New credit-bureau rules likely to benefit consumers

The National Consumer Assistance Plan will improve the quality of the data used by credit bureaus to calculate credit scores of consumers.

Beginning on July 2, 2017, the three main credit bureaus – TransUnion, Experian and Equifax – tightened the standards applied to tax-lien and civil-judgment data the bureaus use to assess consumer creditworthiness. Pursuant to the National Consumer Assistance Plan, these liens and judgments, both existing and new, must now include the person’s name, address and another identifier: either date of birth or Social Security number, sometimes called an SSN.

Change will help consumers

This tightening of standards will help to keep liens and judgments that belong to people with the same or similar names off the reports of the wrong consumers. Of course, a tax lien or civil court judgment mistakenly included in a person’s credit report could adversely impact his or her ability to get credit, a mortgage or other loan, a lease or a job by making him or her appear to be a greater risk than he or she actually is.

In addition, for liens and judgments that meet the new standards, there is always the chance that even after the liabilities are paid in full, the information that the debt was satisfied may not make it into the person’s file at the credit bureau. It would then appear that the liability still exists when it actually has been satisfied.

To help prevent the undeserved damage this could do to a person’s credit, the new rules require that the credit bureaus recheck the public records at least every 90 days to verify that the tax liens and judgments are still unpaid.

The New York Times estimates that few civil judgment records meet the new standards and that at least 50 percent of tax liens do not. Accordingly, the Times reports that this change could improve the credit scores of around 12 million people.

The credit-bureau settlement

The National Consumer Assistance Plan came out of the 2015 settlement of a dispute with 31 state attorneys general. The bureaus agreed to adopt the new rules in part as an attempt to increase the accuracy of the consumer information used to create credit scores.

The new rules have been rolled out on a schedule. In 2016, other rules took effect, including a requirement that collection agencies and debt buyers only report debts that were created by contracts or agreements with the consumers at issue. This eliminates reporting of liabilities like court fines and traffic tickets.

A few more provisions take effect September 15, 2017. One subject that will be addressed is the reporting of medical debt, which will be improved in a couple of important ways:

• A medical debt will not be reportable until it is at least 180 days past becoming delinquent, to allow time for the health insurance claim to be sorted out and paid.
• For medical debts that are reported, a follow up must be sent to the credit bureau if the debt is later paid by insurance.

Another provision taking effect in September is broader. Any debt or liability reported to a bureau will need to include the full name, address, SSN and date of birth of the debtor, which should improve the reliability of data used by the bureaus in creating credit scores. In turn, this should in the long run help both consumers and those wanting to extend credit, leases or jobs to them.

Talk to a lawyer about problems with credit bureaus

Despite the new rules, a consumer may still have problems with the accuracy of credit bureau information as well as other concerns such as the availability of free reports, dispute resolution, application of one person’s data to the wrong person’s credit score, identity theft and more. A consumer protection attorney can provide information about what legal remedies may be available, including a potential lawsuit under the Fair Credit Reporting Act or FCRA.

Attorney Tom Breeden of Thomas R. Breeden, P.C., in Manassas represents people in Northern Virginia who have been harmed by credit report errors or other actions by credit bureaus or creditors that have resulted in financial loss or harm to reputation.