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What Are Leasing Agreements and How Does Credit Reporting Play a Role?

What Are Leasing Agreements and How Does Credit Reporting Play a Role?

Lease contracts can produce unexpected pitfalls in the credit reporting world.  Whether it is an automobile lease or an apartment lease, they have their own challenges and unforeseen consequences.  At Blankingship & Christiano, P.C. we have helped a number of clients that have had extremely problematic leasing issues.  Most of the car leasing problems that we have seen arise out of problems following lease extensions.  It is rather routine to get a lessor to extend an auto lease for up to five months, but if they try to extend it for more than six months, the lessor is required to provide new disclosures under the Truth In Lending Act and they most definitely do not want to do that.  Disaster awaits any consumer that decides to keep paying on the lease at the end of the extension period rather than return or purchase the vehicle.

Automobile Lease Credit Issues

We have had a few clients that wanted to purchase the vehicle at the end of the extended lease term but did not close the deal in time and the response from the lessor was unbelievable.  In those cases, the lessor reclaimed possession of the vehicle and then promptly charged off the entire value of the vehicle.  Without so much as an invoice, the lessor claimed that the balance that would have been due if the consumer decided to purchase the vehicle was due in full and the lessor took possession of the vehicle.  While that was totally inappropriate and misleading, the damage to a consumer credit file from a large charged off balance is catastrophic.  

Rental and Utility Lease Credit Issues

Other issues with lessors involve late tax bills or other charges after lease termination that can promptly escalate to charge off status.  In a similar manner, residential leases can cause credit reporting havoc long after termination and move out date.  Since housing leases are rarely credit reported during their lease term, the problem only surfaces after it is over and sometimes long after it is over.  Along with those late surprises, utilities like phone and cable and internet can pop up long after you have moved and changed service providers.

Ways to avoid Lease Credit Issues

The best way to avoid such surprises and problems is to close out and finalize all auto leases before the extension period expires.  If you intend to purchase a vehicle at the end of the term, you probably should not extend the lease or agree to an extension and then promptly complete the purchase option.  If you simply turn in the vehicle and walk away, get something in writing that all the charges at the end of the lease have been paid and satisfied.  If you live in a state with personal property taxes, make sure that they have been settled and if there may be additional ones that come due after termination follow up and see what is owed and pay it.  In housing leases, the same advice applies.  Get something in writing from the landlord that all bills/charges have been paid and settled and that you will receive your deposit back.  If you are a co-tenant with any other tenants that have remained in the property, make sure you have something in writing verifying that you have been released from all obligations and will not be held liable for anything after the date of your termination.  The most important advice to avoid potential surprises later is to follow up in a few weeks or a month to verify that everything is settled particularly if they will not provide you some satisfaction letter in writing.

If you have an error on your credit report and need legal help getting it corrected contact the Virginia Credit report error lawyers at Blankingship & Christiano, P.C.  (571) 207-8331 or fill out our contact form to discuss your case.

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