5 mistakes to avoid 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 investigate your credit report dispute. So are the furnishers that supply your financial information to the credit bureaus. But companies’ initial investigations are often quick, say experts, and may not involve a substantial review of your case, causing some errors to get mistakenly 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.
1. You disputed the error only with the furnisher.
If 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. Don’t.
“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.
But 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 Muskego, Wisconsin.
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 the issue 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.”
You may also get your dispute resolved faster if you go through a credit bureau rather than a furnisher.
Credit bureaus used to rely heavily on furnishers’ investigations when verifying an error. But in a 2015 settlement with the state of New York, the big three credit bureaus agreed to review disputes more thoroughly if consumers submitted evidence supporting their case and an initial review verified the errors without recommending any changes.
2. You lost evidence.
If 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.
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 were negatively affected by the 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 advocate and attorney with Consumer Litigation Associates in Newport News, Virginia.
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,” says Joy.
Saving your denial of credit letters could also help you if you need to dispute a creditor’s actions for other reasons, says Cary Flitter, a consumer lawyer and law professor in Philadelphia.
“In general, if you have been told by a potential lender that a negative entry has caused a denial, or acceptance at a higher interest rate, get the name and title of the lender’s rep telling you that, and get something from them in writing,” writes Flitter in an email.
“You’ll need it later! Sometimes a less scrupulous lender will tell a consumer that his dinged credit has caused a lower score and higher cost of credit,” says Flitter. But then the lender will “inflate the interest rate beyond what the credit ding would warrant.”
Providing additional evidence also will make it more likely that the credit bureaus promptly fix the error when you dispute it, allowing you to avoid an expensive court case.
Credit reporting agencies used to discard evidence or fail to pass it along to lenders, say experts. But since 2013, credit reporting agencies have received increased scrutiny from the Consumer Financial Protection Bureau and state attorneys general and have agreed to revamp their dispute processes and take evidence more seriously.
For example, as a result of the 2015 settlement with the state of New York, credit bureau employees are now supposed to verify errors using submitted evidence rather than rely on automated dispute processes.
Employees also are supposed to step up investigations if an error involves identity theft, fraud or mixed files and hand off the supporting documentation to specially trained employees. Starting in June 2018, credit bureaus won’t be able to reject your dispute if you previously submitted a dispute sometime in the past three years.
These rules don’t – and won’t – apply, though, if you submit your dispute through a credit repair company rather than directly so be sure to submit your information yourself.
3. You didn't include enough information in your dispute.
When disputing credit report errors, people often opt for convenience and file a dispute online or by phone, says the CDIA’s Norm Magnuson.
The credit reporting agencies actively encourage this brevity by marketing on their websites how easy it is to use their online dispute systems, which often give you just enough room to briefly state your dispute.
However, consumer lawyers say that using a form supplied by the credit bureau – without attaching additional evidence or a longer letter explaining your dispute – 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 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.
Credit bureaus now allow you to attach additional evidence directly to your online dispute.
However, experts recommend you instead mail a detailed letter to the credit bureaus that:
- Gives details why the information in the report is wrong.
- Contains evidence proving the mistake.
By including the evidence 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.
Similarly, experts recommend you send the lender connected to the error identical copies for the same reason. Credit bureaus will forward any evidence you send with your dispute, including any additional letters you write explaining your dispute. But it may still be a good idea to send a separate letter to the furnisher, just in case.
“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, he says.
Lenders and other data furnishers have also been warned by the Consumer Financial Protection Bureau that they need to investigate consumer disputes more thoroughly than they have in the past.
In addition, the 2015 settlement with the state of New York requires credit bureaus to monitor data furnishers more aggressively and penalize furnishers who don’t follow proper procedures. So the data furnisher also may have more incentive to properly investigate your dispute if you provide them with enough information to conclude that the information they’re furnishing is incorrect.
4. You skipped over the terms of an agreement with the credit bureau.
If you recently bought a credit report online or accepted a “free report” from one of the big three credit bureaus, you probably ignored the terms buried at the bottom of the web page. Many people do.
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 try to legally press the arbitration clause and force you to give up your right to argue your case before a jury or join in a class-action lawsuit against the bureau.
That can make it much more difficult to prove your case and win substantial damages if you’ve been financially wronged, experts say.
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 consumer lawyer Cary Flitter. “They only help the business that does something wrong.”
That’s another reason why you should send your disputes by mail, rather than go through a credit bureau’s online system, he adds.
“The problem with the online dispute is the possibility you will unwittingly agree to forgo a legitimate claim in court merely by clicking,” writes Flitter in an email. By sending your dispute by mail, you’ll not only preserve your right to sue, you’ll have more control over how much information you can share.
“Online, you are limited to about 10 words or less sometimes,” writes Flitter. “In a letter, you tell the narrative of your own story. Be brief in any dispute letter, but put on paper and in the mail, and attach any pertinent support.”
If you do obtain a credit report from a bureau that enforces an arbitration provision, be sure to mail an opt-out letter to the credit bureau within 30 to 60 days of receiving the report, depending on the company’s agreement.
Depending on the clause’s placement on the bureau’s website, you also may be able to argue that the arbitration clause isn’t legally enforceable because it wasn’t obvious that it applied to the credit report you purchased.
In March 2016, the U.S. Court of Appeals ruled that an arbitration clause TransUnion buried in the website’s service agreement wasn’t legally enforceable because the bureau also didn’t make it clear to users that purchasing a TransUnion credit score automatically bound them to arbitration. However, you would be safest to just opt out of the arbitration agreement altogether.
Also, don’t forget to reexamine a credit bureau’s terms if you deal with them again in the future – even if you didn’t see an arbitration clause the last time you scanned their terms.
However, that could change if a credit agency starts to feel less pressure from regulators and activists. Already, the stepped-up pressure that credit bureaus felt under the Obama administration has begun to abate.
In November 2017, for example, the Trump administration nixed a Consumer Financial Protection Bureau rule that would have barred credit bureaus and other financial companies from enforcing arbitration provisions that ban people from joining together in class-action lawsuits.
Under new leadership, the CFPB has shown less willingness to aggressively regulate financial services companies. As a result, some credit bureaus may feel emboldened to reintroduce broader arbitration agreements.
Regardless of the political climate, it’s always a good idea to make a habit of scanning terms every time you obtain a credit report or initiate an online dispute.
5. You listened to a debt collector.
You 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 also can 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 of limitations 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 and 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.
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