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Part 1: Protecting Yourself Under the New Credit-Reporting LawBy Jane Bryant Quinn
Tuesday, October 29, 1996
NEW YORK -- Memo to the thousands of people who've struggled to fix an error on their credit reports: A new set of amendments to the Fair Credit Reporting Act (FCRA) will take effect 11 months from now. They'll expand your rights and make it easier to enforce the rules.
The credit bureaus have already put many of these reforms in force. Some were adopted on a voluntary basis. Others were instituted at gunpoint, after the states or the Federal Trade Commission accused the bureaus of violating the law.
"The new amendments codify the reforms, so they're no longer optional," says Ed Mierzwinski, of the U.S. Public Interest Research Group in Washington, D.C. The rules will be clear. When they're broken, you can sue.
Of the many problems the new law addresses, two stand out:
Problem one: When you spot an error on your report, and complain to the credit bureau, the bureau checks back with the creditor. The creditor (a bank or store) is supposed to investigate the problem.
The "investigation," however, may be a simple check of its records. That won't help, if the records are wrong.
In theory, the creditor should struggle to get its records right. But that doesn't always happen. Worse, after your credit report has been straightened out, the mistake may reappear. Under the current FCRA rules, creditors aren't liable for their carelessness.
Problem two: Even if you can prove you're right, the credit bureau can take the creditor's word, instead. That's not necessarily what happens, says Norm Magnuson of the Associated Credit Bureaus in Washington, D.C. The big bureaus do accept certain forms of proof from consumers. But they don't have to.
Under the new law, credit bureaus large and small will have to consider your evidence. But what evidence?
Magnuson says the bureaus may accept canceled checks, proving that a debt was paid; a receipt, showing that an item was indeed returned; or a letter on the creditor's stationery, stating that you don't owe the money. The creditor might have sent the letter at your request but never bothered to remove the blot from your record.
Other acceptable evidence may be defined by government regulation or the courts.
The new law says that disputed data removed from your file can't be reinserted unless the creditor certifies that it's accurate. At present, "certification" means a letter from the creditor asserting that the debt is owed, Magnuson says.
If disputed data does return to your record, the credit bureaus will have to notify you. Currently, you have to keep checking your credit report to be sure that bad data is kept out.
In an important change, creditors in all states will- for the first time -be liable for violating the FCRA. Right now, state law makes them liable only in California and Massachusetts.
You won't be able to sue your creditors for mistakes. Lawsuits will generally be possible, however, if they don't correct a mistake you've shown them or if they reinsert erroneous data in your file. This should make sloppy creditors careful.
Creditors will have other duties. For example, they'll have to tell the credit bureaus if an account is in dispute and if you closed an account voluntarily (accounts apparently closed by the creditor may work against you).
National credit bureaus will have to supply you with a toll free 800 number backed by real people. Today, only Trans Union fails to give customers an 800 number for ordering reports.
Many questions remain. For example, what if a court judgment is recorded against you, because a crook got a credit card in your name and charged up a storm? Will the credit bureau keep that blot off your record? And what about the credit scoring systems that decide whether you're a good credit risk? Can they score accounts that are in dispute?
Some bad news: Consumers have apparently lost the national battle for one free credit report a year, from any credit bureau.
Some free reports are available. You're entitled if: 1. you live in Georgia, Massachusetts, Maryland and Vermont; 2. a poor report caused you to be rejected for credit, an apartment, a job or a loan at favorable rates; 3. you have a file at Experian (formerly TRW), the only bureau that voluntarily offers free annual reports. To find out how to get the report, call Experian at 800 682 7654.
The new law will also require free reports for victims of credit fraud, people on welfare and unemployed people intending to look for work within the next two months. "The bureaus will probably take your word for it," Magnuson says. Otherwise, your report will cost you up to about $8, and $16 if you also need one for your spouse.
Jane Bryant Quinn welcomes letters on money issues and problems but cannot offer individual financial advice.