Employers who make hiring decisions based upon an applicant's credit report

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Are they judging you based upon your credit score?

Have you ever applied for a job, got to the second interview, had the discussion about salary and benefits, had a really good feeling about getting the position, only to have the wind knocked out of your sails because the employer needs to check your credit report?  Several months ago, a close friend of mine applied for a position with the US Department of Justice's local Seattle office and after the first interview, she was denied further consideration because of the information they found on her credit report.  They told her (in so many words) that the reason they require a clean credit history is because people who have bad debt can somehow be tempted to do unethical things on the job.  In other words, the content of a person's character is a direct result of their financial condition.  I could not disagree more with this flawed logic. But more on that topic later..

My friend has been unemployed for 8 consecutive months, haven't found full time work in almost 3 years, and has applied either in person or online to over 700 jobs with no success.  I'm telling you her story because my still employed friends keep telling her that many people are in the same position as she is; their unemployment benefits have run out, their home has been foreclosed, and things have reached a critical level financially. 

It truly amazes me how many peoples lives have been utterly and completely devastated by the economic recession and home foreclosure crisis.  We have all heard about how the home foreclosure crisis happened, who's to blame, and what the president is trying to do to help a fraction of those people who didn't loose their home, fight to keep it.  What about the people who must rebuild their lives from nothing because of not being able to pay their bills for all this time?  How will they survive a credit check if they haven't been able to pay their bill at all, let alone in a timely manner?

According to the US Bureau of Labor Statistics, the national unemployment rate is 8.3%.  Nationally, That percentage converts to about 26 million people.  And that's not to mention what economists call the real unemployment rate that includes people who have been forced to take part-time jobs, or seasonal positions, or those who are working jobs that pay way below a living wage, or people who have stopped looking for work altogether.  Those economists say the real unemployment rate is somewhere between 17-20 %!  In my home state of Washington (not the District of Columbia) the unemployment rate is 8.7%, just above the National average.   

In recent years, employers have been trending towards using credit reports to screen out potential applicants who might be untrustworthy or unreliable based upon an unsatisfactory credit history.  According to an article written by New York law firms, Dechert LLP, and Associated Corporate Counsel because of this corporate trending towards using credit reports in hiring decisions, federal regulations are expanding in an attempt to avoid possible discrimination law suits.  In recent months, the The Equal Employment Opportunity Commission has likewise stepped up its enforcement
efforts in this area. For years, the EEOC, like many state fair employment practices agencies, has taken the position that the use of credit reports in employment decisions has a disparate
impact on certain minority groups. Recently, however, the EEOC has become much more
aggressive in trying to curb employers’ use of credit checks.

In an attempt to send a firm message to employers, the EEOC brought a class action suit in December 2010 against Kaplan Higher Education Corp. in the Northern District of Ohio, alleging that the company engaged in a pattern or practice of discrimination by refusing to hire applicants based on their credit histories. The EEOC contends that this practice has an unlawful disparate impact on African Americans. It's not just African-Americans who are feeling discriminated against by this relatively new trend, but all people who were adversely affected by the economic recession.  For Blacks, the situation is obviously much worse.  The unemployment rate for them is somewhere around 20% and that was before the recent economic recession.  A Vermont law going into effect on July 1, 2012 will severely limit the use of consumer reports by employers during the job application process. Joining California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington, Vermont is the eighth state to pass such a law, with Vermont's arguably being the most restrictive to date. For a full summary of the new Vermont law, click here - http://www.jdsupra.com/post/documentViewer.aspx?fid=4a2b9a29-984d-4000-883e-1f4427f51632

To date, 61 bills in 29 states and the District of Columbia were introduced or pending in the 2011 legislative session. The total number of states that limit employers' use of credit information in employment is now seven: California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington. Washington enacted legislation in 2007, Hawaii enacted legislation in 2009, Illinois and Oregon enacted legislation in 2010. California, Connecticut and Maryland enacted legislation in 2011. In my home state of Washington,


According to John Ulzheimer at http://www.credit.com/, Equifax has chosen to cease selling credit reports to employers for pre-employment screening. Apparently, the profit from selling this type of credit report was not worth the risk to Equifax. There has been a lot of reporting about the trap that potential employees find themselves that starts with them becoming unemployed, leading to them getting behind on their bills, which hurt their credit scores and then, when they finally get an interview, they don't get the job because their potential employer doesn't like the looks of their credit report, which leads to further unemployment and further damage to the credit report. 

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.

Piggybacking–does it still work post FICO 08?

Several years ago I was on another one of my bad-credit-induced searches for ways to improve my FICO score. It was then when I first discovered the concept  known as “piggybacking.”

Technorati Tags: piggybacking,authorized user accounts,fico 08

Credit Piggybacking is essentially a matching service that connects people with a strong credit history, called “credit-lenders” to customers with poor credit scores who are willing to pay a price to boost their FICO score. The key to the piggybacking business is how authorized user accounts are incorporated into the FICO score calculation.

One company who sells these credit trade lines explains the method like this: “When one person is listed as an authorized user on someone else’s credit card- someone with a healthy credit rating. The authorized user does not typically use the card, know the account number, nor have access to any information about the primary user, but the credit history of that card appears on their credit report. When the new history appears in the authorized user’s credit reports, their credit score is immediately recalculated to show an increase as a result of the new card’s presence in the report.

While the authorized user does not receive the physical card or account number, they do receive the benefit of having that particular credit card’s entire credit history – limit, balance, payments – in essence “copied and pasted” onto their credit report, looking as though it were there the entire time. Having a higher FICO credit score means lower interest rates, easier loan approvals, higher credit limits and better terms for consumers.”

Being a critical thinker, I thought there must be a catch. So I started doing research on this phenomenon and soon found out that it was indeed a legitimate way of drastically increasing a person’s FICO score in very short period of time. I also found that this method had been around for awhile. In fact, by the time I found out about it the Fair Isaac Company- the company who created the FICO scoring system - was already in the process of changing their credit scoring algorithm to do away with piggybacking entirely. By the summer of 2007 the word was all over the Web that piggybacking would be a thing of the past by the end of the year.

Well, the end of ’07 came and went and credit repair companies were still advertising the use of authorized trade lines as a way to increase your credit score. I started checking credit repair blogs to see what people were saying and I got a mixed bag: some were saying au accounts were dead, others were saying they were still selling them successfully. This presented a major problem because I had no way of finding out who was right and who was wrong. And since purchasing a trade line or au account costs on average around 1500-2500 dollars I wasn’t about the take the risk without knowing the truth. With so much at stake, I was determined to get to the bottom of piggybacking so I started doing more research.

And a quick word about reading blogs to find information - please be aware that some of the opinions you read on a blog posted by an "average Joe" or even someone who might appear to know what they are talking about might be an "industry plant" getting paid by a large company in that particular industry to push public opinion in a direction that serves that company's best interest. Politics are everywhere - especially on blogs so don't believe everything you read. Do your own homework!

I soon found out that FICO 08 did not affect authorized user trade lines because the new Fair Isaac algorithm violated a section of the Equal Credit Opportunity Act. Fair Isaac’s president admitted this at a congressional hearing in July of 2008. But instead of revealing to this publicly, the Fair Isaac Company issued a press release indicating the exact opposite, thus starting all the internet rumors that piggybacking was no longer useful in increasing the FICO score.

Moreover, because of all the confusion regarding the new FICO algorithm, Experian, Equifax and Transunion decided to create their own credit scoring system to replace the embattled FICO. The new scoring system, “Vantage Score” was on its way to industry-wide acceptance until Fair Isaac brought a law suit against “the big three” for monopolizing their market share. 

 

More recently, I found a 2012 report from the Federal Trade Commission that stated unequivocally that purchasing trade lines is legal. According to Fair Isaac, they claim to have come up with a system that can distinguish authentic authorized users from those “gaming the system” – purchasing au accounts simply to boost their credit score.

Piggybacking is, as of this writing, still a viable, legitimate and legal method of increasing your FICO score, however, be aware that Fair Isaac has released it’s updated algorithm and many companies already are using it to determine a person’s credit worthiness. That being said, I have found no information on the Internet that indicates the new algorithm has had any significant effect upon credit repair companies that claim to sell au accounts.

Do you know your Credit Score?

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Let’s face it; times are tough on just about everyone these days. Housing prices may be down, but it takes stellar credit to purchase one because of the recent housing foreclosure crisis. The national unemployment rate is the highest it’s been in 30 years, millions of people can’t afford health care. The list goes on and on. We live in a buy now pay later society and it has finally started to catch up to most Americans. We are definitely in an economic recession, but that doesn’t mean we have to sit back and let it happen as if we were absolutely powerless. There are things we as consumers can do to manage our finances so this recession doesn’t have such a negative impact on our lives. Effectively managing one’s finances is more important than ever under this current economic recession. Knowing how to manage your money can make the difference between coming through the current economic storm unscathed, or loosing everything, or even worse, having to file for bankruptcy.




Over 82 million Americans live with poor credit scores. According to Office of Government Accountability, many consumers are aware of the basics of credit scores, but are not aware of the factors that can lead to a low or high score. Further, statistics show that most people with high FICO scores tend to know what’s contained their credit report, and they also tend to know what their FICO score actually is. The opposite is true for people with low credit scores. They tend not to know what’s in their credit report and generally do not know their FICO score. I do not claim to know why it is that way, and I am not here to judge anyone. I am writing this article to let people know how important, and easy it is to find out what’s contained in their credit reports and how to remove any information that might be inaccurate, incomplete or just plain wrong.



According to a study conducted by the research firm, US PIRG, almost 80 percent of Americans have mistakes on their credit reports. You read it right, almost 80 percent! Even further, one in every four credit reports contain erroneous information severe enough to cause the denial of credit or employment, not to mention having to pay higher insurance premiums, higher rental costs, and higher percentage rates for items such as automobile loans. For example, on a $300,000 mortgage loan, the difference in payments between a 620 FICO score and a 720 FICO score is over $70,000 over the life of a 30 year loan. These facts, taken together show a grim picture of the credit industry and clearly reveal the importance of knowing what the “big three” credit bureaus are “telling” business about your financial habits and history. What is most disturbing here is that some of the information they have on record in our consumer credit files is outright false!

What you can do?

As consumers, we have several weapons that can help us defend ourselves against the credit industry and the machinations of the “big three” credit bureaus. It is called the Fair Credit Reporting Act (FCRA). The Fair Credit Reporting Act is a United States federal law that regulates the collection, dissemination, and use of consumer information, including consumer credit information. Along with the Fair Debt Collection Practices Act (FDCPA), it forms the base of consumer credit rights in the United States. It was originally passed in 1970, and is enforced by the US Federal Trade Commission and private litigants. Knowing the pertinent sections of these laws is critical to anyone trying to repair their credit and must be referenced when dealing with the credit bureaus, collection agencies, and original creditors.

Add Seasoned Trade Lines to Improve Your Credit Score

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The 2007 recession created the housing crisis, historical levels of unemployment, and the stock-market crash on Wall Street. On Main Street, most people could not even relate to concepts like the Troubled Asset Recovery Program (TARP), or the National Economic Stabilization Act, but we could relate to not being able to pay our mortgage, or our car payment. For most people, losing a job usually has catastrophic effects upon their lives. There can be some severe results of losing a job; losing your home, losing your car, drastic change in lifestyle. Those material things can be replaced over a relatively short time period once a person finds work. However, what cannot be remedied in the short term by finding work is the damage done to a person’s credit rating. Once that damage is done, it can take years and years of work to regain your previous credit standing. And there are no guarantees that you won’t encounter difficulties repairing your credit as you will have to deal with greedy collection agencies, original creditors, and of course, “the big three” credit reporting agencies – Equifax, Exprerian, and TransUnion. We all know it’s a lot easier to lower your
FICO score than it is to raise it.

From a socio-economic perspective, it seems quite unfair that wrong-headed politics can drive the world’s strongest economy into the worst recession since the Great Depression, cause hundreds of thousands to lose their jobs, then hold them individually responsible for repairing their own credit when they weren’t responsible for what caused their credit score to tank in the first place.

If you are one of the many people who need to improve their credit score or repair their already bad credit, tapping seasoned trade lines is one of the strategies available in the market. A Trade line is any account included in your credit report; a mortgage, credit card, car loan, computer, and even furniture payments. Any account with a balance and perfect payment history over a long period of time is called seasoned trade line. This concept is also known as piggybacking. Historically, this practice was conducted by business investors to improve their credit scores. Now this tool is being offered to the public.

Using seasoned trade lines to boost credit score has been subject to numerous controversies. Although it is a considered technically legal, many financial experts consider this credit repair trick very unethical. Recently, several cities across United States and the Federal Trade Commission are scrutinizing this unconventional method. Following the normal procedures, it will take them at least 3 to 5 years to improve their scores.


Here’s exactly how it works:

When a borrower opens a line of credit, such as a credit card, car loan, or a home mortgage, these accounts are called trade lines. The number, history and status of these credit trade lines comprise a large part of a person's credit score. The higher a person's credit score, the greater the likelihood of obtaining credit and of qualifying for more favorable interest rates and terms.

Credit bureaus such as Experian, TransUnion, and Equifax look at the amount of open trade lines, the payment history on the accounts, how long the account has been open and how long since the last activity on an account to determine an individual's credit score. To build positive credit history a person generally should strive to have approximately 3-5 active trade lines that are "seasoned," meaning the accounts have been open for around 2 years, have positive payment history on all accounts and the accounts should be current and in good standing.

Lines of credit that are in the name of the primary account user are called primary trade lines. For example, if Borrower A opens a credit card in his name, Borrower A is considered the primary account user and the credit card account is considered a primary trade line. If Borrower A added Borrower B onto the credit card account as an authorized user, Borrower B would be considered a secondary account user and this would be considered a secondary trade line for Borrower B. Authorized users on accounts are generally not responsible for re-paying any debt incurred on the account as the primary and/or joint account holder would.
Due to the importance of trade lines in credit scoring, there are now businesses that sell access to positive trade lines to customers who are looking to improve their credit score. These businesses find and pay people with good credit who are willing to add other authorized users onto their seasoned and positive credit accounts. Customers looking to build their credit pay these businesses for the ability to be added as secondary authorized users on these established accounts. This practice is often known as "piggybacking."

In theory, the positive history of these trade lines help increase the credit score of the borrower with negative credit history, since these trade lines are reflected on both the credit history of the primary holder and on the secondary holder as well. This was generally done with parents adding their children as secondary users on their accounts to help their children build credit. However the practice of selling seasoned trade lines, while legal, is considered controversial and can be a risky endeavor


This method is plagued by legal controversies. Privacy laws and the Fair Credit Report Act make it impossible for lenders to identify fraud from legitimate use. Financial experts admit this is technically legal but can be fraudulent in most cases. Credit score companies are taking some steps to halt the growing usage of this method. In fact, FICO already changed their scoring method by not considering "authorized users" to come up with the credit score. Eliminating this will have outright impact on many striving students who are using their parents' credit cards and for unemployed spouses relying on their partners.     
For those who extend their good credit through seasoned trade lines, there is a possible downside. The other party might actually use the credit and refuse to pay for it. For this reason, it is important to carefully consider if you are interested to be a "donor" in this transaction


WHAT THE FTC SAYS:
The “seasoned” part simply implies that the account is aged or that it has an established history. There is no cut and dry answer regarding the many questions surrounding the legality of piggybacking; however, there are many sources that tend to indicate perhaps a general answer, such as:

FTC spokesman Frank Dorman said: “What I’ve gathered from attorneys here is that it is legal, however, the agency is not saying that it is legal technically.” Other law enforcement agencies, like the Florida Attorney General’s Office, are reviewing whether such activities are legal.

A report published by the Federal Reserve Board reported “This is possible because creditors generally have followed a practice of furnishing to credit bureaus information about all authorized users, whether or not the authorized user is a spouse, without indicating which authorized users are spouses and which are not. This practice does not violate Reg. B”

In a written statement from Fair Isaac Corporation on credit scoring models and credit score before the U.S. House of Representatives Committee on Financial Services, Subcommittee on Oversight and Investigations, Tom Quinn, Vice President of Global Scoring Solutions for Fair Isaac Corporation, stated: “After consulting with the Federal Reserve Board and the Federal Trade Commission earlier this year, Fair Isaac has decided to include consideration of authorized user trade lines present on the credit report…”

What's in it for people with good credit? They are paid $100 to $150 for every account they authorize as users. Some seasoned trade lines companies lure many people with good credit by promising that they can earn more than $10,000 per month without doing anything. This method has existed for many years but did not gain much popularity until now. Most of the time it is used by many students who piggyback with their parent's credit cards. Of course, this is free! The subject of controversy is whether it is unethical to let other people use your good credit so they can convince lending companies to approve their loans or mortgages.     
A simple Internet search will reveal numerous online businesses like seasonedtradelines.com, offering this service to the public. While there are some legit seasoned trade lines groups, the number of scammers is significantly growing. One common aspect among these companies is the promise to improve credit scores literally overnight. Although some are subtle on this matter, they let people with bad credit believe in miracles like raising your credit score by 200 points with no effort at all or 30 days seasoned trade lines.      
It is very understandable why many people with bad or low credit scores are drawn in to participate in seasoned trade lines and pay high fees ranging from $700 to $2000. A good credit score means many things to many people. It can lower your interest rates, allow you to buy new homes or take vacation to your dream island, and to be considered for some high-paying jobs.      
On the side of cardholders with good credit reputation, there are some big risks involve in venturing with this business. Overall, it can hurt your reputation or be demoted to bad credit once financial institutions learn your participation. However, that is very difficult to prove because we are protected by many privacy laws and Fair Credit Report Act.
Another downside of seasoned trade lines is when your so-called authorized users use your credit to settle their debts and refuse to pay you in the end. All trade line companies promise they never share the full credit card number to their customers. In spite of this, they are many ways to get this information for these newly authorized users are empowered to make some transactions on your behalf.

Corporations too big to fail...Also too big to sue.

Supreme Court biased toward big corporations

Technorati Tags: consumer protection,too big to fail,supreme court,social justice

Anyone paying attention to the Supreme Court over the last decade would have noticed a trend toward more conservative decisions in general but more specifically with regard to matters involving big-business and corporations.  The current Supreme Court has 5 justices who regularly decide cases based upon conservative ideology, and 4 who are arguably liberal, but considerably less liberal than the most liberal justice (Sandra Day O'Connor" in recent times.
Liberal organization, Alliance for Justice called the current court, “the court for the 1%.”  They have released the above video that features several cases that showcase unfair treatment of the “little guy” by big corporations such as Wal-Mart, and other cases where the Supreme court sided against the individual. The Court is lead by openly conservative Chief Justice John G. Roberts. Many liberals think that the current conservative Court is turning back the clock on decades of progressive jurisprudence with it’s 5-4 majority decisions on nearly every controversial issues involving civil rights, voting rights, regulating big business practices, and the 1%.

The United States Supreme Court, the highest court in the United States, in 2010. Top row (left to right): Associate Justice Sonia Sotomayor, Associate Justice Stephen G. Breyer, Associate Justice Samuel A. Alito, and Associate Justice Elena Kagan. Bottom row (left to right): Associate Justice Clarence Thomas, Associate Justice Antonin Scalia, Chief Justice John G. Roberts, Associate Justice Anthony Kennedy, and Associate Justice Ruth Bader Ginsburg. (Photo credit: Wikipedia)

The video is hosted by editor and publisher of The Nation Magazine, Katrina vanden Heuvel.

Related articles

• Money, Politics and the Roberts Court (counterpunch.org)
• Citizens United 2.0 To Go Before US Supreme Court (crooksandliars.com)
• Supreme Court won't allow challenge of surveillance law to move forward (grumpyelder.com)
• Sandra Day O'Connor steps carefully in NY gun case (crainsnewyork.com)

FRCA – Time Limitations related to charged-off accounts reported to credit bureaus

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 This is an actual letter I found while doing some research on time limitations rules based upon the FCRA. Clarke W. Brinkerhoff is a Federal Trade Commission attorney charged with responding to consumer complaints and questions regarding FCRA issues. It’s a little complicated, so put on your thinking cap and read CAREFULLY. Division of Financial Practices Clarke W. Brinckerhoff Attorney 202-326-3224 UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION WASHINGTON, D.C. 20580 February 15, 2000 Ms. Alaina K. Amason 14155 Shire Oak San Antonio, TX 78247 Dear Ms. Amason: This responds to your letter concerning the time limitations imposed by the Fair Credit Reporting Act (“FCRA”) on the reporting of chargeoff accounts by a consumer reporting agency (“CRA,” usually a credit bureau). We list your inquiries on this topic below in italics, with our replies immediately following each item. 1. What reporting limits does the FCRA provide with respect to chargeoffs, and how long have they been in effect? Section 605(a)(4), which has been in effect since the FCRA became effective in April 1971, has always prohibited CRAs from reporting chargeoffs that are more than seven years old.(1) Section 623(a)(5), which became law in September 1997, requires a creditor that reports a chargeoff to a CRA to notify the agency (within 90 days of reporting the account) of “the month and year of the commencement of the delinquency that immediately preceded” the chargeoff. Section 605(c)(1) provides that the seven year period begins 180 days from that date. Both provisions were part of the major revision to the FCRA that were enacted in 1996.(2) 2. Is the reporting period extended if (A) the original creditor sells or transfers the account to another creditor, (B) the consumer responds to post-chargeoff collection efforts by making a payment on the debt, or (C) the consumer disputes the account with a CRA? Does it matter whether the 7-year period has expired when any of these events occurs? No. In enacting the new provisions discussed above, Congress intended to establish a date certain — 180 days after the start of the delinquency that led to the chargeoff — to begin the obsolescence period. It did so to correct the often lengthy extension of the period that resulted from later events under the original FCRA. Enclosed are two staff opinion letters (Kosmerl, 06/04/99; Johnson, 08/31/98) that discuss the impact of these provisions, and the legislative history relating to their enactment, in more detail. Because the commencement of the seven year period is now described with some precision by the statute, it is our opinion that none of the subsequent events you listed — sale of the charged off account by the creditor, or a payment on or dispute about the account by the consumer — changes the allowable period for a CRA to report a chargeoff. 3. Since Sections 623(a)(5) and 605(c)(1) provide new rules for calculating the 7-year period that became effective in 1997, do chargeoff accounts now have different obsolescence periods depending on when the chargeoff occurred? Yes. Section 605(c)(2) states that the section “shall apply only to items of information added to the (CRA) file of a consumer on or after” 455 days after enactment, or December 29, 1997. Therefore, a chargeoff reported to a CRA on or after that date is subject to the new commencement-of-the-delinquency method of calculating the obsolescence period set forth in Sections 623(a)(5) and 605(c)(1). On the other hand, a chargeoff reported to a CRA before December 29, 1997, is not covered by the new provisions, as discussed in one of the enclosed letters (Kosmerl, 06/04/99). If a credit account was reported as a chargeoff before that date, the Commission’s view has been that it can be reported for seven years from the date the creditor actually charged it off.(3) The opinions set forth in this informal staff letter are not binding on the Commission. Sincerely yours, Clarke W. Brinckerhoff 1. Section 605(b) provides that there is no time limit applicable to a report made in connection with credit involving a principal amount (or insurance with a face amount) of $150,000 or more, or employment for a salary of $75,000 or more. Prior to September 1997, those amounts were $50,000 and $20,000, respectively. 2. The Consumer Credit Reporting Reform Act of 1996 (Title II, Subchapter D, of Public Law 104-280, signed into law on September 30, 1996), made many other changes to the FCRA. 3. Commentary on the Fair Credit Reporting Act, 16 CFR Part 600 Appendix, comment 605(a)(4)-2. 55 Fed. Reg. 18804, 18818 (May 4, 1990

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Here is the entire legal text of the Fair Credit Reporting Act pertaining to the credit reporting time period (if you quote it is “Section 605 of the FCRA”):
§ 605. Requirements relating to information contained in consumer reports [15 U.S.C. § 1681c]
(a) Information excluded from consumer reports. Except as authorized under subsection (b) of this section, no consumer reporting agency may make any consumer report containing any of the following items of information:
(1) Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
(2) Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.
(3) Paid tax liens which, from date of payment, antedate the report by more than seven years.
(4) Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.⁽¹⁾
(5) Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.¹
(b) Exempted cases. The provisions of subsection (a) of this section are not applicable in the case of any consumer credit report to be used in connection with
(1) a credit transaction involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;
(2) the underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or
(3) the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.
(c) Running of reporting period.
(1) In general. The 7-year period referred to in paragraphs (4) and (6) of subsection (a) shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.
(2) Effective date. Paragraph (1) shall apply only to items of information added to the file of a consumer on or after the date that is 455 days after the date of enactment of the Consumer Credit Reporting Reform Act of 1996.

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How To know if a trade line has been RE-Aged by a collection agency

Share | If you have finally decided to take a look at your credit report (this can be scary for some – for others, not so much) and you see some very old, maybe even ancient debt that you thought should have been long gone by now, it might be because they have been re-aged. This is not a new concept in the world of credit repair. In fact, re-aging of debts is about as old as the bureaus who keep the records. It is a practice proliferated by collection agencies that allows them to keep a debt listed on your credit report in hopes that you will pay it off even though you don’t have to any longer. This practice is illegal. The Fair Credit Reporting Act dictates that most debts can only remain on your credit report for 7 years. The proverbial "clock" starts ticking at exactly 180 days from the date of first delinquency; the day that your payments to the original creditor were first classified as late.
Don't confuse the statute of limitations for lawsuits with the credit reporting period's statute of limitations. These are two totally different time frames. The statute of limitations for lawsuits refers to the amount of time a debt collector can legally sue you in your state. Each state has different statutes of limitations. Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies. This law is known as the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer’s credit report for 7½ years. The clock starts approximately 180 days after the date of first delinquency on the account.
The Federal Trade Commission lists the following steps as the appropriate method for resolving credit reporting inaccuracies. This is codified in § 632 of the FCRA, and 15 U.S.C. § 1681s-2.

Step 1: Get Your Credit Report

An amendment to the FCRA requires each of the nationwide consumer reporting companies -- Equifax, Experian, and TransUnion -- to provide you with a free copy of your credit report, at your request, once every 12 months.There is only ONE website that allows a person to get a free copy of their credit every 12 months. It is called AnnualCreditReport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can print this FTC form.

Step 2: Look for Errors

Review the report and compare the information it contains to information you know to be accurate. In particular, make sure the report contains your accurate:

1. Name
2. Social Security number
3. Address and previous addresses
4. Accounts and account numbers
5. Date of first delinquency on each of your trade lines

If any of the above information is inaccurate, the consumer credit reporting agency may have added incorrect information to your account accidentally. This is very common. If incorrect addresses or Social Security numbers appear, this may be evidence of someone using your identity.
Under the FCRA, both the consumer reporting agency and the information provider – original creditor (i.e., the person, company, or organization that provides information about you to a consumer reporting agency) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting agency and the information provider.

Step 3: Correct the Errors

Tell the consumer reporting agency, in writing what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, "return receipt requested," so you can document what the consumer reporting agency received. Keep copies of your dispute letter and enclosures.

Consumer reporting agencies must investigate the items in question -- usually within 30 days -- unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. (please see my article on e-Oscar for information on how this is ALWAYS done incorrectly).After the information provider receives notice of a dispute from the consumer reporting agency, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer reporting companies so they can correct the information in your file.When the investigation is complete, the consumer reporting agency must give you the results in writing and a free copy of your report if the dispute results in a change. This free report does not count as your annual free report. If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider.If you ask, the consumer reporting agency must send notices of any corrections to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.

If an investigation does not resolve your dispute with the consumer reporting agency, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting agency to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.

Re-aged collections on your credit report can leave you getting turned down for loans and credit you actually qualify for simply because a collection agency is violating federal law. If you suspect that a collection agency is intentionally reporting the wrong dates to the credit bureaus in an effort to leave its black mark on your credit report for longer than the law allows, your first course of action should be to get a copy of your credit report from each credit bureau – Experian, Equifax and TransUnion.
Remember, federal law entitles you to one free credit report per year. If you order that free credit report from AnnualCreditReport.com, you won't have to deal with giving out your credit card number and then canceling any ridiculous subscriptions later on down the road. AnnualCreditReport.com is regulated by the FTC, and its the only place you should turn to for free credit reports.

Find Each Collection Account's Removal Date
Find the correct deletion date, flip to the collection accounts section of each credit report. The error you're searching for is collection accounts that show up on your credit report for longer than the time limit allowed by the Fair Credit Reporting Act. The FCRA says that collection accounts must be deleted from your credit report 7 years from the date of first delinquency on the original account. The date of first delinquency is 180 days from the date of your very last payment to the original creditor. The most effective way to verify the first day your account went delinquent is to find the paperwork that should have been sent to you by the original creditor, or call them and ask for the information.
If the Credit Bureau Doesn't Delete the Entry
If the credit bureau doesn't delete the re-aged collection account from your credit report, its time to take the fight directly to the collection agency. Send the company a letter noting the following:

1. You recently requested the name and address of the original creditor from the collection agency and the date of first delinquency for that particular debt occurred more than 7 years ago.
2. The credit bureaus deleted the original creditor's negative tradeline after 7 years and 180 days in compliance with the FCRA. The collection account should have been removed at the same time.
3. You notified the credit bureaus of the discrepancy and the credit bureaus contacted the collection agency, which verified the dates were accurate when, in fact, they couldn't be if the original creditor for the account was accurate.
4. The dates for the collection account were clearly re-aged – an illegal practice under the FCRA.
5. The collection agency must immediately delete its tradeline from your credit report to remain in compliance with federal law. If it does not, you will report the collection agency to the Federal Trade Commission for re-aging, contact your attorney general and file a lawsuit against the company for violating the FCRA.

If the collection agency persists, or ignores you, take more aggressive action by filing a complaint with your local Attorney General’s Office. If you can, have an attorney contact the collection agency on your behalf and prepare to send them a Summons indicating your intention to file a lawsuit. Most collection agencies will indeed respond to this by deleting the inaccurate information.

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Can accumulating enormous debt have an effect on your credit score?

Share |  Posted April 19, 2013 by guest writer Andy Raybuck at AscendantEquity.com

Can accumulating enormous debt have an effect on your credit score?
If you have incurred enormous debts, then you will have to take the necessary steps to pay them off. The company may write off your debt so that they can get tax benefit but, generally, your debt gets sold to a collection agency. The agency may either take legal action against you or sell it to the other collectors. This will ultimately fall off your credit report and leave a negative impact on your credit score for several years. If debts have become unmanageable for you, you may take the help of credit card consolidation and get rid of debt problems soon.

Old debts – What is their reporting time?
The old debts generally get charged off when you do not agree to pay them. As such, the banks usually write off credit card outstanding balance within 180 days of negligence. The bill then gets sold to the debt collectors and it appears on your Equifax, Experian and TransUnion credit reports for seven years. The collection agencies may add up their own entries that will stay on the credit report for the same period of time. With having old debts, your credit score will get lowered till they get removed automatically in seven years.
Debt – What effect does it have on your credit score?
There are several factors such as old and new debts that affect your credit score to a great extent. The old debt consists of collection agency accounts and charged off bills that are a part of your credit report. This includes 35 percent of your credit score. You counterbalance the effects of the old debt by maintaining revolving account balances low and paying off the present accounts within their due date. Lenders will show more interest in your present financial condition than your previous mistakes.
Debt Settlement Law – What do you need to know about it?
Debt settlement is an industry that has conventionally not been regulated. As a result, many consumers have taken undue advantage by deceitful individuals in this sector. It has been undecided as to what organization should be controlling the debt settlement industry. Attorney Generals of individual states have varied in their approaches to safeguard the people. This has created a puzzled network of rules and regulations that often leave the consumer susceptible to untrustworthy debt settlement companies.
The Federal Trade Commission (FTC) has formulated a set of new regulations that will enable the FTC to better administer the debt settlement industry in a more uniform manner. The new FTC rules require that you do not need to pay any fees till debt settlement services takes place. This provides assurance to the clients that they’ll receive the services they had enlisted for implementation.
Old accounts – What are its considerations?
The old accounts usually get removed through the dispute process by the Fair Credit Reporting Act if there appears any error in the credit report entries. You can obtain your free credit reports through AnnualCreditReport.com and find even a small incorrectness to dispute with Equifax, TransUnion and Experian. The credit bureaus are needed in order to attempt legalization with the lender. The lender may even be out of the business if the debt is old by many years. However, if they fail to validate, it means that the wrong entry will be removed from your credit report. This, in turn, will help you raise your credit score.
Old debt – How is statute of limitation different from one state to the other?
You need to know that old debt has a statute of limitation that varies from state to state. This is the reason as to why the collection agency or the creditor cannot file a suit against you when the statute has been passed. The NOLO legal website cautions that dishonest debt collectors purchase your old debts and, in turn, make false threats to get the payments. They may even tell you that they’ll put previous bill on your credit report and hurt your credit score. However, they do not have the legal right to do so. Tell the debt collectors that you are aware about the law very much and will dispute for change in the credit report and report them to your state attorney general in case they may follow through.
Thus, if you have accumulated huge debt, this will hurt your credit score. As such, you should try to pay off your debts on time. This will prevent you from dropping your credit score.

The Consumer Financial Protection Bureau Turns its Gaze To Collection Agency Business Practices

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Today the Consumer Protection Bureau released a new set of rules allowing them to monitor and regulate how debts are collected by debt collectors, junk debt buyers, and any law firm or business who acts as a debt collector. These rules give the CFPB the authority to regulate any firm that has more than $10,000 in receipts from consumer debt collection activities. The CFPB’s authority over these business entities will begin on in January of 2013. This move by the CFPB to regulate debt collection activity is no doubt a response to the thousands of consumer complaints they have received. Companies like LVNV Funding, AFNI, Asset Acceptance Corp., and NCO Financial Systems are considered the worst of the worst amongst a murder of crows. The stories I have read on many credit repair blogs, and my own experience dealing with them confirm they are the biggest offenders of the law and will stop at nothing to collect a debt – whether the debt is valid or not. ”Millions of consumers are affected by debt collection, we want to make sure they are treated fairly”, said Director of the CFPB, Richard Cordray. “Today we are announcing we will be supervising the larger debt collectors in the market for the first time at the federal level” We want companies to realize that the better business choice is to follow the law, not break it”
Did you hear that sound? That is the collective sound of hundreds of thousands of Americans breaking forth in a great sigh of relief! Finally, the consumer has a protector – a champion who has not only the prerogative, but also the muscle to slay the beast…the Beowulf. Here are the details of what the CFPB is going to do regarding their supervision of collection agencies and how they are going to to do it:
Pursuant to the CFPB’s supervision authority, examiners will be assessing potential risks to consumers and whether debt collectors are complying with requirements of federal consumer financial law. Among other things, examiners will be evaluating whether debt collectors:

• Provide Required Disclosures: Examiners will evaluate whether debt collectors are properly identifying themselves and properly disclosing the amount of debt owed. The CFPB intends to ensure that debt collectors are upfront and clear with consumers.
• Provide Accurate Information: Examiners will assess whether debt collectors are using accurate data in their pursuit of debt. Inaccurate information can lead to collectors attempting to collect debt that consumers do not owe or have already paid.
• Have a Consumer Complaint and Dispute Resolution Process: As part of the CFPB’s compliance management review, examiners will assess whether complaints are resolved adequately and in a timely manner, whether the complaints highlight violations of federal consumer financial law, and whether the debt collector has a process in place to address consumer disputes.
• Communicate Civilly and Honestly with Consumers: Examiners will be assessing whether debt collectors have harassed or deceived consumers in pursuit of debt. For example, debt collectors should not be using obscene or profane language with consumers. Nor should they be engaging the consumer in telephone conversations repeatedly or continuously with intent to annoy, abuse, or harass. Debt collectors cannot threaten to imprison consumers who do not pay their debt or threaten to tell the consumer’s employer about the debt.

According to a report on the CFPB website, the CFPB is also publishing new questions and answers about debt collection in its Ask CFPB database. This interactive, online database answers consumers’ most frequently asked questions in plain language. The questions cover topics such as the definition of a debt collector, the best way to negotiate a settlement with a collector, and what a collector has the authority to do. You can also find information on debt collection on the FTC website under the Consumer Protection tab.