And one U.S. Senator from Ohio wants to do something about it.

Senator Sherrod Brown has started a campaign to make banks and buyers of debt accountable for their mistakes. He cites the recent debacle with Chase Bank reported recently in our blog that affected the credit of about 14,000 debtors in Ohio and he wants to avoid any future such incidents for his constituents.

Zombie debts are those that stay on a consumer’s credit report even after they have been paid. One consumer said that his credit rating rose 80 points after having zombie debts cleared off his credit report.

Other than the negative effect on a credit report that could keep someone from buying a house or even getting a job, debts that linger after they are technically dead create havoc for consumers who are besieged by abusive debt collection efforts by collectors who continue to try to get them to pay retired debt.

Senator Brown says that one in five Americans have some sort of zombie debt on their credit reports. He has contacted the Federal Reserve to make better efforts to oversee the sale of debts to collection agencies and make sure that dead debt stays that way. He is also trying to pass a bill called the Consumer Reporting Fairness Act which would require the reports to show a zero balance for any debt resolved through bankruptcy.

Brown points to the economic challenges of the last few years as another reason for the more vigilant oversight of the debt collection industry. Consumers who have gone through foreclosure or are one of the over 40,000 people who filed bankruptcy in Ohio last year are in the process of repairing their debt and paid debts that remain on their credit reports are a major obstacle in the rebuilding process.

Whether Brown’s bill passes or not, creditors who fail to properly report paid off debts may be liable to the consumer, as the Chase Bank settlement showed. If you find yourself facing credit problems due to zombie debt, contact an attorney who helps consumers deal with these issues and do what you can to improve your credit before the zombie debt consumes it beyond repair.

Source: WKSU, “Ohio Senator Sherrod Brown attacking zombie debt,” Kevin Nierdermier, Sept. 4, 2015

Secondary Source:  Newsnet5.com “‘Zombie debts’ could be attacked with new legislation,” Jonathan Walsh, Sept. 4, 2015