How to know if you have a legal claim under the FDCPA

Share | The ability to obtain credit is one of the most important privileges a person living in this country can have.  The so-called "American Dream" is inextricably tied to the credit industry.  If you don't have good credit, you cannot buy a home, get decent car insurance rates, get a decent credit card, or get a loan from your local bank. 

This article is about how to know if you have a Fair Debt Collections Practices Act (FDCPA) claim when dealing with your creditors and collection agencies.  For the sake of full disclosure, only an attorney can determine whether a consumer actually has a legal claim worth pursuing in the courts. The information below is only a guideline for consumers to help them understand their rights and possibly prompt them to seek legal counsel.

Activities of all collection agencies are regulated by the Federal Trade Commission and Consumer Financial Protection Bureau through the FCRA and the FDCPA.  Original creditor actions are now regulated by a new prohibition enacted when the Dodd-Frank Act was passed called Unfair, Deceptive Acts and Practices, also known as UDAAP. UDAAP also indirectly applies to third party creditors as well according to a recent CFPB bulletin.

Below are the rules and the context within which those rules create a legal cause of action:

1. A claim by a debtor that a third party debt collector has engaged in prohibited conduct in collecting or attempting to collect a consumer debt.
2. The creditor is typically not a party.
3. The validity of the underlying debt is not relevant or an issue in the action.

 The FDCPA mandates three areas of collector compliance:
1. Identifying oneself as a debt collector.
2. Advising the debtor of the right to verify and dispute the debt.
3. Refraining from harassment, false representations and third party communications.


PRIMARY SOURCES OF THE LAWA. Fair Debt Collection Practices Act. 15 U.S.C. § 1692 et seq.

Now, let's drill down to the core of what all of that means.  1. A claim by a debtor that a third party debt collector has engaged in prohibited conduct in collecting or attempting to collect a consumer debt.  The operative words of this rule are "prohibited conduct."  Prohibited conduct includes:

• Hours for phone contact: contacting consumers by telephone outside of the hours of 8:00 a.m. to 9:00 p.m. local time
• Failure to cease communication upon request: communicating with consumers in any way (other than litigation) after receiving written notice that said consumer wishes no further communication or refuses to pay the alleged debt, with certain exceptions, including advising that collection efforts are being terminated or that the collector intends to file a lawsuit or pursue other remedies where permitted
• Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously: with intent to annoy, abuse, or harass any person at the called number.
• Communicating with consumers at their place of employment after having been advised that this is unacceptable or prohibited by the employer
• Contacting consumer known to be represented by an attorney
• Communicating with consumer after request for validation has been made: communicating with the consumer or the pursuing collection efforts by the debt collector after receipt of a consumer's written request for verification of a debt made within the 30 day validation period (or for the name and address of the original creditor on a debt) and before the debt collector mails the consumer the requested verification or original creditor's name and address
• Misrepresentation or deceit: misrepresenting the debt or using deception to collect the debt, including a debt collector's misrepresentation that he or she is an attorney or law enforcement officer
• Publishing the consumer's name or address on a "bad debt" list
• Seeking unjustified amounts, which would include demanding any amounts not permitted under an applicable contract or as provided under applicable law
• Threatening arrest or legal action that is either not permitted or not actually contemplated
• Abusive or profane language used in the course of communication related to the debt
• Communication with third parties: revealing or discussing the nature of debts with third parties (other than the consumer's spouse or attorney) (Collection agencies are allowed to contact neighbors or co-workers but only to obtain location information; disreputable agencies often harass debtors with a "block party" or "office party" where they contact multiple neighbors or co-workers telling them they need to reach the debtor on an urgent matter.)
• Contact by embarrassing media, such as communicating with a consumer regarding a debt by post card, or using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business
• Reporting false information on a consumer's credit report or threatening to do so in the process of collection

In such cases, the original creditor is NOT a party in this action, has sold the debt to the collector and cannot be listed on the legal Complaint as such.  As for whether a consumer actually owes the money to the collector, it is not an issue that can be legitimately presented in court by the collector.  The legal issue is the conduct by which the collector exercised their right to collect the debt from the consumer.  If any of the three mandates I mentioned of above have been violated by the collector, a consumer has a possible legal claim. 

If you are serious about pursuing a lawsuit against a collector you must know how things work in the legal system.  First, you must have some kind of proof of an actual violation.  The truth is that some claims will require more clear proof than other types of claims.  For example, If a collector "publishes" a debt list and your name is on it in black and white - you have clear and compelling claim if you can produce the publicized list in court.  However, you may not have a claim if your lawsuit alleges that a collector called you on two separate occasions at times after the mandated 9:00 PM limit.  Even though they did break the law, it simply does not rise to the level of a legal claim because it is not egregious enough to warrant the courts' time and resources in comparison to other claims that clearly should be heard by the court.

If you receive a dunning letter (collection letter) and it does not advise you of your right to verify and dispute the debt, you may have a claim.  Don't just take it for granted that a business is always doing what it is supposed to do.  23,000 FDCPA lawsuits last year is proof that they are not. So carefully look over any communication you receive from a collector.  It's safer for you to assume there might be an error on that document than to assume there isn't.

Seasoned Tradelines and Authorized User Accounts 2013

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It has been a while since I last wrote about Tradelines and A/U accounts.  I thought it would be a good idea to catch my readers up on the latest industry news and company reviews regarding this always intriguing subject.  Before I wrote this article, I did an Internet search using the words: "Seasoned Tradelines+Authorized user account."  The results were not surprising.  Google turned up 14,900 results.  Most of the hits were companies selling tradelines in one form or another, but none of the sites (except one) actually explained what tradelines are and how to distinguish between a good deal and a scam. 

After about an hour of visiting sites and reading the same regurgitated information, I came across a site called Tradelinesforum.com. As the address title suggests, it is a forum of individuals discussing the subject of tradelines and authorized user accounts.  And, as  suspected, people are still very much interested in the so-called phenomenon of seasoned tradelines and A/U accounts. I also noticed that people are also still confused about them.  To get a basic understanding of what tradelines are you should read my article here. 

Tradelines are still a viable (and legal) financial instrument that can be used to improve a person's credit score.  And yes, they are still somewhat controversial among some in the credit and finance industry.  Some still say they provide an "artificial" increase in a person's credit score, thus are inherently wrong because the increase is not based upon an actual improvement in someones creditworthiness.  Be that as it may, Tradelines are here to stay.  In my search for the latest information on Tradelines, I ran across a very helpful website - one that I don't think existed a few years ago.  The website reviews what they consider to be the best Tradeline companies.  I trust Tradelinesforum.com, and that is where I found the link to a site called Tradelinesreview.com. This site featured reviews of several websites that offered tradelines for sale.  Of the several sites they reviewed, one company called Superior Tradelines.com was given their highest rating based upon several categories like customer service, knowledge of product, and pricing. 

If you are interested in purchasing a Tradeline I would suggest you give superior Tradelines a call and grill them about their product and their industry knowledge.  The tradelines review website has some excellent suggestions for questions you could ask.

Method of Verification–A Powerful Credit Repair Tool

Technorati Tags: credit repair,method of verification,FCRA 611,credit dispute letter,credit bureaus

A dispute letter is easy enough to write. There are samples all over the Internet. Some of the letters you will find are good, others not so much. Disputing negative credit listings on your credit report is, so they say, the first step in credit repair. However, many people are foiled in their dispute attempts because of the way the credit bureaus actually “investigate” the disputes.

It doesn’t matter how fancy, or intelligent sounding your letter is, or how many smart references you have to the laws of the FCRA; in many cases, your letter will produce nothing more than a, “verified” response from the credit reporting agencies. This is not your fault. It is a necessary step in the dispute process. You MUST initiate the dispute process with the credit bureaus FIRST.


If you get a notice from the credit bureaus telling you the information you disputed has been verified as accurate, and in most cases you will, you can then request the method of verification, which is your right under the FCRA section 611 (a) (7). The credit bureau must give you this information within 15 days of the request.

Why the CRAs are not doing their job

Each credit reporting agency has a different process for handling credit report disputes, but all three use a similar system. The three bureaus collaborated through their trade organization to automate the entire reinvestigation process using an online computer program, E-Oscar.

Want to see the form they use for disputes? Here ya go.
All disputes received by the credit bureaus are done via written letter, the telephone or the credit bureaus online dispute service. Even if the credit bureau receives a written dispute highly detailed and with documentation, each dispute is reduced to a two-digit code - by a low wage earning employee who couldn’t care less about the actual investigation they are supposed to be doing on the trade line you disputed.

Under the FCRA, the credit bureaus are required to send the information on to the furnisher of the consumer’s account (in other words, the original creditor), but all the original creditor receives is the two-digit code produced by the E-Oscar software program.

According to testimony from Leonard A. Bennett, Testimony Before Subcommittee on Financial Institutions and Consumer Credit of the Committee on Financial Services Regarding “Fair Credit Reporting Act: How it Functions for Consumers and the Economy,” June 4, 2003, Leonard A. Bennett P.C. on behalf of the National Association of Consumer Advocates (http://www.naca.net):
The employees of all three CRAs operate under a quota system whereby each employee is expected to process all of the disputes of an individual consumer in less than four minutes. Worse still, the “codes” used by both the CRAs and their subscribers (the furnishers) are limited in number and rarely describe the actual basis for the consumer’s dispute.

For example, in two of my recent cases, both identical, consumers wrote dispute letters to all three bureaus. The disputes were conveyed in great detail and explained that the consumers were not responsible for the disputed accounts and that any signatures claimed to be theirs were forgeries. Each consumer dispute letter also enclosed copies of handwriting exemplars such as signatures on driver’s license, military IDs and other credit cards.had also obtained a copy of the forged note and included it in his dispute letter. When Equifax and TransUnion received the letters, their employees simplified the disputes to a code and the description “not his/hers.” The [two-digit code indicating "not mine"] was all the furnishers received.In a deposition taken in a Pennsylvania case, TransUnion’s responsible employee explained the CRA‘s “investigation procedure.”Q.[T]he dispute investigator looks at the consumer’s written dispute and then reduces that to a code that gets transmitted to the furnisher?A.Yes.Q.Does the furnisher ever see the consumer’s written dispute?A.No.Q.Are there any instances in which the dispute investigator would call the consumer to find out more about the dispute?A.No.This is consistent with CRA testimony in every other case of which I am aware. The Bureaus do not convey the full dispute or forward any of the documents to the furnishers. As an expected result, nearly all consumer disputes are verified against the consumers.
The computer-based system, described above, which all of the credit bureaus use is called eOscar. For more information on this system, here is the link.

Case in point: A real life experience:

“What is the CORRECT way to request the method of verification? I’ll tell you about an experience of someone I know, who had a bogus tax lein which had appeared on their credit report.
They were refinancing their home and their loan officer called to tell them they were approved but they would have to pay off their $5000 Florida state tax lien!! They had never lived in Florida, so they wouldn’t have needed to pay state taxes (you have to be employed in Florida for this to happen); therefore, it was impossible for this lien was theirs. They politely explained this to the loan officer (who happened to be a friend of theirs for many years). As you can imagine, they were extremely embarrassed.

The conversation with Equifax
They called Equifax (the CRA who had this listed) and disputed the tax lien. To their surprise, it came back “verified”. They then called the toll-free number listed at the top of the report sent to me by Equifax and asked for method of verification. The response: “We have documentation.”
“What kind of documentation do you have?” They asked.
“Documentation.”
Silence followed. “Who did you call? Did you call the county clerk?”
“We never call the original creditor,” the Equifax employee responded.
“Never?”
“No, Ma’am.”
Stuttering in surprise, they asked for the number and name of the court house. With disgust so palpable that it could be feel it through the phone line, they were given the name and number of the Florida courthouse.

My own investigation efforts
Naturally, they immediately called the Florida courthouse, asked for the records clerk and explained the situation. The very nice woman on the other end of the phone said, “Well, I can tell you that no credit bureau has ever called here.” She then asked for my social security number and name and after comparing them, “Honey, the social security numbers aren’t even close! This definitely isn’t yours.”
They breathed a sign of relief and asked, “Can I get a letter from you stating this tax lien isn’t mine?”
“I’m afraid we can’t do that, as this information is private. The tax lien isn’t yours.”
“Can I give Equifax your name and number and have them call you so you can tell them what you told me?” The clerk assured me that would be fine, and they wrote down the information.

Forcing Equifax to comply
They called Equifax back, and recounted what the clerk had just told me. They then insisted that Equifax call the clerk to verify what I had said. “Oh we can’t do that,” was the reply.
“You better do that, or I will sue you for willful non-compliance with the FCRA. You are required to investigate my dispute, and consider all information.”
“Does this mean you want to open up a new investigation?” My friend held back the expletive which was on the tip of his tongue, and replied that yes, he did want to open a new investigation. I gave her the clerk’s name and direct line. I was given a new confirmation number for my dispute.

The Results
10 days later he received a letter from Equifax that the account was removed from my credit report. The loan went through.

Update Feb 18, 2008: But wait! There’s more! This little item came back!

The Method
After this experience, they did a little more investigation on the credit bureau’s methods of investigation and someone pointed them to the Bennett testimony. Based on hearing my friends’experience and what he learned, I came up with the following procedure which seems to be working for people:

1. Challenge the listing in the normal way.
2. If verified, with a copy of the investigation result in hand, call the CRA at the toll-free number listed at the top of the report. (If not, you’re done, you lucky dog!)
3. Give the report reference number and ask for method of verification per FCRA Section 611(a)(7) .
4. They will have never called the OC (original creditor), but will have relied on a third party database to verify, which they may or may not admit to you. If they can’t cite solid evidence like “we called the OC and they verified”, ask for OC’s phone number.
5. Call OC and ask for the records.
6. If the OC doesn’t have them (they will typically tell you that the collection agency has them and they don’t keep them), get the person’s name and direct line. If they do have them, demand a copy under the new FACTA act.
7. If you are sent records, review them and see how good they are. If they are not conclusive, take the next step.
8. If the OC has no records

• Call the CRA back and tell them the OC has no records.
• Inform the CRA that they need to open another dispute. The new information for the disput is the name and number of the person to whom you have just called at the OC.
• If they refuse, inform them you will sue for willful non-compliance under section FCRA § 616.
• If they still refuse, send the information via certified letter along with an intent to sue letter. If not, they will give you a new confirmation number (write it down! and the date!). This acts as a new investigation, and the CRA has 30 days to get back to you.

1. If you have written records proving the OC can’t back up the negative listing(s) they are reporting on your credit report

• send them registered mail to the CRA along with an intent to sue letter if the account is not removed.

What is E-Oscar??

Technorati Tags: e-oscar

 

e-OSCAR is a web-based computer software that data furnishers (creditors, banks, etc.,) use to communicate with the credit reporting agencies. The system enables Data Furnishers (DFs) and Credit Reporting Agencies (CRAs) to create and respond to dispute letters.

If you are positive a mistake has been made on your credit report, it may be that the e-Oscar investigation system is the reason the mistake was verified as correct. Credit reporting agencies (CRAs) have created an automated computerized system of dealing with credit disputes.

The e-Oscar (Online Solution for Complete and Accurate Reporting) system is used even when consumers send in detailed disputes, with supporting documents. The dispute is broken down into a two or three digit code and sent to the original creditor to verify a simple code, failing the duty to investigate

e-Oscar and disputes

As of 2004 the big three CRAs; Equifax, TransUnion, and Experian-require mandated use of e-Oscar. When a dispute is sent to a CRA by a consumer it is coded from among 26 different dispute reasons such as Not his/hers, claims inaccurate and sent to the data furnisher without any human intervention. The furnisher is than suppose to investigate the dispute and respond with the dispute result to the CRA. When the furnisher conducts an investigation they will look at their files to see to assess the accuracy of the information disputed by the consumer. If they determine the information is reporting incorrectly they will send an update to the CRAs with the correct information. If the furnisher never even responds within the 30 days the CRA must delete the information.

Problems with the e-Oscar System

From the surface e-Oscar is a great idea and will enable consumers to get their dispute resolved faster. The reality seems to be quite different. Two major problems exist with e-Oscar. First, disputes are shoved into a single dispute reason code. This is unfair because often disputes have many reasons. Nevertheless it still gets put into a single dispute code by a low paid employee who is scanning the dispute letter. The second problem is very little documentation is included.

The CRAs are NOT including all relevant information like they are suppose to. The FTC’s Report to Congress on the Fair Credit Reporting Act Dispute Process notes TransUnion typically does not supply copies of consumer-supplied documentation to furnishers but added that, if the documentation can be reasonably verified as being authentic, the account is automatically updated based on the documentation, in lieu of sending an ACDV (Automated Credit Dispute Verification). So if you send a copy of an account statement or some other proof that an account item is reporting incorrectly it rarely makes it to the data furnisher. Why? Because transmitting that information is not easy or cost effective for the CRAs. It requires them to mail it or fax it which costs money. As a result, the supporting documentation is left out.

Introduction

Q: How does the CRA convey a dispute through e-Oscar?
A: The CRA will notify the data furnisher by ACDV. ACDV stands for Automated Credit Dispute Verification. The Automated Consumer Dispute Verification (ACDV) is a consumer dispute that is routed to a data furnisher (DF) from a Consumer Reporting Agency (CRA) via e-OSCAR. ACDVs are sent to the data furnisher on behalf of the consumer.
The data furnisher returns the ACDV once the proper investigation has been completed. AUD stands for Automated Universal Data form. AUDs are initiated by the data furnisher to process out of cycle modifications and updates, and are sent to the CRAs with whom the data furnisher has a reporting relationship.

Batch Interface

Large data furnishers such as MBNA or Chase get lots of disputes. Going through each dispute manually is an expensive and resource intensive process. E-Oscar’s solution is to send all the disputes over in a batch computer file. Hundreds, even thousands, of disputes can be sent from the CRA to the data furnisher at one time.
The data furnisher can then send the computer file back to the CRA with the dispute results of the entire batch. One inappropriate feature is the “reply all” function. This allows the data furnisher to select a response, saying “Account Verified” and respond to all disputes at once.

So if 20 disputes came in, the data furnisher could respond to all 20 disputes with the result “Account Verified” without even looking at any of the disputes! That’s right, the data furnisher is able to respond to all disputes with a single click without even conducting an investigation or even looking at the dispute.
In fact, this is a feature e-Oscar is very proud of and has a section on their web site all about it.

Here s a quote taken from e-Oscar’s web site:
The Batch Interface is an exciting product offering that allows Data Furnishers with large volumes of

Automated Consumer Dispute Verification (ACDV) requests to receive a batch file in an XML format

Once the file is delivered, each Data Furnisher can further automate the development of responses to

ACDVs. The development effort by the Data Furnisher to achieve the benefits of the Batch Interface, will

vary depending on the Data Furnishers internal business and compliance requirements.
For example, one Data Furnisher may choose to auto-populate the response fields automatically for staff

review prior to submission. This business plan would save your staff the time and potential errors of data

entry. Another Data Furnisher may elect to automate only certain response types.
For example, A Data Furnisher might only automate “delete” responses and require that staff review

responses on all other disputes.(emphasis added)
The FCRA states that the furnisher must perform a reasonable investigation. However if the data furnisher is able to automate the investigation process without even looking at the incoming disputes, doesn’t that seem like a violation of the FCRA? How is this considered a proper and legal investigation!?

How long does the furnisher have to conduct an investigation?

A common misconception is that the furnisher has 30 days to perform an investigation of the dispute. This is not true. The 30 day clock begins when the CRA receives the dispute letter from the consumer. The CRA then needs time to send the data furnishers’ response to the dispute to the consumer once it is complete. Therefore the furnisher has around 15-20 days to conduct an investigation.

What happens if a furnisher does not respond?

This is often a desired outcome. Depending on what type of dispute it is, the CRA might update the account in favor of the consumer, or it might delete the trade line off the credit report.

Is 'rapid re-scoring' better than long-term credit restoration?

Mortgage companies use 'rapid rescore' to quickly boost FICO scores.


"We've never seen a legitimate credit repair operation" is the quote I read in bold large type on a website called Credit technologies, Inc. (credittechnologies.com). The website was quoting C.Steven Baker, who is the Director of the Federal Trade Commission's Chicago Regional office.  Honestly, when I saw that quote I was a little shocked and offended.  First, let me say a little something about credit technologies, Inc.  The company was founded in 1990 by Thomas Conwell III.  Their official business listing is a 'consumer reporting agency'.  They actually offer an impressive array of services including: credit reporting, credit re-scoring, automated credit analysis, and access to many types of public records.  According to their website they also offer mortgage, Realtor referral services. 
Only after reading through the 'Services' page of their website did I realize why they used that quote from Mr. Baker.  Their main service is rapid re-scoring of credit files which basically entails the same type of work credit repair companies do, except they claim to do it faster and better.  After more research, I found that while there are less of that type of company than there are credit repair agencies, the same warnings should apply to them: watch out for the scammers!

This company (Credit technologies, Inc.) claims that a consumer can get their credit report rapidly re-scored without providing any documentation.  If you read the article that I reference below in this post, you will see this type of service is regulated by the same laws (CROA) as credit repair companies.  That means they ultimately must  operate by the same rules.  The main rule to which I am referring is section 611 of the Fair Credit Reporting Act (FCRA) - duties of furnishers upon receiving dispute from a consumer. While the turn-around time is faster because of the contractual relationship between the credit reporting agency and the mortgage company, the responsibilities of the consumer disputing the information are the same: they must provide documentation that indicates proof that the information contained in the credit file is either, wrong, erroneous, or incomplete.  If the consumer cannot provide that proof, it does not matter how fast the turn-around time is, the information will be verified by the original creditor and the consumer's FICO score is not going to change.

Now I would like to put some context around that startling statement from Mr. Baker.  It just so happens that I was doing some internet surfing looking for information on the Credit Repair organizations Act and found a news article from 2010 indicating 9 Chicago area credit repair agencies were indicted and sued by the FTC for fraud and deceptive practices.  On top of that, most of the agencies that were sued were not even registered with the State of Illinois to be doing business.  They had no Illinois state business licenses!  It's no secret that there are a lot of so-called credit repair companies that commit fraud in order to deceive their clients.  The nature of credit repair itself makes it easy for someone to put up a website, and claim that they can clean up someone's credit when they know next to nothing about consumer protection laws. 

Credit repair, at its core,  is simply the act of telling a credit repository (better known as credit reporting agencies) either in writing or on the phone that you don't agree with something in your credit file.  That's it.  It has been my experience, along with finding tons of empirical evidence from organizations like the creditinfocenter and  National Consumer Law Center that the credit repositories are the ones who complicated things by not being responsible with our private financial information.  So I would beg to differ with Mr. Baker.  Maybe he's never seen a legitimate credit repair agency in Chicago and other places under his jurisdiction, but I know of several legit credit repair agencies personally, including the one I own and operate.

What  is Rapid Re-scoring?

Rapid re-scoring is a service that is exclusive to mortgage companies, Brokers, and Realtors who contract with the 'big three" credit bureaus on behalf of their clients who want to raise their FICO score in order to qualify for a loan or a better interest rate on a loan.  The service is not available to the general public and costs about $30.00 per tradeline.  The basic process is the same for each credit provider.  Once a tradeline has been identified, an updated statement or letter from the account holder is obtained.  Paperwork from the credit provider is filled out and returned along with the proof of change to the account.  The credit provider researches and verifies the validity of the update and adjusts the score based on the updated information.  The credit provider then notifies the lender of the change. This entire process can take little more than a few days.  For a more details on how rapid re scoring works visit this site.

Is rapid re-scoring better than traditional credit repair?

It depends.  Assuming both the credit repair company and the rapid re-scoring company are legit and do good work, it really depends upon which type of tradeline you are dealing with, and how fast you want the tradeline(s) investigated, and whether you have documentation that can prove the tradeline is erroneous or incorrect.  For a list of the types of tradelines eligible for rapid re-scoring please see the website I referenced above.  If you are only 20-30 points from a certain score and you are well into the process of buying a home, I would go with a rapid re-score.  If you are six months out and just have started looking to buy a home, I would definitely go with a reputable credit repair agency.

Technorati Tags: Rapid rescoring,credit repair organizations act,CROA,credit repair

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How FACT-ACT Section 312 amends FCRA Section 623

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Today on C-Span, I watched and listened to a Senator speak about a bill that would infuse small community banks with about 7 billion dollars to give our lagging economy a shot of much needed "adrenaline." While the recent economic downturn has wreaked havoc on general bank lending, small banks (those with revenues under 10 billion annually) have suffered the most. Even as banks like Goldman Sachs, Citicorp, and Bank of America (which currently holds more mortgage paper than any bank in the US) are starting to pay back the TARP (Troubled Asset Relief Program) funds they borrowed from us tax payers, they still refuse to loosen their new, tighter lending policies. This fact is forcing our government consider new ways to stimulate the economy without raising taxes. Timothy Geithner, the current US Treasury Secretary said at a Senate hearing that TARP funds were ultimately meant to spur small business, but admitted that the program has not performed as well as anticipated. Anyone who is smarter than a tree knows that banks aren't going to start lending again until people start working again. While I don't subscribe to the Ronald Reagan trickle-down economic theory, I do believe that big and small businesses, including banks will be last to participate in any kind of economic recovery until they see a sharp increase in jobs all over the country.

Unemployment compensation claims are still increasing for heavens sake!! The Obama administration is now touting that at least claims aren't increasing at the same rate they were a year ago. I guess that's an interesting perspective, but it does not help those who still cannot find work after more than a year of being on the unemployment compensation rolls. Let's be clear, the US economy is still in trouble, and some are even talking about a "double-dip" recession. Most agree that the housing crisis was the cause of the recession, and is likely the key to any future economic recovery. Because the housing crisis also caused a crisis of dependable and accurate credit information, our banking system has become heavily dependant upon procedures and systems that do not allow misinformation to occur.

To this end, Congress has amended the FRCA Section 623 with a new FACT Act law that is located at Section 312. Section 623 of the FCRA is entitled: Responsibility of Furnishers of Information to Consumer Reporting Agencies. In the interest of accuracy, especially with regard to a consumers ability to dispute the accuracy of information directly with an issuer of information/credit, or an original creditor, companies realized it was in their best interest to have policies and procedures in place that show how they control, and access data on it's customers.

Section 623 places a requirement on issuers of information to provide accurate information to the credit bureaus. The FCRA gives consumers the right to directly engage the issuer of credit in the dispute process by demanding to see exactly HOW they came to their conclusions about debts they say the consumer owes them; Issuers are required to provide, upon written request, all documents that prove the legitimacy of the debt; prove the alleged debt is strictly accurate with regard to the amount, correct dates of delinquency, and all late payments. If they cannot provide proof in those and other areas, they must cease reporting the information to the credit bureau, who in turn must delete the debt listing from the consumers credit file.

The new FACTA Section 312 gives FCRA Section 623 the teeth it should have been born with. It places not only a requirement on issuers of information to keep complete and accurate records, it also creates a right of the consumer to bring a lawsuit under FCRA Section 616 - wilful non-compliance. The FCRA requires that issuers of credit must perform a "reasonable investigation" and that they must have appropriate audit plans in place to evaluate their own ability to retain complete and accurate records. If they do not have such a program in place, there is no way they can claim they are following reasonable procedures to insure their data is accurate.

What does all of that mean for a consumer trying to restore their credit? It means the dispute process just got a little easier, in some ways. The dispute process can be complicated, but these two important sections of the FCRA and FACTA make it easier for the consumer to navigate the process. Just remember, my brother in arms, that credit repair is not about finding loopholes in the law, or luck. It's about protecting your rights as a consumer and holding companies accountable for violating those rights.

There's a New Sheriff in Town: The Consumer Financial Protection Bureau

For years, the big three credit reporting agencies - Equifax, TransUnion, and Experian, have operated with little to no government oversight or regulation. These are the three agencies that control who gets approved or rejected for loans on everything from credit cards, to cars, to even buying a home.

Consumer protection organizations such as US PIRG (US Public Interest Research Group) have long claimed that the big three operate under a mysterious shroud of secrecy and are the reason the entire credit and lending system is plagued with inaccuracies and erroneous information.

Several studies over many years have repeatedly documented the chronic problem of inaccuracies in credit reports. The U.S. PIRG has conducted at least six studies between 1991 and 1998 and each time has found a shocking number of serious errors in consumer credit reports. US PIRG’s most recent study in 1998 revealed the following:

Twenty-nine percent (29%) of the credit reports contained serious errors --false delinquencies or accounts that had never belonged to the consumer --that could result in the denial of credit; 

 Forty-one percent (41%) of the credit reports contained personal demographic identifying information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect; 

Twenty percent (20%) of the credit reports were missing major credit, loan, mortgage, or other consumer accounts that would demonstrate the positive creditworthiness of the consumer; 

Twenty-six percent (26%) of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open; 

Altogether, 70% of the credit reports contained either serious errors or other mistakes of some kind.


Federal laws like the Fair Credit Reporting Act (FCRA) and the Fair Debt Collections Practices Act (FDCPA) provide consumers with some protections and more importantly, a basis for litigation against companies who violate consumer protection laws regarding how consumer credit information is handled, and how debts should be collected by collection agencies. Still, it seems collection agencies, and the big three credit reporting agencies have managed to sidestep the regulations aimed at protecting consumers from their mistakes, lack of security and illegal collection practices. Credit reporting agencies and collection agencies try to defend (even in courts of law) severely flawed business models that make it extremely difficult if not impossible for the average consumer to call them on their mistakes and get relief from practices that are intentionally harmful to a consumers credit file. Consumer requests to the credit reporting agencies to correct erroneous or inaccurate information in their file are routinely ignored or mishandled. Consumer investigation requests are conducted via a process that has been describes as “shoddy” and “grossly irresponsible” by legal professionals in the industry.


Evidence of high error rates in the credit reporting system is also found in the complaints received by the Federal Trade Commission regarding credit reports. For many years consumer complaints about credit reports have ranked at the top of all complaints submitted to the FTC for any reason. Identity theft, which also involves creditors or furnishers of credit information and credit reporting agencies, is now at the top of all fraud complaints received by the FTC. The FTC reported to Congress that as of March 2002, the FTC received approximately 3000 calls per week to their toll-free identity theft hot line. Approximately 43% of all complaints received by the FTC in all subjects are identity theft related. When one considers number of people applying for credit in the US on a daily basis, the number of persons affected by credit reporting agency mistakes and information mismanagement is absolutely staggering.


It is clear that the credit reporting agencies and the collection companies need more regulation and oversight. A close examination of their procedures and Operations reveal that their business models complement each other, resulting in a two-pronged attack upon the consumer. Well, it appears the consumers’ cry for help after all these years has finally been heard.


On July 16th in Detroit Michigan, the new director of the newly formed Consumer Financial Protection Bureau (CFPB) Richard Cordray announced: “the Consumer Bureau is issuing a new regulation to expand our supervision program to oversee these credit reporting companies. The authority to supervise firms is the authority to conduct on-site examinations of whether and how they are complying with the law. It affords an opportunity to gain a more thorough understanding of their business models and their business practices, to work with them to correct any problems we find, and to find ways to resolve matters that may be causing harm to consumers.”


Cordray went on to comment about the important role credit reporting agencies play in our entire economy:

“So this critical market is at the heart of our lending systems. It has enabled many of us to get credit and to afford a home or a college education. But it is also clearly a market that can cause considerable problems for consumers. For example, sometimes credit reports contain errors that inaccurately reflect people’s financial histories and can unfairly block them from getting approved for credit or can make it cost more than it should. Consumers also can encounter great difficulties at times in getting errors corrected. When the Consumer Bureau first opened its doors almost a year ago, we asked people to share their consumer experiences with us. We have heard reports since from many consumers that their credit reports are not accurate, and it is difficult to get them corrected. Because of the critical role that credit reports play in consumers’ lives, it is our job to make sure we understand the full extent of these problems and address them effectively.”

“Given its enormity, given its influence, and given its wide impact on our overall economy, you can see that there is much at stake in ensuring that the credit reporting market is working properly for consumers.”

David Holt, with Clear Point Credit Counseling Solutions says it's a good move. "This is a big deal for consumers," he says. The goal is to ensure credit reporting agencies are working properly for consumers, lenders and the economy. "The laws are already there in the Fair Credit Reporting Act but they are going to shore up the rules on what the agencies have to do," Holt says.

David Holt of Clear Point is exactly right, this is a big deal. However, the effectiveness of this new bureau will surely be measured by what they actually do, and what real regulative authority they have. I believe the effectiveness of any regulatory government agency should be measured first by its leadership, and second, by its mission statement. The CFPB is headed up by Richard Cordray. But as anyone who hasn’t spent the last three years in a cave would know, the first choice to lead the agency was Elizabeth Warren, the up and coming Harvard Law professor who gained notoriety as an outspoken critic and Chairman of the Congressional Oversight Panel of the infamous TARP Bailout of 2008.

In the hallowed halls of congress, Warren is considered the Champion of the beleaguered Middle Class. The CPFB was her own brainchild. As she crisscrossed the country, spreading the word about the C.F.P.B., Warren became a familiar face to many, especially to those who had seen her on television—on CNBC, Real Time with Bill Maher, and The Daily Show with Jon Stewart. Whatever the reasons, president Obama ignored scores of political groups like the AFL-CIO and thousands of people around the county who had petitioned him to appoint her as the nation’s top consumer protection watchdog. (See article in Vanity Fair).

So, who is Richard Cordray? As attorney general of Ohio, Cordray aggressively pursued lawsuits against some of the country’s biggest financial firms — including AIG, Bank of America and Fannie Mae — for misleading the state’s pension funds, ultimately securing a $700 million settlement from AIG over accounting fraud. He also led an early effort to go after so-called “foreclosure mills” that used falsified documents to speed up foreclosures on consumers, suing Ally Financial in 2010 and campaigning for big banks to slow down their own foreclosure proceedings. “We pursued many actions against foreclosure rescue scammers who were reaching into the pockets of desperate people in an effort to steal what little remained as they sought to keep their homes,” His background seems well suited for the position, but the jury is still out as to what direction the bureau will take and how affective it will be. For Mark Spindel, co-founder of the Potomac River Fund, that will be a major indicator of how effective the CFPB can be. “The key for me is whether and when and if this will have some impact on the foreclosure and housing markets. the real test for the CFPB will be in seeing how aggressive Cordray will be in pushing financial policy to favor consumers.















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