Debt Parking

Debt parking summary: 

• Debt parking is a form of fraud committed by debt collectors. 

• If you’re a victim of debt parking, that means debt collectors have reported certain debts to credit bureaus, even if the debts aren’t valid, don’t belong to you, or are already paid off. 

• Debt collectors are supposed to give you a chance to validate any debts that are in collections.

Debt Parking Definition and Meaning

Debt parking is a fraudulent business practice used by some debt collectors in which fake debts are placed on your credit report. Some debt collectors park debts that you don’t owe without notifying you first. The types of debts involved might include invalid debts and debts that you have already paid. 

The fraudulent collector uses this wrongly reported debt as a tactic to strong-arm borrowers into paying debts they don’t owe.

If you become a victim of debt parking, your credit score will likely take a hit. You may not know about the debt parking until you apply for a loan or a credit card and are turned down. You might have to dispute the false debts with the credit reporting company. 

Understanding debt parking could help you avoid becoming a victim. And debt parking is an important reason to keep monitoring your credit report, even when your bills are paid and you have no overdue debts. 

Types of Debt Parking

Debt parking is a form of fraud and high-pressure collections activity used by some unscrupulous debt collectors. Debt parking means the debt collector is reporting certain debts to a credit bureau as unpaid without verifying the debt or first notifying the borrower.

Here are a few types of debt parking activity that might hurt your credit: 

• Fake debts. A debt is reported that doesn’t exist. Even though you never borrowed the money, the balance might still show up on your credit report as being overdue. 

• Fraudulent debts. You reported a debt as the result of identity theft or fraudulent charges and it’s placed on your credit report anyway. Debt that’s flagged as stemming from identity theft or fraud should not show up on your credit report. 

• Questionable debts. A debt is reported without being validated. Whenever debt collectors contact you, you’re allowed to ask for a debt validation letter. This lets you confirm that the debt exists and that you actually owe it, and to confirm the amount and other details. With debt parking, debt collectors skip this step and report the debt as yours so it’s parked on your credit report, without giving you a chance to validate or dispute the debt. 

• Paid-in-full debts. You have a $0 balance on a debt, but it’s placed on your credit report as unpaid. Some unethical debt collectors commit debt parking by putting debts on your credit report that you paid. That hurts your credit score for no reason. 

• Debts that don’t belong to you. Sometimes debt collectors mistakenly assign debts to the wrong person. In debt parking, an unethical debt collector deliberately reports a debt to a credit bureau when you are not the borrower. 

Debt parking is not just a stressful hassle—it’s illegal. If a collection agency or debt collector commits debt parking, they are violating the rules of the Fair Debt Collection Practices Act (FDCPA). This law forbids debt collectors from using false or misleading representations, and gives consumers the right to validate and dispute any debts that are being collected. 

Real-Life Examples of Debt Parking 

Over the past few years, the Federal Trade Commission (FTC) has cracked down on debt parking, and has brought law enforcement actions against unscrupulous debt collectors. In a 2020 case, a collection agency used debt parking to report more than $98 million of false or highly questionable debts. 

Some of the types of debt in this debt parking scheme included: 

• Payday loans

• Debts in the process of being discharged through bankruptcy 

• Debts people already paid

• Debts being investigated for fraud 

• Medical debts that were being rebilled to people’s health insurance 

Medical debt is one of the more common types of debt that can be parked, although credit reporting agencies have voluntarily limited reporting of medical accounts.