By Teresa McUsic,
THE SAVVY CONSUMER
The Texas Attorney General, along with 30 other state attorneys general, reached a $6 million settlement in May with the three credit reporting agencies that will help provide more accuracy to credit reports.
Equifax, Experian and TransUnion will have to make widespread changes to the way they address errors in credit reports, including how negative information such as tickets and fines and medical debt is added.
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“This settlement elevates standards placed on credit reporting agencies, which will provide greater protections for consumers in Texas and nationwide,” Attorney General Ken Paxton said in a statement. “A good credit rating is an increasingly important piece of people’s lives, and the results of this effort will give consumers greater assurance that their score is a fair and accurate reflection of their financial health.”
Errors in credit report can come from a variety of sources, including identity theft, fraud or when the agencies mismatch information because of similar names or other identifying information provided by data furnishers. In the latter case, the credit information of one consumer can become “mixed” into the file of another consumer.
A 2013 study by the Federal Trade Commission found that one in four study participants found at least one error in their credit report that might affect their credit score. Thirteen percent of study participants saw a rise in their credit score after disputes were corrected to their credit reports.
“We’ve come a long way in the last five to 10 years in consumer protections, but obviously there is still room for improvement,” said Curtis Arnold, founder of CardRatings.com, an online service to help consumers find the best credit card offers. “This settlement is a significant step in the right direction.”
The multistate investigation, started in 2012 by Ohio Attorney General Mike DeWine, focused on four areas: consumer disputes on credit report errors, monitoring and disciplining of credit report information providers, accuracy in consumer credit reports and the marketing of credit monitoring products to consumers when they called credit reporting agencies to dispute their reports.
"This agreement addresses some of the most egregious problems in credit reporting that consumer advocates have complained about for many years," said Chi Chi Wu, staff attorney at the National Consumer Law Center, in a statement.
Under the settlement, the credit reporting agencies will be required to:
• Increase monitoring of data furnishers, including maintaining information about problem data furnishers.
• Use a better system to share data between the agencies and notify the other agencies if one finds a mixed report.
• Not sell credit monitoring services until after the dispute portion of the call has ended and make consumers aware that the service is not required to fixing the dispute. Fixing a credit report is free to the consumer.
• Send the consumer’s supporting documents in a dispute to the original data furnisher.
• Provide an additional free credit report if the disputed information is changed.
• Prohibit including information about fines and tickets to credit reports.
• Provide a link to each bureau’s online dispute website on the website www.annualcreditreport.com. The credit reporting agency’s dispute website must be free of ads and any marketing offers.
• Not place medical debt on a credit report until 180 days after the account is reported to the credit reporting agency, giving consumers time to work out issues with their insurance companies.
The last requirement is particularly significant because 43 million Americans have overdue medical debt on their credit report, which makes up half of overdue debt, according to a study by the Consumer Financial Protection Bureau.
The changes will be implemented in three phases to allow time for the credit reporting agencies to update their systems and their procedures. All changes must be completed within three years and 90 days following the settlement’s effective date.
Despite the added consumer protections, Arnold recommends consumers continue to be vigilant in reviewing all three credit reports each year, as well as use free services that provide free credit scores.
“We still as consumers need to be proactive,” he said. “Ultimately we ourselves are our best protection for our credit reports.”
Teresa McUsic’s column appears Saturdays in the Fort Worth Star-Telegram. TMcUsic@SavvyConsumer.net