Equifax buys CSC

Credit bureau Equifax recently purchased CSC Credit Services, Inc. for the price of $1 Billion.  CSC was one of the last (if not THE last) of the affiliate bureaus to the big three credit bureaus.  Back when I started suing credit bureaus using the Fair Credit Reporting Act, there were several affiliate bureaus to the credit bureaus, including CSC and one right up the road from here called Memphis Consumer Credit Bureau.  

The affiliate bureaus basically "owned" the credit files of consumers living in certain geographical areas, even though the data comprising the credit files were stored on one of the big three bureaus' computer systems.  CSC owned consumers' Equifax credit files from Texas to Indiana (I know because I have sued them in both states and many in between).  

This led to a lot of confusion for consumers, who would buy their Equifax credit reports, find an error, then dispute the error to Equifax.  At first, Equifax would just write the consumer back and say that Equifax did not own their file and they would have to contact CSC to dispute the error.  They stopped this practice eventually, probably because lawyers (myself included) kept arguing that Equifax, when it receives a dispute, has to investigate it, particularly when the disputed data is housed on Equifax's computer system.  Equifax never did agree, but started forwarding the disputes themselves to CSC to "investigate", instead of relying on the consumer to re-send the dispute.

The Equifax/CSC relationship made for trickier lawsuits, since Equifax retained the duty to "follow reasonable procedures to assure maximum possible accuracy" of the credit reports it generated, but shifted the responsibility for performing reasonable procedures to CSC since they owned the data that Equifax was publishing for the consumers located in CSC's ownership area.  So, in some cases you would need to sue both Equifax and CSC but in some (those involving only botched investigations) you could sue just CSC.

At least the purchase of CSC will possibly do away with some of the confusion, both for consumers and lawyers suing Equifax.  

Funny side note - I got word of the purchase of CSC by Equifax a couple of weeks ago (I'm slow to blog about it thanks to the holidays and a busy work schedule).  After hearing the news, I received a call from an Equifax attorney on the other side of one of my FCRA cases.  I told him about it and he had not even heard yet.  Then, a week or so later, he calls and leaves me a message to "let me know" that Equifax had purchased CSC.  Funny, I thought I had let him know, not the other way around.  Guess even Equifax's attorneys do not follow reasonable procedures to assure maximum possible accuracy.

Fifth Circuit affirms FCRA verdict

The United States Court of Appeals for the Fifth Circuit recently affirmed a verdict in a Fair Credit Reporting Act case from the United States District Court for the Western District of Texas against consumer finance company Santander Consumer USA.  In the lawsuit, the plaintiff alleged that Santander failed to properly investigate his disputes of its erroneous publications to the credit bureaus.  The jury agreed and found that Santander had negligently failed to properly investigate the plaintiff's disputes.  Santander did not dispute the jury's finding of liability on appeal but did dispute the sufficiency of the plaintiff's proof of the damages he suffered.  However, the Fifth Circuit found the plaintiff's proof to be sufficient to affirm the verdict.

Santander contended on appeal that the proof of the plaintiff's damages resulting from the inclusion of the erroneous listing of the Santander account on his credit report was not sufficient to support the verdit in the consumer's favor.  The consumer's damages included a lowered credit limit, increased interest rate on a refinanced mortgage, the deferment of personal expenditures due to the uncertainty of his credit situation and mental pain and anguish, embarrassment, and difficulties caused to family and business relationships.  While the Fifth Circuit found that a diminution of his credit line alone is not sufficient to support the damage award, the Court found the rest of the plaintiff's proof sufficient to support the $20,437.50 verdict in his favor.  The consumer's attorney should also be entitled to his attorneys' fees to be paid by Santander, an amount which, given the time spent trying the case and then having to defend an appeal, should dwarf the verdict.

It is good to see the Fifth Circuit affirm a verdict like this.  It even cited one of my old cases, Cousin v. Trans Union Corp., as support for the plaintiff's damage claim.  

CFPB to release report on CRAs soon

It looks like the Consumer Financial Protection Bureau is now moving past its initial first steps and moving on to the type of topics it was created to address.  Below are the prepared remarks from its director Richard Cordray which I received ahead of the press call later today.  I can't wait to read the actual report!

Prepared Remarks by Richard Cordray

Director of the Consumer Financial Protection Bureau

Credit Reporting White Paper Press Call

December 12, 2012

The Consumer Financial Protection Bureau is releasing a report on the big three credit reporting companies – Equifax, Experian, and TransUnion – and how they manage consumer data.

The report highlights the basic systems the credit reporting companies use to collect, organize, and maintain consumer credit information.  It is based on information submitted by the three largest credit bureaus and other sources, and is one of the most comprehensive looks at the credit reporting industry to date.  And, importantly, it brings us one big step forward in understanding this industry and making it more transparent for consumers.

As you know, credit reporting plays a critical role in consumers’ financial lives.  Credit reports on a consumer’s financial history and behavior can determine eligibility for credit cards, car loans, and home mortgage loans – and they often affect how much a consumer is going to pay for that loan.  The industry is critical in our economy.  Without credit reporting, many consumers would likely be unable to get credit.

Almost every adult in America has a credit file.  Estimates are that Experian, TransUnion and Equifax each maintain files on about 200 million Americans gleaned from approximately 10,000 providers of information.  The amount of data collected and exchanged is astounding.  Each year, approximately 36 billion updates are made to consumer credit files.  There are more than 1.3 billion trade lines actively reported.  Trade lines are individual consumer credit accounts, so one person will likely have multiple trade lines, such as her car loan, bank account, and home mortgage, as well as different trade lines for each credit card she holds.

Today’s report found that credit card history makes up more than half of the information on an average credit report.  It also found that most of the information provided to the credit reporting companies comes from a few large companies, such as big banks.  This means credit cards are given great weight in credit profiles – a lesson that consumers could end up learning the hard way.  Especially around this holiday season, consumers may take out a retail credit card in order to save 20 percent off their purchases on a given day.  If they are not responsible with that one card, it could end up costing them a lot more down the line when they go to take out a mortgage and that credit card is a black mark on their credit report.

We also learned that more than a third of consumer disputes have to do with collection items.  Now, some of that may have to do with a consumer’s incentive to wipe out any negative information on their report.  But whatever the incentive, we found the information provided by the collections or debt buying industry is more likely to be questioned by a consumer than, say, the data from their mortgage lender.  In fact, the information provided by the collections industry is five times more likely to be disputed than mortgage information.

We also found that only about 44 million consumers – just one in five people with a credit history – check their report in a given year.  This is a shame because the most effective way for consumers to identify errors in their reports is to obtain copies of them and review them.  This is also a shame because – while we do not know for sure how common these errors are – we know that people do find errors.  And if consumers are not checking their reports, these errors can persist and pop up when a consumer can least afford them, blocking them for borrowing money for a larger purchase or causing them to pay a higher rate of interest than they should.

We also found that the credit reporting companies resolve an average of 15 percent of consumer disputed items internally, without getting the data furnishers involved.  The remaining 85 percent are passed on to the furnishers.  Today’s report found that the documentation consumers mail in to support their cases may not be getting passed on to the data furnishers for them to properly investigate and report back to the credit reporting company.

As a data-driven agency we believe in informational reports like this.  We believe in doing deep dives into the markets we regulate, because we think the best and most effective way to oversee an industry or market is to understand it thoroughly.  And our markets teams, such as those that authored this report, are key to this function of our mission.

I also consider today’s report a significant addition to the Consumer Bureau’s oversight of credit reporting.  You will recall that in July, we adopted a rule to begin supervising the larger credit reporting companies.  These companies had never been supervised at the federal level.  Then, in October, we began taking individual complaints about credit reporting companies.  If a consumer files a complaint with a credit reporting company and is dissatisfied with the resolution, the CFPB is available to assist.

Today’s report establishes a baseline knowledge about the industry as we embark on our regulatory and supervisory mission.  Given our supervisory role over many of the providers and distributors of credit report information, we can play a positive role in resolving accuracy issues and other risks to consumers within the system.  And given our enforcement authorities, we can make sure that consumer financial laws are being followed.  Overall, we are very interested in finding better ways to measure and improve accuracy within this system.

What consumers can do is to be smart about how they manage their own credit.  They need to know how to build up their creditworthiness, so they can take control over their credit history in a positive way.  They also need to be aware that federal law gives them the right to a free credit report once a year from each of the nationwide credit reporting companies, which they can obtain at www.annualcreditreport.com.  It is critical for each of us to exercise that right.

Keep in mind that nobody else has as much incentive to protect you as you have to protect yourself.  Checking your credit report can reveal odd entries you do not recognize, which may be signs of identity theft.  It also can uncover errors that will hurt your creditworthiness unless you dispute them and get them fixed.  I urge every consumer to perform this self-check at least once every year.  Consumers can learn more about how to check their credit reports, and fix any errors that they may find, at www.consumerfinance.gov.

Today’s study helps bring clarity to the confusing world of credit reports.  It will help educate regulators and consumers about how this important industry works.  If consumers know how these companies handle their credit histories, they can make better decisions on how to manage their financial lives.  And, as I said earlier, credit reporting is a critical market at the heart of our lending systems.  Given its enormity, given its influence over people’s lives, and given its wide impact on our overall economy, you can see that there is much at stake in ensuring that it is working properly for consumers.

###

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.

Article about new website

A very nice and almost embarrassingly flattering article written by Einstein Law about the launch of the Kittell Law Firm's new website.  Check it out here - http://www.einsteinlaw.com/2012/11/21/kittell-law-firm-announces-the-release-of-its-new-website/

Soon, I will start blogging about more than just FCRA topics on the Kittell Law Firm's website's blog but will keep on posting here as well regarding FCRA matters (and any future embarrassingly flattering articles about yours truly!).

New firm's website

Last week, the Kittell Law Firm launched its new website.  Please visit it here - www.kittell-law.com - to read about my most recent Fair Credit Reporting Act and identity theft cases, as well as my personal injury cases.

Terrible acts by American Express lead to them having to pay a settlement with FDIC and CFPB

The Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) have reached a settlement with American Express Centurion Bank (Bank), Salt Lake City, Utah, for deceptive debt collection and credit card marketing practices, in violation of section 5 of the Federal Trade Commission Act.

This action results from a FDIC and Utah Department of Financial Institutions examination, in which the Consumer Financial Protection Bureau (CFPB) joined last year. The CFPB, the Office of the Comptroller of the Currency (OCC), the Utah Department of Financial Institutions, and the Board of Governors of the Federal Reserve System took separate actions against various entities related to the Bank (collectively referred to as American Express). Under the settlements, American Express agreed to the issuance of Consent Orders, Orders for Restitution, and Orders to Pay (Orders) which result in total restitution from all entities of approximately $85 million to more than 250,000 affected consumers, and the imposition of civil money penalties totaling approximately $27 million.

The FDIC and the CFPB determined that the Bank violated federal law prohibiting unfair and deceptive practices by, among other things:

• Misrepresenting to consumers that if they entered into an agreement to settle old debt (that was no longer being reported to consumer reporting agencies), such settlement would be reported to consumer reporting agencies and thereby improve the consumers' credit scores. In fact, no such reporting occurred.
• Using settlement solicitations that implied that consumers who entered into settlement agreements to partially pay such debts would have the remaining balance of their debts forgiven, when in fact the balance remained a debt owed to American Express.
• Using solicitations that misrepresented the points and awards consumers would receive upon enrollment in one of American Express' credit card products.

In addition to restitution and CMP, the Consent Order requires the Bank to correct all violations, provide clearly written disclosures on debt collection statements, and stop using deceptive credit card solicitations. In addition, the Bank will improve its compliance management system and improve board oversight of affiliates and third-party service providers in order to adequately manage third-party risk.

See, I told you so - the scores the credit bureaus sell you may not accurately reflect the score they provide to your potential lenders!

From the Consumer Financial Protection Bureau:

CONSUMER FINANCIAL PROTECTION BUREAU STUDY FINDS CREDIT SCORES USED BY CONSUMERS AND LENDERS CAN DIFFER

One out of Five Consumers Likely to Receive Meaningfully Different Score than Creditor

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) released a study comparing credit scores sold to creditors and those sold to consumers.  The study found that about one out of five consumers would likely receive a meaningfully different score than would a lender.

“This study highlights the complexities consumers face in the credit scoring market,” said CFPB Director Richard Cordray. “When consumers buy a credit score, they should be aware that a lender may be using a very different score in making a credit decision.”

The complete Analysis of Differences between Consumer and Creditor-Purchased Credit Scores is available at: http://files.consumerfinance.gov/f/201209_Analysis_Differences_Consumer_Credit.pdf

The Dodd-Frank Wall Street Reform and Consumer Protection Act directed the CFPB to compare credit scores sold to creditors and those sold to consumers by nationwide credit bureaus and to determine whether differences between those scores harm consumers. Today’s study analyzes credit scores from 200,000 credit files from each of the following credit bureaus: TransUnion, Equifax, and Experian.  It is a follow up to a study the Bureau released in July 2011 that described the credit scoring industry, the types of credit scores, and the potential problems for consumers that could result from differences between the scores they purchase and the scores creditors use.

The study released today determined:

·        One out of five consumers would likely receive a meaningfully different score than would a creditor: When consumers purchase their score from a credit bureau, the score they receive may be meaningfully different from the score that a lender would consult in making a decision. A meaningful difference means that the consumer would be likely to qualify for different credit offers – either better or worse – than they would expect to get based on the score they purchased. 

·        Score discrepancies may generate consumer harm:  When discrepancies exist between the scores consumers purchase and the scores used for decision-making by lenders in the marketplace, consumers may take action that does not benefit them.  For example, consumers who have reviewed their own score may expect a certain price from a lender, may waste time and effort applying for loans they are not qualified for, or may accept offers that are worse than they could get.

·        Consumers unlikely to know about score discrepancies:  There is no way for consumers to know how the score they receive will compare to the score a creditor uses in making a lending decision.  As such, consumers cannot exclusively rely on the credit score they receive to understand how lenders will view their creditworthiness.

The Bureau recommends that consumers consider the following in evaluating the credit score they receive:

·        Shop around for credit.  Consumers benefit by shopping for credit.  Regardless of the scores different lenders use, they may offer different loan terms because they operate different risk models or face different competitive pressures.   Consumers should not rule out of seeking lower priced credit because of assumptions they make about their credit score.  While some consumers are reluctant to shop for credit out of fear that they will harm their credit score, that negative impact may be overblown.  Inquiries generally do not result in a large reduction in a consumer credit score. 

·        Check the credit report for accuracy and dispute errors.  Credit scores are calculated based on information in a consumer’s credit file.  Inaccurate information may be the difference between a consumer being approved or denied a loan.  Before shopping for major credit items, the Bureau recommends that consumers review their credit files for inaccuracies.   Each of the nationwide credit bureaus is required by law to provide credit reports for free to consumers who request them once every 12 months. 

The Bureau will begin supervising consumer reporting agencies as of September 30, 2012.  The CFPB’s supervisory authority will cover an estimated 30 companies that account for about 94 percent of the market’s annual receipts.  The Bureau’s examiners will be looking to verify that consumer reporting companies are complying with federal consumer financial law, including that the companies are using and providing accurate information, handling consumer disputes, making disclosures available, and preventing fraud and identity theft.

BIG news!!!

Big happenings going on in my household right now, which explains at least partially my silence of late.  Two major events are occurring as I type this.  First, the wife and I are moving the family from Clarksdale, Mississippi to Hernando, Mississippi.  Hernando is about an hour northeast of Clarksdale, so not really a long distance move but still a major event.

Even bigger than that is the other news.  Not only are we moving, but the wife and I are starting the Kittell Law Firm.  That's right, I have made the huge step of going out completely on my own.  No more law partners.  Just me and my wonderful and beautiful wife, who is going to be the firm's paralegal and office manager.

We are close to being completely open.  The office needed some renovations, which were completed first.  Then came office furniture.  Now, today, our computers are being installed as well as our phones and Internet.  Since leaving the old firm, I have been referred to by my wife as the "Lincoln Lawyer" since, much like Matthew McConaughey in the movie of that name, I have been practicing out of our vehicles, usually with one or more kids in the backseat.

So life is very exciting right now.  And, for the first time in a long time, the practice of law is both enjoyable and fulfilling once again.  So watch out credit bureaus, collection agencies and credit card companies, the FCRA lawyer is back ... and soon to be out of his Tahoe and back in an actual office.

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/