A little while ago i get a call from my folks in NH that they received a letter from a collections company trying to collect a debt.
The issue is, That debt was paid to a collections company in 2006...

In the summer of 2003 i went back to school and took out a private school loan for $11,500.  I ended up not going back after that semester.  Admittedly in 2004/2005 time i defaulted on the loan, and it went to collections.  In 2006 we got a letter from a collections company saying they are the servicer of the loan and owe them $12,something.  I was away at AIT for the guard so my mother was handeling everything.  She made a few phone calls to the company and got a pay off amount.  A check or cashiers check (my mother cant remember which) was sent along with a letter requesting a detailed invoice form the compnay as well as a pay off letter.  The original check was returned along with a memo saying it was a wrong amount and was off by $600 or so.  A new check was sent with the amount requested and again asking for a pay off letter/invoice.  Nothing was received and life happened and it wasnt followed up on.

Fast forward to a few weeks ago and this new company is saying they have the loan and to pay them $13,something.  I called them, and told them that loan was already paid to another company.  They said they want proof from the other company that it was paid off.  They have already reported a new collections account to transunion.  
I called the original company and spoke with a guy who looked up my account and said there were no notes in their system.  No records of receiving payments, no records of any correspondence to them or from them.  They also said they were showing a zero balance, which they said was because they didnt have the loan any more.  

Next i called the original loan company who said in 2006 they sent the loan to the company i just called and that in 2011 they got the "loan" back and gave it to another company in November of 2011, then got it right back and gave it to a third comany in December of 2011.  They did say they gave this current company the "loan" earlier in 2014.  

I sent a fax to the current company requesting a verification that the loan was still valid and also to cease contact and report the account in dispute with transunion.  Today i got a letter from them saying they will honor the cease and report the account as disputed.  They also included a copy of the original forms i filled out in 2003.

The bank that the check or cashiers check was drawn off only keeps records for 7 years...here we are 9 years later.  They cant look up my folks' account that far back. And if there was a canceled check or cashiers check stub it has been lost within the last 9 years along with them moving 4 times.  

I am trying to get buy a house and this damn thing is keeping me from getting one.  I got pre approved from USAA but they want proof that the account with the collections company is taken care of.  

The only thing i can think of is to sue the original company we paid and request a copy of their financial records in discovery for that time frame to try and find a depoit in the amount.
Oh and we do still have digital copies of two letters we sent to the original collections company saying that a check was included and requesting the invoice and what not.

Any other suggestions?

I am not a lawyer but do you have any way of looking up the check that your mother sent?

Nope. There are no records going back that far according to the bank

Neg. private loan

I know they cant sue me for it, but its now on my credit report and holding me up from getting a mortage.
I have an appointment next week with an atty.  in the mean time my mother who lives right down the road from the bank they used then in NH is going to talk to the bank mamager and see if they have an archive of their documents.  I cant believe that they would just dump stuff after 7 years.

There was just a rather lengthy thread in GD on this topic.

If regulation allows for destruction of records after 7 years then you better believe they're going to follow it.

I'd call an attorney.  I don't believe they can legally have that show up on your credit report.

http://www.nolo.com/legal-encyclopedia/debt-buyers-your-credit-report.html