CFPB to start supervising credit bureaus

Finally, the Consumer Financial Protection Bureau is going to start supervising the credit bureaus.  The legislation creating the CFPB was enacted shortly after President Obama took office but the CFPB is just now getting up to cruising speed, having survived attacks by the Republican side of the aisle regarding its purpose and who would lead it.

Below is the official reaction by the National Consumer Law Center to the CFPB's supervision of the credit bureaus:

WASHINGTON─Advocates at the National Consumer Law Center (NCLC) applauded today’s announcement by the Consumer Financial Protection Bureau (CFPB) that the agency would begin oversight of the nation’s largest credit reporting agencies on September 30. “The fact that the CFPB will oversee the large credit reporting agencies is a game changer,” stated Chi Chi Wu, staff attorney at National Consumer Law Center. “This could potentially improve the economic lives of millions of Americans by improving the accuracy of the system and its responsiveness to consumers.”

A credit report is a record of how a consumer has borrowed and repaid debts. About 200 million Americans have their credit reports on file with the three largest credit reporting agencies (CRAs)–Equifax, Experian and TransUnion (also known as the “Big Three”). These reports also form the basis of credit scores, the three-digit numbers from FICO and VantageScore.

Credit reports and scores have an enormous impact on the economic lives of Americans, because they are used by the vast majority of lenders in the U.S., as well as by insurers, employers, landlords, and others. Yet until today, these three companies were not subject to supervision by any federal agency. The Federal Trade Commission (FTC) had the ability to take law enforcement actions against the Big Three CRAs, but such actions were difficult, rare, and costly.

“The CFPB will have far stronger tools to regulate the Big Three CRAs,” explained Lauren Saunders, managing attorney of National Consumer Law Center’s office in Washington, D.C. “The CFPB will have the authority to examine the policies and procedures of these companies, to go deep in its supervision, and to require changes much more quickly through the supervision process than the FTC could.”

Wu expressed hope that oversight by the CFPB would lead to better accuracy and a better credit reporting system. She noted that there have been longstanding complaints about the accuracy of credit reports, as well as the handling of disputes over errors. Studies by consumer groups have found errors in 25% of credit reports serious enough to cause a denial of credit, while studies funded by the industry have claimed that this rate was less than 1%. Even an error rate of 1% is problematic, given that means that two million consumers would be affected. Consumers can check their credits reports for errors and are entitled to one free report from each of the Big Three CRAs each year, available through www.annualcreditreport.com.

As for the dispute process, the Fair Credit Reporting Act (FCRA) requires that credit reporting agencies conduct a “reasonable investigation” when a consumer files a dispute over an error in their credit reports. Yet a 2009 report by NCLC (http://www.nclc.org/images/pdf/pr-reports/report-automated_injustice.pdf) found that the Big Three CRAs have turned the FCRA dispute process into a travesty by conducting investigations in an automated and perfunctory manner. The Big Three translate the detailed written disputes submitted by desperate consumers into two or three digit codes, and limit their role to little more than selecting and sending these codes off to the creditor or other entity that furnished this information.

“This week, the CFPB celebrates its one-year anniversary, and it is the bureau that is giving the American public a great birthday gift,” noted Wu. “We are thrilled that consumers finally have a government agency on their side whose mission is to make sure that the credit reporting system works for them.”

New scam claims that President Obama will pay your utility bills

Although if true they might help his re-election chances, recent claims that President Obama will pay your utility bills through a new federal program are actually scams. The scammers have reportedly used telephone calls, fliers, social media and text messages in several different states to try to lure their victims into giving the crooks their Social Security numbers and bank routing numbers.  If the victims provides the requesting information, he or she is given a fraudulent bank routing number to pay their bill through an automated telephone payment service.

No matter how hot it is, consumers should not believe these scams.  The end result if they do is likely that their identity ends up being stolen.

The primary reason so many people are falling for this scam (2,000 so far in Tampa, FL and 10,000 so far in New Jersey) is that it appears to work ... for a little while.  The payments seem to go through and get credited to the victims' accounts.  The victims then spread the word to family and friends, only to later learn that their payment is rescinded when its too late to warn the people the original victim told about the "federal program".

Don't fall for this scam.  But if you already have and do end up a victim of identity theft, remember that I am more than willing to help you.

Credit Score myths

Here's a link to a good article at Forbes magazine about three myths about credit scores.  I suspect a lot of people think the same thing that the author of this article used to think about her credit score.

Here's the article - http://www.forbes.com/sites/moneywisewomen/2012/06/21/3-myths-i-used-to-believe-about-credit-scores/

The Types of Jobs where your Credit History Matters

I have posted previously about how potential employers often run the credit histories of potential employees as part of the decision making process on whether to hire the potential employee.  A recent poll shows how prevalent this practice really is.

The Society for Human Resource Management (I bet they throw one heck of a Christmas party!) recently polled its members regarding whether they utilize credit reports during the hiring process.  47% of those polled indicated that they run a credit history on at least some candidates and 13% run a credit report on all potential employees.

But what are the types of jobs where employers want to know about your credit history?  The top such jobs are those that include a fiduciary or financial responsibility (I once represented an airline pilot that could not change to a bigger and better airline because of a ding on his credit report - airline pilots get to use the company credit card and they thought he was too much of a risk).  Other jobs where credit reports are often used are top level jobs (i.e. CEOs, CFOs, etc.) and those with access to either highly confidential or highly sensitive information.

What types of bad credit harm potential employees' chances the most?  Judgments top the list (who wants an employee that gets sued a bunch?!) as well as bankruptcies and outstanding collection items.  A high debt to income ratio also appears to be a red flag for employers.

So, if you are planning on applying for one of the types of jobs listed above, you'd better check your credit report first and fix/correct/pay anything you can.

What is rapid re-scoring?

When applying for a mortgage, most lenders offer the consumer the opportunity for a rapid re-score, which is basically a way to quickly dispute errors on a credit report in the hopes of increasing the credit score just enough to get a better rate or qualify for the mortgage at all.

Using rapid re-scoring, the consumer can get accurate information added to his or her credit report in days rather than weeks.  A rapid re-scoring service can get the errors investigated in days, whereas the credit bureaus have 30 days to investigate disputes directly from the consumer.  Of course, rapid re-scoring is usually only available when a consumer is trying to get a mortgage and does not make sense for disputing information at other times.

Rapid re-scoring is also NOT credit repair.  Rapid re-scoring deals with inaccuracies on a consumer's credit report.  Credit repair, which is almost always a scam, deals with trying to get accurate (but derogatory) information removed from a consumer's credit history.

So if you are applying for a mortgage, you should check your credit report to see if there are any inaccuracies that, if rapidly re-scored, might get you a better interest rate.

Dr. X's ordeal with Bank of America

Bank of America certainly has a tendency to make their customers mad.  They have done it to me.  They have done it to scores of clients I have represented in litigation against them over the years.  Now, they've done it to Dr. X.  And he wants the internet to know about it.

Read his story here - http://drx.typepad.com/psychotherapyblog/2012/06/bank-of-america-stealing.html.  It sounds oh so familiar.

The Truth About Credit Repair Companies

I am often asked what the deal is with credit repair companies.  Can they really remove derogatory but accurate credit history from a person's credit report.  The short answer - NO!!!  So, all of you out there, quit paying money to these companies to "fix" your bad credit.  Instead, use that money to pay your debts and get your own self out of the hole that you unfortunately find yourself in.

Apparently, I'm not the only one being asked this question.  Below is a link to an article on foxbusiness.com regarding credit repair companies.  Their advice mirrors mine.  Here's the link - http://www.foxbusiness.com/economy/2012/06/18/is-there-legit-company-to-fix-my-credit-score/

The Band is Back!!!

Anyone who has read this blog knows that I don't exactly love Experian.  I also don't really like their subsidiary freecreditscore.com, since they don't really offer free credit scores.  But I have to admit, I liked the down and out band that starred in the original freecreditscore.com commercials.  From living in the basement of their in-laws and having to settle for early '90's style cell phones, all due to bad credit and not knowing their credit score, these guys exemplified the rough life of having bad credit.

I'm not sure if they wrote their own songs, but the songs were so great and really underscored why your credit score is so important.  In fact, given Experian's tendency to not report accurate credit (which in turn leads to inaccurate credit scores), I think the commercials starring the original band were helpful in educating potential jurors across the nation about the importance of credit scores, jurors who hopefully would make Experian pay proper compensation to those injured as a result of Experian's failure to abide by the provisions of the Fair Credit Reporting Act.

For some reason, freecreditscore.com did away with the popular band, held a contest to find a replacement which simply turned out not to be as entertaining as the original band.  Apparently seeing their blunder, freecreditscore.com has announced that its bringing the original band back!  I can't wait to see some new material from them.

Online data - the new credit report?

Here's a link to a good article about the emergence of spokeo.com type consumer reporting agencies and the importance of the Fair Credit Reporting Act being applied to them. The collection and sharing of online data about consumers is really a growth industry right now and one that I will be focusing more on in future posts and (I am sure) future lawsuits for consumers.

Here's the link I mentioned - http://www.mobiledia.com/news/154050.html

Vermont passes legislation to limit use of consumer reports by employers

A Vermont law going into effect on July 1, 2012 will severely limit the use of consumer reports by employers during the job application process.  Joining California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington, Vermont is the eighth state to pass such a law, with Vermont's arguably being the most restrictive to date.  For a full summary of the new Vermont law, click here - http://www.jdsupra.com/post/documentViewer.aspx?fid=4a2b9a29-984d-4000-883e-1f4427f51632

MoneyTalksNews.com's article on destroying high interest debt

As usual, I love what MoneyTalkNews.com is saying.  Here's another excellent article from them about destroying your high interest debt. Definitely worth a read.

Another way to help destroy high interest debt?  Make sure your credit report is accurate.  Inaccurate derogatory payment histories kill your credit score.  Also, credit cards that don't report an accurate credit limit can hurt your credit score because that can affect your debt to available debt ratio.  Too high of a ratio is a bad sign to potential lenders, so they up the interest rate they charge you to cover their perceived added risk.

Also, make sure the balances reported by your creditors is correct.  Too high of a total balance of debt is bad for your debt to income ratio, which can also hurt your credit score.

But I digress.  Here's the link I mentioned - http://www.moneytalksnews.com/2012/06/19/ask-stacy-how-can-i-destroy-high-interest-debt/?utm_source=Money+Talks+News+Updates&utm_campaign=email-2012-06-19&utm_medium=email  Happy reading!

Potential data breach at the University of North Florida

From the Florida Times-Union's Jacksonville.com website:

A computer database containing information about 23,246 people who submitted contracts to live in the University of North Florida’s residence halls might have been compromised by a hacker.

School officials have locked down the affected computer server as they try to find out if any personal information was taken.

The database included names and Social Security numbers of people who submitted housing contracts between 1997 and spring 2011. The hacking could have occurred as long as a year ago, according to UNF officials.

“When we first started to suspect someone who was not authorized had gotten into the database, we immediately began investigating,” UNF spokeswoman Sharon Ashton said. “At the same time, we moved the information off that server and put it on a different server, and put additional security measures in place.”

The investigation needed a few weeks to determine which file was broken into, then how to get in touch with everyone on it to alert them to the breach, Ashton said. Now the university is sending them letters and emails about the breach.

“We don’t have any evidence that any information, or that anything, was copied from the files, but it is a possibility,” Ashton said.

So far, Ashton says, none of the people that were in the database have reported their personal information was used. The school will pay for one-year memberships in a credit-protection program for anyone impacted. It has set aside $80,000, but is prepared to pay for all 23,246 if they request it. And school officials recommend they place a fraud alert on their credit files via Equifax, (800) 525-6285; Experian, (888) 397-3742; or Trans-Union, (800) 680-7289.

In October 2010, someone gained access to personal information on almost 107,000 UNF students, potential students and employees. Other universities have been affected by hackers more recently.


The University of Nebraska identified an undergraduate student in May it says is responsible for breaking into a school database with information on more than 650,000 students, parents and employees, according to www.computerworld.com. And in January, Arizona State University shut down its web services after someone downloaded an encrypted file containing user names and passwords of an unknown number of students, faculty and staff, according to the school.

Equifax's stock hits 52 week high

Equifax's stock price has reached a high point for the past year yesterday, closing Thursday at $47.78.  I guess it pays to outsource your investigation department to Jamaica where you can pay investigators less than minimum wage.

Scam Alert - Placing an ad on your car doesn't get you paid

I just heard of a new scam.  It goes like this.  You receive an e-mail or other solicitation that indicates that you can add an advertisement to your car, drive it around, and get paid by the advertiser.  To do this, you just need to pay a one time fee of $39.95.

Unfortunately, this is a scam.  While it is true that there are companies that will hire you to drive around a vehicle with their ads on it, you don't have to pay a membership fee to do so.  Any offer where you are supposed to get paid but requires a payment from you to get started is almost always a scam.

As I often heard growing up, if it sounds too good to be true, it probably is.  And that's even more true in this day and age.

Dishonesty on credit card applications at three year high

The level of dishonesty on credit card applications is on the rise, according to a recent study by Experian.  Not that Experian is actually known for its accuracy, but for the sake of argument, lets assume Experian's study is accurate.

According to Experian, 44 out of every 10,000 current account applications were found to be fraudulent in the first quarter of this year.  This represents an increase of 23 percent over the last three months of 2011 (which would include the holiday shopping season which to me would seem like a time of the year that would be highest for this sort of fraud).

Current account fraud includes things like misrepresenting income or exaggerating or hiding personal information, such as bad credit histories.

While troubling, another way to look at the figure of 44 out of 10,000 is that its a lot less than Experian's error rate which is somewhere around 2,500 out of every 10,000 credit reports containing serious errors!