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Credit Check

posted by Elizabeth Warren

Late yesterday I recorded an interview with Terry Gross on Fresh Air.  She is one of my favorite interviewers (smart, and what a voice!).  She had called me to ask about credit reporting agencies. What made the interview stand out was her introduction. She told a story about her husband's trip through Credit Reporting Hell. 

Her husband's experience is no real surprise.  After all, a 2004 PIRG study found that 87% of credit reports had errors, and one in four had an error big enough to change a credit score. Consumer Federation of America reported  that 31% of credit reports had an error that would change a credit score by 50 points or more.  If a serious error hasn't happened to you, then it has happened to someone you know. Because Terry Gross's husband could hire a lawyer, the problem was eventually fixed, but not until he had spent a lot of time and a lot of worry. 

Starting the interview with a personal story about the impact of an error raised an important question:  Why should consumers be saddled with the responsibility to monitor the errors of credit reporting agencies? It is MY information about ME.  Someone else is collecting it, creating errors, and passing those errors along to other people. Those errors can cost me a job, denial of homeowners' insurance, a higher premium on my car loan, a higher price to buy a car even for cash, and, of course, a higher price for a mortgage, a credit card, a car loan, or any other loan. And the system says, in effect, it is my problem to monitor the information. It isn't enough that I don't impair my own credit. It is also my problem to find errors that the company has put in, to document the correct those errors, to fight with the company if they won't believe me, to check to make sure the errors were removed and to make sure those errors never reappear. I can even pay for insurance to help me if a credit reporting company makes a mistake.   

Since I already have a full-time job and a life outside that job, I resent this capture of my time. I also believe that a law that puts the burden on consumers to correct errors and puts no penalty on the credit reporting companies for passing along bad information is designed to encourage a high error rate.  There are simply not enough incentives for the credit issuers to spend their money to reduce errors in the credit reporting system or to make correction cheap and quick. 

In some states, it is possible to lock a credit report to stop all activity.  That helps prevent future errors, but it still puts the burden on the customer.   

A lot of people end up paying for bad credit reports. Many never know it because they don't know that the price quoted for insurance or a car was based on their credit score. They will just be poorer than they would have been if the credit reporting companies had more incentive to get it right.

Comments

Credit reporting agencies do not like taking the consumers word or dispute. Consumers are not paying the bills! It is the creditors that pay the monthly fee to report the “credit” good or bad. The credit reporting agencies then charge the consumers to track their own credit report. (like they don't do it already) Consumers pay to see what ole' "Isaac" has to say about their own credit worthiness but will not tell them how it’s calculated. Disputing is placed beyond the reach of "John Q" and reserved for only the most astute. Boy, there is money and power in the numbers game they are playing. The Fair Credit Reporting Act is supposed to provide recourse. Who, other than an attorney or the like can grasp and calculate your “statue of limitations”? You can torpedo yourself and not even know it.

Long story short, they are not going to change themselves. There is just too much money to be had if they “let it ride”. We cannot go by the ole’ “market will weed out the bad players” theory here. The opposite is true. If they don’t play badly the creditors will weed them out not the consumers.

re the statement that bad credit may result in "a higher price to buy a car even for cash":

I recently paid cash for a car. I did not provide the dealer with my SSN, and never signed anything to authorize a credit check. I was quoted a price by email, before they had any personal information beyond my name.

I don't think they had my credit report, and I don't think they cared; they've got their money once the wire goes through, and I don't get the car till it does.

I'd be curious to know the circumstances of this, whether it's more stupid or more sinister.

Credit reporting agencies are notorious for perpetuating errors. They need to be accountable for the information they gather. Maybe a good class action suit should remedy that.

Have there been any cases in which a "mistaken" (negligent) reporter was held liable for a consumer's time, effort and expense? I suspect some sort of "treble damages" legislation would remedy the problem rather quickly.

This cries out for some input from someone who knows how these things are handled in other countries. Allegedly the EU is more protective of privacy rights. Is that true for credit reports? What about Canada? Australia & New Zealand?

Collection agencies are buying old bankrupt debt and trying to collect on it. Call 1-888-267-2373 or go to our website www.bankruptcy-records.us for more information. This is against Federal Law, someone needs to stop this before it gets out of hand.

Paula-

We call it locally as “Claims Laundering”. Why else would someone or some company buy a discharged debt? Right now totally legal to do but when they make a “demand” then it becomes illegal. Some dance on that “line” others, I suspect, based on the sheer volume of that kind of debt out there are crossing it and crossing it often. The ones that get caught up in that trap are unfortunately the ones who do not know better, the financially unsophisticated.

We call it “Claims Laundering” because it gets pass back and forth between 3,4,5 etc. many companies. They change amounts owed, they change the account numbers, they add reference numbers so by the time someone “Violates the Discharge” and tries to demand payment, it looks like some other debt. Maybe it looks like a debt that was left out of the “bankruptcy schedules” at first glance. That is one aspect of my job that I am truly good at... spotting violations of the "stay" and "discharge". As a defense the collector says “well… I bought it from so and so and they didn’t tell me that this debt was discharged”. You go back and ask “so and so” and they say the same thing! So on and so on. So the ones you catch and haul in to BK court can “honestly” say they didn’t know. I estimate that even if 10 out of 1000 get caught in the “trap”, the 10 would have more than paid for defense of a single “Violation of Discharge” suit and the fine. Most likely insurance is going to pay for all of that or some sort of "hold harmless" agreement.

Unfortunately, Paula we do what we can. The debtors, right now, have to raise their hands. We can’t pursue what we don’t know about. Even then, for the average consumer bankruptcy attorney, it is one more deadline on top of many… many deadlines, he, she or they already have. Your talking, production of interrogatories, admissions; sending out interrogatories and admissions; filing a motion to re-open, maybe fighting a 12(b)6 motion or two or three. You do all of that work for a Violation of Discharge based on a collection call, letter or suit for collection of $400.00 and up. It can drive you nutz! This is why I believe that there is safety in numbers. They “hide” in the volume.

There is about $304 million reasons that debt buyers purchase chapter 7 cases. This is that approximate amount distributed to unsecured creditors in 2004 according to the 2004 audit report of chapter 7 cases. Distribution normally occurs after a discharge order is entered and in some cases may take more than three years.

Mr. Bell-

That explains "asset" chapter 7s'. What about the “no asset” chapter 7s debts? Out of all the 7s I have seen, “asset” 7s are a rarity when we are talking consumer 7s. I see the point in buying them in the case of an “asset” 7, I would do it myself if I could. Our debtors are getting, post-discharge, solicitations to “improve” their credit history by “electing” to pay off the discharged debt. I wonder if they did, would it creat that "new" contract? Still, I know that I know that I know, there are collections on discharged “no asset” chapter 7 debts out there. I have even seen them file POCs in a subsequent 13.

Respectfully,

My Horror Story led to a New Federal law in Australia and an Independent Commission Against Corruption investigation that exposed what they called "The Information Exchange Club". Ended with about 150 Bankers, Private Investigators, Public Servants, Lawyers, Finance Company executives and Corrupt Police being arrested. The Report is on the ICAC site NSW Australia. Search "Trade in Confidential Information".

In simple terms I didn't use credit and yet ended up with a credit file full of false entries from people trying to "get something on him" (perils of a high profile job at the time). This caused no end of problems during a divorce and the arrogance of the Credit Reporting Agency got enough politicians off side to get the "Privacy Amendment Act" through both houses at the Federal level.

Your comments are absolutely correct. I've managed to impair my FICO score by aggressive exploitation of 0% "balance transfers." It was more fun when they were fee free, but is still worthwhile even with a 3% fee as long as the fee is capped @ something that works out to less than 50 bp of the amount of the credit line. The only way it works of course is to make a single balance transfer of the total line of credit and then shred the card. The FICO formulae appears to ding me because of these lines/balances. Can one find damages here that are worth pursuing? Invasion of privacy claims? Anything short of having to declare a revolution and taking to the streets again?

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The reason it hurts your FICO scores when you transfer a balance, even if it is under 50% of the limit is because it hurts your scores have a balance on brand new credit cards. Bust bet is to leave them open for 6 months to 1 year before you start using them at all. Of course that defeats the purpose of 0% for first year.

I truly admire Elizabeth Warren and the amazing efforts she has made promoting consumer awareness.

My life changed Memorial Day weekend 2001 when my employer (a bank) had laptop computers stolen and my personal information was compromised. I was promised the "bank took care of it" and I was clueless until I wanted to refinance my home to buy out the co-owner.

I was more than able to afford the loan with standard interest rates undependently, I had a solid career that was upwardly mobile and I LOVED my house.

All three credit reporting agencies reflected over $750,000 in unsecured debt, a reposessed car or two, judgements, collection accounts, and more. According to the credit reporting agencies I was married to several people including my father, I had multiple social security numbers, I lived at my correct residence in NJ but commuted to go work in a retail jewelry store in a mall in Texas, all while serving a prison sentence in Canada.

From 2004 my life turned to hell, I lost my home, I lost my job, I was denied student loans, my insurance went so far through the roof I couldn't afford medical insurance. I was even denied dental care unless I walked in with CASH, Equifax lied telling them I had a history of writing bad checks. Think about the embarassment and humilitation that causes.

I went on a writing campaign and received documentation from each and every creditor stating the debt did not ot belong to me and/or was unverifiable meaning they didn't know who the debt belonged to. In a few cases, the debt listed was charge off's dating back beyond the legal statute of limitations for reporting.

The creditor bureaus provided false information to Citibank who in turn "served me" lawsuit papers at an address I did not live at and initiated a judgement. Lawyers wouldn't help because I did not have $2,000 sitting around gathering dust for a retainer, so I represented myself. The judge would not look at my documentation, and ruled in favor of Citibank on the appeal. To add insult to injury Citibank's lawyers couldn't be bothered to show up. Two weeks after Citibank unfairly seized $8,000 in assets forcing the sale of my home, they sent a letter of apology stating the account was fraudulently opened in my name and they corrected my credit reports and removed the judgement. They promised refund and I never saw a penny. Still, the court clerk and judge refused to look at my documentation and lawyers felt I had a strong case, but again I was asked for thousands up front in retainers.

Despite creditor evidence stating fraud or mixed files, the credit rewporting agencies claim they verified the debt as accurate.

I have been a real go-getter and in the last six months I have emailed personally David Emery of Trans Union (I am pleased to announce I am the bane of his existence) asking what this means exactly. All they say is they "checked with the creditor who verified the information reported as accurate".

When you are on that "troublemaker list" and they claim you are being "frivoulous" because you will not roll over and play dead like they want you to, they will set up intentional roadblocks to stonewall you and prevent you from seeing your credit report. They will require you supply personal identifying information and then when you send it, they claim "it was never received". I don't understand why private industry needs photocopies of my social security card to investigate a claim ior file a report. This should be illegal. The only people needing access are employers for tax purposes. This is a tax identification number and I have a lot of issues with private industry becoming "Big Brother".

What I don't understand is why I am required to make the MP3's of phone calls with creditors confirming my documetns are accurate and they credit reporting agencies are making errors, and I am obligated to prove their information is inaccurate, but they don't have to supply any information reagrding the process, the procedure, or the methods used to determine accuracy.

I even started tracking trade lines that have been illegally re-aged from 1999 (not belonging to me but my ex-roommate's sister in law) refelcting it to be a current charge off as recent as this month. I keep sending letters from that original creditor dating back to 2006 but no luck all three agencies will not acknowledge it and consider my evidence frivilous.

In one case, a overzealous Equifax employee named Margaret McNiff called my employer to question my integrity and sent me a letter (I still have it) making an implication that I somehow masterminded a scam to reporoduce the letterheads of creditors. She claimed to have reported me to the FBI. This was after contacting the FTC questioning this employee's integrity and competency after discussing my profile with a receptionist at my place of employment. I contacted the FBI and filed reports against Ms. McNiff because the FBI was not involved. Ms. McNiff was allegedly fired.

This is only the tip of the iceberg, I have unconvered so much corruption in the financial industry and the recent collapse of the economy is no surprise when it is an unregulated industry that is driven by greed and not by the common good of Americans.

My article exposing the usury across the financial industry from banks, to collection agencies, to the credit reporting agencies is to be published in a few weeks. I hope that our target audience (musicians) can see how this really affects them and how these PIGS would capitalize on their dreams/desires to further their musical career.

Now that I am done ranting, we are down to fighting about 2 derogatory trade lines and 2 satisfactory trade lines that do not belong to me with Trans Union. Equifax and Experian both refuse copies of my credit reports for the past year. Free, by Fee or otherwise, they refuse.

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