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| JOHN BRIOSO painting storm coming |
Storm brewing for Credit Reporting
Credit Cops get a Spanking from New York
Soon Nationwide
NBC news on Monday as the most radical change to credit
reporting in decades and New York Attorney General Eric T. Schneiderman
said his agreement with the three major national credit reporting agencies
(CRAs) will reform the entire credit reporting industry and protect millions of
consumers across the country.
The agreement between Schneiderman and Experian,
Equifax, and Transunion reported on Monday requires the CRAs to institute a number
of reforms to increase protections for consumers, over a three year period.
While the agreement is specific to New York State, it is expected
that most of the reforms will be instituted nationwide.
The three major CRAs maintain consumer credit information on an
estimated 200 million consumers. Information provided by "data
furnishers" such as banks and collection agencies includes the type and
amount of debt, both current and extending back seven years, and how consumers
have managed that debt. The CRAs aggregate information on individuals
into files and provide reports to companies who use them to determine whether
to grant credit to potential borrowers and at what cost. The credit
reports are also frequently used by employers to check on potential hires.
The Attorney General's office said that in a 2012 study by the
Federal Trade Commission 26 percent of participants found at least one
potentially material error in their credit report and 13 percent received a
higher credit score after successfully disputing an error. These
findings, Schneiderman's office says, suggest that millions of consumers have
material errors on their credit reports.
"Credit reports touch every part of our lives. They
affect whether we can obtain a credit card, take out a college loan, rent an
apartment, or buy a car - and sometimes even whether we can get jobs,"
Schneiderman said. "The nation's largest reporting agencies have a
responsibility to investigate and correct errors on consumers' credit reports.
This agreement will reform the entire industry and provide vital protections
for millions of consumers across the country. I thank the three agencies for
working with us to help consumers."
The new agreement calls for reforms covering some of the most
commonly expressed complaints from consumers about the credit reporting
process including accuracy, the fairness and efficacy of complaint resolutions,
and the harm done to credit histories due to medical debt.
- Improving
the Dispute Resolution Process. Rather than relying as they do entirely in
some cases on a fully automated complaint resolution process, the
agreement requires that the CRAs have specially trained employees review
all documentation submitted by consumers claiming that incorrect
information belonging to other consumers has been mixed into their files
or that they are the victim of fraud or identify theft. Even in cases
where an automated dispute resolution system is employed a CRA employee
must review the supporting documentation.
- Medical
Debt. Medical debt constitutes over half of all collection items on credit
reports and often results from insurance-coverage delays or disputes.
Under the new agreement CRAs must institute a 180-day waiting period
before medical debt is included in a credit report. In addition, while
delinquencies ordinarily remain on credit reports even after a debt has
been paid, the CRAs will remove all medical debts from a consumer's credit
report once the debt is paid by insurance.
- Increasing
Visibility and Frequency of Free Credit Reports. While current federal law
provides consumers with the right to receive one free credit report a year
from each of the three major CRAs, many are not aware of that fact. The
agreement requires the CRAs to include a prominently-labeled hyperlink to
the AnnualCreditReport.com website on the CRAs' homepages. Consumers will
also now be entitled to receive a second free report each year if they
successfully dispute an item on their report in order to verify the
accuracy of the correction.
- Furnisher
Monitoring. The Attorney General's agreement requires the three CRAs to
create a National Credit Reporting Working Group that will develop a set
of best practices and policies to enhance the CRAs' furnisher monitoring
and data accuracy. This group will develop metrics for analyzing furnisher
data, including: the number of disputes related to particular furnishers
or categories of furnishers; furnishers' rate of response to disputes; and
dispute outcomes. Each CRA will implement policies to monitor furnishers'
performance and take corrective action against furnishers that fail to
comply with their obligations.
Two additional provisions included in the settlement announcement
make specific reference to New York State and were not mentioned in a joint
credit release from the three CRAs so is not clear if they apply
nationally. The first relates to so-called "payday loans" and
prohibits the CRAs "from including debts from lenders who have been
identified by the Attorney General as operating in violation of New York
lending laws on New York consumers' credit reports." The second
requires the CRAs to carry out an extensive three-year consumer education
campaign in New York focusing on the free credit reports, and consumers' rights
to dispute errors. The campaign must be carried out via public service
announcements and paid placements on television, radio, print media, and online
and requires the CRAs to expand the consumer education materials available on
AnnualCreditReport.com.
Experian, Equifax and TransUnion in a press release on
their respective websites announcing the launch of the National Consumer
Assistance Plan to implement the agreement's reforms. The release says
"This new plan builds on years of work by the credit reporting agencies to
enhance accuracy and extends consumer protections beyond the requirements of
state and federal law," and lists the five major changes in the agreement.
It concludes, "The U.S. credit reporting system helps
consumers build their future by accessing credit for homes, cars, small
businesses and even a good education. Both consumers and businesses benefit
from reports being accurate as possible, and this National Consumer Assistance
Plan will mark a significant step forward."
"This agreement addresses some of the most egregious
problems in credit reporting that consumer advocates have complained about for
many years," said Chi Chi Wu, National Consumer Law Center staff
attorney. "We commend Attorney General Schneiderman and his staff for
getting these changes, which should benefit consumers enormously."
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