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Monday, March 8, 2010

Time Limit for Reporting Tax Liens

Tax liens are treated differently than any other item on a credit report.  Most adverse items are allowed to be reported for seven years from the date of delinquency, regardless of whether the item is ever paid.  Tax liens, on the other hand, potentially fall under two different seven year reporting periods.

15 U.S.C. 1681c(a)(3) says that paid tax liens are allowed to be reported for seven years from the date they are paid.  All other tax liens fall under the catch all provision found at 15 U.S.C 1681c(a)(5) and are allowed to be reported for seven years from the date they come into existence (since they are immediately considered adverse). 

Thus, you could have an unpaid tax lien reported for seven years, fall off the report, then, when paid, reappear for another seven years.  It is therefore not in a consumer's best interest (at least as far as credit reporting) to pay a tax lien after seven years.  But, it would be in the consumer's best interest to pay the tax lien as early in the seven year unpaid tax lien reporting period as possible, since this will allow both seven year periods to run more or less concurrently.  Kind of like a two for one sale.

But what about tax liens that are satisfied and/or released without any payment.  For instance, I had a client call me about an eight year old tax lien appearing on his credit report that had been "released" due to his bankruptcy about four years ago.  In this instance, the lien should have fallen off the report as obsolete since it was over seven years old and had never been paid.  A release does not always mean payment.  This is one such instance.  Another is where the lien is entered in error and released not because of payment but because of a recognition of the erroneous nature of the lien.

Unfortunately, the credit bureaus do not appear to have a mechanism in place to recognize the interplay between 1681c(a)(3) and 1681c(a)(5) when applied to tax liens.  As a result, tax liens often appear on consumers' credit reports longer than they should and often require a dispute to the credit bureaus (or more) to get them removed.

Monday, March 1, 2010

FTC cracks down on advertising for non-free services while ordering your free credit reports

NewJersey.com reports on new restrictions by the FTC -
In an attempt to make sure credit reporting agencies don't put a fast one over on consumers seeking free credit reports, the Federal Trade Commission has adopted tough new disclosure rules in response to more than 1,000 comments it received from consumers and others last fall.

Under a federal law passed in 2003, the three credit reporting agencies — Equifax, TransUnion and Experian — are required to provide consumers with a free copy of their credit report each year, but the agencies have found ways to recoup fees they used to get for those reports.

Part of the problem is that the gateway to the free reports — AnnualCreditReport.com — takes you through sites for the individual agencies. There, they try to sell services for which there is a fee, such as monthly reports (rarely needed) or your credit score (needed only occasionally).

And it's not just the three agencies, as other commercial sites use bait-and-switch tactics, drawing you in with the lure of free reports before pushing you to pay services.

Starting April 1, the commercial enterprises will still be able to sell their wares, but they'll have to do a better job of distinguishing between free and paid services.
The rest of the article can be found here - http://www.northjersey.com/news/business/85754242_Indeed__a_free_credit_report.html.