Credit Reporting Deals Already Show Benefits, Experts Say

By Jessica Corso

Law360

Law360, Chicago (September 17, 2015, 6:05 PM ET) -- The attorneys who hacked out the 32-state agreements that changed the way credit reporting agencies handle disputes nationwide sat down once again on Thursday, this time to tell a Chicago audience how the credit reporting landscape has changed since the deals were signed.

Linda Dubnow, the head of TransUnion LLC’s law department, told industry watchers at an American Bar Association conference that she found the settlement-imposed meetings among industry leaders about the way debt data is collected and reported on “beneficial.” She said she hopes the discussions continue even after state regulators are satisfied that the terms of the settlements have been met.

“The meetings yield benefits beyond the four corners of the settlement,” Dubnow said, adding that the industry is “trying to use the settlements to do the right thing.”

According to 32 state attorneys general, the right thing to do is provide greater access to the resources consumers need to dispute debts listed on their credit reports and to be more careful about the way certain types of debt, such as medical debt, is reported.

The attorneys general came to two agreements with the nation’s three largest credit reporting agencies — TransUnion, Equifax Information Services LLC and Experian Information Solutions Inc. — earlier this year.

The first, written by New York Attorney General Eric Schneiderman in March, set out a new model under which the agencies don’t report medical debt for 180 days after it is issued to give consumers an ability to dispute the charge. The agencies must also put in place a multistep dispute resolution process and take identity theft claims more seriously.

The agencies also cannot list noncontractual debt such as fines and tickets in a person’s report or sell credit monitoring services to consumers calling with a dispute.

In May, the three agencies signed off on a second agreement with 31 other states, through which they agreed to similar provisions and to pay a collective $6 million penalty.

Both agreements apply nationwide.

Jeff Loeser, an attorney with the Ohio Attorney General’s Office who led negotiations on the second settlement, said the attorneys general were pushed to begin investigating the credit reporting industry after seeing a rise in complaints from consumers angry that concerns about old or unknown debt were not being taken seriously.

He said that while his office was focused on protecting consumers, he wasn’t deaf to concerns from the industry about the new regulations. He said the Ohio-led deal allows credit reporting agencies to bypass the new dispute resolution process for frivolous claims.

“You pass those names on to us,” Loeser told a concerned audience member when asked what to do with credit repair organizations and other parties that are known to file a large volume of difficult-to-square disputes.

Troutman Sanders LLP partner Ashley Taylor, who negotiated on behalf of Equifax, said that, while the attorneys general are skewed toward consumer concerns, data furnishers have told him that the “requirements are sufficiently sensitive to the nature of their disputes.”

Dubnow agreed, saying the purpose of the settlement was not only to correct past industry standards but also to address consumer misunderstandings about the credit reporting process. And the agencies have at least three years to phase the new regulations in, so as not to burden the industry, she pointed out.

In the end, Loeser said, credit transactions have become much more complex than when he was a new attorney in the 1970s and 1980s. What used to be mostly localized, paper-based transactions have become nationwide and electronic, and reports now follow consumers everywhere, even as a requirement to getting a job, he pointed out.

The way the industry operates must also change, Loeser said, and attorneys general “have to play a role” in that change.

--Additional reporting by Evan Weinberger and Beth Winegarner.  Editing by Brian Baresch.