Michigan Collection Law Blog published By Michigan Creditor Lawyers Nitzkin & Associates

The Fair and Accurate Credit Transactions Act ("FACTA") was enacted in 2003 as an amendment to the Fair Credit Reporting Act ("FCRA"). According to Stuart King's Risk Management Blog, he noted that just yesterday, President Bush signed HS 4008 which states:

Except as otherwise provided in this subsection, no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.

Mr. King noted that:

Any American consumer who purchases goods or services from an American based company has a right to take legal action if the receipt from a credit card transaction shows either more than the last 5 digits of the credit card number or the card expiry date. And there are quite significant fines at stake as well. According to this document, Costco, California Pizza Kitchen, FedEx Kinko's, IKEA, Wendy's, TGI Friday's, T.J. Maxx, and Radisson Hotels (among others) are all defending against FACTA class action lawsuits.

I just thought you should know.

I confess...I loooove Zombie movies. George Romero is one of my all time favorite directors. He produced Night of the Living Dead, Day of the Living Dead and other classic brain eating films. Its great to see it on the silver screen. Its horrible when a debt that was discharged in bankruptcy or had been previously paid, re-appears on your credit report. This kind of reappearing debt is now called "Zombie Debt." The culprits behind this voodoo are credit card companies that sell off this debt and collection agencies that love to re-age the debt. Bad debts must be removed from your credit bureau after seven years. Collection agencies re-age the debt so that, like a social disease, it always stays with you for life or until you pay it. Take heart (and don't let the mad scientist at the banks and collection agencies rip it out of you) and know that you have rights under the Fair Debt Collection Practices Act ("FDCPA") and the Fair Credit Reporting Act ("FCRA").

If a little zombie re-appears on your credit report, file an online dispute with the credit reporting agency such as Experian, Equifax or Transunion ("credit reporting agencies).. Its very easy to do and its far less painful than having your credit rating affected by the little creature. The credit reporting agency then has 30 days to verify the zombie with the credit furnisher (e.g. the creditor). If the debt is not verified within that time period, the CRA has to remove the zombie from your credit report. "BUT WHAT IF THE DEBT IS VERIFIED AND IS NOT REMOVED?" you might ask. Hire a law firm to file a lawsuit under the FDCPA and the FCRA as the debt is not yours. When you prevail on your claim or settle it, the zombie debt can actually make you some money and it will cause the credit reporting agencies and/or the credit furnisher to pay your attorneys fees.

Don't let Zombie debt devour your credit rating. Instead, use it to your advantage.

On more than on occasion, I have advised you to get your free credit report as is your right under the Fair Credit Reporting Act. Once a year, you can obtain your free credit reporting by visiting www.annualcreditreport.com.

I have also advised you to check it out and to make sure that it is accurate because more than 80% of all credit reports contain inaccurate information. I have been remiss because, until now, I have not told you HOW to go about disputing an item on your credit report. This is very easy to do; here's how:

1. Visit www.annualcreditreport.com. This is the official website sponsored by Experian, Equifax and Transunion. These are the big three credit reporting agencies. Be prepared to answer come key questions about recent credit transactions in order to obtain your credit report. Don't have a computer? No problem. You can call the annualcreditreport.com people at 877-322-8228.

2. Read the credit report. OK, its not going to read quite as easily as you may like. But, if you were smart enough to get to this step, you are smart enough to spend a few minutes to read the instructions about how to understand your credit report. Let me give you some key ideas about reading your report.

Key idea 1 - Make sure all of the reported accounts actually belong to you. One of the biggest mistakes that the credit reporting agencies make on credit reports is called "mis-merging." If someone else has a name that is similiar to yours, a credit reporting agency may report that other person's debt on your credit report. Be vigilant and review your credit report to make sure that all of the credit grantors who are reporting anything about you are actually YOUR credit grantors. This happens more frequently than you might guess.

Another way for an account to find its way to your bureau that should not is when you are merely an "authorized" user of an account rather than the one who owns the account. For example, Rachel gets a visa credit card. She calls her bank and asks for an additional card for Jonah. Jonah racks up a bill on Rachel's account. That account should not be reported on Jonah's credit bureau because he is not responsible for that bill. Frequently, however, the credit card companies will report the bill to both Rachel and Jonah's account. If you are Jonah and the credit entry is not good, then dispute it and get it off your credit report.

Key idea 2 - Check the validity of late payments reported on your credit report. Nothing drags your FICO score down as quickly or frequently as a late payment. Credit grantors frequently report payments as current, late 30 days, late 60 days, late 90 days, etc. Read those payment reports. See if any late payment has been reported about you. Sometimes a credit grantor will report you as a late payment when you have not been late. For example, some years, ago, American Express had reported me as having failed to pay my bill altogether....until I faxed them the cancelled check. I could not believe that they had screwed up that bad. Nevertheless, the lesson is plain....credit reporting agencies screw up all the time. If they do, it is your responsibility to make sure that they have their facts right.

Key idea 3 - Check the expiration date of any derogatory information on your credit report. Bad debts that are yours can only stay on your credit report for 7 years. Bankruptcies can only stay on your report for 10 years. Any debt older than these dates must come off your report. Frequently, they do not. Simply follow the dispute instructions below to remove expired debts.

Key idea 4 - Check out the Public Records. This includes judgments, tax liens. Since these items are filed by name and not by one' s unique social security number, it is very likely that someone with even a somewhat common name may have an items appear on his or her credit bureau. Make you are not one such victim.

HOW TO MAKE YOUR DISPUTE

1. On line. Its a piece of cake. With your credit reporting sitting on your monitor, there is a unique identifying number next to each item on your credit bureau. You can click the DISPUTE button next to each such item that you dispute. Then a pull down list of REASONS FOR THE DISPUTE will appear. Select the appropriate reason. It is just that simple.

2. By mail - In your letter that you will have to address to the particular credit reporting agency that is reporting the offending entry, be sure to put your name, address, telephone number and social security number on the letter. Also put the identifying information about the credit report you are disputing. (e.g. my credit report of September 15, 2007. Report number. xxxx -x-x---xx). Then, make sure that you report the name of the credit grantor and the identifying number of the entry in your letter. Finally, state why are you disputing that item.

WHAT HAPPENS NEXT?

As soon as the credit reporting agency receives your dispute, it is required to present your dispute to the credit grantor. The credit grantor then has 30 days to either verify that the debt is being properly reported or to remove it. By default, if the credit grantor does not verify the debt within that 30 day period, the item must be removed from your credit report. But note, that if the credit grantor subsequently verifies that debt as being reported accurately, it can have that debt placed back on your credit report.

THE CREDIT GRANTOR IS STILL REPORTING THIS DEBT ON MY CREDIT REPORT WHEN IT SHOULD NOT

You then have two options. Option 1 - sue the credit grantor. Note that you cannot sue the credit grantor until you have gone through the dispute process above. If you file a lawsuit without having gone through this process, you will get kicked out of court. Better yet, hire an attorney who will guide you through the litigation process. The attorney will or should cost you nothing out of pocket since under the Fair Credit Reporting Act, you are entitled to attorneys' fees if you prevail on your case. Note that most of these kinds of cases settle anyway and if you are in the right, you will likely get a favorable settlement.

Option 2 - You can put up to 100 words on your credit report to inform people of your side of the story. This rebuttal option will not fix any damage done to your FICO score on account of the creditor's reporting you as a late pay. It will give a reader, however, an idea of why this item is being reported as it is. This is not my favorite option because the damage done to your credit is not fixed with this option.

There, I feel better. You now know how to dispute items on your credit report. Now, I can go back to preaching to the world "Pull your credit report every year." I can now tell the world, "Go dispute whatever is incorrect with your report. It's easy and I have told you how to do it."

Under the Fair Credit Reporting Act ("FCRA"), soliciting lenders are able to give search criteria to credit reporting agencies. The agencies then provide a list of persons by name and address who meet those criteria to the soliciting lender. Fear not, as these lenders are not provided with your social security number. Moreover, the furnishing of your name and address to these lenders does not leave a foot print on your credit report as an inquiry into your credit by a lender with whom you have applied for credit would. These soliciting creditors

Then, the soliciting enders may make offers of credit to the persons on this list. However, under the FCRA, these offers must be "firm offers of credit" which means that the lender must be ready to close that loan on the terms that it offers.

Some people get bombarded with telephone calls, letters, and now emails by lenders asking to for their refinance business. If you are one of those persons that constantly receives such solicitations, you can opt out by visiting www.optoutprescreen.com. It's the official website of the Consumer Credit Reporting agencies and it will prevent your name from going to these soliciting lenders. Opting out is easy. Just follow the link on the blog and fill out the information requested. Then, go live in peace.

It is time to get your free credit report. Note that you have a right under the Fair Credit Reporting Act to get a free copy of your credit report, once a year. Be careful. There are a number of companies that use this as bait to get you to buy their credit monitoring services for a monthly fee. You do NOT have to sign up for any of these credit monitoring services to get your free credit report.

Note that you are entitled to a free credit report annually. You are not entitled to see your credit score for free. That you have to purchase.

To order your free annual report from one or all the national consumer reporting companies, and to purchase your credit score, visit www.annualcreditreport.com, call toll-free 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P. O. Box 105281, Atlanta, GA 30348-5281.

There is an excellent chance that there is something erroneous with your credit report that is dragging your credit score down. Indeed at least 70% of all credit reports have some sort of erroneous information. This can include data that does not belong to you. Derrogatory information that should have fallen by the way side (7 years for a late payment, 10 years for a bankruptcy). It costs you nothing to look at your credit report. Disputing and removing errors, however, can save you a fortune.

I just came across a funky blog that had a great article entitled "Another Simple Way to Understand your Credit Report. This blog post was excellent. It talked about how someone with an excellent credit score can go down 100 points in one day with a single late payment. The author also spoke about how people with differing credit scores can end up purchasing the same asset and yet get financed quite differently resulting in one paying far more interest than the other.

This article should be read in light of the Fair Credit Reporting Act. ("FCRA"). You see, while FCRA is the basis for many of the issues raised in this blog post, many of the points made by the author do not relate to anything in FCRA specfically. For example, the late payment will penalize someone with a high FICO score far more than one with a mediocre FICO score. I recommend this article, highly.

I just read an excellent article by Elizabeth Fisher entitled You Have a Right to Dispute Your Credit Report. It is a quick and highly informative read. Ms. Fisher notes that her credit bureau contained a pile inaccuracies that painted her as a deadbeat. Clearly, she is not. She is not alone. Approximately 80% (yup..you read that right...80%) of all credit reports contain errors.

As consumers, we are so daunted and bullied by big business and their computers, we simply take it for granted that what they are telling our potential credit grantors MUST be accurate. I am here to tell you, that it ain't all true and it is affecting your financial condition. Here are some of the most common errors:

1. Mismerge - Your name is Jim Smith. The credit bureau might merge another Jim Smith's informaiton into your bureau. Forget that he has a different social security number. If he has derogatory information on his bureau, it gets posted to yours.

2. Debts that are out of statute. - You may have debts that are no longer collectible because they are out of statute. The credit bureau may still report this debt as owed even though it is not supposed to do so. Bad debts can be reported for up to 8 years. Prior bankruptcies are reported for up to 10 years.

3. Late payments that were not late.

Disputing these debts is easy. You can dispute any debt on your bureau on line with the credit reporting bureau. Once you dispute the debt, the bureau has 30 days to verify the debt with the credit reporter. If the bureau is unable to get verification of the debt, then it must remove the debt from your bureau. If the bureau gets a confirmation of the debt from the credit reporter, you can then sue both the credit reporter and the credit bureau. DO NOT LET THE CREDIT BUREAUS bully you into thinking its a long and arduous hassle to get a debt removed from you bureau because it is not. They are governed by the Fair Credit Reporting Act and the recent update called Fair and Accurate Credit Transactions Act (FACTA).

You have credit and you have rights. Don't be afraid to use either of these.

I just read a great article about changes coming to FICO scores this September. Pat Earnhard reports that the practice of using someone else's credit score to boost one's own will be curbed by the Fair Isaac Company, the progenitor of the omniscient FICO score. Most credit grantors use the FICO score to determine whether your loan will be granted or not.

Piggy backing was originally intended to be used by parents helping their children establish credit. The parent would add the adult children to his or her credit accounts and the child would get the benefit of the parents credit score. In recent years, Piggy Backing has been abused. Credit repair companies would pay individuals with excellent credit a sum of money to add their clients to the person's account. The piggy backing exception has resulted in a great deal of piggy back abuse. Naturally, the individual with the artificially inflated credit score obtains credit that he cannot handle. When a debt goes bad, we all pay. The ride will soon be over.

An article in Bank Lawyer's Blog talks about piggybacking credit being "the latest and greatest" way to improve one's FICO score. With Piggybacking, someone with a subprime score ("a Subprime Risk") can become an authorized user of someone else's credit without actually being authorized to incur credit on the better credit risk's ("BCE") accounts. The subprime Risk then gets the benefit of BCE's credit score and resultantly, it raises the Subprime Risk's FICO score. This is called Piggybacking. It is neither the latest nor the greatest.

Piggybacking has been allowed for a number of years. This exception to the Fair Credit Reporting Act was designed to allow an adult child to build credit using the benefit of the parent's credit score. It has, unfortunately, been abused. Indeed, there are companies that will pay hundreds if not thousands of dollars to BCE's for the benefit of leasing their better FICO scores to Subprime Risks. This loophole to allow a young adult to build credit has been hijacked by those who are, for whatever reason, just plain poor credit risks. Common sense would tell you that Piggybacking results in deception to credit grantors and the granting of credit to those who are simply unable or handle or manage the credit responsibly. When this happens, the credit grantor is the first one to eat these losses. However, these losses are ultimately bourne by the consumer.

Fair Isaac, the company that invented the FICO score back is wise to this perceived industry abuse. There is talk in the industry that Fair Isaac is in the process of re-tooling the FICO score to close this exception to the general rule that everyone's credit must be a reflection of one's own credit history. Unfortunately, like any other war, there is collateral damage. In this case, it is our children.

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The Fair Credit Reporting Act ("FCRA") allows potential credit grantors to get your name and address from a credit reporting agency ("CRA") in order to send you a firm offer of credit, if you meet certain criteria. So just what is a firm offer of credit? In the 6th Circuit, that issue is not quite so clear.
Recently, Judge Cleland from the U S District Court for the Eastern District of Michigan held in Phinn v Capital One Auto Finance, that a firm offer of credit does not have to include terms of repayment including an interest rate.

Ken Phinn is a consumer that received a flyer from Capital One Auto Finance. In that flyer, Capital One offered to finance up to $25,000 in credit for an auto purchase to Mr. Phinn. The flyer did not discuss the interest rate, the term or the amount of repayment. Phinn contended that this was not a firm offer of credit as required by FCRA in order to go trolling through a CRA's records for his name. Judge Cleland held that the offer was firm enough to satisfy the requirements of FCRA and dismissed the case.

I don't think this case should give the consumer any reason for alarm. Potential credit grantors simply seek the names and addresses of consumers that meet certain criteria. CRAs only return names and address to the credit grantors. CRAs do not give the credit grantors any other information about the consumer. I think this case was more in the nature of a fund raiser for Mr. Phinn as even if there were a technical violation of the FCRA, so what? He was not harmed. The CRA's identifying him as an individual who met certain criteria did not lower is FICO score.
Again, Judge Cleland wrote another well reasoned and persuasive opinion.

The 6th Circuit has just decided, for the second time, Bach v First Union National Bank. I was very surprised to see the court of appeals cut the punitive damages awarded by an obviously outraged jury from $2.6 million down to $400,000. Ms.Bach obvious had a good case for violation of the Fair Credit Reporting Act against the bank because the jury awarded her $400,000 in damages. Equally obvious is the fact that she was treated maliciously by the bank as the jury also gave her punitive damages of $2.6 million. What is surprising is that the 6th Circuit took what I think is very extraordinary action. It reduced the jury's award of punitive damages of $2.6 million down to $400,000. The court reasoned that there were not enough aggravating factors to support a $2.6 million award. I think differently. I think that it took an incredible amount of nerve for the court to second guess a jury verdict based upon days and days of testimony and deliberation.

So why did the court really reduce a punitive damages verdict to 1/6th of its original value? I don't know. But I can tell you that courts are usually very reticent to supplant a jury verdict for their own. I do have to wonder, however, is this an omen of things to come in consumer litigation in our jurisdiction? Should consumers and their attorneys worry about whether this decision was simply a rogue opinion or is it the beginning of trend that will tend to route consumer rights? Time will tell.