The FTC and Its’ Latest Interim Report

The FTC and Its’ Latest Interim Report
The following information was not written by me.  It was found on the US Public Interest Research Group Website.
The FTC has issued to Congress its latest interim report on the status of its multi-year investigation of credit bureau mistakes as mandated by the 2004 FACTA or Fair and Accurate Credit Transactions Act.
U.S. PIRG, Consumers Union, Consumer Federation of America, National Consumer Law Center is among the leading organizations that have conducted research into credit report and credit score inaccuracy and the impact on consumers.
The FTC study, which will take several more years to complete, will help. What will help more is that the new Consumer Financial Protection Bureau -- as of July 21, 2011 -- will gain new authority to issue rules and conduct on-site examinations of the big credit bureaus-- authorities the FTC has never had. Bank regulators can walk in and examine (or supervise) banks on a day-to-day basis, yet even though the credit bureaus are arguably more important players in the economy than almost any individual bank (there are only three major credit bureaus) no government regulator has ever walked inside their doors -- without a bureau PR flack hiding everything important walking on either side of her, that is.
Meanwhile, the credit bureaus have risen to occupy a critical gatekeeper function in society -- whether you get affordable credit or insurance or a job or even a place to live largely depends on your credit report and any credit scores derived from it. Yet, the FTC (which will retain shared jurisdiction with CFPB) has never had the tools it needs to wrangle the credit bureaus. The bureaus are quite cognizant of this superpower ability that they have to ignore both the government and private attorneys seeking to protect consumers from their error-ridden ways. Their legal and regulatory stance is extremely arrogant. Further, they've developed a business model that does not make either consumer credit report accuracy or consumer service priorities. The FTC will continue to work with CFPB, and has a lot of institutional expertise on the FCRA, but the CFPB will gain needed tools that will help both FTC and CFPB with the Big Three -- and all the other, smaller, specialized credit bureaus, too -- as soon as it turns on the lights. And maybe then the credit bureaus will begin to act as if they've seen the light.

CREDIT SCORING

CREDIT SCORING

One of the questions that always come up is “What is my score”?  Or they come to the loan officer after pulling their credit and buying their score from the web and say, “Well, I am ready.  My score is now 642.  You said I needed a mid score of 640 and I have that.”  Then they are very disappointed when the Loan Officer pulls their credit and it is 585.  How can this be?

First of all, there are many scores:  some for mortgage, some for renting an apartment, some for insurance, some for auto dealers, and so on.  For example, I had a client that came to me with a credit pull for a rental he was considering.  It showed a 751, and he was elated.  What he did not realize was that the scoring for rental agreements is based on a 1500 maximum.  That would equate to a 425 for a mortgage pull!

Let me share with you another example:

I just received a credit report from a client, pulled on line from Zendough, a company owned by Transunion.  The score they report is a 637.  He is real close to the 640 threshold needed for FHA financing.  What he does not realize is Zendough’s scoring system is based on a 990 maximum.  He is not even close to the threshold needed.  The ironic part is what is stated on the report.  I quote:  “When lenders evaluate your credit applications, they review your credit report to get a detailed history of your credit.  And at zendough, you can see what lenders see.”  What lenders want is your score – and the score they sell has nothing to do with the scores lenders see.  It is kind of like comparing scores from a sporting event:  Dallas Cowboys 23, Minnesota Twins 8.  There are the scores – but there is no relevancy.  Those scores tell you nothing.

If you really want to know what your score is, contact a Loan Officer.  They have the real scores for mortgages.

What does the law say about repairing your credit?

What does the law say about repairing your credit?

The United States Congress enacted the Fair Credit Reporting Act (FCRA) in 1971 to insure that the credit bureaus investigate the credit items disputed by consumers.  It was last amended in 2001. This federal law set technical rules which gave the consumer the right to challenge the accuracy, validity, and verifiability of the credit trade lines appearing in their credit report. It also required that the credit bureau fix any credit listing if it was inaccurate or could not be verified.

In theory, the FCRA mandates the credit bureaus with responsibility to the consumer as well as the credit grantor. In reality, the credit bureaus resist, resent, and reject consumer disputes. The credit bureaus would rather be left alone to make a profit. And, each time a consumer challenges his credit, profit is lost.

The credit bureaus first defend their profits by erecting stockades of stall tactics, including requests for more information, further clarification, and additional identification. The vast majority of consumers give up before they even receive copies of their credit reports. If a consumer manages to get a credit report, decipher the codified information, write a reasoned dispute, and mail it, the bureaus may still find some reason to disregard the challenge. The entire dispute system is designed to frustrate and discourage the consumer.

However, if you manage to submit a valid dispute letter, and the credit bureau investigates your dispute, the chances of success are good - whether or not the negative listings are accurate! Accuracy actually has little to do with the deletion of negative items.

If a credit bureau cannot verify an item before completing its investigation, that item will be removed. Many creditor grantors are simply reluctant to take the time to verify the data. While the credit bureaus may be in the business of reporting credit histories, creditor grantors are not.

At Master Credit Solutions, we are in the Credit Restoration and Education business.  We get astonishing results because we have Attorney Facilitated Credit Repair – in which our Foundation Attorney writes the letters and are sent off on attorney letterhead.  We get results others dream of.

Please visit us at www.mastercreditsolutions.com.

Credit Card Company Closes an Account - WHY? What Happens To My Score?

Here is a recent question from a client.  I think it is very appropriate for this blog:

A Credit Card Company (we will not disclose the credit card company – however we will refer to them as CCC) lowered my wife’s credit limit from $7500 to $1000.  Then she just got a statement saying they closed her account completely.  When she inquired they said it was because of a poor credit score.  She’s been paying bills on time etc…..where do you think this is coming from.  We’re a bit confused. 

CCC, quite frankly, did something kind of nasty.  Unless her balance on the card is $0, they could easily have hurt her score, because they increased her revolving debt ratio.  Here is what happens:  Let’s say, hypothetically, your wife has $10,000 in revolving debt with $20,000 available to her.  Her ratio would be 50%.  Understand that 35% of her credit score comes from revolving debt and how it is used.  If her revolving debt ratio is 50%, that is not bad.  However, CCC reduces her limit down to $1000.  Now you reduce her available amount of credit down to $13,500.  With her debt load of $10,000 and the available of $13,500, her ratio is now 75%, much worse.  That would lower the score.  Then they close her account, take away another $1000, and her ratio becomes 80%. 

For maximum scoring, the ratios for revolving debt should be under 15%.

Now, where it came from:  CCC may have changed their underwriting procedures so that they will not have anybody on their books with a score under 700.  That has been happening a lot lately.  So, they close her account.  How did they find out about her score?  In the boilerplate language of the application that was signed between your wife and CCC, Your wife authorized CCC to pull a credit report anytime they wanted!  This credit check “should not” hurt the score as it is considered a “soft pull.”

How do you remove accurate derogatory items from my profile?

One of the questions I am asked a lot is “How do you remove accurate derogatory items from my profile?”

The question alludes to the premise that the item is accurate. 

What we (MCS) do is apply the laws that are already in place – The Fair Credit Reporting Act (FCRA), the Consumer Credit Protection Act (CCPA) and the Federal Trade Commission (FTC) rules that are already in place.

Let’s take a look at a parallel situation.  A person, driving, is pulled over for weaving.  The police are suspicious that they have been drinking.  But instead of taking a breathalyzer or obtaining blood to determine the blood alcohol content, they book you on Drunk Driving.  You go before the judge, you are not allowed to say anything, and the judge finds you guilty.  You now have a record.  Is this possible in our criminal justice system?

No, the Prosecutor has to PROVE it – weaving by itself is not proof.  The court would then dismiss the case if there is no proof.  Even if the driver had drunk a 24 pack in 3 hours, it does not matter – the State has to prove their case.

In the Credit system of reporting, that does not happen.  The bureaus collect the data and put it on your report without you even knowing about it!  Even though you may have “Accurate” information on the credit report, the bureaus, through the creditors that report to them, must maintain information that is not Outdated, Undocumentable, or unverifiable.

Verifiable – Technically, the credit bureaus correspond with the creditors and determine if the trade line is correct.  They are to receive documentation from the creditors proving the item and how it is reporting as correct.

 Accurate – Any item must be accurate.  If you have had a bankruptcy, each trade line on the credit report must be zeroed out.  If you have had a short sale, they cannot list it as a foreclosure.  If you have been late 2 times and they list 3 times, they must change it.

Obsolete - It cannot be obsolete – that is, beyond the legal time line.  Most items can only stay on a report for a maximum of 7 years.  Bankruptcies can stay on for 10 years. 

We find that a lot of items are untenable – that is, they are unverifiable, not documentable, or  are obsolete.  Thus, they must come off!

The burden of proof is on the Bureaus and the creditors.  You do not have to prove your innocence, they must prove your guilt.

MASTER CREDIT SOLUTIONS - HOW WE CHALLENGE ITEMS

STEP 1 - Letters to the Bureaus - Experian, Transunion, and Equifax.
	An analysis of the credit report is done by the paralegals to determine which trade line items will be challenged.  A report is sent to processing, via spreadsheet, for the development of the Demand Letters.
	No more than 4 items (trade lines) are put into one letter.  For example, if there are 15 items being challenged with Transunion, there will be 4 letters developed and sent to Transunion in 4 separate envelopes.  All letters are sent to the Attorney for his signature.  They are then sent out via mail.
	Typically, the bureaus have 30 days to respond.  Their clock starts when they receive our Demand Letters.  The bureaus must, by law, investigate and remove any item they cannot document as being verifiable, accurate, and not obsolete.  The bureaus send back their responses.  Depending on what part of the country you live in, Transunion and Experian will send their reports back to the consumer, while Equifax sends their report back to the MCS office.  In the Western part of the United States, Equifax sends their reports back to the consumer. The consumer MUST send ALL information from the bureaus back to Master Credit Solutions, either by fax, e-mail, or regular mail.  Why?  There is absolutely no way we can determine which items have been deleted without these. The spreadsheet is updated and sent to the consumer along with the Deletion Fee sheet.  Round two will go out after the deletion fees are paid. Step 2 – Round TWO to the Bureaus  A second round of letters goes out to the credit bureaus demanding a reinvestigation and a demand for the Name, address and phone number of the person/entity that conducted the reinvestigation. The Demand Letters are sent to the attorney for signature.  They are sent out via mail. Again, the bureaus have 30 days to respond.  Upon the bureaus response, we update the spreadsheet again and send them to the client, along with the Deletion Fee sheet.  The consumer MUST send ALL information from the bureaus back to Master Credit Solutions, either by fax, e-mail, or regular mail.  The spreadsheet is updated to include the name, address and phone number of the creditor. Step 3 – Round 3 to the Creditors Pursuant to Title 15, Section 1666 of the United States Code, Master Credit Solutions demands all documentary evidence pertaining to the account be sent to us. The Creditors must comply with this and send us all supporting documentation regarding the trade line.  If they do not, or send us inappropriate information, it should be deleted. During this process the responses are directly sent to each creditor.  Each creditor will send their response back to MCS and NOT to the client. If they do not, then we go to step 4. Step 4 – Round 4 Certified Mail to the Creditors (additional charge)  A lot of times, the creditors, either due to lack of understanding of Title 15 Section 1666, or by intention, they will not send the appropriate information or will totally ignore us.  What now? We send a second letter to the Creditors, Certified. We now have the name of the person signing for it and when it was received by the Creditor. Now if they ignore us, they are on record as doing so. If they do not respond according to law, we take all supporting documentation and send to the bureaus for removal. , Credit bureaus if they refuse to correct information after being provided proof are subject to penalties for   Defamation and Willful Injury.  Step 5 – Sue  If the bureaus now do not remove the disputed item, THE CLIENT files in Conciliation Court in their jurisdiction.  This cannot be done by Master Credit Solutions – it must be done by the consumer.  MCS will forward l supporting documentation to the consumer to support their claim. (An alternative step to step four above would be to send all supporting documentation to the appropriate State Attorney General’s office and to the Federal Trade Commission.)