Enhanced Recovery Company (ERC) On Your Credit Report?

Enhanced Recovery Company: Out of Business

As of 12 November 2023, the Better Business Bureau reports that the Enhanced Recovery Company has been dissolved. Any accounts they had were required to be returned to the original creditors. If you were charged by them after that date, you only have the original creditor to work with. They may be able to still prove your ownership of the debt but the good news is that it will be more difficult to do so.

Suppose a third-party debt collection company closes its doors. The disruption to the collection of its consumers’ debts raises a multitude of questions—not the least of which being: to whom and how should the consumers pay up? Typically, when a collection agency holds a debt, the goal is that consumers will start paying it. The collection agency will pursue unpaid charges to the fullest extent possible. But when a firm shuts its doors, collections cease, and the account is returned to the original creditor. Debt collection stops for a time, while the consumer waits to see if their debt is bought by another agency.

The second immediate effect of the ERC shutdown was that the firm erased all of its trade lines from consumers’ credit reports. A trade line is the lengthy history of a credit account; for ERC, trade lines are the collection accounts that the firm was collecting on. If trade lines disappear, the consumer’s credit score might improve because not only the trade line but also the negative marks associated with the collection account would disappear, too. Of course, that isn’t the same as the debt being forgiven—it might still exist, and the original creditor could sell it again, at which point it would likely be sent to yet another agency who would try to collect it.

What Happens to Your Debt When a Collection Agency Shuts Down?

In such a situation, you need to know your rights so you’re not taken advantage of. Under the Fair Debt Collection Practices Act (FDCPA), if the consumer demands it, a debt that the creditor has re-acquired or sold to another collector must be validated. FDCPA rights are especially pertinent during such transitions because errors and mismanagement are not uncommon when a collection agency closes.

Since you are about to be transferred into the hands of a new debt collection agency, it would be worthwhile to re-familiarize yourself with your rights so that, in the heat of the moment, you are not cowed into doing something you will later regret. Above all, keep in mind that you are protected from harassment and abuse. For instance, debt collectors cannot threaten you or swear at you, nor call you before 8 a.m. or after 9 p.m. They cannot pretend to be anyone else or misrepresent the amount of your debt. They must always tell you clearly and consistently what they are trying to recover and when.

If the collection agency or creditor doesn’t send you a validation notice or otherwise violates the FDCPA, you can file a complaint with the Consumer Financial Protection Bureau or sue the collector in court. The law protects you by prohibiting a collector from reporting the debt to a credit bureau until after the debt collector has verified it, which, in turn, avoids sullying your credit history with bad data or information that the collectors can’t prove.

Protecting Your Credit During Debt Transfers

You want to know what those rights are because, when you have an account with a creditor or an agency that is eventually transferred to another entity, that transition can lead to a lack of account management, a false entry on your credit report (like an extra account or an inaccurate debt amount), and more. Knowing your FDCPA rights can help keep safeguards in place so that a transition or sale doesn’t lead to damaging your credit reputation.

Lastly, ask for all three of your credit reports to ensure the ERC trade lines are gone, and to check your accounts for other fraud. The disappearance of debt from your report looks like a win, to be sure, but you’ll want to ensure it hasn’t simply been sold off to another agency to restart the process. A critical eye on your credit now will mean fewer surprises down the road.

Long story short, it’s your responsibility to keep your credit in good standing, verify that your debt is eliminated, and be prepared for the day it rears its ugly head once again—this time with another collector. You have rights, but you have to take action.

What Happens Next?

First and foremost, you will want to be on the lookout for duplicate reporting. When the collectors change, mistakes can happen, and the same debt can now be reported by ERC (before they delete their ‘account’) and the new collector. You will want to monitor your report carefully during this time. These items can be disputed under the Fair Credit Reporting Act (FCRA).

If a collection agency files for bankruptcy, that can be your ticket to negotiating a new contract or a settlement with a new creditor or agency. If the debt is sold, the new collector might be more amenable to settling the account—especially if they purchased the debt at a discount on the open market. You can pay less and step out of debt sooner. Get the agreement in writing, and save the proof of payment in case they try to come after you again.

How to Protect Yourself From Fraud and Errors During the Transition

With ERC now closed, your best insurance is awareness. Don’t let a posing scam artist take advantage of you in the confusion. Scam collectors pretend to be legitimate agencies and tell you that you owe them money. Ask for proof of the debt in writing and make sure you are dealing with a licensed debt collector before you pay anything. The FDCPA requires that all debt collectors provide proof of the debt in writing, including the original creditor and the amount owed within five business days of when they first make contact with you. If a debt collector can’t provide this information then you can safely assume they are attempting to scam you.

You will also want to check the statute of limitations on the debt as any payment, even just one dollar, can restart the statute of limitations on the debt, meaning it can stay on your report for an additional seven years. If the debt is too old to legally pursue, a payment can bring it out of the grave. If you have been sent a collection letter on an old debt, check the statute of limitations for your state and make sure the debt has run out. If it has, don’t send in a payment.

Finally, you may want to  hire a credit repair company to help with monitoring and disputes. Credit repair companies such as Credit Glory can help walk you through these tricky transitions and can make sure that your credit report is correct and that you don’t suffer long-term damage. You can inoculate yourself—if you start early enough but you need to be proactive.

Steps for Cleaning Up Your Credit Report After a Debt Collector Closes

The closure of a debt collection agency is a  great time to clean up your credit report but you have to start making the most of this opportunity right away. Your score may get a momentary lift because your credit is now clear, but you must remain vigilant if you want it to remain that way. 

File disputes with Experian, Equifax, or TransUnion, for example, if you notice something inaccurate—like a charge-off that shows up as a $0 balance, or a listing of a debt that was discharged in bankruptcy, or a debt that already appeared on the report before—or for any new entries you didn’t authorize. Follow up frequently to make sure that the disputed items are corrected or removed.

If your debt is sold to another collector, negotiate now—the debt will be rescored, but you may be able to get a settlement or pay-for-delete with the new collector and have the negative record removed. Either way, document any agreement in writing and keep a copy of the correspondence and all payments so you can prove it in case of a dispute down the line.

Finally, if all of this seems too much for you to handle by yourself, you can use a company such as Credit Glory to handle all of the heavy lifting for you. They can pull your reports for you, identify inaccuracies and make note of all the things that can be disputed with the bureaus, negotiate with collectors, and get things removed and noted correctly on your credit report by collecting agencies. This way, you can restore your credit much more quickly and don’t have to keep track of disputes yourself. With a bit of work, and a bit of help, you can reclaim control of your credit’s destiny and avoid further credit calamities.