New credit Reporting laws
On March 8, 2015 the three credit reporting agencies, Experian, Equifax and TransUnion, entered into a settlement agreement with the New York Attorney General. The settlement will result in massive changes in credit reporting practices. The reason these changes are so meaningful is two-fold. First, even though this is an agreement with one state’s Attorney General, the credit bureaus have agreed to make changes for everyone in the United States. It wouldn’t have made sense to have a New York resident policy and then a policy for everyone else. So, everyone will benefit, regardless of where you happen to live.
The second reason this is such a big deal is that the credit bureaus will make considerable changes to their dispute resolution process and help protect consumers from unnecessary medical collections appearing on their credit reports. Changes like these typically take an act of Congress to accomplish, and that’s not a pun. Normally, the Fair Credit Reporting Act has to be amended, forcing the credit bureaus to make meaningful changes to their processes.
Since the settlement announcement, I’ve had some time to dissect the settlement agreement and have come up with the following schedule of meaningful dates for implementing the various phases of the settlement. You may want to put these dates on your calendar.
This is the date the settlement was signed and is what’s being referred to as the “Effective Date” in the settlement agreement. The implementation of the changes to the credit bureau policies will be rolled out in three phases, with three different completion dates, one each per phase. The completion dates for the three phases are six months, 18 months and 39 months after the Effective Date.
The first phase of changes will be implemented and completed by the credit reporting agencies by September 8, 2015. These changes are more administrative in nature and don’t require a ton of programming or training to successfully implement. For the first phase, the initiatives are more about changes in their existing policies. First phase initiatives include the following:
- The announced retirement of the older Metro 1 credit reporting format.
- Informing furnishers of information to the credit reporting agencies that any newly opened accounts reported to the credit bureaus must also include the authorized user’s date of birth, if there is an authorized user on the account.
- The credit bureaus will not be able to refuse to accept a dispute from a consumer simply because he or she hasn’t recently obtained a copy of their own credit report. The credit bureaus will also not create the impression that the consumer must obtain a copy of his or her credit report before being able to file a dispute.
- The credit bureaus will implement processes to identify and then process consumer disputes that warrant escalated handling. There will be nothing that discourages credit bureau employees from escalating disputes.
- If the consumer submits a dispute with supporting documentation and the credit bureaus do not modify the credit entry as a result of the dispute process, then the credit bureaus will assign an agent to review the documentation with discretion to act upon the documents and make a change to the consumer’s credit reports on the basis of the documentation.
The next phase of changes will be completed and implemented by the credit reporting agencies by September 8, 2016. These changes require more lead time because they involve changing the policies of thousands of their customers as well as creating new internal policies around sharing information across the three agencies. Second phase initiatives include the following:
- The credit bureaus will implement changes to how collection agencies may report information, of any kind, to their databases. Collectors must continue to furnish the name of the original creditor and the type of business that the original creditor is engaged in to the credit bureaus. Collections that do not comply with these requirements will be rejected by the credit bureaus. And, collectors that do not consistently report the type of business that the original creditor is engaged in can have their data suppressed and no longer accepted by the bureaus. Finally, any collections reported to the credit bureaus related to the collection of debt that did not arise from a contract or agreement to pay will be systemically removed from the credit bureaus databases.
- Instruct collection agencies on the use of codes used to clearly identify medical collections that are being paid or have been paid by insurance, and instruct collection agencies to remove or suppress medical collections that have been paid by insurance if the debt was, in fact, paid in full by the consumer’s insurance carrier and was not the obligation of the consumer.
- The credit bureaus will implement a process to share information with each other about consumers who disputed inaccurate tradelines that are being reported with a deceased indicator, and for which the bureaus have verified that the consumer is not deceased.
- The credit bureaus will provide consumers with the right to request one additional credit report through AnnualCreditReport.com during the same 12-month period if the consumer initiated a dispute from a credit report pulled through AnnualCreditReport.com. So, the consumer won’t have to wait 12 more months to pull another credit report from that site.
- The credit bureaus will update their websites and AnnualCreditReport.com to include educational content regarding disputes that qualify for escalated handling. (See #4 from Phase 1.)
- The credit bureaus will update their websites and AnnualCreditReport.com to include educational content regarding the dispute process and the type of documents that would be helpful to include in the consumer’s dispute. (See #5 from Phase 1.)