The Bank Customer Consumer Credit Report Correction Process
By: BEAU J. HURTIG
September 2007
The following is a scenario becoming all too common in today’s banking industry. Bank’s customer, John Smith, applies for an automobile loan. However, Mr. Smith’s credit report reveals several credit problems, which cause the bank to deny Mr. Smith’s credit application. When the bank representative informs Mr. Smith about the problems listed on the credit report, Mr. Smith says that the reported negative information is erroneous. Although the bank representative is sympathetic, he informs Mr. Smith there is little he can do and that Mr. Smith will have to work things out with the credit reporting agency.
The purpose of this article is to provide a better understanding of the process bank customers may undertake to correct their credit report information. Although bank officials should not provide legal advice, they may help customers get off to a good start by suggesting a visit to the FTC’s website, described below. Bank customers may also want to hire legal counsel to help resolve the credit issues.
Background
The Fair Credit Reporting Act, as amended (“FCRA”), regulates credit reports by placing restrictions on obtaining, placing information in, and disclosing information contained in a consumer credit report. The FCRA requires banks to provide notice to customers following an “adverse action” regarding a credit decision based on information contained in the credit report, and sets forth a dispute resolution process. The customer should begin this process by examining the Federal Trade Commission’s (“FTC”) identity theft website available at http://www.ftc.gov/bcp/edu/microsites/idtheft/, which contains information, form letters, and other useful tools.
Mitigating Future Damage
Although inaccurate credit report information may be the result of an honest error, the customer should place a fraud alert on his or her credit report as soon as possible to minimize risks associated with potential identity theft. A fraud alert requires creditors to use additional reasonable procedures to verify the customer’s identity before issuing credit. The fraud alert can be placed on the customer’s account for either 90 days or seven years, depending on the likelihood of identity theft, and is initiated by contacting one of the three credit reporting agencies:
Equifax: 1-800-525-6285; www.equifax.com; P.O. Box 740241, Atlanta, GA 30374-0241;
Experian: 1-888-EXPERIAN (397-3742); www.experian.com; P.O. Box 9532, Allen, TX 75013;
TransUnion: 1-800-680-7289; www.transunion.com; Fraud Victim Assistance Division, P.O. Box 6790, Fullerton, CA 92834-6790.
The customer need contact only one of the agencies, all of which are required to contact the other two agencies regarding the fraud alert. The customer may also place a freeze on their credit report, which will prevent future creditors from accessing the customer’s credit report without the customer’s lifting the freeze.
Obtaining Copies of Credit Reports and Identifying Errors
The customer should next obtain a copy of the credit report from all three of the credit reporting agencies listed above. The customer will likely be entitled to obtain a free copy of the credit report from each agency both because the customer placed a fraud alert on the credit report and because the customer experienced an adverse action based on the credit report within the past 60 days. Once the customer receives the credit reports, he or she should carefully review all three of the credit reports for errors and circle all the errors.
Note that under the FCRA, every individual is entitled to one free copy of their credit report annually from each of the credit reporting agencies. Credit reports can be obtained by visiting www.annualcreditreport.com.
Contacting Law Enforcement
The customer should attempt to determine the source of the incorrect credit report information. If the customer believes the incorrect information is a result of fraudulent activity, the customer should immediately close any fraudulent accounts and contact the police to file an identity theft report. The customer may also want to send a complaint to the FTC by calling 1-877-ID-THEFT.
Correcting the Credit Report
Once the customer has taken action to identify the source of the incorrect information, prevent it from reoccurring, and report it to the proper authorities if fraud is involved, the customer can then take action to correct the credit report by mailing letters to each of the three credit reporting agencies listed above. These letters should describe the errors and their suspected source and state the customer did not initiate or authorize the transactions underlying the disputed information. The letter should be accompanied by a copy of the credit report for each respective agency, with the disputed information circled, along with a copy of any police reports, if available. In addition to the letters to the credit reporting agencies, the customer should also send similar correspondence to each business that reported the erroneous information to the credit reporting agency. It is essential that the customer keep copies of all correspondence and send all mailings via certified mail.
The FCRA imposes obligations on both the credit reporting agency and the business reporting the erroneous information to investigate and report erroneous information contained in the customer’s credit report. Generally, this investigation must be completed within 30 days of receiving the dispute letter. When the investigation is complete, the credit reporting agency must notify the customer of the results in writing. The agency may then remove the disputed information from the credit report or, if the credit reporting agency refuses to correct the disputed information, the customer can request that the credit report file contain a statement of dispute viewable by those requesting the report.
Takeaway
Bank representatives with a basic understanding of the credit report correction process can provide better client service and increase their chances of closing the loan.