Credit Reporting - PowerPoint Presentation

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Credit Reporting

CWAG

Annual MeetingJuly 21, 2015

Washington, DC

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New York

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Philadelphia

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Chicago

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Denver

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Florida

www.cohenmilstein.comSlide3

Credit Reports Matter

Access to/cost of credit

EmploymentSecurity clearancesIdentity theft/data breachesFTC study found that nearly 20% of consumers had confirmed errors on their credit reportsfor 13% the error was significant enough to change their credit scoreOnly tells part of the story -- “confirmed errors” = errors changed

by the credit bureaus70% of study participants believe that at least one piece of previously disputed information still inaccurate after going through dispute process

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Credit Reports Matter

Interviewed consumers who couldn’t:

refinance their mortgagesget credit cardssign a leaseconvince the credit bureaus they weren’t deceasedImpenetrable cycle of errorconfusing,” “frustrating,” “hopeless”Chip Reeves mixed with Charles E. Reeves.  7 of 9 SSN digits match and last two were transposed.  Dispute not addressed and filed suit.  Settled and

NCRA deleted incorrect info.  Reappeared; lawyer called and deleted. Two years later, when applied for a loan, information was back; lawyer wrote again.  Two years later, buying a Christmas gift, was denied credit.  Requested his credit report and file again mixedSome errors inevitable, but has to be escape hatch

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History of Enforcement Actions

Have been issues with credit reports for almost as long as there have been credit reports

Experian 1991 FTC and AG consent orders problems with mixed files, lack of reasonable procedures to assure maximum possible accuracy, problems with reinvestigation when consumers file disputesEquifax 1992 and 1996TransUnion 1983 and 19922000 FTC Consent Orderservice levels at call centers, including blocked calls and average speed of answer

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Federal and State Laws

Fair Credit Reporting Act, 15

U.S.C. § 1681, requires that credit bureaus:Take reasonable steps to ensure the maximum possible accuracy of consumer credit reportsReasonably “reinvestigate” consumer disputesFurnishers must conduct their own reasonable investigationsProvide free credit reports every 12 mos (or after adverse action, identity theft, or if unemployed or on public assistance)

Restore Online Shopper’s Confidence Act, 15 U.S.C. § 8403For negative option sales, requires online merchants to disclose clearly all material terms, obtain consumer's express informed consent, and provide simple means for the consumer to cancel.UDAP

statutes bar unfair and deceptive conduct

May also reach conduct prohibited by federal law

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2015 Multistate Settlement

Announced in May 2015

Important progress on issues relating to accuracy of credit reports and investigation of consumer disputesMaximum possible accuracy:Collection furnishers to report original creditor and creditor classification codesDelay medical collections reporting until 180 daysCollection furnishers remove or suppress medical accounts reported as paid by insurance Working group to establish standard re. collection of public records data

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2015 Multistate Settlement

Consumer dispute process:

Must accept dispute without credit report or ID numberNCRAs to share dispute information re. deceased indicators, mixed filesEnhance AnnualCreditReport.com to include clear and noticeable hyperlinks to each NCRA’s online dispute website, instructions re. how to initiate disputeEnhanced consumer educational content on NCRA

websites and AnnualCreditReport.com to improve understanding of credit reports, dispute process (such as what kinds of proof documents to submit)Improved notifications re. reinvestigation results, including contact information for furnishers and post-dispute optionsAdditional free annual credit report to consumers following reinvestigationEscalated dispute handling – mixed files, fraud, identity theft

Review supporting dispute documentation submitted by consumers

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2015 Multistate Settlement

Other:

Cannot market direct-to-consumer products to disputing consumers until dispute portion of call has endedCommunicate disclosures to consumers regarding products including pricing structure, nature of products, rollover features, and cancellation rights“National Credit Reporting Working Group” to (1) catalogue and share best practices for monitoring furnishers; (2) identify and establish data quality metrics; and (3) share/compare information to identify further actionable data quality and accuracy initiatives

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Mississippi Attorney General Lawsuits

Mississippi Attorney General filed suit against Experian (May 2014) and TransUnion (May 2015)

Lawsuits include several issues that were not covered by the multistate settlementConfine my comments to issues within 4 corners of Mississippi’s complaints and other non-confidential information

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Maximum Possible Accuracy

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Data Quality

NCRAs

maintain that they’re librariesSimply report information provided by furnishersBoth furnishers and NCRAs have duty to reasonably ensure maximum possible accuracyBeyond technical screening, little evidence that NCRAs remediating or excluding inaccurate data, e.g., High dispute or deletion/correction rates

Subject to enforcement actions, like Asset Acceptance (FTC sued AA for reporting inaccurate information; at least one NCRA continued to include AA data in credit reports)Problems identified in their own reviews

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OFAC

Alerts

NCRAs offer service to creditors to alert them to Blocked Persons/Entities and Specially Designated Nationals who appear on the OFAC list (terrorism, trafficking, etc.)Ineligible for creditAllegations only partial “name only” matchingProblem for common names or Latino names Mr. Sergio L. Ramirez applied for an auto loan at a Nissan dealership and was denied because the report TransUnion sent the dealership contained an

OFAC alert. Names on credit report were James Sergio Humberto Ramirez Aguirre and Sergio Alberto Cedula Ramirez Riveria.

Questions about whether consumers even put on notice of

OFAC

match

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Consumer Disputes

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Reasonable Reinvestigations

High volume of consumer disputes indicates problems and generates significant volume for

NCRAs to addressDispute agents assign a code to a consumer’s dispute and send it on to creditorLetters, cancelled checks, payoff statements, birth certificates, etc. provided by consumers boiled down to “not mine” or “never late”August 2014, NCRAs began transmitting proof documents consumers sentStill make no effort to conduct their own investigation

Virtually whatever furnisher directs, credit bureau implements -- “parroting”If error in consumer record, may continue to verifyNo validation of creditor’s response

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Reasonable Reinvestigations

What does reasonable reinvestigation mean?

Particularly where some indicia of problem – consumer’s documents or creditor’s track recordSomewhere between not doing anything and conducting full investigation required of creditorContacting third party sources?Pulling public records?Examining for red flags, like multiple SSNs?

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Access

Difficulties in obtaining free credit report

Consumers have complained that it can be nearly impossible to pass authentication screen to get a free credit report that allows them to identify potential errorsProblems reaching call center agentsCan’t get telephone number, which changes or isn’t on website Long waits to reach an agent, hang-ups, etc. Make it difficult for consumers to identify, file disputes

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Deceptive Marketing

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Credit Monitoring Subscriptions

Sale of credit monitoring subscriptions makes up significant portion of

NCRAs revenuesConsumer credit monitoring and identity theft protection services = 22% of Experian’s $4.8B revenue in 2014. $15-$20/month until cancelledConsumers report:not knowing they’d signed upthinking they were getting free credit score or $1 credit report

not realizing the costnot being able to cancelI did what everyone else did and gave my information to pay for a $1.00 charge. Transunion began charging my account $17.95 every month for about three months before I caught it. I am no dummy and they tricked me, so I am heartbroken for the elderly and less fortunate people who are being taken advantage of every month . . .

Search for “free credit report” or “free credit score” on Google directs consumers to TransUnion website

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Legislative efforts to improve the credit reporting process

Free annual access to credit scores

Strengthen prohibitions against deceptive marketing of free or low-cost credit reports, scores, and services onlineMaking injunctive relief and costs and attorney fees available in consumer lawsuitsRequiring furnishers to review documents submitted by consumers with their disputesRequiring NCRAs to implement a “credit inquiry alert” to immediately notify consumers by phone or email anytime access to their credit is requested Law in some states entitle residents to two free credit reports annually from each

NCRARequire creditors and debt buyers to report to credit bureaus when a consumer’s debt has been extinguished through bankruptcy and to ensure the report shows a zero balance

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