Category: After bankruptcy reporting

The 8/19/08 stipulated order pertains to several class action against all three CRAs.

DRAFT: I will edit this entry after I read the order again or get some feedback from attorneys.  I am NOT an attorney (updated 10/14/08 11:03 am)

The lead case is Terri N. White, et al. v. Experian Information Solutions, Inc.  Case No. SA CV 05-1070.

The 8/19/08 order.

The credit bureaus routinely failed to correctly report discharged accounts as included in bankruptcy and the order addresses some, but unfortunately not all problems with after bankruptcy reporting.

It shows that the plaintiffs’ attorneys don’t know anything about FICO scores and they missed the opportunity to make this a truly comprehensive order.  Of course that’s good for you, the credit professional, as it means that most after bankruptcy reports will benefit from an expert’s review.

The highlights of the order:

1) CRAs have to report many, but not all derogatory tradelines, collections and judgments as included in bankruptcy within 60 days of reporting the bankruptcy filing.

The CRAs had until October 1, 2008 to scrub all credit files to ensure that most dischargeable closed derogatory accounts with major derogatories (as defined) and opened before the bankruptcy discharge are reported as included in bankruptcy, with NO balances and NO new lates payments.

2) CRAs cannot update certain dates such as the EXTREMELY important Experian status date.

This was one of my claims against Experian in my first federal suit.  Unfortunately, I had to dismiss my entire case in exchange for the removal of my entirely unredacted credit reports from PACER, where anyone could download my reports for 8 cents/page.  [My petition for rehearing / en banc re. Experian filing my unredacted credit reports]

I do NOT understand why Experian is allowed to report the status date as a month AFTER the discharge date.  Lawyers on drugs???

3) Consumers retain the right to dispute accounts incorrectly reported as discharged.

It is most important for FICO scores to have OLD positive accounts and established OPEN accounts.  Unfortunately, the CRAs have repeatedly REFUSED to remove the bankruptcy notations from mortgages and auto loans that were actually paid as agreed and NOT discharged.  The FICO scores can easily be lowered over 50 points by incorrect bankruptcy reporting.  In this order, the credit bureaus acknowledge that they know that incorrect bk reporting can be detrimental.

4)  They FAILED to address the Trans Union Date Closed.

Capital One is notorious for removing the date closed for discharged accounts or using a much more recent date closed.  The difference in FICO scores can exceed 80 points.

5) Incomplete reporting is EXPLICITELY allowed.

They explicitly ALLOW incomplete reporting of accounts without the date opened.

6) NO liquidated damages for violations of the order.

If they were SERIOUS about accurate reporting, we would have a clause with liquidated damages for failing to comply with the order.   After my preliminary analysis of the order, the primary benefit seems to be for lawyers in future litigation.

7) Implementation

September 1, 2008 with possible extensions to March 31, 2009.  I don’t know yet what the status is, have to check the docket.

CONCLUSION

There’s nothing exciting about this much hyped stipulated order other than to establish the POSSIBILITIES for accurate reports due to software automation.  There are SO many incorrectly reported accounts that could be automatically corrected or rejected by software.

Quite likely MANY accounts that were NOT discharged will be reported as discharged.

With so much more important incorrect reporting, it looks like this is a HUGE money maker for the plaintiffs’ attorneys who apparently don’t care about COMPLETE and ACCURATE reporting.  I question the ethics and/or competence of the attorneys.  Considering the NUMBER of attorneys involved, this is truly disappointing.

Consumers will still have to spend $50/person on myFICO credit reports after the discharge.

Consumers can wait 60 days after the discharge before ordering myFICO reports.  However, it is quite likely that disputes will need to be submitted anyway.

I also expect the CRAs’ software to IMMEDIATELY correct discharged accounts when the bk discharge public record is reported. There is absolutely no need to delay 60 days as it is done automatically by software.  But it’s possible that they’ll program the software to wait 60 days to ensure maximum inaccuracy as long as possible.

As always, ANALYZE the FICO score factors.

Don’t waste your clients’ money on frivolous disputes.  It’s important to have the accounts reported as discharged and to have the correct DATES.  Do NOT dispute accurate derogatory data or other irrelevant derogatory notations such as the charge-off status.

Consumers are experts at submitting frivolous disputes themselves and if all the IMPORTANT data is accurate, they can start disputing in hopes of getting the accidental deletions.

Make sure that your clients understand that deletions of discharged accounts may result in LOWER scores.

Sometimes those frivolous disputes backfire, causing accounts only on one report to be reported to all three CRAs or causing score lowering changes in the reporting.   I always annotate the clients’ derogatory accounts NOT to dispute because deletion would likely lower scores and I usually do NOT recommend frivolous disputes.  After all, it is quite likely that a credit bureau will revert to incorrect reporting, then refuses to correct and that a lawsuit has to be filed.  It is NOT helpful to have CRAs produce the frivolous disputes.

Definitions and highlights from the 36-page order:

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