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Credit dispute process fix coming soon

Credit bureaus retool software to include consumers' error documentation

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If you're still trying to clear stubborn errors from your credit reports, you're in luck. Your chances of finally getting those long-standing blemishes resolved are about to substantially increase -- as long as you've got the right documentation to prove they are real.

Beginning later this year, the big three credit bureaus -- TransUnion, Experian and Equifax -- will, for the first time, begin scanning every document that you mail in, including the full text of your dispute letter and any evidence you send to back up your dispute.

The bureaus will then electronically transmit those documents to lenders and other data furnishers through an internal portal known as e-OSCAR (which the credit reporting agencies have long used to communicate disputes with lenders). That way, lenders will have a better idea of what exactly you're disputing.

Credit dispute process fix coming soon

"Thick or thin, regardless of whether it's a one-page letter or it's a thick stack of documentation that the consumer sends, that will be scanned and that will be made available to the lender," says Stuart Pratt, president of the Consumer Data Industry Association (CDIA), a trade group that represents the bureaus and also runs e-OSCAR. "If the consumer has something they want to say directly to his or her lender, we'll make sure that message is delivered."

Previously, credit bureaus sent lenders and other data furnishers a two- to three-digit code that categorized the dispute and, occasionally, a 100-character summary. (The codes will still be used in the new system, says Pratt, along with consumers' attachments.)

The bureaus didn't include consumers' evidence, such as loan statements or copies of identification, however, because e-OSCAR wasn't set up to accept them. 

Consumer advocate victory
The omission of consumers' documents drew strong criticism from consumer advocates who said credit bureaus are obligated by law to pass on any information that might be relevant to an investigation.

By leaving the documents out, consumer advocates said credit bureaus were making it much harder for lenders and other data furnishers to properly investigate a dispute -- particularly if the error was due to a mix-up in the lender's files and could be easily resolved by looking at a consumer's evidence.

"This is something that we have pointed out has been a flaw of e-OSCAR for years," says Chi Chi Wu, a staff lawyer at the National Consumer Law Center, who has repeatedly testified before Congress about the credit report dispute system. "The Fair Credit Reporting Act requires that all information be sent from the credit reporting agency to the furnisher," says Wu. "The fact that they were not forwarding it, we thought it was a violation of the FCRA."

CFPB's report
Wu says it's no coincidence that the year the industry finally fixed e-OSCAR so that it accepts consumer's documents is the same year the Consumer Financial Protection Bureau (CFPB) began regulating credit bureaus.

Thick or thin, regardless of whether it's a one-page letter or it's a thick stack of documentation that the consumer sends, that will be scanned and that will be made available to the lender.

-- Stuart Pratt 
Consumer Data Industry Association 

The CFPB formally began overseeing the credit reporting industry in September 2012, and published a comprehensive report on the credit bureaus' practices in December.

In that report, the CFPB publicly confirmed that the industry didn't forward consumers' documents because the e-OSCAR portal didn't have the technical capacity to do so.

The revelation that credit bureaus were leaving consumers' documents at the bureaus had previously been reported by media outlets (including CreditCards.com) and by consumer advocates, such as Wu. However, the fact that the disclosure came from a federal agency in a document that was explicitly written for the public made an impact, say experts.

"They kind of made it known that there's an issue with consumers' documents being irrelevant if they submit them," says John Ulzheimer, president of consumer education at SmartCredit.com. "I think that woke up some folks in the know at the CDIA and at the bureaus." The bureaus realized that it would probably be a smart move to make before being made to do it by the CFPB, says Ulzheimer, who used to work in the credit reporting industry.   

The CDIA's Stuart Pratt, however, disputes that timeline. He says the industry began talking about changing the system well before the CFPB showed up. "Interestingly enough, this idea has been in intensive discussion for the last 24 months," says Pratt.

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According to Pratt, technological and security issues delayed the update. So, too, did the fact that until recently not all lenders and data furnishers were using e-OSCAR.

"We're the ones who started the dialogue," says Pratt. "The question was, would the data furnishers feel similarly?"

"There's the good news," he adds. "The response has been incredibly good ... Lenders have been enthusiastic about seeing the documentation with the hope that if they're not getting it right, the documentation will help them even further."

Even if lenders aren't enthusiastic about the new technology, they won't have a choice about using the system. "When the system goes live, the lender is obligated to click on the link and look at the document," says Pratt.

Debate remains over industry's practices
Regardless of who prompted the change and when, analysts are split over just how effective the update to e-OSCAR will be, particularly for consumers who are victims of what industry insiders call a "mixed file."

"The information will allow furnishers to better be able to resolve the disputes," says Wu -- if the error started with the furnisher and the furnisher is willing to properly investigate it. Wu points to debt collectors as an example of a data furnisher who may not be willing to play by the rules.

However, "the mixed file errors are completely the fault of the credit reporting agency," says Wu, "And it's not going to be fixed by better documentation."

That's because mixed files -- in which information that doesn't belong to a consumer shows up on his or her reports -- often occur as a result of identification errors at the bureaus, says Wu.  

For example, credit reporting agencies use only part of a consumer's Social Security number -- rather than all nine digits -- to match consumers to an account. As a result, consumers with similar names and Social Security numbers sometimes get matched to the wrong account.  

"Ultimately, the credit bureau has an independent duty to conduct its own investigation, to review the facts and make its own assessment," she says. 

Bureaus just shifting burden of responsibility?
Rahul Sharma of College Station, Texas, can testify to the frustration of trying to clear his credit reports of information that did not belong to him. A recent college grad, Sharma spent six years trying to scrub accounts and Social Security numbers that weren't his from his credit reports. "Everything was incorrect," he says.

Sharma included with his disputes copies of his Social Security card, driver's license and passport in order to prove his identity. However, it wasn't until he enlisted the help of a lawyer that he was able to get the errors removed.

Sharma is skeptical of the industry's latest push to forward documents onto a lender since he believes the credit bureaus are just shifting the burden. "If they find an error on their side, they should fix it," says Sharma.

Ulzheimer is more optimistic. In cases where a consumer's identity has been mixed up with someone else's, he says consumers will likely have an easier time getting errors resolved. "I don't know that you'll see fewer incidences of the problem, but you'll see fewer instances of the consumer being unable to correct it," he says.

That's particularly true for cases where a consumer has been mistakenly declared dead by a third party or has been mixed up with a relative with the same name.

"It's pretty easy to verify who you are," says Ulzheimer. "Think about the massive amount of information you get every single month that validates that you're alive, that you are who you say you are and it's coming from a reputable source."

The credit reporting industry's new system won't solve everything, however. But, "it's a step in the right direction," says Ulzheimer. "And, quite frankly, I think the CDIA and the credit industry gets a bad rep and sometimes I think it's unfair. They're not handling a dozen eggs. They're handling a trillion eggs, so mistakes are going to happen."

See related: Why the credit report dispute is broken

Published: June 17, 2013


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