Experian, Equifax, and TransUnion are credit reporting agencies (“CRAs”) that maintain consumer credit information on approximately 200 million consumers. The information in a consumer credit report is compiled by CRAs from submissions by banks, collection agencies, and other creditors. The consumer’s credit report is then sold by the CRA to companies who use the report to assess the consumer’s credit-worthiness.
This system of data collection commonly results in errors in a consumer’s credit report. A 2012 study by the Federal Trade Commission found that 26% of study participants identified at least one potentially material error in their credit reports, and that only 13% of study participants experienced a change for the better in their credit score as a result of modification to their credit report after a dispute to a credit reporting agency. These findings suggest that millions of consumers have material errors on their credit reports.
New York State Attorney General Eric Schneiderman recently announced a settlement with Experian, Equifax, and TransUnion after a three year investigation that may substantially change CRA processes. Many of these changes will be instituted nationwide. Provisions of the settlement include:
1.Improving the credit dispute process by employing specially trained employees to review all supporting documentation submitted by consumers for all disputes involving mixed files, fraud or identity theft. Additionally, when a creditor verifies a disputed credit item through the automated dispute resolution system, the CRA will not automatically reject the consumer’s dispute. Instead, a CRA employee with discretion to resolve the dispute must review the consumer’s supporting documentation;
2.Establishing a six month waiting period before reporting medical debts on a credit report. Many delinquent medical debts are caused by delayed insurance payments or other disputes;
3.Promoting the federally mandated entitlement to one free consumer credit report from each CRA via AnnualCreditReport.com. The CRAs must include a prominently-labeled hyperlink to the AnnualCreditReport.com directly on the CRAs’ homepages or by a drop-down menu visible on the homepages;
4.Providing a second free credit report to consumers who experience a change in their credit report as a result of initiating a dispute; and
5.Removing medical debts from a credit report after the debt is paid by insurance.
The agreement allows these changes to be phased in over three years, but most of them will occur over the next six to 18 months.
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