Inspired (actually, copied near verbatim) from a comment on What to do If My Pay for Delete Offer Fails.
You have a jet ski loan through Big Bastard Bank. Your loan gets charged off. Big Bastard bank sells the debt to Scumbag Collection Agency. Both accounts now show up on your credit report. Why do they both get to continue reporting the debt?
Because Big Bastard Bank is an Original Creditor (OC), and their debt is for the original amount of credit.
However the debt was sold/transferred to Scumbag Collection Agency, who will list it as a collection account.
Yes, the collection account is for the same underlying debt, but the OC debt was for a consumer credit transaction. Thus, through the magic of legalistic dick-itude, the
original underlying debt gets transformed into a different debt and you now have two items for your credit file.
That said, you only owe one entity for the debt, but the OC may still report the original line of credit...and that is what confuses people. The credit report file is not a list of everything you owe currently, but rather a list of accounts you have held at one time (or, in the case of collection accounts, had forced upon you).
First, think of Big Bastard Bank reporting your jet ski loan as a historical record of your credit relationship with them, not in terms of "I only owe one person this money why the hell are there two people demanding payment". Then, think of Scumbag Collection Agency as the place you currently owe the money to.