Here is a story that plays out every day, with a twist. One day your up all night, zerging out on coffee, watching an infomercial and for some reason decide “yeah I need that gizmo” so you pick up the phone and place your order, and pay for it with your credit card. Weeks later your gizmo has not arrived, the company you ordered it from claims they sent it. You call your credit card and dispute the charge, they claim it will be investigated and send you papers to fill out which you do, then they claim the charge is reversed and you forget about it. While you were disputing the charge you with held the $149 dollars from your credit card payment, expecting the credit card company to correct any late charges, since you won the dispute.

One day in the near future, you check your credit report expecting a great credit score, since you have worked so hard on doing just that. Only you discover an erroneous charge staring at you in the face as you look at the credit report. You spend hours disputing it with all three major credit reporting agencies, and the process takes weeks. Finally you succeed, the credit card company cannot argue the dispute with the merchant, and the charge off and late payment notation disappears from your credit report. You breath a sigh of relief as your credit score jumps back to 731.

Flash forward two months, you walk outside to the mailbox, only to find a collections agency letter greeting you in the mail box. Sweating you open it, only to find the original merchant in regard to the disputed charge with the credit card has sent a $149 debt to collections. It was for merchandise you never received, and you won the dispute with the credit card and with the credit reporting agencies, so how can this be happening? Is this a scam? Sadly thousands of Americans ask themselves this each year.

Sadly it can happen. You are merely disputing the charge with the credit reporting agencies. You used a credit card to make a purchase, and the goods you ordered with that credit card never arrived. The original merchant was never paid, so they can in fact send the account to collections. To make matters worse, this collections account, for the same charge can now appear on your credit reports, starting the process all over again.

There are laws in place, such as the Truth In Lending Act, that dictate credit card companies must respond to a dispute for any goods or services paid for with a credit card, when there is any sort of billing error. Billing errors can include things like goods not being delivered. Yet this same law mentions nothing about the original merchant in the transaction, and there in lies the loop-hole for the merchant to go after you. It is like double jeopardy, but legal.

You will have to dispute the collections account with the creditor, or with the credit reporting agencies once more. Keeping any records and documentation will help in the matter. The lesson learned here is that a dispute with the credit reporting agencies and the credit card companies does not mean the original merchant cannot pursue the alleged debt.