George Cole, president of National Credit Educational Services, was recently invited by the Atlanta Business League to present key credit reporting problems and legislation recommendations to a group of legislators in Washington, DC.
Below is a summary of his findings and legislative recommendations. You DO have a friend in Washington!
Problem #1: Credit reporting agencies change date of “most recent activity” on credit reports when a consumer disputes an entry
• FACTS: The “date of last activity” affects how long a debt is collectible by legal action. Using the dispute date as the last activity date can effectively reset the statue of limitation for the debt. So, even if the debt was 6.5 years old and about to age out of collectability, the dispute/verification causes the debt to remain collectible for an additional 3 – 10 years, depending on the state and type of debt.
• WHY IT MATTERS: Consumers are effectively stripped of their right to validate a debt unless they are willing to restart the statute of limitations on that debt
• NCES LEGISLATIVE RECOMMENDATIONS: Rewrite the law to clearly state that requesting a validation of a debt or disputing a debt DO NOT reset the statute of limitation.
Problem #2: Debt collection companies routinely submit invalid and inaccurate information to the credit reporting agencies
• THE FACTS: Debt collectors often report debts long past their state-mandated statute of limitations, add excessive interest and fees, and inflate the original amount of the debt, all in the hopes of posting more profits for themselves.
• WHY IT MATTERS: Old debts look new again, hurting the consumer’s ability to get approved for affordable financing. Debts also become unaffordable for the consumer to pay off, frequently resulting in legal judgments and wage garnishments. In turn, this increases bankruptcy and unemployment rates as consumers seek ways to escape oppressive garnishments.
• NCES LEGISLATIVE RECOMMENDATIONS Enforce stricter “due diligence” requirements on the credit reporting agencies before posting a collections account to ensure the debt information is accurate and valid.
Problem #3: Credit Reporting Agencies Fail to Remove “In Dispute” Status
• THE FACTS Failing to remove the “in dispute” notation from an account in a timely manner once a dispute decision has been made negatively affects credit scores
• WHY IT MATTERS: Consumers are denied mortgages and other financing because of a clerical error
• NCES LEGISLATIVE RECOMMENDATIONS: Establish and enforce a time limit for “in dispute” notation removal. Penalize the credit reporting agencies for noncompliance.
Problem #4: There Are No Minimum Amount Requirements For Collection Accounts on Credit Reports
• THE FACTS: A $100 past due account has the same effect as a $10,000 past due account on a consumer’s credit score.
• WHY IT MATTERS: A negligible delinquency can prevent mortgage and business financing approvals.
• NCES LEGISLATIVE RECOMMENDATIONS: Establish and enforce a minimum threshold for reporting collections on credit reports. The consumer is still legally and morally responsible for the smaller debts, they will simply not be part of the credit profile.
So, what does all this mean for you?
You now know more about what is going on in Washington and behind closed doors at the credit reporting agencies. Use this knowledge to protect yourself! Teach the ones you love how to protect THEIR rights. Write to your congressman. File complaints with the Consumer Financial Protection Bureau.
Be your best advocate!
If you have any questions, please give us a call at 770-952-5168 or contact us online.
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This information is intended for informational and educational purposes only and not as legal advice. If you have concerns about your credit report, harassment, identity theft, illegal collections activity, garnishments, or property liens, you should consult an attorney who specializes in consumer rights and defense.