Search

Major Changes Coming for Credit Reporting

by devteam March 10th, 2015 | Share

It was hailed by NBC news on Monday asrnthe most radical change to credit reporting in decades and New York AttorneyrnGeneral Eric T. Schneiderman said his agreement with the three major nationalrncredit reporting agencies (CRAs) will reform the entire credit reporting industryrnand protect millions of consumers across the country.</p

The agreement between Schneiderman’srnoffice and Experien, Equifax, and Transunion reported on Monday requires thernCRAs to institute a number of reforms to increase protections for consumers,rnover a three year period.  While thernagreement is specific to New York State, it is expected that most of thernreforms will be instituted nationwide.  </p

The three major CRAs maintain consumerrncredit information on an estimated 200 million consumers.  Information provided by “data furnishers”rnsuch as banks and collection agencies includes the type and amount of debt,rnboth current and extending back seven years, and how consumers have managedrnthat debt.  The CRAs aggregate informationrnon individuals into files and provide reports to companies who use them torndetermine whether to grant credit to potential borrowers and at what cost.  The credit reports are also frequently usedrnby employers to check on potential hires. </p

The Attorney General’s office said thatrnin a 2012 study by the Federal Trade Commission 26 percent of participants foundrnat least one potentially material error in their credit report and 13 percentrnreceived a higher credit score after successfully disputing an error.  These findings, Schneiderman’s office says, suggestrnthat millions of consumers have material errors on their credit reports.</p

 “Creditrnreports touch every part of our lives. They affect whether we can obtain arncredit card, take out a college loan, rent an apartment, or buy a car – andrnsometimes even whether we can get jobs,” Schneiderman said. “The nation’s largest reporting agencies have arnresponsibility to investigate and correct errors on consumers’ credit reports.rnThis agreement will reform the entire industry and provide vital protectionsrnfor millions of consumers across the country. I thank the three agencies forrnworking with us to help consumers.”</p

The new agreement calls for reforms coveringrnsome of the most commonly expressed complaints from consumers about the creditrnreporting process including accuracy, the fairness and efficacy of complaintrnresolutions, and the harm done to credit histories due to medical debt.</p<ul class="unIndentedList"<liImprovingrnthe Dispute Resolution Process. Ratherrnthan relying as they do entirely in some cases on a fully automated complaintrnresolution process, the agreement requires that the CRAs have specially trainedrnemployees review all documentation submitted by consumers claiming thatrnincorrect information belonging to other consumers has been mixed into theirrnfiles or that they are the victim of fraud or identify theft. Even in cases where an automated disputernresolution system is employed a CRA employee must review the supportingrndocumentation.</li<liMedicalrnDebt. Medical debt constitutes over halfrnof all collection items on credit reports and often results fromrninsurance-coverage delays or disputes. Under the new agreement CRAs must institute arn180-day waiting period before medical debt is included in a credit report. Inrnaddition, while delinquencies ordinarily remain on credit reports even after arndebt has been paid, the CRAs will remove all medical debts from a consumer'srncredit report once the debt is paid by insurance.</li<liIncreasingrnVisibility and Frequency of Free Credit Reports. While current federal law provides consumersrnwith the right to receive one free credit report a year from each of the threernmajor CRAs, many are not aware of that fact.rnThe agreement requires the CRAs to include a prominently-labeledrnhyperlink to the AnnualCreditReport.com website on the CRAs' homepages. Consumers will also now be entitled to receiverna second free report each year if they successfully dispute an item on theirrnreport in order to verify the accuracy of the correction. </li<liFurnisherrnMonitoring. The Attorney General's agreement requires the three CRAs to createrna National Credit Reporting Working Group that will develop a set of bestrnpractices and policies to enhance the CRAs' furnisher monitoring and datarnaccuracy. This group will develop metrics for analyzing furnisher data,rnincluding: the number of disputes related to particular furnishers orrncategories of furnishers; furnishers' rate of response to disputes; and disputernoutcomes. Each CRA will implement policies to monitor furnishers' performancernand take corrective action against furnishers that fail to comply with theirrnobligations.</li</ul

Two additional provisions included inrnthe settlement announcement make specific reference to New York State and werernnot mentioned in a joint credit release from the three CRAs so is not clear ifrnthey apply nationally.  The first relatesrnto so-called “payday loans” and prohibits the CRAs “from including debts fromrnlenders who have been identified by the Attorney General as operating inrnviolation of New York lending laws on New York consumers’ credit reports.”  The second requires the CRAs to carry out anrnextensive three-year consumer education campaign in New York focusing on thernfree credit reports, and consumers’ rights to dispute errors.  The campaign must be carried out via publicrnservice announcements and paid placements on television, radio, print media,rnand online and requires the CRAs to expand the consumer education materialsrnavailable on AnnualCreditReport.com. </p

Experian, Equifax and TransUnion postedrna joint press release on their respective websites announcing the launch of thernNational Consumer Assistance Plan to implement the agreement’s reforms.  The release says “This new plan builds onrnyears of work by the credit reporting agencies to enhance accuracy and extendsrnconsumer protections beyond the requirements of state and federal law,” andrnlists the five major changes in the agreement.  </p

It concludes, “The U.S. creditrnreporting system helps consumers build their future by accessing credit forrnhomes, cars, small businesses and even a good education. Both consumers andrnbusinesses benefit from reports being accurate as possible, and this NationalrnConsumer Assistance Plan will mark a significant step forward.”</p

“This agreement addresses some ofrnthe most egregious problems in credit reporting that consumer advocates haverncomplained about for many years,” said Chi Chi Wu, National Consumer Law Center staff attorney. “Werncommend Attorney General Schneiderman and his staff for getting these changes,rnwhich should benefit consumers enormously.”

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.

About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

See all blogs
Share

Comments

Leave a Comment

Leave a Reply

Latest Articles

Real Estate Investors Skip Paying Loans While Raising Billions

By John Gittelsohn August 24, 2020, 4:00 AM PDT Some of the largest real estate investors are walking away from Read More...

Late-Stage Delinquencies are Surging

Aug 21 2020, 11:59AM Like the report from Black Knight earlier today, the second quarter National Delinquency Survey from the Read More...

Published by the Federal Reserve Bank of San Francisco

It was recently published by the Federal Reserve Bank of San Francisco, which is about as official as you can Read More...