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Don’t make these mistakes when disputing errors on your credit report

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Don’t make these mistakes when disputing errors on your credit report. These tips come from a great article on CreditCards.com

  1. Dispute only with the furnisher
  2. Skip over the terms of an agreement with the credit bureau
  3. Lose evidence
  4. Don’t include enough information in your dispute
  5. Listen to a debt collector
  1. Why you should not dispute a debt directly with the Furnisher of the False, Negative Credit Information

             This is completely counterintuitive. The Fair Credit Reporting Act (“FCRA”) gives you the right to directly dispute debts with the entity that is reporting false credit information about you (the “furnisher” within the meaning of the FCRA). The FCRA imposes specific duties on a Furnisher when it receives a dispute from you, the consumer. But the FCRA does not provide any remedies for a consumer against a Furnisher that breaches its duties. That is, you can’t sue a Furnisher for failing to correct errors in connection with a direct dispute. Rather, the FCRA only allows you to sue a Furnisher concerning false information if you first dispute the false credit information with a consumer credit reporting agency (“CRA”), i.e. Equifax, Experian, and Trans Union.

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.”

  1. Arbitration is a Claim Killer

Arbitration is plague on the exercise of consumer rights, the scope of which is way outside this article. But you should be aware, that when you purchase a consumer credit report from a CRA, the CRA’s website will contain terms that require you to arbitrate any claims you have against the CRA bases on the credit report. You may unwittingly agree to forced arbitration of your claims and thereby forever waive your right to sue in court.

“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.”

Look for the terms and send the CRA an opt-out letter rejecting forced arbitration. Most likely, the letter needs to be sent within 30 days of obtaining your credit report.

  1. Don’t Throw Away your Proof

“Hope for the best, plan for the worst.” Lee Child riffing on John Jay from 1813. This is how should approach disputes with a CRA. Hope that the dispute fixes the problem, keep all evidence and proof of the dispute in the event that the dispute does not work. The odds are good that the dispute will not fix the problem.

In my experience, a lawsuit is often the only way to get the attention of a CRA or Furnisher of false negative credit information. (You can assume I’m a bit biased, because my practice includes suing CRA’s and Furnishers.) But in order to sue and receive damages, you must be able to document your dispute and damages. As explained in the article:

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,” says Joy.

  1. Failure to Include Documents with your Dispute

As explained in the article:

When 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 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 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 send a detailed letter to the credit bureaus that:

  • details why the information in the report is wrong and,
  • 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.’
— Leonard Bennett
Consumer lawyer

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 are currently under increased scrutiny from the Consumer Financial Protection Bureau for failing to thoroughly investigate consumer disputes. So the data furnisher may also 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.

  1. Don’t Let a Debt Collector Trap you

Debt collectors often try to collect old debt that it is way past the statute of limitations for bringing suit on the debt. If you’re contacted by a debt collector and agree to pay the debt in whole or part, you may re-age the debt and restart the statute of limitations on the debt. What does this have to do with disputing negative information on your credit report?

There’s a separate statute of limitations under the FCRA for reporting negative information on your credit report. Debt collectors often report negative credit information on your credit report for purposes of collecting the debt. Why? Because it works and it is cheap.

You may find a debt collector on your credit report. You may dispute the information with the CRA’s. You may contact the debt collector in order to get the debt off of your credit report. If you contact the debt collector, you should be aware that agreeing to pay the debt in full or in part may re-start the statute of limitations on suing to collect on the debt. But this has nothing to do with the limitations period under the FCRA for reporting the debt.

Under the FCRA, most debts must drop off of your credit report no later than seven-and-a-half years after the debt went into default. This date is measured by the date of first delinquency, which Furnishers are required to include in the negative information that they furnish to the CRA’s. When disputing information furnished by a debt collector on your credit report, you need to be aware of both the statute of limitations for suing to collect the debt and the limitations period for reporting the debt on your credit report.

 

If you’d like more information for disputing errors on your credit report, PLEASE call or email me for a free consultation and credit report review.

(502) 473-6525

james@kyconsumerlaw.com

 

 

 

 

Medical Debt vs. Credit Card Debt: Which is Worse?

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Our friends at Nerd Wallet have a nice article weighing the negativities of cred card debt to medical debt against each other. The article notes that credit card debt is more predictable and negotiable, at least as to rates. These observations relate to the fact that you are in control of incurring credit card and the debt is voluntary, whereas medical debt arises out of medical treatment which is by and large unpredictable, unplanned, and out of your control But credit card debt also accumulates interest and drags down your score more.  The article also notes that hospitals often have programs for reducing fees and negotiating lesser amounts. Of great interest is this observation:

NerdWallet Health has found that Americans pay three times more in third-party collections of medical debt each year than they pay for bank and credit card debt combined. In 2014, roughly one in five American adults will be contacted by a debt collection agency about medical bills, but they may be overpaying – NerdWallet found rampant hospital billing errors resulting in overcharges of up to 26%.

Paying three times more in medical debt to collectors than payments to banks and on credit card debt combined is a staggering fact. How can the economy move forward when staying healthy in drowning us in debt?

A Good Overview of Problems and Developments in Credit Reporting

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The American Banker recently published a good and informative article with an overview of problems and recent developments in the credit reporting industry. There’s nothing new in the article, but it’s a good read for talking points. I particularly liked the description of the FCRA “dispute process as a virtual merry-go-round of frustration.”

The article also notes the tension that exists between the need for more accurate information and credit monitoring, which has become a huge profit center for consumer reporting agencies (“CRAs”).  This tension, as explained in the article:

“The credit reporting agencies are set up to profit from their own inaccurate information,” said Leonard Bennett, a founding partner at Consumer Litigation Associates, who specializes in credit reporting cases. “They market their companies as if the bureau systems are objective, neutral libraries of information. But these are private businesses engaged in making money and selling a product — they are not government agencies.”

In other words, the CRA’s profit from their own mistakes.

Also of  interest is the article’s emphasis on the problem with furnishers of credit information. The article notes that increasing pressure on and oversight of  furnishers could result in furnishers pulling out of credit reporting all together:

It’s not clear that’s a viable option, however, because the entire credit reporting system falls apart if the data supply begins to resemble Swiss cheese. Regulators have also grown increasingly worried about those with thin or nonexistent records, and firms looking to scale back or quash their furnishing duties could, in a roundabout way, find themselves exacerbating the problem.

The article is a good read and worth your time if you’re interested in credit reporting issues. Check it out here.

Who is Southwest Credit Systems, LP?

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Southwest Credit Systems, LP (“Southwest”) is a debt collection company located in Carrollton, Texas. A quick search of the web reveals multiple complaints about Southwest and its collection methods. It appears, at least in Kentucky, that Southwest collects a lot of telecommunications debt from companies such as AT&T and Windstream Communications, Inc. One of Southwest’s favorite collection tactics is to furnish negative information on the alleged debtor’s consumer credit report.

Southwest, however, does not delete negative information on credit reports after the original creditor has removed an account from Southwest for collection. Southwest’s failure to delete could violate both the Fair Credit Reporting Act and the Fair  Debt Collection Practices Act. In essence, the failure to delete negative information on debts that Southwest is no longer actively collecting creates zombie or phantom debts.

After the original creditor (AT&T, Windstream, etc.) removes the account from Southwest for collection, the original creditor often sells the debt to third-party debt buyers such as LVNV Funding, LLC and Midland Funding, LLC. The debt buyer then also furnishes negative information about the same debt to the consumer credit reporting agencies. This results in multiple collection accounts on a credit report concerning the same debt. This has multiplying negative affect on a consumer’s credit report.

If this abuse is happening to you, we can help.

Please call 1-502-473-6525 or email James Lawson for a free consultation

 

 

Three Common Mistakes than can Hurt your Credit Score

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U.S Money just published a good article on Four Mistakes that can Hurt your Credit Score. I’m going to focus on just the first three, because the fourth was simply to routinely check your consumer credit reports. But if you’re not regular monitoring your credit report, chances are that you’ve already caught any of the first three that might apply.

The article begins with a nice reminder why you should pay attention to and monitor your credit reports:

Your credit score is important, often affecting areas of your life that range from where you live to how much you pay for auto insurance. More importantly, it usually determines whether or not you’re approved for credit, and could cost or save you thousands of dollars, as it’s often used to figure out how much you’ll pay in interest.

So here are the top three mistakes according to the article:

  • Maxing out your Credit Cards

Making charges on your credit cards that push the amount owed close to the credit limit can adversely affect your credit score in a very significant way. You can suffer a drop of 40 or more points even though you never miss a payment and pay the entire amount off each month. U.S. Money suggests that

…instead try keeping your utilization rate between 1 and 20 percent. This will show lenders that you’re using credit, but don’t rely on it.

  • Making Late Payments

Your on-time payment percentage could make or break your score. Lenders really want to see that you’re a reliable borrower who will repay debts in a timely manner. Consider this Credit Karma analysis: While consumers in the “excellent” scoring range (750 or higher) typically pay their bills on time 99.9 percent of the time, even the average consumer who falls into the “fair” range (640 to 699) has a respectable 99 percent on-time payment record. The numbers paint a stark picture – paying most of your bills on time isn’t good enough – just one or two late payments could have a drastic effect on your score.

Instead … get those payments in on time as often as you can. If you’re the forgetful type, set up a calendar reminder. Personally, I like to pay my bills whenever I get paid (twice a month). That way, I get payments in on a regular basis and know I have the money to back them up.

  • Making Lots of Credit Applications

Simply put, racking up handfuls of hard inquiries by applying for lots of credit could make you look desperate for credit – a trait frowned upon by potential lenders. While one or two hard inquiries each year may not affect your score by much, a ton of hard inquiries can do some significant damage.

Instead … limit your applications, and try only applying for credit that you need. If you’re looking for the best auto or home loan rate, shop around over a short period of time – within 14 to 45 days. By applying for the same type of credit line each time during that period, some scoring models will recognize that you’re rate shopping and may combine those hard inquiries into just one.

This is a problem that often arises when you’re tempted to apply for store credit cards in order to get an instant discount. Or when car shopping and get talked into seeing if you qualify for a loan. (Remember you can limit the number of credit pulls a car dealer makes, but you have to be proactive about it. We have an article about it here.)

Standing to Foreclose in KY Requires the Plaintiff to Prove Possession of the Note at the Time Suit is Filed

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In a rare win for Kentucky consumers, the Kentucky Supreme Court denied discretionary review in the case of Acuff v. Wells Fargo Bank, N.A., which could prove to be a very important foreclosure case.

The facts of Acuff are fairly simple. The bank, Wells Fargo, filed a foreclosure complaint against the Acuffs. Wells Fargo attached a copy of the note to its complaint. The note included an allonge that included an indorsement in blank that would have the affect of turning the note into bearer paper. The Acuffs defended on several grounds, the most important of which here is that Wells Fargo lacked standing to bring suit. In particular, the Acuffs alleged that allonge “lacked any identifiable information connecting it to their note, such as the date of transfer, ‘property address, loan number, parcel identification number, or borrower’s name;’” and that Wells Fargo had failed to produce the original note in prior requests under the Real Estate Procedures Act (“RESPA”).

The trial court granted summary judgment to Wells Fargo. The Kentucky Court of Appeals reversed on grounds that Wells Fargo failed to meet its burden of proving that there was no genuine issue of material fact as to whether it had standing to bring suit at the inception of the case:

We must conclude that the evidence in the record, as it currently stands and viewed in the light most favorable to the Acuffs, is insufficient to establish whether Wells Fargo was the holder of the Acuffs‘ original note and thus, the real party in interest at the time the foreclosure action was filed.
Acuff v. Wells Fargo Bank, N.A., No. 2012-CA-001221-MR, 2014 WL 1873503, at *5 (Ky. Ct. App. May 9, 2014), reh’g denied (Sept. 2, 2014) (bolding and underlining added).
The Acuff Court concluded that reversal was required because Wells Fargo failed to produce the original note and because  “the blank endorsement on the note is contained on a separate page, not numbered in correspondence to the note itself, and contains no identifying information that establishes that it is indeed related to the note.”
Acuff makes clear that, in order to have standing to bring a foreclosure action, the plaintiff must be a holder of the note at the time suit is filed and this includes a requirement that the plaintiff has possession of the original note at the time suit was filed. This means that acquiring the original note after bringing suit will not cure any standing issues that were present when suit was filed.
Acuff’s discussion of Stevenson v. Bank of America, 359 S.W.3d 466 (Ky. App. 2011) is also important because it reinforces Kentucky’s common-law rule that the mortgage follows the note and the mere possession of a mortgage, without the underlying note, does not give a party standing to foreclose.

Credit Reporting Agency Changes means an End to Parking Debts on Credit Reports

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The new credit reporting overhaul and changes means the end of parking debts on credit reports. The recent settlement agreement between the New York Attorney General’s office and the three major consumer credit reporting agencies—Equifax, Experian, and Trans Union—will result in many benefits for consumers. One benefit that’s not getting much discussion is that collections that have not been updated on a credit report in the past six months can be removed by the CRAs. This requirement should substantially curb the onerous practice of some debt collectors of parking debts on consumer credit reports.

          Debt collectors sometimes will “park” a debt on your credit report. This means that the debt collector will report negative information about you to credit reporting agencies but take no other action to collect the debt. This is particularly common with debts with small amounts. I often see debts to book clubs parked on credit reports.

          The debt collector’s strategy is to park the debt and wait for the consumer to discover the negative information in connection with some important event in the consumer’s life such as buying a home or applying for a job. At this point, the time for dealing with the debt will be short but the need to deal with it great. The debt collector can use the negative information and the time restraints as leverage to coerce payment from the consumer, regardless of whether the debt is actually owed or the amount is correct.

          With a six-month limit on furnishing negative credit information means that debt collectors will no longer be able to park debts, but, rather, must continue to update information. Additionally, debt collectors will also have to delete trade lines of collection debts that have been sold, transferred, or are no longer being worked by the collection agency.

Student Loan Bill of Rights

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On March 10, 2015, President Obama introduced the Student Aid Bill of Rights; another executive action to deal with student loan debt. Read the official Memorandum.

The Student Loan of Bill Rights makes some important changes to student loans and the collection student.

Joshua R. I. Coehn is a prominent consumer lawyer in the area student loans. He recently posted a summary of the Student Loan Bill of Rights and its impact on student loans and the collection of student loan debt. It’s a good and informative read. Joshua’s summary addresses each major section of the Bill of Rights, which are:

Section 1.  State-of-the-Art Complaint and Feedback System.

(a)  Complaints and Feedback Regarding Federal Financial Aid

(b) Coordination Among Other Enforcement Agencies.

Sec. 2. Helping Borrowers Repay Their Loans and Avoid Default.

(a) Higher Standards for Federal Direct Loan Servicing.

(b) Regular Review of Student Loan Performance and Borrower Trends

(c) Additional Protections for Student Loan Borrowers.

(d) Higher Customer Service Standards in Income-Driven Repayment Plans.

(e) Finding New and Better Ways to Communicate with Student Loan Borrowers.

(f) Making it Easier for Federal Direct Student Loan Borrowers to Repay Their Student Loans.

Sec. 3. Fair Treatment for Struggling and Distressed Borrowers.

(a) Raising Standards for Student Loan Debt Collectors.

(b) Providing Clarity on the Rights of Borrowers in Bankruptcy.

(c) Protecting Social Security Benefits for Borrowers with Disabilities.

Remove Judgments from your Credit Report

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Lawson at Law, PLLC can help you remove judgments on discharged debts from your credit report. A bankruptcy discharge “voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under” the bankruptcy code. 11 U.S.C. § 524(a)(1). This includes discharged under both Chapter 7 and Chapter 13. Void and discharged judgments provide solid grounds for vacating a state court judgment.

We have the tools, the means, and the experience to vacate any state court judgment on a discharged debt. We can remove judgments on discharged debts from the public record section of your credit report for very reasonable flat fees: $200.00 for one judgment, $250.00 for two judgments, and $300.00 for three or more judgments.

Removing a judgment from your credit report can help substantially improve your credit scores. Each judgment in the public-record section of your credit report can lower your credit score by up to 40 points.[1] Your credit score and credit rating are important to many aspects of your life, including employment, rentals, relationships, and the cost of credit.

Entry of a judgment allows the judgment creditor to file a judgment lien that attaches to all of your real property. A judgment lien can be very costly when it comes to time to buy or sell property. Vacating the underlying judgment eliminates the basis for the judgment lien. With your credit and credit score, it is important to be proactive and act to clean up your credit report before you need good credit. Because when you need it might be too late. Please call or email us today to discuss removing the judgments that are dragging down your credit and credit score.

[1] Dana Neal, Credit Ratings: advanced strategies for FICO scoring http://www.bestcredit.com/credit-ratings-advanced-strategies-for-fico-scoring/

Kentucky Statute of Limitations for Credit Card Debt

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           The statute of limitations for credit card debt is an open question in Kentucky. This is because there is no statute squarely on point and no Kentucky appellate court has yet addressed or decided the issue. Creditors generally take the position that the statute of limitations is five years under KRS 413.120 or fifteen years under KRS 413.090.

            Recently, a federal district strongly indicated that credit card debt is subject to a five-year statute of limitations under Kentucky law. Conway v. Portfolio Recovery Associates, 13 F.Supp.3d 711, 715 (E.D. Ky. 2014). See also Fulk v. LVNV Funding LLC, No. CIV.A. 5:14-125-DCR, 55 F.Supp.3d 967, 972 (E.D. Ky. 2014) (same). This is based on the argument that credit card agreements are not sufficiently definite in terms and conditions to be subject to the fifteen-year statute of limitations for contracts in writing. But Conway ultimately determined that the credit card at issue in the case was subject to Virginia’s statute of limitations under a straight forward application of Kentucky’s borrowing statute. KRS 413.320.

            The borrowing statute provides that

[w]hen a cause of action has arisen in another state or country, and by the laws of this state or country where the cause of action accrued the time for the commencement of an action thereon is limited to a shorter period of time than the period of limitation prescribed by the laws of this state for a like cause of action, then said action shall be barred in this state at the expiration of said shorter period.

           The key to triggering to Kentucky’s borrowing statute is accrual of a cause of action in a in another jurisdiction. When an “injury is purely economic,” which is the case with a defaulted credit card account, “the place of injury, and therefore the place of accrual of the action, may be where the economic impact of the defendant’s conduct is felt, which is usually the plaintiff’s place of residence.” 51 Am. Jur. 2d Limitation of Actions § 91 (Updated Aug. 2014). This is the general rule, which the Kentucky Supreme Court recently adopted in Abel v. Austin, 411 S.W.3d 728 (Ky. 2013).

            This means that when the statute of limitations of the state where a bank is headquartered is less than five years for an action to collect a credit card debt, under the borrowing statute, the statute of limitations of that state applies to an action on a credit card account issued by that bank. This has particular relevance for banks headquartered in Delaware, North Carolina, and Virginia all of which have three-year statute of limitations. This includes a great many banks including Chase Bank USA, N.A., Discover Bank, and FIA Card Services, N.A., which are all headquartered in Delaware; Bank of America, N.A., which is headquartered in North Carolina; and Capital One Bank (USA), N.A.

            Two party store charge cards that can only be used at one particular store are subject to a four-year statute of limitations under KRS 355.2-725.

            If a debt collector has tried to collect a debt from you that is barred by the statute of limitations, threatened to sue, or has sued you to collect a time-barred debt,this is illegal and can be stopped. PLEASE call or email at your earliest convenience. I may be able to help you at no cost to you.

            (502) 473-6525

            james@kyconsumerlaw.com