Monday, April 28, 2014

New legislation hopes to shake up the credit reporting industry and help consumers.

U.S. consumers may be getting a valuable ally when it comes to correctly reporting their credit scores if newly introduced legislation gets passed.  A bill sponsored by U.S. Senators Sherrod Brown (D-OH) and Brian Schatz (D-HI,) among others, would call for accuracy and accountability from the credit bureaus when it comes to reporting consumers’ credit.  The Stop Errors in Credit Use and Reporting (SECURE) Act of 2014 would give the public an avenue for transparency in reporting, a way to access free credit reports, and a way to dispute and correct inaccuracies under protection of the law.  

Errors aren’t harmless since lenders, banks, and employers base their rates, premiums, and hiring decisions, on consumers' credit score.  The Federal Trade Commission (FTC) recently released a study that said up to 40 million Americans have error(s) on their credit reports.  At least 10 million of these errors would result in higher interest rates on loans or put them at other financial detriment.  Errors can take the form of duplicates, misreporting, identity errors and mix-ups, and outdated items. 

Under the current system, Credit Reporting Agencies (CRA’s) put very little man-hours or resources into fixing inaccuracies and errors, and there’s no minimum standard for to accurately match and report data.  However under the new act, there would be new procedures that CRA’s were legally mandated to follow, protecting consumers.

S. 2224 dovetails on a proposal by Senator Bernie Sanders (I-VT) which calls for free, verifiable credit reports and scores to all consumers one a year.  That differs from the current system where CRA’s provide a free report that is almost valueless.  They sell “educational” scores and reports to consumers that are rarely used by lenders.  Too often, consumers start by requesting a free copy of their credit score and end up duped into paid credit monitoring services.

The Act would:

“Ensure that agencies send consumers’ disputes and supporting documents to the creditor when there is an error on a report, so that they can thoroughly review the consumer’s claim.
Make it easier for consumers to spot errors in their credit reports by requiring that consumers receive a free copy of their credit report if anyone makes an unfavorable decision based on the report.
Give consumers the ability to request a free credit score along with their annual free credit report to see what credit they might be eligible for.
Give courts the ability to stop a credit reporting agency from reporting inaccurate information and provide the Federal Trade Commission with new authority to stop sloppy practices.”  
For instance, if a consumer filed a legitimate complaint for an error on their report, the CRA would only have 14 days to provide evidence of the reporting.  This would include debt collection agencies affiliated with the CRA’s. 
The SECURE Act is cosponsored by Senator Sanders as well as Elizabeth Warren (D-MA) and Richard Blumenthal (D-CT).  It’s also endorsed by the Consumers Union, the National Consumer Law Center, the National Association of Consumer Advocates, Consumer Action, and U.S. PIRG. 

The bill has been referred to the Senate Committee on Banking, Housing, and Urban Affairs.  You can read the complete Act here.

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