The nation’s three credit bureaus will improve their process for fixing errors and responding to consumer complaints under an agreement announced Monday by the New York state attorney general’s office. The seven-point agreement addresses some of the more vexing problems consumers have reported when dealing with the bureaus.
Some quick highlights. The agreement:
- requires that the bureaus move away from an automated system that rejects consumer disputes without reviewing evidence they supply
- institutes a 180-day waiting period for appearance of unpaid medical debt, and removes those derogatory entries when those debts have been paid in some cases
- requires that each bureau link prominently to AnnualCreditReport.com and offer a second free peek at credit reports for consumers involved in disputes
- prevents reporting of delinquent payday loan payments if the lender is found to be operating illegally
- requires closer monitoring of credit report data furnishers
- requires credit reporting agencies to pay for a media campaign to help call attention to consumer rights
“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,” Attorney Eric General 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 agreement comes after endless studies showing consumers struggle with inaccuracies on their credit reports, and are often frustrated in their efforts to correct those mistakes. The most recent FTC study on the issue had discouraging findings about discouraged consumers. Nearly half of consumers engaged in an unresolved dispute with a credit reporting agency wave the white flag, according to the study published in January by the Federal Trade Commission. Of those who surrender while still believing inaccurate information persists on their reports, one-quarter give up because they “do not have enough time” to continue; 10% said they felt there was “little hope” for fixing the error. Another 40% say they gave up because they didn’t think the issue was important, or they had no interest in pursuing the matter.
“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.”
Here is more detail about the agreement from the attorney general’s website.
1. Improving the Dispute Resolution Process
Schneiderman’s investigation of the CRAs revealed that in some cases, the CRAs use a fully-automated process in which they reduce consumers’ disputes to a three-digit code and submit the code and any documentation to the creditor. If the creditor verifies the challenged information, the CRA rejects the consumer’s dispute without conducting any further investigation.
The has been true for years; that Kafka-esque process was described at length in my book, Your Evil Twin: Behind the Identity Theft Epidemic.
The agreement requires that the CRAs employ specially trained employees to review all supporting documentation submitted by consumers for all disputes involving mixed files, fraud or identity theft. The agreement also requires that, for all categories of disputes, when a creditor verifies a disputed credit item through the automated dispute resolution system, the CRA will not automatically reject the consumer’s dispute, but rather, a CRA employee with discretion to resolve the dispute must review the supporting documentation.
Above all, litigation is a common way for parties to resolve legal issues. If your business has been involved in a dispute, it might be in your best interests to seek legal advice from an expert such as Weissblatt Law Firm – this law firm specializes in business law.
2. Medical Debt
Over half of all collection items on credit reports are medical debts. Medical debts often result from insurance-coverage delays or disputes. As a result, medical debt may not accurately reflect consumers’ creditworthiness.
Pursuant to the Attorney General’s agreement, the CRAs will institute a 180-day waiting period before medical debt will be reported on a consumer’s credit report. This waiting period will provide extra time to permit resolution of delinquencies that result from insurance delays or disputes. 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 after the debt is paid by insurance.
3. Increasing the Visibility of AnnualCreditReport.com
Many consumers are not aware that they are legally entitled to one free annual credit report from each CRA via AnnualCreditReport.com. Consumers searching for a credit report online frequently find a CRA’s website, and many consumers subscribe to a CRA credit monitoring service to obtain a credit report or purchase a credit report from the CRA without understanding that they can obtain a free credit report. The agreement requires the CRAs to include a prominently-labeled hyperlink to the AnnualCreditReport.com website on the CRAs’ homepages. The hyperlink must appear directly on the CRAs’ homepages or via a drop-down menu visible on the homepages.
4. Additional Free Annual Credit Report
Consumers have a statutory right to obtain one free credit report per year from each CRA. The Attorney General’s agreement requires the CRAs to provide a second free credit report to consumers who experience a change in their credit report as a result of initiating a dispute. This requirement will permit consumers to verify that the CRA made the correction to their credit report without have to pay for a second credit report.
5. Payday Loan Debt
Predatory high-interest loans made in violation of New York lending laws are often referred to as “payday loans.” New Yorkers who take these loans often have trouble paying them back, damaging their credit, and making it more difficult to obtain a credit card, get a job, or even rent an apartment. The Attorney General’s agreement 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.
6. Furnisher Monitoring
Companies that provide consumer data to the CRAs (“furnishers”) must investigate consumers’ disputes and report their findings to the CRAs. The Attorney General’s agreement requires the three CRAs to create a National Credit Reporting Working Group (“Working Group”) that will develop a set of best practices and policies to enhance the CRAs’ furnisher monitoring and data accuracy. The Working 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.
7. Media Campaign About Consumers’ Rights
To ensure that consumers understand their rights, the Attorney General’s agreement requires the CRAs to carry out an extensive consumer education campaign in New York via public service announcements and paid placements on television, radio, print media, and online. The campaign will be carried out over three years and will focus on consumers’ rights to: (a) obtain a free annual credit report; (b) dispute errors in their credit reports; and (c) submit documents in support of disputes. The agreement also requires the CRAs to expand the consumer education materials available on AnnualCreditReport.com, the website that consumers can use to obtain their free annual credit report.
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