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Credit Reporting Agencies To Be Under Microscope in ’07

Incoming Chairman of the House Financial Services Committee Rep. Barney Frank (D-Mass.) has announced his intent to hold hearings in 2007 aimed at the credit reporting industry. Frank believes that the 2003 Fact Act that provided consumers easier and cheaper access to their credit report may not have gone far enough. Providing access is a good start, but if consumers cannot correct the errors they find on their credit reports, then Frank believes further legislation may be warranted.

Frankly, (ha ha) this comes as no surprise to me. When a consumer disputes (click here to see a sample dispute letter) an item on their credit report with one of the big three credit reporting agencies, Trans Union, Experian and Equifax, the dispute is transmitted electronically to the creditor. In some cases, the creditor then verifies, or confirms as correct, incorrect information. The credit reporting agency then reports back to the consumer that the disputed information is correct and will not be removed from the consumer’s credit report. At this point, the credit reporting agency feels it has done all it can, and directs the consumer to contact the creditor directly to address potentially incorrect information. The problem is, sometimes the consumers doesn’t know how to contact the creditor or the creditor is unresponsive.

Whether the credit reporting agency really has done all it can, could or should do at this point largely depends on what information the consumer provided in her original dispute. But that is a topic for another day.

As for the creditors, perhaps they don’t have as much incentive as we would like to correct erroneous information. A consumer’s private right of action under the Fair Credit Reporting Act is much more limited against creditors than the credit reporting agencies (the financial industry is a REALLY big lobby), and this lack of teeth sometimes leaves them less than enthusiastic about resolving consumers’ credit reporting complaints.

The bottom line is that further legislation needs to be directed at this relationship/interaction between the credit reporting agencies and creditors. It also wouldn’t hurt to open the creditors up to more significant liability under the Fair Credit Reporting Act.