The often frustrating task of correcting an inaccurate credit report will soon be a bit easier, thanks to changes in the Fair Credit Reporting Act.
The changes, which went into effect Oct. 1, 1997 won’t transform the process into a walk in the park. But they will give consumers more ammunition in forcing the credit reporting companies, and the creditors who report to them, to get their information right.
"Mistakes in credit reports were the leading consumer problem in the early 1990’s," said Ed Mierzwinski of the United States Public Interest Research Group. "Thirty-three percent of all credit reports, in our view, contained then - could still contain now - serious errors."
Credit reporting companies already had made many of these changes, in some cases after states or the Federal Trade Commission accused them of violating the law.
Of the troika of big reporting companies, Experian and Equifax Credit Information Services are operating under consent decrees with the Federal Trade Commission. The third, Trans Union Corp., is still negotiating.
Among the changes:
Current or potential employers have to tell employees or job applications if they will use a credit report in deciding whether to hire or promote. They must give applicants the chance to discuss any problems in their report before acting on it.
Consumers have the right to opt out of receiving pre-approved credit offers in the mail.
Nationwide credit reporting companies must provide a toll-free number for consumer complaints and inquiries. They must complete an investigation of disputed items in a consumer's file within 30 days. Within those 30 days, they have five business days to notify the source of the information that is under dispute, and five business days to remove or correct inaccurate information.
Companies that report inaccurate information will be liable. The amendments allow consumers to sue under the Fair Credit Reporting Act against lenders that knowingly allow false information to remain in a file. Right now, state law makes them liable only in California and Massachusetts.
"The consumer has the right under the law to go to a credit grantor and say, ‘Hey, that’s wrong, and change it,’" said Norman Magnuson, director of public affairs for the Associated Credit Bureaus, Inc., a trade group.
The amendments limit access to credit files to people who have a legitimate reason to see them, such as a creditor, insurer, employer, landlord or other business that extends credit.
Credit reporting companies can charge no more than $8 for a credit report, except in the six states that require them to offer one free report per year to each applicant. The Big Three companies each charge $8, or $16 for a joint report. Experian used to offer free reports but stopped last spring.
Some people can get a free report anyway, including those who have been denied credit, fraud victims, welfare recipients, or unemployed people looking for a job.
The amendments also crack down on so-called "credit repair organizations," which advertise that, for a fee, they will mediate with a credit reporting company to correct inaccurate reports or even erase accurate but damaging information.
"Credit doctors promise that they can remove accurate but negative information from your credit report," Mierzwkinski said, "and that's an absolute lie."
The new rules require such companies to sign a contract with consumers that can be rescinded within three days. They aren't allowed to instruct consumers to make false statements or to alter a person's identity. They may not request payment until all services are rendered, and they can't make false claims to consumers about what they can do
Mierzwinski, whose organization helped fight for the changes, said the new law doesn't go far enough to protect consumers’ privacy. He wants to require the use of a personal identification number to gain access to credit files. But he still called the amendments "a major victory for consumers" that give them "greater certainty that negative information that is false will be removed from their report."
People who don't want to receive pre-approved credit offers in the mail should write to the credit reporting agencies:
Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
(800) 525-6285
Experian
P.O. Box 1017
Allen, TX 75013
(800) 301-7195
Trans Union
P.O. Box 390
Springfield, PA 19064
(800) 680-7289
New Law Helps Fix Credit Errors
Lance Clem says his credit record once showed a store that no longer existed closed an account he never had. It took him more than two years to erase that smudge on his credit.
His phone calls to credit bureaus ended up where so many phone calls go to die - in some impenetrable answering system. Letters didn't help.
"They just weren't paying any attention to me," said Clem, 46, of Denver.
Now they must.
Under a law that took effect October 1, 1997, consumers have a new set of tools to fix what officials say is one of the main frustrations of the marketplace - credit problems created by inaccurate information in credit bureau files.
Bureaus must make employees available - not just recordings – to talk to consumers who call on toll-free lines, the Federal Trade Commission says.
They face a 30-day deadline for resolving mistakes, instead of the stretchy ``reasonable'' time they had before.
And in one of the largest leaps in protection, the banks, department stores and other creditors that supply information to the bureaus are legally bound to be accurate, or to fix their errors.
Before, creditors had little obligation to set things straight, leaving that up mostly to the credit bureaus.
"When consumers find mistakes, they should be able to get them corrected promptly and easily now," said Michelle Meier of Consumers Union, which lobbied for the law for six years.
Jeri Benner would like to think so. The Frederick, Md., computer consultant was on the eve of closing on her family's new home in 1991 when the bank issuing the mortgage found what it thought was over $100,000 in previously unreported debt.
"It wasn't like I was able to pick up the phone and say, ‘Please help me,’" she said. "I was begging, pleading, groveling."
The home purchase was delayed a week until the error was corrected. By then the Benners had to pay an extra point on their loan, or $1,300.
The law likely would not have made much difference in resolving a problem that developed overnight.
But Mrs. Benner said "it would have helped a little, by putting the onus back on them" and by making contact presumably easier with credit officials scattered across time zones.
Consumers Union, publisher of Consumer Reports magazine, found mistakes in almost half the credit files it reviewed for a 1991 study and said 20 percent were serious enough to risk costing someone a car loan, a mortgage or a job.
Associated Credit Bureaus Inc., trade group for the industry, says credit bureaus have voluntarily adopted many of changes required by the law over the past few years.
Among the steps largely in place are the 30-day limit on investigations and an $8 cap on the cost of a routine credit report to consumers, said Barry Connelly, group president.
The law, toughening the Fair Credit Reporting Act, also prohibits employers from getting credit reports on job applicants without their permission.
When they do get a report and find something that concerns them, they must give applicants a copy before telling them they are not getting the job.
The law also might take a bite out of all those credit card applications in the mail.
It gives people the option of blocking credit bureaus from giving out their names and addresses to credit card companies that want to use the "prescreened" lists for soliciting customers.
Applications now must include a credit-bureau phone number that people can call to get off the lists.
Consumers have faced "months of waiting for their credit reports to be fixed, credit card companies who are unresponsive, and no one to talk to who will listen to their complaints," said Sen. Richard Bryan, D-Nev., who co-wrote the legislation with Sen.Christopher Bond., R-Mo.
That was Clem's experience, until he approached Consumers Union and got some help.
Now Clem, who runs a metro Denver community policing program, is in need again. After becoming a victim of credit card fraud, he had the bureaus attach a note to his files requiring lenders to hold off on giving him credit until they verify his identity and wishes.
That worked fine in the summer when, forgetting what he had done, he applied for a store credit card and got rejected. He decided to get rid of that special protection.
He's still trying.
