5 mistakes people make when disputing credit report errors
If you're not careful, you could unknowingly
undermine your consumer rights -- as well as the ability to successfully
challenge your case -- when disputing credit report errors.
Under the Fair Credit Reporting Act, credit
reporting agencies such as Experian, Equifax and TransUnion are required to
thoroughly investigate your credit report dispute. So are the furnishers that
supply your financial information to the credit bureaus. But companies'
investigations are often quick, say experts, and rarely involve a substantial
review of your case, causing some errors to get repeatedly verified as accurate.
If this happens to you, you have a legal right to
sue. But you may not get very far if you don't take extra steps beforehand to
prepare your case, according to numerous court documents reviewed by
CreditCards.com and interviews with consumer lawyers experienced in handling Fair Credit Reporting Act cases.
Many people get tripped up by a confusing number of
pitfalls that sometimes begin before they even submit their first dispute. Here
are five of the most common mistakes made when disputing credit report errors.
Dispute only with the furnisher
you know a lender is misreporting your information to a credit bureau, it may
seem faster to bypass the credit reporting agency completely and deal only with
the lender. "The law allows you to go directly to the furnisher and state your
case," says Norm Magnuson, vice president of public affairs at the Consumer
Data Industry Association, a group representing consumer data reporting companies.
Don't. If you skip the credit bureaus' dispute
system, you risk not being able to fight back if the lender fails to correct
the mistake, say experts. "In order to trigger the investigation process under
the Fair Credit Reporting Act, the dispute has to be sent to the credit
bureau," says DeVonna Joy, an attorney with the Consumer Justice Law Center in
Big Bend, Wis.
That means if a lender or other type of data
furnisher, such as a debt collection agency, insists their records are correct,
you can't sue them for failing to investigate the mistake unless you've
disputed with a credit reporting agency first. "You don't have a claim until
you've disputed at least once," says Joy.
You also can't sue a creditor or credit bureau
based solely on the inaccuracies in your report, she says. "Most people do not
realize that it is not illegal for a credit bureau to report inaccurate
information," says Joy. "A claim arises only if the credit bureau or furnisher
fails to properly investigate a dispute."
Skip over the terms of an agreement with the credit bureau
you recently bought a credit report online from one of the big three credit
bureaus, you probably ignored the terms buried at the bottom of the credit
bureau's Web page. Many people do.
However, unless you mail an opt-out letter to the
credit bureau within 30 to 60 days of receiving the report, you automatically
agree to a binding arbitration clause that bars you from airing your dispute in
front of a jury and from joining in a class-action lawsuit against the bureau.
Most people do not realize that it is not illegal for a credit bureau to report inaccurate information.
|-- DeVonna Joy
All three major credit bureaus have arbitration
That means if you buy your credit report online and find an error on it, you
can still dispute the error. However, if you disagree with how the credit
bureau managed the dispute and want to take the bureau to court, the credit
bureau can legally press the arbitration clause and force you to give up your
right to argue your case before a jury.
That can make it much more difficult to prove your case and win
substantial damages if you've been financially wronged,
say consumer lawyers.
In arbitration, your complaint will be handled by an individual
arbitrator, appointed from an arbitration association chosen by the credit
bureau, and it will be solely up to the arbitrator to decide your case. If you
disagree with the arbitrator's decision, you are not allowed to appeal.
"Forced arbitration clauses never help the
consumer," says Cary Flitter, a consumer lawyer and law professor in
Philadelphia. "They only help the business that does something wrong."
you send dispute after dispute to the credit reporting agencies and continue to
get nowhere, your next best step may be to sue the credit bureau, say experts.
(You can also file a complaint with the Consumer Financial Protection Bureau.)
You won't get far with your case, however, if you
didn't save evidence proving the mistake is real -- and that you've been
substantially harmed, say consumer lawyers. "The strongest cases are where the
consumer has tried on their own, made multiple disputes and can show that
they've been harmed," says Joy.
In numerous court cases reviewed by CreditCards.com,
many people lost their chance to argue their case before a jury because they
did not save enough evidence that could be used in court to prove they had been
wronged. Instead, their case was moved to summary judgment at the request of
the credit bureau or the furnisher of the information, causing it to be decided
by a judge rather than at a trial by jury.
In order to get a case past summary judgment and get
a jury to hear your complaint -- which gives you the best possible chance of
winning your case -- you will have to produce evidence showing there's
factual disagreement about what happened to your dispute and how you suffered
as a result.
That includes saving documents, such as a certified
mail receipt, that shows the credit bureau received your dispute. "The big three
consistently lose or claim to lose consumer correspondence," says Leonard
Bennett, a consumer lawyer based in Newport News, Va.
It also includes saving all of your financial paperwork,
including any denials of credit that you have received. "Those denial of credit
letters are proof a consumer may have been harmed by credit report errors,"
File disputes online instead of in writing
disputing credit report errors, most people opt for convenience and dispute
online or by phone, says the CDIA's Norm Magnuson. "About 54 percent of
disputes are done on the telephone or Web," he says. When people do mail a
dispute, they rarely include a robust explanation of their complaint, he says.
"Only 2 or 3 percent involve a free-form letter [that's] a page or more," says
The credit reporting agencies actively encourage
this brevity by marketing on their websites how easy it is to use their online dispute
systems. However, consumer lawyers say that using a form supplied by the credit
bureau could cost you your case if you later need to take the credit bureau to
court. "Never do credit report disputes online or on the small space on the
credit report itself," says Joy. Often, "there isn't enough room to make full
explanations," she says.
That could hurt you later on if you have to sue the
credit bureau for failing to properly investigate your dispute. You'll need to
be able to prove in court that you gave the credit bureau enough information to
examine your case and conclude that the error is legitimate, say experts.
Otherwise, "the credit reporting agency will uniformly respond with, 'Not our
fault, we didn't have enough information,'" says consumer lawyer Bennett.
Experts recommend you mail a detailed letter to
the credit bureaus that:
- details why the information in the report is
- contains evidence proving the mistake.
The credit bureau is unlikely
to use the evidence to investigate your complaint. However, by including it with
your letter (and making copies for your files), you are making it much harder
for the credit bureau to later claim that the error is your fault because you
didn't send enough information, say consumer lawyers.
The credit reporting agency will uniformly respond with, 'Not our fault, we didn't have enough information.'
Similarly, experts recommend you send the lender
connected to the error identical copies for the same reason. Credit bureaus
rarely forward evidence to the furnishers of the information and instead shrink
your dispute into a two- to three-digit code and a 100-character summary of the
dispute. Many lenders have complained in congressional testimony that the
condensed information makes it hard for them to know what the dispute is about
and to properly investigate the complaint.
"The reason why you want to send a copy of the
letter is not because [the furnishers] are going to do a substantive
investigation. They typically don't," says Bennett. You want to send it so the
furnishers can't argue in court that the dispute they received was inadequate,
Listen to a debt collector
can't dispute accurate information on your credit reports and expect the credit
bureaus to remove it. However, you can hold the credit bureaus liable under the
Fair Credit Reporting Act if they fail to observe the time limit on your debt.
By law, negative information should drop off your report after seven years. A bankruptcy may remain on your report for up to 10 years.
If you see a debt that's real on your report, but is
older than seven years, you can dispute the debt to the credit bureaus and
demand that it's removed. You can also fight back against a debt collector that is threatening to sue you for the debt if it's past its statute of limitations.
The legal expiration date on the debt should give you a bulletproof defense of any lawsuit that's filed after the statute ends. That strategy only works, however, if you didn't accidentally re-age the debt after talking with a debt collector, says Paul
Stephens, director of privacy and advocacy at Privacy Rights Clearinghouse.
"There is a big problem with this particular issue,"
says Stephens. Debt collectors often sell accounts to one another and sometimes
the debt collectors will report inaccurate timelines, causing the debt to be
reported longer than it should. "That's what's called re-aging of debt," he
says. Under the Fair Credit Reporting Act, this shouldn't happen and you have
the right to fight it.
However, if you receive a call from a debt collector
and agree to pay part of an expired debt, you could potentially restart the clock on the debt's statute of limitations
undermine your ability to successfully fight back.
"Debt collectors can keep calling you and hounding
you," says Stephens. "They may get you at a weak or vulnerable moment and at
that point in desperation you may make a promise to get into a payment plan or
potentially acknowledge the debt." At that point, the debt collector can sue you -- and potentially win a judgment against you -- for a debt that you should have been able to scrub from your credit history for good.
See related: A guide to the Fair Credit Reporting Act
Published: November 1, 2012
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