Archive for May, 2012

How Credit Bureaus Experian, Equifax and TransUnion Rose to Power as the “Big Three”

Posted by Joel pate in Auto Loans, Credit Cards, Credit Repair, Management. Tagged: , , , , , , , , , ,

Most of us at one time or another have had to take out a loan to buy a new car or a home. During the process, the lender will pull your credit report and score to find out if you’re worthy of receiving a line of credit. They want to know whether you can repay the money that you’ve borrowed on time, or have a history of being late with your payments. The rates or fees you have to pay on your loan may be based on how well you’ve handled credit over the years.

We’ve all come to accept the fact that we’ll have our credit checked these days when trying to get a loan, but where did the process originate and when did the the three major credit bureaus rise to power?

History of the Credit Bureau

So when did the idea of the credit bureau get it’s start? As far as back as the 1860s we can find traces of the ideas behind credit bureaus. Local merchants would share and maintain lists of individuals who were high credit risks. That allowed them to offer more credit to people who weren’t on the lists, whereas previously, most merchants only extended credit to people they knew personally.

Later on as populations became more mobile and a wider group of merchants across the country needed information to help determine the creditworthiness of individuals, credit bureaus as we know them today began cropping up.

What Are the Three Credit Bureaus?

Over the years, as the number of people seeking credit grew, the ability to find consolidated credit reporting information took on added importance. Today, some 2 billion data points are entered every month into credit records in the U.S, and approximately 1 billion credit cards are actively being used in the U.S. That’s a lot of data to process!

A variety of big and small credit bureaus have been on the scene to help track credit, but a majority of lenders and financial institutions now use one of the “Big Three” credit bureaus in order to assess whether someone is worthy of receiving a loan. The 3 agencies include Equifax, TransUnion and Experian. Let’s take a brief look at their history.

History of Equifax

Equifax was founded way back in 1899 as the Retail Credit Company. They grew at a furious pace and had offices throughout North America by the 1920s. By the time the 1960s rolled around, they had credit information for millions of Americans on file, and weren’t afraid to share it with just about anyone.

The passage of the Fair Credit Reporting Act of 1970 placed some limits on what information could be shared with who, as well as put laws in place to govern the credit industry and protect consumers. Retail Credit Company suffered a bit of an image problem, but by 1975 they had successfully re-branded as Equifax.

TransUnion History

TransUnion was the second of the Big Three to come along. Founded in 1968 as the holding company of Union Tank Car, a rail transportation equipment company, TransUnion jumped into the credit sphere in 1969 when they began acquiring regional and major city credit bureaus. They’ve grown over the years to the point where they now have over 250 offices across the U.S., as well as in 24 other countries.

History of Experian

Experian is the latecomer to the Big Three. They were founded in 1980 in England as CCN Systems. They expanded to the United States in 1996 by acquiring a company called TRW Information Services. They’ve continued to grow their operations to the point where they now have a presence in 36 countries.

Credit in the Internet Age

With the dawn of the internet age, credit bureaus now offer the ability for consumers to view their credit reports online, as well as give them access to dispute incorrect items that may have shown up on their credit. In the past, this process would have to be done by mail.

Consumers can also now get a free annual credit report from each of the big three agencies through the government’s website at AnnualCreditReport.com. There are also ways to get a look at your credit score from one of the three agencies via other free or paid services more than once a year, so it’s easier than ever to for you to determine how good, or bad, your credit situation is.

The watchdogs are on the trail

Posted by Joel pate in Credit Repair. Tagged: , , , , , , , , ,

This is a recent article from the Columbus Dispatch:

The watchdogs are on the trail

New consumer agency, state attorneys general checking credit reports

By Jill Riepenhoff and Mike Wagner
Sunday May 13, 2012 8:33 AM

WASHINGTON — Mistakes in credit reports cross political-party lines, but the new federal consumer protection agency assigned to regulate credit-reporting companies faces some significant hurdles in that task.

Chief among them is that a majority of Senate Republicans say the office has too much power.

They used that argument to reject President Barack Obama’s appointment of former Ohio Attorney General Richard Cordray to lead the Consumer Financial Protection Bureau.

Then, in a political maneuver that angered the Republicans further, Obama appointed Cordray on Jan. 4 during a congressional recess.Cordray says he intends to push forward soon with regulation of the credit-reporting agencies to address the thousands of consumer complaints highlighted in last week’s four-day Dispatch series, “Credit Scars,” but it’s unclear how quickly he will see results.

So a group of state attorneys general, led by Ohio’s Mike DeWine, are planning to attack the problems from another front. And such efforts by attorneys general on behalf of consumers in the past have led to significant changes.Attorneys general have a long and successful record of seeking justice for consumers: They won settlements against big tobacco in 1998, a big drug manufacturer in 2006 and, in a landmark $25 billion settlement, the country’s largest, with mortgage servicers earlier this year.

Ohio attorney generals serving during those times — Jim Petro (drugmaker) and Cordray and DeWine (both mortgage servicing) — all were on the front lines pushing for change.“You don’t want to hear that 50 attorneys general are on the line,” DeWine said. Such previous actions have produced results “because they’ve worked together.

You get people’s attention real quick.”Relief for consumers facing credit-report errors likely won’t happen quickly, but DeWine said he and other attorneys general are committed to solving the problem.

“It’s a shocking mess,” DeWine said. “We’re not going to let this die.

These agencies hide by responding to the attorneys general and nobody else.

”The Dispatch investigation found that when consumers sought help from an attorney general, their problems most times were resolved quickly. But when they tried to battle mistakes on their own, they had much less success.

“The ultimate club is the Fair Credit Reporting Act. The AGs have authority to file a lawsuit under that act.

That ultimately could happen,” DeWine said.The Consumer Data Industry Association, a Washington-based lobbying group, speaks on behalf of the three national credit-reporting agencies: Equifax, Experian and TransUnion. It did not respond to requests for comment. Previously, it said that the agencies do everything in their power to produce accurate credit reports and respond to consumers’ concerns.

But the agencies are facing scrutiny like never before.For Cordray, the way in which he was appointed “could lead to legal challenges of any CFPB actions,” Rep. Shelley Moore Capito, a West Virginia Republican, warned at a recent House Financial Services Committee hearing.

When Cordray appeared before the committee in March to brief members on the accomplishments of the young consumer-watchdog agency, he didn’t talk about plans to regulate the three national credit-reporting agencies. Rather, he spent hours defending the existence of the agency and vowing that he would not head off on a power trip that could damage the country’s fragile economy.

Before the hearing began, Capito and Texas Republican Jeb Hensarling each greeted Cordray with friendly smiles and small talk.

When the hearing began, they were among a long line of Republicans who offered blistering commentaries and veiled threats.

“You are either an unconstitutional appointee or an unlawful appointee … and you lack credibility,” said Hensarling, before adding that Cordray shouldn’t take his remarks personally.

Lost in the rhetoric are consumers who face financial hardships because their credit reports contain mistakes that they cannot correct. A yearlongDispatch investigation found that the federal law that governs credit reporting is fraught with loopholes and obstacles that make correcting mistakes difficult, if not impossible.

The newspaper collected and analyzed nearly 30,000 consumer complaints filed with the Federal Trade Commission and attorneys general in 24 states that alleged violations of the Fair Credit Reporting Act by Equifax, Experian and TransUnion.

The complaints document the inability of consumers to correct errors that range from minor to financially devastating.

The newspaper’s investigation prompted a bipartisan call for investigations and reform. Rep. Steve Stivers, a Columbus Republican who sits on the Financial Services Committee, has said that fixing the credit-reporting system should be a priority and not a political issue.

Since the series was published last week, numerous consumers have contacted DeWine’s office either to file complaints or seek information about their credit-reporting history. Nearly 90 of them came when DeWine’s staff took calls during a WBNS-10TV news broadcast last week. The phone lines lit up for the full 90 minutes as consumers asked where they could receive free credit reports, or complained about possible identity theft and problems with their credit reports.

Cordray reviewed a summary of the newspaper’s findings in March then offered the following comments about credit reporting:

Q: What is your reaction to the Dispatch’s “Credit Scars” findings?

A: I think if there are systematic and significant errors in people’s credit files, that is of great concern because of all the ramifications credit files mean for people now. It may be accessing credit, but they are paying a higher interest rate. It may be losing out on jobs. And people often have very little understanding on this influence over their lives, and they don’t know how to protect themselves. And when they go to try to protect themselves, it’s very difficult to get satisfaction.

Q: In a Dispatch Poll, 15 percent of participants said they have never seen their credit report. Why do you think some people have ignored their credit reports or don’t check them on a regular basis?

A: You know how people set a timer so that they check the batteries in their smoke detectors? Well, there ought to be times (in) a year where we set a date so we are pushing people to check their credit reports. It’s a way to protect against ID theft and the consequences of it, and you can protect against the mistakes made in your file. (Credit reports) are not well known to people. It’s not something that is ever in front of their face. In fact, most of the time when they go to enter a credit transaction, this is all sort of behind the curtain. They just learn that they are denied a loan or they are just given an interest rate. They think it’s the market rate, but it’s 2 or 3 or 5 points higher than someone else would have been given. But they just assume that it’s like prices on the shelves where they are the same for everybody. Nobody explains it to them or takes the time to explain it to them.

Q: Consumer advocates say that one of the biggest problems with the credit-reporting agencies is that there are no incentives for them to help consumers. Are there enough incentives for those agencies to respond to consumers who experience problems on their credit reports?

A: The main paying customers for this information are financial institutions and others who access it. There may be problems in terms of accuracy, in terms of helpfulness, and getting problems resolved. Everything that would be done to improve accuracy costs them money. There is a broad volume of activity that they do, and they try to make it as efficient as possible. But then dealing with the individual consumer who has a problem becomes very time intensive, labor intensive. And system processes are not good at doing that.

Q: The Consumer Financial Protection Agency is expected to announce in July how it will regulate the three national credit-reporting agencies. Generally speaking, how will your oversight differ from that of the Federal Trade Commission, which had overseen those agencies since 1971?

A: I think the most-significant step is that we have authority over the largest banks and then we have authority over nonbanks. Our ability to go in and supervise and correct problems, often without having to file lawsuits, is a major step forward in terms of overseeing and subjecting those folks to meaningful accountability.

Q: How can we make parents and others more aware of children’s identity theft?

A: I have been thinking an awful lot about financial literacy. There ought to be an initiative with kids in high school to do some of the minimal things that can be done to get them off to a good start as they go out into the world. There are things they can learn, and if they start with a better credit score, it puts them on a better trajectory. Parents, families and schools know very little about this.

Justice Department Requires Credit Repair?

Posted by Joel pate in Credit Repair, Management. Tagged: , , , , , , , , ,

The Justice Department announced that it had reached a settlement of alleged violations of the Servicemembers Civil Relief Act (SCRA) providing damages and credit repair to 26 servicemembers whose cars were towed and sold while they were on active duty without obtaining court orders as SCRA requires. The settlement resolves allegations that B.C. Enterprises Inc ., d/b/a Aristocrat Towing and Aristocrat Towing Inc. (collectively “Aristocrat Towing”), violated the SCRA when it towed and sold these servicemembers’ vehicles without obtaining court orders. The case began with a referral from the United States Navy to the Justice Department after Navy Lieutenant Yahya Jaboori returned from deployment in Iraq to find that Aristocrat Towing had towed and sold his vehicle without a court order while he was deployed.

The SCRA protects the rights of servicemembers while on active duty in the military by suspending or modifying certain civil obligations. Under the terms of the settlement, which must be approved by a federal court in Virginia, Aristocrat Towing must pay a total of $75,000 in damages and repair the credit of the identified aggrieved servicemembers.

“Servicemembers make great personal sacrifices. We will ensure that the rights of the brave men and women who serve and protect us are protected at home,” said Assistant Attorney General for the Civil Rights Division Thomas E. Perez. “This settlement sends a strong message to businesses nationwide that the Justice Department will enforce the SCRA to protect against the taking of servicemembers’ property without first seeking court orders as is required by law.”

“No member of the military should come home from deployment to find their car has been towed and sold,” said United States Attorney for the Eastern District of Virginia Neil MacBride. “Businesses should be aware of the many rights that SCRA gives to servicemembers and their families, and businesses should also be certain that we’ll work tirelessly to ensure that those rights are protected.”

This lawsuit, filed in 2008, was the first filed by the Civil Rights Division under the SCRA. The Civil Rights Division received enforcement authority under the SCRA in 2006, and has since filed suit and entered into a number of settlements with defendants ranging from local landlords to the nation’s five largest mortgage servicers.

Servicemembers and their dependents who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program office. Please consult the military legal assistance office locator at http://legalassistance.law.af.mil/content/locator.php. Additional information on the Justice Department’s enforcement of the SCRA and other laws protecting servicemembers is available at www.servicemembers.gov . Related Material: Consent Order

Contact: Department of Justice Main Switchboard – 202-514-2000