California Credit Law Blog

Call for Trans Union to Stop Selling Employment Credit Reports

Fri, 04 May 2012 10:02:12 -0800

Recently a woman was fired by her employer (Bain & Co no less) for having excessive student debt. She started a petition to Trans Union asking them to stop selling credit reports to employers.

The petition states that TransUnion, the world’s largest privately held credit reporting company, promotes credit history as a measure of character and suitability for employment. Some 60% of employers surveyed report they consult credit reports for job applicants, a practice that has left many qualified applicants out of work.

The reasons TU should stop this practice are as follows:

First, credit checks in hiring create a fundamental “Catch-22” for job applicants: applicants can’t pay their bills because without a job yet they cannot get a job because they cannot pay their bills.

Second, the use of credit in hiring discriminates against African American and Latino job applicants. According to one study, the average credit score of African Americans and Latinos is 5% to 35% lower than that of whites.

Third, credit history does not predict job performance. The definitive study on this issue, presented to the American Psychological Association in 2003, concluded that credit history does not correlate with employee conduct.TransUnion representative Eric Rosenberg has admitted: "At this point we don't have any research to show any statistical correlation between what's in somebody's credit report and their job performance or their likelihood to commit fraud."

Finally, credit reports are inaccurate. A 2007 Zogby poll reported that 37% of people surveyed found an error on their credit report, and half of these respondents reported that they could not easily fix the mistakes.

To sign the petition, go here.

Report on How Errors in Criminal Background Checks Hurt Workers

Wed, 11 Apr 2012 14:22:59 -0800

This month, the National Consumer Law Center issued a report on problems with companies that offer criminal background checks to employers. Over 90% of employers now run such checks on some employees and 73% run checks on all potential employees. The Internet has facilitated the means by which hundreds of companies offer criminal background checks using data purchased from cities, counties and states. One company's website brags it has 345 million criminal records available. About sixty-five million adults in the US have some sort of criminal record.

The number one problem is that the data often has incorrect information leading to applicants unfairly being denied jobs. The report gives the example of a Samuel M. Jackson who was denied employment after a prospective employer ran an InfoTrack background check. InfoTrack reported a rape conviction from 1987—when Mr. Jackson was four years old. The rape conviction actually belonged to fifty-eight-year-old male named Samuel L. Jackson from Virginia, who was convicted of rape in November 18, 1987.

The Fair Credit Reporting Act (FCRA) requires background checking agencies to maintain procedures to ensure the accuracy of information they report about consumer. Unfortunately, the FCRA is not being very well enforced as against background screening companies. The companies continue to routinely make mistakes with grave consequences for job seekers.

Here are some of the errors the background companies make:

• Mismatch the applicant with another person;
• Report sealed or expunged information;
• Omit information how the case was resolved;
• Include misleading information; and
• Exaggerate the seriousness of the offenses reported.

One reason for so many errors is that the companies buy the data in bulk form and then fail to verify or update the information. Another is they use unsophisticated matching criteria. Yet another is they fail to use all available information to prevent a false positive match.

Persons who were denied employment because of errors in background checks have remedies under California and federal laws. California has one of the better laws to protect consumers. The laws provide for damages and attorney's fees.

Problems with Mortgage Companies' Credit Reporting

Tue, 13 Mar 2012 15:20:37 -0800

Mortgage loan companies and mortgage servicing companies do not always accurately report on consumers' credit history after such events short sales, foreclosures, and payment modification plans.

In a short sale a lender allows the home owner to sell for less than the amount owed on the mortgage. Effective July 15, 2011, an owner selling a house or apartment building with four or fewer units in a short sale will not owe the lender a deficiency balance (Civil Code Section 580e). Therefore, after a short sale, the lender should not report the consumer owes any money on the mortgage loan.

If a purchase money lender forecloses on four or fewer units, the lender may not seek a judgment for the deficiency balance. Civil Code Section 580b. This law applies to both 1st and 2d mortgages. Any post-foreclosure report to the credit bureaus should make clear that the former home owner is not subject to a lawsuit and judgment. A report that a debt of $100,000 (the deficiency balance after foreclosure) is “due and owing” is misleading because the lender has no recourse to the courts to collect the $100,000.

Under the Home Affordable Modification programs, a lender typically agrees the consumer may pay less on the mortgage during a trial period. Under these programs, if the owner was current on the mortgage payments before entering into the program and makes the required reduced payments during the trial period, the lender may not report late or inadequate payments to the credit bureaus. Once a permanent modification plan is in effect, if the owner makes the required mortgage payments, the lender may not send adverse reports to the credit bureaus.

FTC Report on How Credit Bureaus Deal with Identity Theft

Tue, 13 Mar 2012 14:55:34 -0800

The FTC has a report out on a survey of 3,000 identity theft victims and their experiences dealing with the credit reporting agencies. The survey indicated that many consumers start out not knowing how the dispute process works under the Fair Credit Reporting Act. This is not surprising given the complexity of the matter and the counter intuitive requirement that the consumer contact the credit bureaus directly rather than going through the creditor that is reporting the inaccurate information.

Among the identity theft victims who contacted the credit bureaus, 40% did not know they had the right to dispute to ask the credit bureaus to investigate and correct inaccurate information on their credit reports. Of those who did dispute the information on their credit report, 52% said the information was correctly removed, 29% said the information was not removed and 18% were not sure.

Of those who said the inaccurate was removed, 39% were either somewhat or very dissatisfied with the process. The main reason for the dissatisfaction was that the inaccurate information was not removed. Only 42% were able to get information removed with a single contact to a credit reporting agency while 24% needed three to five contacts. 4% had to contact a credit bureau six or more times to get the information removed!

The FCRA requires credit bureaus to block accounts that are the result of identity theft. The trigger for the blocking action is a police report by the victim and a dispute letter explaining the writer is a victim of identity theft. Very few consumers are aware of the right to have the credit bureaus block the fraudulent accounts. Only 21% of the persons who contacted the credit bureaus attempted to have the accounts blocked. Even those who asked had their accounts blocked only 46% of the time for reasons unknown.

One common reason for dissatisfaction was the difficulty of reaching a live person when calling a credit bureau. Another was the sheer difficulty of getting the bureaus to remove fraudulent accounts from their reports. Some reported the bureaus tried to sell them fraud alert packages and the like they did not want.

Consumer Gets Credit Ding After Donating Motorhome

Mon, 13 Feb 2012 12:22:39 -0800

In July 2010, one of my clients put an ad on Craigs List offering to donate her motorhome to a charitable organization. She received a call from an organization that picks up vehicles, sells them, and sends the proceeds to a charity of the owner's choice. While waiting for a representative to pick up the motorhome, the owner received a a Mr Bob Kaufman who said he was coming to get the motorhome. The owner said OK thinking he was with the group that works with charities. Turns out, Kaufman was acting on his own.

Investigating the matter, we found an article in the SF Chronicle on Kaufman written by C.W..Nevius. According to the article, Kaufman has as many as 11 vehicles scattered around the streets of the Bayview district of San Francisco and that he is often cited by the police for keeping unregistered cars. SF Superior Court records show the City has sued him and vice versa on these matters.

Kaufman evidently saw the Craigs List ad and intervened to take possession of the motorhome. He may have used it for living quarters until November 2010, when the police had it towed.

The first the my client knew there was a problem was in September 2011, when a debt collector, Lien Enforcement, Inc., San Jose, reported to Experian that she owed $8,900 for towing and storage.

After I was retained, I sent two letters to Lien Enforcement explaining my client did not owe for towing and storage and that Lien Enforcement was unfairly damaging her credit. Both letters were ignored. We filed a lawsuit for damages and other relief on January 25, 2012.

Inaccurate Credit Reporting on Mortgages Hurting Consumers

Mon, 30 Jan 2012 07:56:35 -0800

Banks and their mortgage loan servicing companies are increasingly reporting consumers late on mortgages when they were not late and even when the mortgages were paid in full. Reuters reports on these inexcusable practices causing consumers no end of financial problems.

Homeowners are finding that mortgages they thought were dead and buried are springing back to life. Sometimes, the end result is a foreclosure.

"It's the most egregious manifestation of an industry that's seriously broken," said Ira Rheingold, director of the National Association of Consumer Advocates.

An attorney with the National Consumer Law Center has seen hundreds of foreclosure cases and in nearly all of them, the homeowner was not in default. The main problem is faulty records on the part of mortgage servicers.

Consumers have remedies under the FCRA. When letter writing does not solve the problem, consumers should find an attorney to sue the responsible parties.

Identity Theft Victims Should Always Obtain a Police Report

Sat, 14 Jan 2012 11:11:57 -0800

Identity theft often results in accounts showing up on the victim's credit reports. When that happens, a first step is to go to the local police to report the theft and get a report. A next step is to send a copy of the report to each of the credit bureaus with a letter asking that the fraudster's accounts be deleted.

Police reports are important in this process because under the FCRA, 15 U.S.C. § 1681c-2, a credit bureau must block the reporting of any incorrect information in a consumer's file upon receiving: "(1) appropriate proof of the identity of the consumer; (2) a copy of an identity theft report; (3) the identification of the information by the consumer; and (4) a statement by the consumer that the information is not information relating to any transaction by the consumer."

A consumer in a lawsuit against a credit agency known as Early Warning System lost the case because he failed to file an "identity theft report" to the bureau. The judge explained that the FCRA defines that term precisely. To qualify, the report must be a document meeting the following conditions: "(A) that alleges an identity theft; (B) that is a copy of an official, valid report filed by a consumer with an appropriate . . . law enforcement agency . . .; and (C) the filing of which subjects the person filing the report to criminal penalties relating to the filing of false information if, in fact, the information in the report is false." 15 U.S.C. § 1681a.

The consumer never filed a report with the police. Instead, he relied on a report that a Maryland county police department wrote. The consumer said he sent a copy to EWS, but the court said that did not suffice. "The obstacle Thomas faces is that this report cannot qualify as an "identity theft report" under § 1681a because it was not "filed by a consumer."

The court explained that an identity theft report must be "an official, valid report filed by a consumer with an appropriate . . . law enforcement agency." A "consumer" is defined as "an individual." 15 U.S.C. § 1681a. The police department is not "an individual" and therefore cannot be a "consumer" as defined by the statute. Because the police report was not "filed by a consumer," it is not an "identity theft report" under 15 U.S.C. § 1681a. Without receipt of an "identity theft report," EWS did not have a duty to block the reporting of the incorrect information.Thomas v. Early Warning Services, LLC. (District Court, MD 2012).
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New California Law Bans Use of Credit Reports for Most Employment Purposes

Mon, 02 Jan 2012 20:25:02 -0800

Responding to complaints that employers were unfairly using credit reports to screen out applicants for all sorts of jobs, the California Legislature enacted a new law effective January 1, 2012, prohibiting employers or prospective employers from using consumer credit reports for employment purposes unless the persons are applying for managerial or law enforcement positions or for jobs that involve handling money or having access to more than $10,000 in cash. The bill is AB 22.

Debt Collectors & Banks Scheme to Revive Old Debts

Sat, 31 Dec 2011 10:52:40 -0800

The WSJ reports that debt collectors are teaming up with some banks to offer a credit card to consumers who have old credit card debts. The old debts are barred by the statute of limitations. The debt collectors send misleading letters to the consumers stating that upon payment of a few hundred dollars on the old debts, the bank will issue a credit card. What the solicitations do not make clear is that the payment will revive the old debts. In other words, payment starts the statute of limitations running again.

In California, the statute of limitations is four years from the date of last activity--the last payment or debit on the account. Some states, however, have statutes as short as 3 years or as long as 10 years!

Consumer Financial Protection Bureau Proposes Credit Card Agreement

Fri, 09 Dec 2011 09:40:30 -0800

The Consumer Financial Protection Bureau is proposing that banks adopt a simplified credit card agreement that consumers can read and understand. Currently, no one reads the dense, fine print multi-page credit card agreements banks send to customers. The Bureau is endeavoring to change that. The Bureau has separated the key terms from the legalese, leaving a clear, readable document. Check it the proposed agreement here.

Debt Collectors Target Relatives of Deceased Persons

Sat, 03 Dec 2011 21:28:16 -0800

Debt collectors are harassing individuals to pay the debts of deceased family members. Many of the targeted survivors are elderly. A WSJ article gives an example of a debt collector retained by Bank of America to collect $16K on a credit card debt from a retired 68 year widow. She received up to 10 calls a day from West Asset Management, Omaha, NE about the debt. The widow was not legally responsible for the debt, but that did not stop the debt collector.

The WSJ article has two recorded calls between the harassed widow and the debt collector. The caller starts with expressions of sympathy (really sincere!) and then goes into a discussion about how she could "get this taken off your plate."

Mrs. Long, of Cape Coral, Fla., told the debt collector she had "lost everything." She had sold the their motor home to help cover medical bills and funeral costs leaving only $2K from some life insurance. She offered to pay that "just to get this off of my head."

Debts don't survive one's death unless surviving family members co-signed on the obligation.

One debt collector focuses exclusively on deceased debts. DCM Services brags it "manages collections on more than $1 billion in deceased accounts per year with an extremely low complaint rate."
To target survivors, DCM Services built a massive database of the recently deceased.

Debt collectors often tell surviving family members that they aren't personally responsible for paying the debts of the deceased. But those words barely register with grieving relatives, according to interviews with a dozen lawyers who represent about 60 families pursued for money owed by dead relatives.

Debt collectors misled some people into believing they are required by law to pay the debts of dead relatives.

Credit Bureau CoreLogic Knows Everything About You

Sat, 03 Dec 2011 13:30:37 -0800

Lenders will soon be able to easily check the deepest recesses of your financial life accessing information that never before appeared on your credit report according to a NYT report.

CoreLogic, a credit reporting agency little known to consumers, is offering a new type of credit file based on the huge repository of consumer data it maintains on just about everything that most of the traditional credit bureaus do not: missed rental payments that have gone into collection, any evictions or child support judgments, as well as any applications for payday loans, along with your repayment history.

The new report includes any property tax liens, overdue homeowner’s association dues, whether your house is underwater, and a lot of mortgage related data. CoreLogic may in the future add information on whether you paid your cell phone bill on time. CoreLogic has a deal with FICO to soon provide credit scores. CoreLogic has data on 100,000,000 persons. Experian, in contrast, has files on 200,000,000 persons.

Credit Monitoring Services Are Not Worth the Cost

Thu, 03 Nov 2011 12:03:37 -0800

Credit monitoring services advertise heavily in the media. For a monthly fee, they promise to alert you of any adverse changes in your credit reports. They are a waste of money for the vast majority of consumers. This is Liz Weston's conclusion as she reports on the MSNBC Money site.

There are many reasons they are not worth the costs. Number One--they lie. They advertise free credit scores, but the credit monitoring they are selling is not free. Consumers often sign up for and only later realize they agreed to make monthly payments when the bills start coming in.

Some sites suggest they are official, federally mandated sites, but they are not. (AnnualCreditReport.com is the ONLY such site).

The free credit scores are worthless since they are not the FICO scores most lenders use. The three national credit bureaus sell their own scores.

Another lie put forth is that the credit monitoring will protect you from identity theft. It won't. You will only find out your identity has been stolen after the fact.

The insurance policies some companies advertise are worthless since identity theft victims rarely if ever have to pay out-of-pocket for losses.

The costs are exorbitant for what you get. Costs run $15 to $20 a month, or up to $240 a year, for credit monitoring. Some of the companies don't watch your reports at all three credit bureaus and not all creditors report to all three bureaus. That causes gaps in what's being monitored. Also, creditors can be slow reporting changes, especially new accounts, to the bureaus, so you might not be getting as much of a head start on cleaning up any problems as you think.

Most everyone's credit scores bounce around just because of the ebb and flow payments to creditors. Seeing the changes probably makes people nervous for no reason at all.

A better alternative is to buy your score from myFICO.com for $20 once every few months and following the detailed advice the site gives on how to improve your numbers.

Finally, what the credit bureaus that offer credit monitoring are doing is selling you data that they collect for free from their creditor subscribers. It costs them essentially nothing. The profits are enormous. Why subsidize such a business?

New California Law Restricts Use of Credit Reports in Hiring

Thu, 13 Oct 2011 08:45:46 -0800

Gov Jerry Brown has signed a bill (AB 22) that prohibits employers from pulling credit reports on prospective employees, with exceptions. The exceptions include positions in management and in law enforcement, positions that require handling over $10,000 cash, and positions in which the employee will sign checks or transfer money for the employer.

According to the California Labor Federation 60% of employers routinely order credit reports on job applicants.

The proponents of the bill argued that a person's credit score says nothing about his or her character or ability to do a job effectively and responsibly. Secondly, credit reports contain lots of inaccuracies and it is unfair to the applicant for employers to rely on the reports. Third, supporters contend that the use of credit reports for employment purposes disproportionately impacts female and minority workers who are typically concentrated in low-wage jobs.

A union official has aptly commented that job seekers with dings on their credit are put in a Catch-22 because they cannot pay their bills because they cannot get a job and they can't get a job because they can't pay their bills.

Liz Weston's Book on Credit Scores is Worth Reading

Tue, 11 Oct 2011 13:07:54 -0800

Liz Weston, who is MSNBC's excellent consumer reporter, is the author of an excellent book on credit scores, Your Credit Score, Your Money & What's at Stake: How to Improve the 3-Digit Number that Shapes Your Financial Future (available on Amazon).

In the first chapter she explains that even a little ignorance about how to make your score higher can cost hundreds of thousands of dollars in higher interest payments over the course of a lifetime.

She dispels myths such as the idea that closing accounts will help raise your score. According to Weston, closing accounts will never raise your score and can frequently lower it.

The chapter headings indicate the topics she covers:

1 - Why Your Credit Score Matters
2 - How Credit Scoring Works
3 - VantageScore - A Revolution or Just More of the Same?
4 - Improving Your Score - The Right Way
5 - Credit-Scoring Myths
6 - Coping with a Credit Crisis
7 - Rebuilding Your Score After a Credit Disaster
8 - Identify Theft and Your Credit
9 - Emergency! Fixing Your Credit Score Fast
10 - Insurance and Your Credit Score
11 - Keeping Your Score Healthy.

An updated edition is available in a few weeks according to Amazon.