Ascendant Equity

The new FCRA Section 623 law

Today on c-span, I watched and listened to a Senator speak about a bill that would infuse small community banks with about 7 billion dollars to give our lagging economy a shot of  much needed “adrenaline.”  While the recent economic downturn has wreaked havoc on general bank lending, small banks (those with revenues under 10 billion annually) have suffered the most.  Even as banks like Goldman Sachs, Citicorp, and Bank of America (which currently holds more mortgage paper than any bank in the US) are starting to pay back the TARP (Troubled Asset Relief Program) funds they borrowed from us tax payers, they still refuse to loosen their new, tighter lending policies.  This fact is forcing our government consider new ways to stimulate the economy without raising taxes.  Timothy Geithner, the current US Treasury Secretary said at a Senate hearing that TARP funds were ultimately meant to spur small business, but admitted that the program has not performed as well as anticipated.   Anyone who is still looking for work knows that banks aren’t going to start lending again until people start working again.   While I don’t subscribe to the Ronald Reagan trickle-down economic theory, I do believe that big and small businesses, including banks will be last to participate in any kind of economic recovery until they see a sharp increase in jobs all over the country. 

Unemployment compensation claims are still increasing for heavens sake!!  The Obama administration is now touting that at least claims aren’t increasing at the same rate they were a year ago.  I guess that’s an interesting perspective, but it does not help those who still cannot find work after more than a year of being on the unemployment compensation rolls.   Let’s be clear, the US economy is still in trouble, and some are even talking about a “double-dip” recession.  Most agree that the housing crisis was the cause of the recession, and is likely the key to any future economic recovery.  Because the housing crisis also caused a crisis of dependable and accurate credit information, our banking system has become heavily dependant upon procedures and systems that do not allow misinformation to occur. 

To this end, Congress has amended the FRCA  Section 623 with a new FACT Act law that is located at Section 312.  Section 623 of the FCRA is entitled: Responsibility of Furnishers of Information to Consumer Reporting Agencies.  In the interest of accuracy, especially with regard to a consumers ability to dispute the accuracy of information directly with an issuer of information/credit, or an original creditor, companies realized it was in their best interest to have policies and procedures in place that show how they control, and access data on it’s customers.  

Section 623 places a requirement on issuers of information to provide accurate information to the credit bureaus.  The FCRA gives consumers the right to directly engage the issuer of credit in the dispute process by demanding to see exactly HOW they came to their conclusions about debts they say the consumer owes them;  Issuers are required to provide, upon written request, all documents that prove the legitimacy of the debt; prove the alleged debt is strictly accurate with regard to the amount, correct dates of delinquency, and all late payments.  If they cannot provide proof in those and other areas, they must cease reporting the information to the credit bureau, who in turn must delete the debt listing from the consumers credit file. 

The new FACTA Section 312 gives FCRA Section 623 the teeth it should have been born with.  It places not only a requirement on issuers of information to keep complete and accurate records, it also creates a right of the consumer to bring a lawsuit under FCRA Section 616 – wilful non-compliance.  The FCRA requires that issuers of credit must perform a “reasonable investigation”  and that they must have appropriate audit plans in place to evaluate their own ability to retain complete and accurate records.  If they do not have such a program in place, there is no way they can claim they are following reasonable procedures to insure their data is accurate. 

What does all of that mean for a consumer trying to restore their credit?  It means the dispute process just got a little easier, in some ways.  The dispute process can be complicated, but these two important sections of the FCRA and FACTA make it easier for the consumer to navigate the process.  Just remember, my brother in arms, that credit repair is not about finding loopholes in the law, or luck.  It’s about protecting your rights as a consumer and holding companies accountable for violating those rights.

There have been many articles written about the FCRA and how it can be used to help consumers repair their damaged credit files.  One Google search will turn up literally hundreds of articles on the subject.  Much of the information is either too difficult to understand, or is woefully incomplete.  Many of the authors of such articles have an ulterior motive; give the reader a tid-bit of information designed to gently lead them to their website where they then offer to give the reader the “whole story” for a price, or solicit other costly credit repair services. 

While I don’t necessarily blame them for trying to make a buck, I like other consumers of credit repair information would like to simply get the whole story without all the underhanded marketing tactics that are so abundant on the Internet.  I promise all of my readers that the information in my posts is “pure” and without strings attached!!  Just knowledge, no fat, no bad information, and no marketing!  While I do own and run a credit repair agency, the information I post is for CONSUMPTION, not to market my credit repair services.

By its very name, the Fair and Accurate Credit Transactions Act places new emphasis on accuracy of information in consumer reports. Two FACTA sections aim to improve the accuracy and integrity of information as well as give consumers a new right to dispute data included in reports directly with the company that furnished it. These sections are:

Accuracy guidelines for financial institutions and creditors that furnish information to credit bureaus. (FACTA §312(a), FCRA §623(e)(1)). Ability of consumers to dispute information with companies that report to credit bureaus. (FACTA §312(c), FCRA §623(a)(8)).

Like other FACTA sections, the accuracy and dispute sections call for rules to be adopted by the federal banking agency and the FTC. On March 22, 2006, the agencies jointly issued an Advanced Notice of Proposed Rulemaking (ANPR), a means of gathering information prior to a rule proposal. The ANPR can be viewed at www.ftc.gov/os/fedreg/2006/march/060322accuratecredittrans.pdf Public comments received in response to the ANPR can be viewed at www.ftc.gov/os/comments/FACTA-furnishers/index.shtm

 While case law has established for the past few years that the Original Creditor (O.C.) can be held liable for reporting inaccurate information (Richardson vs. Fleet, Nelson vs. Chase Manhattan ), the FACTA legislation passed recently allows the consumer to go directly to the
original creditor and dispute information which the original creditor (called the information furnisher) in the FCRA, has supplied to the credit bureaus.  However before disputing with the original creditor, the CONSUMER MUST HAVE DISPUTED WITH THE CREDIT BUREAUS first. Following this step is crucial.

Again, when you write the Original creditor, you are asking for an INVESTIGATION, not verification. Under the laws, the OC’s are not required to verify an account, only to conduct an investigation. If you want to get results, you must invoke the right laws.   O.C.’s are NOT required by law to “verify” anything.  Basically, you can dispute information placed on your credit report by an O.C. in the same way as you would with a credit bureau.   An original creditor must:

1. Conduct an investigation of the dispute
2. Review all information provided by the consumer relating to the dispute
3. Respond within 30 days to the investigation
4. If the information is inaccurate, they must notify the credit bureaus of the mistake and         tell the credit bureau to correct it.

Some of you might remember the very popular slogan used by one of the major parcel delivery services: “We move at the speed of Business”  Well, that slogan was not only true, but it was also prophetic.  Large companies in the US are constantly buying each other out, merging with larger companies, and selling parts of their departments to vendor companies.  This means that information can and does get lost in “translation.”  As anyone who has ever taken an economics course knows, US companies are more concerned with profits than complaints. 

It has been my experience as a credit repair professional that most companies (original creditors) do not adequately staff their dispute resolution departments until they are facing a class-action type lawsuit.  That’s when the lawyers are brought in to clean things up and resolve whatever dispute occurred through litigation.  One consumer complaint is rarely given the attention it deserves because of the simple, yet profound fact that the man-hours to resolve every complaint cannot be justified in a profit-driven environment.  Bottom line: they don’t keep their records very well.  In fact, most credit card companies only keep records for 13-18 months!   Fortunately for consumers, the FACT-ACT now requires any issuer of credit to validate all information it reports to the three major credit bureaus.  Section 623 (a) (8) D) of FACTA which is titled: SUBMITTING A NOTICE OF DISPUTE states:

• A consumer who seeks to dispute the accuracy of information shall provide a dispute notice (letter) directly to such person at the address specified by the person for such notices that:
• identifies the specific information that is being disputed
• explains the basis of the dispute, and
• includes all supporting documentation required by the furnisher (original creditor) to substantiate the basis of the dispute.

(E) DUTY OF PERSON AFTER RECEIVING NOTICE OF DISPUTE- After receiving a notice of dispute from a consumer pursuant to subparagraph (D),

the person that provided the information in dispute to a consumer reporting agency shall–

(i) conduct an investigation with respect to the disputed information;

(ii) review all relevant information provided by the consumer with the notice;

(iii) complete such person’s investigation of the dispute and report the results of the investigation to the consumer before the expiration of the period under section 611(a)(1) within which a consumer reporting agency would be required to complete its action if the consumer had elected to dispute the information under that section; and

(iv) if the investigation finds that the information reported was inaccurate, promptly notify each consumer reporting agency to which the person  furnished the inaccurate information of that determination and provide to the agency any correction to that information that is necessary to make the information provided by the person accurate.

§ 623. (b) Duties of furnishers of information upon notice of dispute.

(1) In general. After receiving notice pursuant to section 611(a)(2) [§ 1681i] of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall

(A) conduct an investigation with respect to the disputed information;

(B) review all relevant information provided by the consumer reporting agency pursuant to section 611(a)(2) [§ 1681i];

(C) report the results of the investigation to the consumer reporting agency;

(D) if the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis; and

(E) if an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation under paragraph (1),

for purposes of reporting to a consumer reporting agency only, as appropriate, based on the results of the reinvestigation promptly –

(i) modify that item of information;

(ii) delete that item of information; or

(iii) permanently block the reporting of that item of information.

I won’t provide an interpretation here because that is as straight-forward as it gets.  You can call up (or write) your credit card company, or any “furnisher” of credit and demand that they investigate your account for inaccuracies and by law they must comply or be found liable in a court of law.  Remember what I wrote above, that the consumer must first dispute with the credit bureaus BEFORE they dispute with the original creditor.  Why?  Because when you dispute the debt with credit bureaus first, they will almost always verify the debt as legit and accurate (they are supposed to do this by contacting the above mentioned original creditor, but in most cases they don’t).  When the debt is verified by the bureaus you then have standing to dispute with the original creditor who then will be liable for verifying a debt with the credit bureaus, but did not (could not) verify it with you - proving no investigation ever occurred!!  When you write your dispute letter threatening to sue for damages they will immediately stop reporting the debt to the credit bureaus, who then in turn must delete it from your credit file.

The Least Sophisticated Consumer???

The Least Sophisticated Consumer

(Debt Collectors deceptive practices)

Debt collection companies sometimes use questionable practices when attempting to collect a debt.  For example, they sometimes send “official” looking letters to consumers that appear to be of a legal nature. They send these types of documents in order to employ a measure of intimidation.  For most consumers, receiving a letter that appears to be from a law firm can be quite intimidating because, as whole, most people don’t know what legal documents look like.  One collection agency even went so far as to use their subcontracted law firm’s letterhead without their permission to send debt collection letters to coerce a potential target to pay a debt.  This practice is illegal.  See article: Collection Attorneys – Do NOT pimp out your letterhead to your collection agency clients

How do you know when you have received a dunning letter that might fall under the deception standard of the FDCPA?  “When considering whether there is deception in debt collection communications, the courts apply an objective standard of deception.  It is known as the “least sophisticated” or “unsophisticated” consumer or debtor standard.  There is no requirement of proof of actual deception of the consumer who files a FDCPA claim to establish debt collector liability.  The courts have rejected a “reasonable consumer” standard in favor of the “least sophisticated consumer.”  Although the standard is objective, the “least sophisticated consumer” standard is lower than examining whether a debt collection communication would deceive or mislead a reasonable debtor.  The question is not whether the plaintiff consumer was deceived or misled but rather whether an unsophisticated consumer would have been misled.  Courts have reasoned that the purpose for the lower standard is to ensure that the FDCPA protects all consumers…from the gullible to the shrewd” says Michigan Lawyer Gary Nitzkin.

Deceptive Statements or Threats are Common FDCPA Violations

The federal Fair Debt Collection Practices Act (FDCPA) provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. .”. 15 U.S.C. 1692e. Yet deceptive threats are among the most common violations of the FDCPA.

The Fair Debt Collections Practices Act:

Gary D. Nitzkin, an attorney in Southfield, Michigan says this about the least sophisticated consumer rule:

The FDCPA uses the “least sophisticated consumer” standard to determine whether something is confusing or misleading. This is a very low standard and hence, it’s very easy to violate.  I am amazed at collection agencies that try to get creative with the collection letters. After all, the FDCPA provides safe harbor language to include in a demand letter. When collection agencies avoid this safe harbor, they usually get Pearl Harbored. Take, for instance,

the case of McMillan v Collection Professionals recently decided by the 7th Circuit Court of appeals. Collection Professionals was hired to collect on a bounced check. Instead of using the safe harbor language of the FDCPA, they stated in their demand letter “You are either honest or dishonest you cannot be both,” and that the “injustice of permitting this account to become past due and then ignoring all requests for payment, casts a doubt of good intention.” Ms. McMillian sued the collection agency for breach of the Fair Debt Collection Practices Act, claiming that the letter used false or deceptive means to collect a debt. The Illinois District Court dismissed her claim while the Court of Appeals reinstated it. The Court of Appeals reminds us that the standard used to determine whether a letter is false or misleading is whether the least sophisticated consumer would be misled. In law, we usually look to the “prudent person” standard. That is, what would a reasonably prudent person do and/or believe. In the context of the Fair Debt Collection Practices Act, the law looks to the “lease sophisticated consumer.”

According to some who share their experiences on popular credit repair blogs, a consumer should “dumb down” all of their written correspondence with a collection agency or credit bureau to ensure inclusion under the least sophisticated consumer standard in the FDCPA should their complaint ever go before a judge.  In one popular blog, I read that one credit repair agency went so far as to write their dispute letters in colored crayon!!  There are hundreds of decisions under the FDCPA considering the deceptiveness of statements in dunning letters, and nearly all of the decisions are favorable to the consumer advancing the claim. See National Consumer Law Center, Fair Debt Collection Appx.H.2.4. (Boston: NCLC 1991 and Supp.)  Under this standard, it is apparently not necessary to actually intend to deceive, only that the capacity to deceive is apparent.  Thus, it also appears that the more unsophisticated a consumer, the better chance they have of successfully litigating their claim under this provision. 

For an exhaustive and comprehensive look at this provision, please reference A Primer on Debt Collection Deception Law on Lectlaw.com.

Ascendant Equity can raise your FICO score and help you get the credit you deserve!  We are credit restoration professionals.  Good credit is just a phone call away!

Improve Your Credit - Improve Your Life!!

Don’t let the credit bureaus get away with keeping you from getting the credit you deserve.  The Fair Credit Reporting Act requires the credit bureaus, collection agencies, and original creditors to follow certain guidelines in how they report information about you!  If they do not follow these rules, we as consumers can force them to correct or remove any information that is outdated, inaccurate, erroneous, or incomplete. At Ascendant Equity, we are ready to fight for your good name and restore your credit profile.  We will work hard to make sure your FICO score accurately reflects your creditworthiness.  Our expertise is proven.  Our honesty and integrity are the hallmarks of our business.

 ←Please click the white up arrow inside the grey box in bottom right-hand corner of player to access additional videos from You-Tube.

Kirk McClain is a fan of

Delridge Neighborhoods Development Association