Open letter to credit Bureaus-when are you going to wise up?

[Feel violated]

For the record, I pay my bills on time. I had (past tense) credit reports that reflected this.

Then I was contacted by a junk debt buying bottom feeding collection agency. In terms of the validity of the debt, the original credit they bought the debt from was a known fraud, a fact I am almost sure the collection agency already knew, and I had to send exactly one debt validation letter cmrrr to get the collection agency off my back unpaid. I knew almost nothing about credit law before being contacted by this low ethics CA, and this forum got me up to speed about how things work fast.

What strikes me about what I learned is two pertinent things.

(1) The relative recent rise of the junk debt buying collection agencies who buy debt so cheap and dubious no reputable collection agency will touch it. That they work this debt very hard is a matter of record. Some of this debt is even somewhat collectable but much of it is 100% garbage. But valid, invalid, it does not matter to these low ethics collection agencies, their business model is to dun as many people as possible, as often as possible, and for any hair thin reason. If as few as one person in 100 pay, it keeps them in business. But what about the 99 who don't pay because the debt is simply not theirs? These junk debt buying collection agencies don't care, don't correct the damage they do, and are too busy dunning someone, anyone, to waste time in regrets.

(2) Thats when the credit reporting agencies come in. They collect vast amounts of consumer data. What funds the credit reporting agencies are various entities paying the credit bureaus for accurate records on a given consumer for purposes of credit granting, employment, and other reasons. Of course, the credit bureau files are worthless if they don't accurately reflect the behavoir of a given consumer. And while credit bureaus would like things otherwise, consumers have rights under law, chief among them the right to make sure the information these credit bureaus have on them is scrupuliously accurate. The way existing laws are written the credit reporting bureaus are responsible for maintaining this accuracy, it brings in exactly no revenues, but if the credit reporting bureaus don't respond to a consumer challenge in a very professsional manner, the consumer can and will sue the credit reporting bureaus and win damages. This accuracy requirement is very human labor intensive, yes it can be reduced by fleeing to low wage countries, but its still a dead drag on credit bureau profits. It would seem to me that the best strategy would be to make sure your records are accurate and stay that way.

So riddle me this---

You are letting these junk debt buying collection agencies buy consumer credit reports off of you dirt cheap and are allowing them to mangle the accuracy of these credit reports. Every time these junk debt buying collection agencies are correct in dinging a consumer's credit report, there may be 25, 50, and maybe 99 cases where these junk debt buying collection agency is dead wrong. Now maybe not all consumers are smart enough to demand correction but enough will and its costing you credit reporting agencies a bundle to correct what they mangle--far more than you made selling those particular credit report in the first place. If you don't feel ill used you should. If I were in the credit reporting agency biz, I would sure would be identifying those collection agencies with the worst records of false dunning; saying to them we will either cut you off from access or you can start paying us to correct your mistakes when the consumer rightly complains and the CA can't validate.

All in all it sounds like a good idea to me. A win, win, win situation. The only loser is the junk debt buying collection agency who is giving everyone a bad name in the first place and should not exist in the second place. If existing law does not allow that restricted access or pay, I would have lobbyist talking to our legislators. Thats a reform almost everyone would gladly support.

So maybe you can also understand that I will soon be writing cmrrr demanding the damage done to my credit file be corrected.

Its going to cost me money, you money, but if you don't correct it I will sue you. Its just the way the system works. if you don't like the way the system works change it using the options available to you.---its why I am writing this letter because this low ethics collection agency really pissed me off and its a war I have not yet begun to fight.

[divemedic]

You are a little off on this one. CRA's don't make $$ from accurate reports. They make money from helping lenders get $$. This is done most efficiently by higher interest and through fees. Ever hear of universal default?

The more negative itmes a CRA reports, the more banks can charge in interest, thus more banks will buy your reports.

[Feel violated]

Thanks for prompt reply divemedic

But you miss my point, when the consumer disputes inaccurate information on their credit report, this is very labor intensive for the CRA. My point is that the junkdebt buying CA puts these inaccuracies on in profusion, most of these debt can't be validated, the CA runs off leaving the clean up to the consumer and the CRA. If the CRA does not clean up the damager done, the wise consumer sues. And these clean up costs are a dead drag on CRA profits.

[DocDon]

I'm not sure if they even look at it that way.

Think about how much the CRA's charge a subscriber, and then calculate the number of people that have actually seen their credit reports, add the number of people that actually know what to do with these reports, and then the time it takes a rep to type in a (half-as*sed) two-digit dispute code... they are repositories, which means there's $ in collecting, maintaining, and distributing info - even if that info is inaccurate.

Class actions and individual lawsuits haven't changed their practices, so they must not yet be concerned about losing profit...

[hubbys_nightmare]

The only thing that surprises me about the CRA's is that they haven't pushed for a law requiring every account - good and bad - be reported. Think of the money they'd make then!

[divemedic]

They actually make more if only negatives are reported. Neg= higher interest= higher bank profit= more CRA negatives= universal default= more negatives= higher interest and on and on

[Methuss]

But you miss my point, when the consumer disputes inaccurate information on their credit report, this is very labor intensive for the CRA.

Ummm. Nope. The CRAs pay a minimum wage employee and require them to process a minimum of 15 disputes per hour. Your complaint get all the attention of about 4 minutes (35 cents). After the second dispute (another 35 cents) the computer flags the line item as "previously investigated" and all future disputes are deemed frivolous getting no attention at all.

The only thing labor intensive about the process is if you end up suing their lazy arses for non-compliance with the law...and only then does it become labor intesive for their staff lawyers.

[Feel violated]

Its quite apparent that those that post replies to this topic don't respect credit reporting agencies; nor do I think they are wrong in their experience. But it my understanding that credit reporting agencies make money selling credit reports. One of the CRA's primary client's, banks, make money selling loans. If a given consumer's credit rating is less than perfect, the bank will charge a higher rate of interest and hence make more money. Unless I am mistaken, the bank does not kick back money to the CRA for reporting less than perfect credit although banks are happy to charge higher interest.

Nor do I think CRA's always do nothing about disputes. (I am about to write them CMRRR so I will have my own experiences) Existing law is very clear on what the CRA must do-------yes they will try to crawfish out if the consumer lets them or is ignorant of the Law. But this proper correction is a labor intensive process, lots of entities must be contacted, yes they can just try to enter some stupid code, all that does is stall for time. In the end, if they don't do it correct the first time, they will end up with more time spent. And my original thesis of the post remains valid, that junk debt buying collection agencies cost the CRA's more money than they earn the CRA's in increased revenues--or should. Our job is to convince these CRA's of this fact. And we do it by disputing, disputing, and disputing with complaint letters to everyone imaginable. And don't forget your friends and neighbors. They will really thank you when some junk debt buying colelction agency contacts them. When the CRA's start feeling the costs viserally in the pocketbook or fall under the shadow of legislative scrutiny, we may be pleasantly surprised to see these CRA's quietly but effectively cut off the junk debt buying CA.

Thats why I am posting this. Better ideas anyone?

[DocDon]

The CRA's do not follow existing law because nobody enforces the FCRA. If you look, you'll see it's pretty much up to the individual consumer to sue in court. The FTC and state Attorneys General has made this pretty clear too.

The CRA's do make money selling reports - not to consumers, but to subscribers. How many times to you think CITI uses the CRA's every day? Our individual reports do mean squat to them, nor do our disputes. The entire process is automated. It's done by magnetic tape and electronics - there isn't much labor involved at all.

CRA's have already been sued and they have not yet changed their ways.

[divemedic]

You aren't getting it. The CRA's are in competition with each other, and with FICO as the referee. Whichever CRA that consistently gives the lenders reports that have lower FICO scores, is the one that the lenders are gonna buy.

The CRA that has the most negatives is the one that gets the most business.

The dispute process goes like this:

1 Consumer disputes

2 Dispute is reduced to a code that is electronically sent to the Furnisher

3 furnisher repies electronically

4 investigation complete

[Feel violated]

Thank you divemedic for finally showing me exactly why the CRA's are so happy to see inaccuracies on credit reports. More dings= more business for the given CRA.

Maybe its misplaced optimism on my part, but I see little profit for any of us to merely document how rotten the existing system is. Moaning and groaning about how rotten things are gets no one anywhere. Understanding exactly why the system is rotten is just a needed start. Might provide some comfort to the educated few, after all a pessimist can only be pleasantly surprised.

The object is to figure a working plan to make the existing system better.

We have the people power, lets use it. Why all this negativity about making things better?

[DocDon]

then add into the equation less dings = approval by a creditor and then more pulls for account reviews....

[Feel violated]

Doc Don, you posted another reason why credit reporting agencies would tend to want inaccuracies unfavorable to the consumer to remain on credit reports. There still remains negatives like lawsuits for CRA's to worry about so its not an all one way street.

But why can't we all focus on doable ways to make the system better? Or is everyone so thrilled that the system is rotten?

Positive ideas anyone?

[divemedic]

I really don't see a way, unless you can get congress to change the laws to favor the consumer. I don't see it changing any time soon. The only way to balance the system is to follow the procedures here.

There are just too many profits in the status quo to fix it without new legislation.

[Xanathos]

I think most here are somewhat missing the point of the CRA's. Yes, their biggest earnings are tied to supplying reports to lenders...but ID theft is fast becoming a substantial earnings department for them. If they were to hold JDB's responsible for ethics, or were to make the system more consumer-friendly to resolve ID theft issues and get them off reports, etc...how many of those 99.95 a year programs do you think they'd sell? It's already win-win for the CRA and the JDB--the consumer gets hosed, the JDB gets to try and make some free money, and the CRA gets the consumer to PAY THEM in order to try and make sure the CRA isn't reporting something false.

[divemedic]

True. Kind of like the virus checker companies.

Bastards.

Just like here:

http://biz.yahoo.com/ap/050628/equifax_identity_theft.html?.v=2

A recent string of security breaches at several high-profile companies and banks, including Citigroup Inc., which lost information on 4 million of its customers has prompted many to plunk down money to monitor their credit.

Even online auction powerhouse eBay Inc. hired Atlanta-based Equifax earlier this month to sell credit monitoring and fraud protection to its almost 150 million customers. Equifax has recorded record profits this year.

Tell me how the CRA's are losing money.....

[Methuss]

Don't forget that the CRAs used "tiered" membership fees. JDBs pay more for the service than does a reputable lender. The CRAs just charge the riskier subscribers more money to access your records. Top that with those nifty alert systems for CA/JDBs that the CRAs sell to let them know when mortgage inquiries start popping up and they have a nifty scam going.

[DocDon]

But why can't we all focus on doable ways to make the system better? Or is everyone so thrilled that the system is rotten?

Positive ideas anyone?

HUH? I think you need to do a little more searching.

We suggest filing formal complaints with the FTC and State Attorneys General. We suggest writing your elected officials. We show people there is legal remedy if they so choose.

The CRA's are a protected species. Short of a revolt, I'm not sure what it is you expect to have happen.

[Feel violated]

To Docdon who posted we suggest you formally complain to the State AG

and the FTC.

Well, I already sent off a long letter to my State's AG last week, working on a formal complaint to the FTC and almost finished. Same letter will go to my various legislators. Will also mail cra soon cmrrr.

What would help is if a lot of others file their complaints also.

But thanks to those that have responded to this post, I have a better understanding of how rotten the existing system is. The better one understand exactly how a system works, the better one can select the places to drop the monkey wrenchs and effect maximum damage.

The real trick is to get a few reglatory agency's woken up---nothing better than that to put the fear of change into those not doing their job and manupulating the system to their advantage.

While I feel my case is strong, I cannot do it alone. We must stand together to effect change.

[DocDon]

Couldn't agree more.

I had an opportunity to speak directly to the AG in PA... he admitted his hands were tied with TU (even though his office received many, many complaints) simply because of the way the FCRA was written, but agreed that as far as consumer protection was concerned, something had to be done about the blatant abuses, but his office could not do it alone....

Add into this equation the majority of the population that doesn't even know how to order a credit report, and mainstream media reporting inaccuracies - there's a special on ID theft in the latest issue of Newsweek, and one of the suggestions they give if you are a victim of ID theft is to look over your inquiries and have bogus information removed immediately. Yeh, right. Just have inquiries and bogus information removed - just that simple...

All those commercials out right now about simply getting a copy of your credit report and the 'testimonals' by the actors claiming, "wow. There was inaccuarate information on my report - thanks to (insert company name here), now I'm on top of my credit". Like anyone knows what to do with their report, what their rights are, or how hard it actually is to get the CRA's to do their job properly.

Until the truth is told, very little will get done to correct it. You don't see Suze Orman spouting the truth about what really goes on - probably part of the agreement to sell her worthless FICO Kit...

[Xanathos]

Waking up regulatory agencies isn't really the issue...they're fully aware of the system. THe problem can be summed up in one word: Lobbyists.

The industry has deep, deep, DEEP pockets, which is why these "big changes" to the FCRA still fall well short of what's needed, why it is 623(a), the best part of the FCRA, isn't consumer actionable., which is why the FTC *CRUCIFIES* credit repair companies (going so far as to say every last one of them is a scam), and pushes for consumers to perform the "easy, painless" process of disputing inaccurate information off reports directly with those good-hearted CRA's.

The issue is getting legislation makers and legislation passers to pass stricter laws and MAKE arms like the FTC enforce the law--which they clearly do not do.

[Feel violated]

To Doc Don who talked to the AG in PA--AG said my hands are tied,"I can't do it alone" Read that as I choose not to do anything and have other fish to fry. A good AG makes their own powers by the power to investigate and the run of the mill just go through the motions. We could use someone like Elliot Spitzer on this issue. Other good point raised is that the credit industry is telling the American people how well the system works in events of disputes

using the main stream media. We here know different but the message is not getting out to the main stream media.-----Let us change that.

Xanathos correctly points out the power of lobbyists. But news flash, the war in Iraq has no legislative soluition, social security is still a third rail of politics,

our legislators seem more worried about feeding the brain dead than the needs of living feeling people, the approval rating of Congress now stands at 33% and falling, and an election in 11/06 is coming up. Our legislators are going to find some set of issues to campaign on soon. Something they can point to and say we are doing the people's business. Which means they must start soon finding things to point to.

Credit reform could be such an issue------but always a risk-----we might want fairer and the lobbyists want more biases in their favor. Look at what happened in bankruptcy laws recently.

But lobbyists, almost the whole credit industry, and effective groups that gets things changed are all organized to act together.

Until we start to do the same, we get nowhere. The system stays the same or get worse.

[Xanathos]

One comment on the media: It's not that the media isn't interested in hearing the real truth, it's that the media doesn't really know who to contact to get the real story.

I've had more than a dozen media requests to give interviews about this whole thing, about half a dozen book deals or requests from attorneys wanting me to "mentor" them on credit law so they can get in on the field, and even one request to fly down to Texas to speak about the true issues/my own personal ID theft story/what remedies are out there on a TV show since I adopted the more "aggressive" style of dealing with the industry. So the media is out there looking for people to give them a story. (side note: Amazing how random reporters can find me/find out who I am yet the collection industry--who I've sued the pants off of, so they should have an easier time of figuring it out--spent an assload of money trying to figure it out and can't even get that right)

Problem is I'm too discreet for the media, I value my privacy too much to throw my name out there, I hate cameras, I absolutely SUCK at deadlines that aren't written out in contract (ask Kristy sometime how bad I was at getting the information she needed for the book to her in a timely fashion, even exempting the family issues that arose) and I'd never want my name put in a book, and I figure any attorney who wants me to teach them so they can "get in on the ground floor of what's going to be an exploding industry" is asking for the wrong reasons.

The media isn't ignoring everybody--it just needs a qualified voice to tell them what the deal is.

[codename_fortyseven]

Xan, Use a pseudonym. Become the credit avenger or something. I am thinking of starting an "angry consumer" website, and would definately like to have your inputs.

There are ways to be public, yet retain your privacy, just ask Bob O' Brien who runs the National coalition against naked shorting (www.ncans.net). He has folks in the media hounding him trying to find out his true identity, but people as far as the WSJ have come up short time and time again.

I agree, 100% that you just need to find the RIGHT person in the media to talk to. Someone that agrees with you.

[Feel violated]

In the course of this post, one viable idea is to get the mainstream media

to show how the system actually works in practice.

Xanathos has declined as being a spokeman for privacy reasons even though certain entities have expressed interest in publishing his story. My point is that someone like Xanathos would be exactly the wrong person to show as a typical victim. Xan is exactly the opposite, a hero to us all because he has gained the knowledge over a long time to sucessfully sue the bastards; hardly a typical victim of a cruel and oppressive system we should hold up as typical example. Some readers might even start to feel sorry for the poor old CA's taken to the cleaners.

Have we not a huge collection of horror stories that amount to exploitation of the ignorant and a subverting of fundemental fairness? Does anyone have a good press contact at a really good newspaper like the New York Times? Even local papers. The more articles showing how the system actually works in practice in print the better.

One basic article can allow alot of journalist to rewrite their version of the same story. The exploiters of the credit system want to continue to operate business as usual. Our job may be to put their dirty deeds under the glare of public scrutinty.