Elise Blasingame, Director of Community Education

The three major credit reporting agencies, Experian, Equifax and Transunion have agreed to several changes that will benefit consumers going forward.  These agencies manage credit information for over 200 million consumers.

The deal came as a result of an ongoing investigation from the office of New York Attorney General Eric Schneiderman. Schneiderman’s office had been receiving consumer complaints about how the agencies were handling disputes and began investigating their practices in 2012.

According to Bloomberg, Schneiderman has stated that “This agreement will reform the entire industry and provide vital protections for millions of consumers across the country.”

Schneiderman’s deal will have national implications; the reporting agencies have agreed to:

• Employ trained staff to review consumer complaints of errors in their files. Disputes were previously often handled by an automated process with little investigation.
• Implement a 180-day waiting period before medical debt is put on credit reports, allowing for insurance payments to be applied and for consumers to catch up on unpaid bills.

Disputing Credit
In 2013, the Federal Trade Commission released a report highlighting that 1 out of 4 consumers has an error on at least one of their three credit reports that might have affected their credit score. According to the Fair Credit Reporting Act (FCRA), consumers can place any negative incident on their credit report in ‘dispute’, which triggers the reporting agency to contact the creditor for confirmation. If the creditor admits it was an error on their part, the issue is removed and the credit score is often improved. If the creditor believes it was rightfully applied, then the incident stays on the report. There are no independent reviewers of these cases, putting all of the power in the hands of the creditors to verify the disputes.

With the new agreement, independent reviewers will be employed by the three reporting agencies to handle disputes and investigate consumer claims.

Medical Debt
In 2014, the CFPB released a study about how problematic medical debt is for consumers compared to other types of debt. Specifically, the study found that:

“Half of all overdue debt on credit reports is from medical debt: A staggering 52 percent of all debt on credit reports is from medical expenses. When a debt is past due, a collector may report the consumer’s account to a credit reporting agency. On the consumer’s report, this item would appear as an account in collections, resulting in a credit score drop.

One out of five credit reports contains overdue medical debt: [The] study found that one out of five credit reports contain medical debt in collections. This means that 43 million Americans have unpaid medical debt adversely affecting their credit report.

15 million consumers have only medical debt on their credit reports: Seven percent of all consumers have medical debt and no other collection items on their reports. These 15 million consumers tend to be more reliable bill payers than consumers with other types of collections on their credit reports. They are much more likely to be consumers who normally meet their debt obligations.

Average reported medical debt is $579: The average unpaid, non-medical collections item on a credit report is $1,000; the median is $366. Unpaid medical collections are smaller, with an average of $579 and a median of $207. These figures contrast with the much larger amounts that are due on credit cards or student loans that are seriously delinquent. Such accounts average several thousand dollars.”
[Source: CFPB]

The new agreement will allow consumers to have a longer period of time to work with the insurance companies in paying off initial balances due before turning them over to collections.

As a Georgia resident, consumers are entitled to (2) free credit reports each year from each of the (3) credit reporting agencies. Visit: www.annualcreditreport.com to get your free credit report today!