It's Been An Expensive Few Years For The Credit Bureaus

Two fairly significant class action lawsuits were settled this year and last between TransUnion, Experian, Equifax and millions of consumer plaintiffs.

The first is the "TransUnion Privacy" lawsuit. TransUnion was accused of selling lists containing personal and financial consumer information to third parties for marketing purposes not in accordance with the FCRA and agreed to a $75,000,000 settlement. I believe this is the largest FCRA settlement amount ever.  The settlement has been approved and all objections to the settlement have been overruled. 

The second is the "White/Hernandez" case.  All three credit reporting agencies were accused of not properly updating debts that were discharged in a Chapter 7 bankruptcy. After years of litigation, the parties agreed on a $45,000,000 settlement, which will be divided and paid equally by the three credit bureaus. I believe this is the second largest FCRA settlement ever. And while the settlement amount has been agreed upon, this one isn't a done deal yet. There is a final fairness hearing in San Francisco in early January 2010, and there will likely be objectors to the terms of the settlement. Stay tuned about this one. 

Links to each of the settlement administrator websites where you can learn more about each of the lawsuits and review the actual court documents:

https://www.listclassaction.com/ and http://www.bankruptcydischargesettlement.com/index.php3

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

Credit Repair: An Overly Regulated Industry?

Pop quiz: Which of these industries is more closely regulated: 1) airline pilots; 2) air traffic controllers; 3) credit repair agencies; 4) big tobacco; 5) school bus drivers? You'd be surprised to learn that, other than big tobacco, the credit repair industry is the most closely regulated, both by federal and state agencies, in fact.

First, let's dispel a persistent and absolutely false myth: credit repair is illegal. No, that's not true. Credit repair is perfectly legal in every state except Georgia, where there are still a variety of ways to run a credit repair organization legally. Having said that, many in the credit industry would love to convince you that credit repair organizations are unethical, immoral, and deceitful.

As long as a company follows the rules set forth by the Credit Repair Organizations Act (or CROA), operating a credit repair organization is perfectly legal. Having said that, CROA has teeth. The law is so overly burdensome that at least one of the credit bureaus has settled a class action lawsuit for alleged violations of CROA. When the law exposes a credit bureau to penalties as a credit repair organization...well, you can see how comical that is.

For the consumer, CROA helps and CROA hurts. It helps to somewhat protect consumers from the rogue credit repair organization, who is in the business simply to rip them off. But, it also prevents legitimate companies from entering the marketplace fearing that much of their revenue would go to pay attorneys. Plus, the credit bureaus have done a masterful job convincing the world that all credit repair is bad, despite partnering with them to provide data. Point being, they don't want YOU to do business with them, but they're perfectly willing to do so themselves.

CROA mandates the following for a credit repair organization to operate legally:

• They must disclose to you that you can challenge incorrect information yourself at no cost.
• They cannot charge you until their services have been completely rendered.
• They cannot guarantee the removal of any of your credit data.

Violating any of these provisions, and there are more, will subject the credit repair company to lawsuits and possibly the wrath of the FTC, who closed down over 30 credit repair organizations in 2008 in what they referred to as "Operation Clean Sweep."

So, if you choose to use a credit repair organization, fair enough. Just be aware that you can do what they do for the cost of a stamp and a few minutes of your time. And, that your air traffic controller isn't under nearly as much scrutiny.

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.