Media outlets were set into a frenzy last month when the New York Attorney General's office announced a landmark settlement agreement which had been reached with the 3 major credit reporting agencies - Equifax, TransUnion, and Experian. The agreement will completely overhaul many of the practices and policies previously held by the credit reporting agencies (CRAs) and has the very real potential to bring about credit score increases for millions of American consumers.
The 41 page long agreement will introduce a large number of credit reporting and dispute resolution changes, some of which are not all that exciting for consumers and several others which are extremely so. If you are interested in reading the agreement in its entirety it can be found here. However, for those of you who would simply prefer the highlights you can read below for the top 5 things which you need to know about the new settlement agreement and the ways it may or may not impact you directly.
1. Changes will be implemented for consumers nationwide.
Although spearheaded by the New York Attorney General, Eric Schneiderman, and the despite the fact that the settlement was actually made solely with the state of New York, all of the changes detailed in the settlement will be implemented for all US consumers across the country. One of the primary reasons why the new policies and procedures will be rolled out for all consumers instead of only those consumers located in New York state is due to the fact that it does not make sense, logistically speaking, for the CRAs to have separate policies and procedures in place for an individual state.
2. Changes will still take time.
The CRAs are going to have to complete tremendous amount of programming work in order to implement the changes detailed in the settlement and, as a result, the changes are not expected to happen overnight. Instead the CRAs have been given a total of 3 years and 3 months, broken down into 3 phases, to complete all of the steps which will be required in order to comply with the settlement. Here is a quick overview of the 3 phases.
· Phase 1 (September 8, 2015)
The easiest changes in the settlement must be implemented by this date. These primarily include changes which will not require an extensive amount of programming and/or training.
· Phase 2 (September 8, 2016)
The changes which must be implemented by the Phase 2 deadline are those which are more (but not most) time consuming from a logistical standpoint. Phase 2 initiatives will involve the development of many new internal policies in addition to new polices for credit reporting between the CRAs and their customers (aka data furnishers).
· Phase 3 (June 8, 2018)
The "Completion Date" detailed in the settlement is the deadline for implementing all remaining changes in the settlement. Changes included in the Phase 3 rollout are the most time consuming in nature from a programming and training standpoint.
3. Medical Collections
Among the most exciting new policy modifications in the settlement include those which are related to the handling of medical collection accounts. Once implemented there will be 2 major changes in medical collection reporting procedures.
a. Delayed Reporting - Medical collection accounts will not be permitted to appear on a credit report until the account is at least 6 months past the date when the account initially went delinquent. This change is required to be implemented by Phase 3 (June 8, 2018). Preventing the early reporting of medical collections will allow consumers more time to ensure that medical bills are paid by insurance without the fear of their credit reports and scores being damaged due to slow insurance claim review processes.
b. Accounts Paid by Insurance - By the Phase 2 deadline (September 8, 2016) the CRAs will be required to remove or suppress from credit reports any medical collections which are paid or are being paid by a consumer's medical insurance provider. The removal/suppression will be retroactive and will apply to medical collection accounts which were paid by insurance in the past but are still currently remaining on any consumer's credit report. What makes this change especially exciting is the fact that the removal of a collection account from a consumer's credit reports, depending upon the situation, could potentially have an extremely positive impact upon that consumer's credit scores especially if it were the only negative account present.
4. More Dispute Resolution Influence from the Credit Reporting Agencies
One of the more anticipated changes by consumers which will be implemented in Phase 1 (September 8, 2015) has to do with the way which the CRAs handle certain disputes. In the past when a consumer disputed an account with the CRAs and included supporting documentation (i.e. proof that an account was paid off) the CRAs would still fully rely upon the data furnisher to either modify, delete, or verify the account.
Once the new policy is implemented, should a consumer submit disputes to the CRAs with supporting documentation AND the account is still verified as accurate then the CRAs themselves will also be required to assign agents to review the supporting documentation in order to determine if a deletion or change is warranted. If a change is deemed to be warranted then the CRAs will actually modify or delete the inaccurate account themselves. Should everything work as planned then it should result in a much easier process for consumers to see errors corrected on their credit reports (provided they have proof of the error).
5. More Free Access to Credit Reports
Since the FACTA amendment to the Fair Credit Reporting Act was passed in 2003 consumers have had the right to claim a free credit report from each of the 3 CRAs annually via the website AnnualCreditReport.com. In addition to this free report some consumers will also be entitled to a 2nd free annual credit report from the same website as part of the new settlement. The additional free report, which must be made available by the Phase 2 deadline (September 8, 2016), can be claimed by any consumer who meets the following criteria: (a.) the consumer already pulled an initial report from AnnualCreditReport.com in the past 12 months and (b.) the consumer initiated a dispute after doing so.
As previously mentioned, the full settlement agreement spans a total of 41 pages. There are certainly many other changes which will be brought about as a result of the new settlement in addition to those listed above. If you are interested in learning more about the coming changes feel free to check out the following article: Huge Changes Coming to a Credit Bureau Near You.
Michelle Black is leading credit expert with over 13 years of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.