On March 8, 2015 the three credit reporting agencies, Experian, Equifax and TransUnion, entered into a settlement agreement with the New York Attorney General. The settlement will result in massive changes in credit reporting practices. The reason these changes are so meaningful is two-fold. First, even though this is an agreement with one state’s Attorney General, the credit bureaus have agreed to make changes for everyone in the United States. It wouldn’t have made sense to have a New York resident policy and then a policy for everyone else. So, everyone will benefit, regardless of where you happen to live.
The second reason this is such a big deal is that the credit bureaus will make considerable changes to their dispute resolution process and help protect consumers from unnecessary medical collections appearing on their credit reports. Changes like these typically take an act of Congress to accomplish, and that’s not a pun. Normally, the Fair Credit Reporting Act has to be amended, forcing the credit bureaus to make meaningful changes to their processes.
Since the settlement announcement, I’ve had some time to dissect the settlement agreement and have come up with the following schedule of meaningful dates for implementing the various phases of the settlement. You may want to put these dates on your calendar.
Effective Date: March 8, 2015
This is the date the settlement was signed and is what’s being referred to as the “Effective Date” in the settlement agreement. The implementation of the changes to the credit bureau policies will be rolled out in three phases, with three different completion dates, one each per phase. The completion dates for the three phases are six months, 18 months and 39 months after the Effective Date.
Phase 1: September 8, 2015
The first phase of changes will be implemented and completed by the credit reporting agencies by September 8, 2015. These changes are more administrative in nature and don’t require a ton of programming or training to successfully implement. For the first phase, the initiatives are more about changes in their existing policies. First phase initiatives include the following:
- The announced retirement of the older Metro 1 credit reporting format.
- Informing furnishers of information to the credit reporting agencies that any newly opened accounts reported to the credit bureaus must also include the authorized user’s date of birth, if there is an authorized user on the account.
- The credit bureaus will not be able to refuse to accept a dispute from a consumer simply because he or she hasn’t recently obtained a copy of their own credit report. The credit bureaus will also not create the impression that the consumer must obtain a copy of his or her credit report before being able to file a dispute.
- The credit bureaus will implement processes to identify and then process consumer disputes that warrant escalated handling. There will be nothing that discourages credit bureau employees from escalating disputes.
- If the consumer submits a dispute with supporting documentation and the credit bureaus do not modify the credit entry as a result of the dispute process, then the credit bureaus will assign an agent to review the documentation with discretion to act upon the documents and make a change to the consumer’s credit reports on the basis of the documentation.
Phase 2: September 8, 2016
The next phase of changes will be completed and implemented by the credit reporting agencies by September 8, 2016. These changes require more lead time because they involve changing the policies of thousands of their customers as well as creating new internal policies around sharing information across the three agencies. Second phase initiatives include the following:
- The credit bureaus will implement changes to how collection agencies may report information, of any kind, to their databases. Collectors must continue to furnish the name of the original creditor and the type of business that the original creditor is engaged in to the credit bureaus. Collections that do not comply with these requirements will be rejected by the credit bureaus. And, collectors that do not consistently report the type of business that the original creditor is engaged in can have their data suppressed and no longer accepted by the bureaus. Finally, any collections reported to the credit bureaus related to the collection of debt that did not arise from a contract or agreement to pay will be systemically removed from the credit bureaus databases.
- Instruct collection agencies on the use of codes used to clearly identify medical collections that are being paid or have been paid by insurance, and instruct collection agencies to remove or suppress medical collections that have been paid by insurance if the debt was, in fact, paid in full by the consumer’s insurance carrier and was not the obligation of the consumer.
- The credit bureaus will implement a process to share information with each other about consumers who disputed inaccurate tradelines that are being reported with a deceased indicator, and for which the bureaus have verified that the consumer is not deceased.
- The credit bureaus will provide consumers with the right to request one additional credit report through AnnualCreditReport.com during the same 12-month period if the consumer initiated a dispute from a credit report pulled through AnnualCreditReport.com. So, the consumer won’t have to wait 12 more months to pull another credit report from that site.
- The credit bureaus will update their websites and AnnualCreditReport.com to include educational content regarding disputes that qualify for escalated handling. (See #4 from Phase 1.)
- The credit bureaus will update their websites and AnnualCreditReport.com to include educational content regarding the dispute process and the type of documents that would be helpful to include in the consumer’s dispute. (See #5 from Phase 1.)
Phase 3: June 8, 2018
This is what’s being referred to as the “Completion Date” in the settlement. It is three years and 90 days from the Effective Date. Third phase initiatives will be completed and implemented by the credit reporting agencies by June 8, 2018. This date, if you haven’t figured it out, is a full 39 months from the date the settlement agreement was signed. These changes include policy overhaul supported by a considerable amount of programming. Third phase initiatives include the following:
- The credit bureaus will require collection agencies to reconcile collections that have not been paid in full. This reconciliation will result in the periodic removal or suppression of all collection accounts that have not been updated by the collection agency within the prior six months.
- Fully retire the older Metro 1 credit reporting format and only accept information from companies that are using the Metro 2® credit reporting format.
- The credit bureaus will prevent the reporting of any medical collections that are less than 180 days from the date the debt first went delinquent.
- The credit bureaus will remove or suppress all medical collections that have been paid or are being paid by insurance.
- The credit bureaus will prohibit the reporting of authorized user credit card accounts without a date of birth (month and year) on newly opened accounts.
- Except for disputes submitted by credit repair companies, the credit bureaus will not deny consumers the right to submit one additional dispute just because they had already filed one previously in the prior three years and the consumer submits supporting documentation with their new dispute. (See #5 from Phase 1.)
- When the credit bureaus receive a notice from another credit bureau that a consumer has a mixed credit file, they will conduct an investigation into whether or not that consumer has a mixed credit file in their database and, if so, take steps to correct the mixed file condition.
- After the credit bureaus complete an investigation pursuant to a consumer dispute, the credit bureaus will provide the consumer a notice (standardized across the credit bureaus) that will explain the following:
- The actions taken by the credit bureau regarding the dispute.
- Contact information of the creditor/collector involved in the dispute.
- The results of the dispute, including any modification or deletion of the disputed item.
- The consumer’s options if he or she is not satisfied with the investigation results, including the right to re-dispute the item and include supporting documents.
Assuming everything works as planned, once these changes have been fully implemented consumers should notice a considerably easier process to have legitimate credit report errors corrected. And while most consumers won’t overtly notice any of these changes, we’ll all benefit from them. And finally, the credit bureaus may actually benefit more than anyone. Their credit files will be more accurate, consumers will be less likely to sue them, and regulators will be less likely to fine them.
President and Certified Credit Expert