More Consumer Friendly Credit Reporting System Begins
Congressional Reforms Take Effect on September 30
WASHINGTON, DC -- The nightmare many consumers face of fixing credit bureau errors is about to come to an end, thanks to new reforms approved by Congress, which go into effect this Tuesday.
These reforms, which Consumers Union championed for six years before they were signed into law, will help make credit bureau files more accurate, fair and private.
"These reforms were necessary because credit bureaus were ruining people's livelihoods and reputations with false information. Consumers should find fewer mistakes in their credit files with these reforms in place," said Michelle Meier, CU's counsel for government affairs.
"When consumers find mistakes, they should be able to get them corrected promptly and easily now. The nightmare of seeing the same mistake popping up again and again should be a thing of past," said Meier.
A CU report issued in 1991 found mistakes in almost half of the credit bureau files reviewed. Nearly one-fifth of these mistakes were serious, the kind that could cost a consumer a car loan, a mortgage or even a job. Since issuing that report, CU spent years trying to get Congress to pass the reforms that go into effect tomorrow.
The new law includes the following reforms designed to keep wrong and outdated information out of credit bureau files:
- Credit bureaus must correct mistakes within 30 days after the consumer notifies them about the mistake.
- Credit bureaus cannot reinsert mistakes. A bureau that reinserts information previously deleted can only do so if the party supplying the information specially certifies its accuracy. In that case the bureau must also notify you of the reinsertion.
- Each credit bureau must set up a toll-free 800 number so consumers can contact the bureau without charge. While the national bureaus signed consent decrees obligating them to set up toll free lines several years ago, these actions still left consumers with only recorded messages rather than live personnel to handle questions and complaints. The new law requires bureaus to make personnel available through the new toll-free lines.
- Bureaus must give consumers a notice of their rights under the new law whenever they receive a copy of their credit report.
- Bureaus must give consumers a free copy of their credit report whenever the report is the basis on which their application is denied. Currently, consumers have a right to a free credit report when it is the basis for the denial of credit, insurance or employment. The new law recognizes that credit reports are now used when a consumer applies for a wide variety of products, including a bank account and an apartment.
- Banks and other businesses must not give credit bureaus wrong information about their customers when they know or should know that it is wrong, and they must promptly correct inaccuracies previously reported. Once a bank notifies a bureau that previously reported information is incorrect, the bureau must notify all other national bureaus of the correction.
The new law will also tighten privacy protections in the following ways:
- Employers will no longer be allowed to snoop into the credit files of their employees or their job applicants unless they have first obtained the permission of the employee or applicant.
- Consumers will be able to keep credit bureaus from giving out their name and address to credit card companies who want to send them credit card applications, a practice known as "prescreening." While the new law allows credit bureaus to sell names and addresses to credit card companies, as does current law, it requires bureaus to set up a toll-free phone number that consumers can call to block their name from any such list. The phone number must be printed on any "prescreened" solicitation a credit card sends them.
"Privacy is a key issue in the information age. Although these reforms do not provide all the privacy protections that are now needed, they are an important step in the right direction," Meier said.
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Credit Bureau Nightmares: Victims Speak Out -->
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