introduced by Senators Jack Reed (D-RI) and Bill Hagerty (R-TN) and Representatives John Rose (R-TN) and Ritchie Torres (D-NY). If enacted, this pro-consumer legislation would curb the abusive use of mortgage credit “trigger leads” to all but a very limited set of circumstances. Trigger leads happen when consumers apply for a mortgage, and the lender puts in an inquiry to a credit reporting agency to pull their credit. Under the Fair Credit Reporting Act, credit reporting acts are currently allowed to resell consumer information to prospective creditors, if they are ready to make consumers a “firm order of credit.” As a result, though, many consumers have been inundated with hundreds of phone calls, texts, and mails, just moments after they applied for a mortgage: adding confusion and stress during an already very stressful time. This law would stop this practice, allowing credit reporting agencies to pass on consumer information only in a very limited set of circumstances, in cases where potential lenders already have a firm relationship with the consumer (for instance, as their current bank or credit union where they hold deposits).

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CFA’s statement addresses three types of emerging forms of credit: Buy Now, Pay Later loans; Earned Wage Access (EWA) programs; and faux Earned Wage Access, overdraft protection, and cash advance products that collect “tips.”

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Download Letter

Click Here to View a Newer Letter to CFPB on FCRA

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The phone survey of 1,001 representative Americans showed that 20 percent of households with incomes below $25,000, but only 13 percent of those with incomes of at least $75,000, intended to apply for credit in the next 12 months.  At the same time, as the table below shows, these low-income consumers are far less likely than the high-income consumers to answer consumer knowledge questions correctly.

“At least one-quarter of low-income consumers lack the knowledge to help them raise low credit scores,” said Stephen Brobeck, a CFA Senior Fellow.  “This lack of awareness could limit their access to credit or subject them to higher costs.  Low income households can least afford to pay higher interest rates and fees associated with low credit scores,” he added.

Low-income consumers are more likely than high-income consumers to consider their knowledge of credit scores to be fair or poor – 58 percent vs. 37 percent.  Probably one reason for this perceived lack of knowledge, as well as less actual knowledge, is that low-income consumers are much less likely to have obtained or received any of their credit scores in the past 12 months – 32 percent vs. 59 percent for high-income consumers.

CFA and VantageScore developed and co-sponsor an interactive website, CreditScoreQuiz.org, that consumers can use to test their knowledge of credit scores. The website includes a 12-question quiz, available in both English and Spanish (http://www.cuestionarioparaelpuntajedecredito.org/).

“Taking our online credit score quiz provides an easy way for consumers to improve their credit score knowledge,” said Barrett Burns, President and CEO of VantageScore Solutions.  Some 250,000 individuals have taken this quiz.

CFA and VantageScore will prioritize low-income households in the dissemination of the quiz this year.  This effort will include working with organizations and networks that serve and have access to millions of low-income consumers.

While survey results indicated that low-income consumers had the least amount of  knowledge about credit scores, a large number of all consumers still lack important basic knowledge:

• Only 22 percent know that on a $20,000, 60-month auto loan, a borrower with a low credit score would likely pay more than $5,000 in interest than a borrower with a high score. Low scores may qualify borrowers for subprime auto loans only, with annual interest rates frequently exceeding 20 percent.
• Only 33 percent know that a credit score typically measures the risk of not repaying a loan. 14 percent think that it measures knowledge or attitude toward consumer credit.
• Only 50 percent know that an electric company can use credit scores to determine the amount of deposit.
• Nearly half (48 percent) think that a person’s age is a factor used to calculate a credit score. However, only one’s use of credit actually influences their scores.
• Over two-fifths (42 percent) think that credit repair companies are always or usually helpful in correcting any credit report errors or taking other measures to improve one’s credit score. Experts agree, however, these companies tend to charge relatively high fees to do what consumers could do on their own for free.

In brief, consumers can raise their credit scores or maintain high scores by:

• Consistently making loan payments on time every month. A late payment may lower one’s credit scores by dozens of points.
• Using a small portion of the credit available on a credit card. In general, the higher the percentage of credit line that is drawn down, the lower one’s credit score.
• Paying down credit card debt rather than just shifting it to another credit card or to a home equity loan.
• Regularly checking one’s credit reports to make sure they are error-free. This can now be done for free monthly by going to annualcreditreport.com or by calling 800-322-8228.

The survey was undertaken by SSRS via phone (70% cell, 30% landline) of 1,001 representative Americans from June 16-21, 2020.  The survey’s margin of error is plus or minus 3.5 percentage points.

Contact: Jack Gillis, 202-939-1018

The Consumer Federation of America is an association of more than 250 non-profit consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy.

 VantageScore Solutions, initially developed by America’s three national credit reporting companies (CRCs) – Equifax, Experian, and TransUnion – is the independently managed company behind the VantageScore credit scoring model.

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Specifically, this bill will create a single online consumer platform that will provide unlimited consumer access to credit reports and scores, allow consumers to initiate disputes about reporting issues, and let consumers track and protect their credit data. The bill will also increase accountability of the three largest credit reporting agencies, Equifax, Experian, and TransUnion by requiring preventive audits to increase credit report accuracy. Further, the legislation will establish a CFPB ombudsman to increase supervision and enforcement of all credit reporting agencies.

“This bill is an important step in making credit reports more accessible to consumers and fixing a broken system for credit reporting disputes,” said Rachel Gittleman, Financial Services Outreach Manager with the Consumer Federation of America. “Especially during the current financial crisis and its aftermath, consumers need easy-to-use tools to better understand their credit history and initiate disputes. We commend this bipartisan effort but urge Congress to go further to protect consumer credit during the COVID-19 emergency, including a moratorium on negative credit reporting.”

Congress has not passed significant credit reporting reform in 17 years. Since the start of the COVID-19 emergency, the Consumer Financial Protection Bureau (CFPB) has received a record-setting volume of complaints and credit reporting (along with debt collection) tops the complaint database for the most complained about product overall. Further, the Federal Trade Commission (FTC) found that 21% consumers have verified errors in their credit reports, while 13% had errors that affected their credit scores.

“We applaud the House of Representatives for their work to increase transparency and accountability in the credit reporting system,” said Rachel Weintraub, Legislative Director and General Counsel with CFA. “Further, we urge the Senate to pass this important, bipartisan legislation to fix glaring issues in the credit reporting system. This modest legislation is long overdue and especially needed during the current financial crisis.”

Contact: Rachel Gittleman, 609-571-5953

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On March 20, 2020 CFA wrote to the President and Congress urging the adoption of a series of measures to address a wide range of consumer protection issues resulting from the coronavirus. While a few of the priorities identified by CFA were included in the final bill, including some measures related to paid sick leave and mortgage relief, most were not.

“Protecting consumers is not just a matter of economic justice, it is also the best way to protect the economy,” said CFA Executive Director Jack Gillis. “CFA will continue to fight to ensure that these critical measures are adopted. Enabling consumers to stay financially healthy is critical to staying physically healthy.”

“Congress must focus on a more comprehensive package to aid consumers. Many of the measures that are most needed were included in the House COVID-19 response bill, but the Senate failed to include them in their Senate bill. We look forward to working with members to ensure that these critical measures are quickly adopted,” said CFA’s General Counsel and Legislative Director, Rachel Weintraub.

The Good News: the bill did take limited steps, along the lines advocated by CFA, to:

Create a comprehensive national paid sick leave policy. Lack of paid sick leave threatens to nullify hard won gains from social distancing. CFA recommended adoption of a comprehensive national paid sick leave policy that must ensure that all employees (and their employers) and independent contractors, have the economic support they need to provide paid leave. With this bill and the Families First Coronavirus Response Act, Congress has provided up to 80 hours of paid sick leave for employees but there are significant gaps. Employers do not have to provide full pay, businesses with fewer than 50 employees and Federal employees of the executive branch can be exempted.

Protect homeowners and renters from economic hardship. CFA recommended forbearance be provided to economically distressed mortgage buyers and to halt evictions and foreclosures for people impacted by the COVID-19 virus. Congress adopted limited measures to address those concerns. On the plus side – impacted consumers with federally-backed mortgages – Fannie Mae, Freddie Mac, Federal Housing Administration, Veterans Affairs, or Rural Housing loans – can receive payment forbearance for 180 days, renewable for another 180.  Renters living in properties with federally backed mortgages can get rent relief if the owners seek and get forbearance on their loans. Temporary forbearance can be had without documentation or paperwork. On the other hand, the bill doesn’t cover the 15 million loans held in bank portfolios or in private label securities meaning that not all mortgage consumer will be treated the same. Also, there is no clear provision liquidity needed by nonbank servicers who provide the great majority of the FHA, VA and RHS loans through Ginnie Mae.

The bill does less to address other measures advocated by CFA to protect the financial well-being of the most vulnerable Americans. For example:

• The bill provides limited assistance for student borrowers. The CARES Act exempts some, but not all, federal student loan recipients from making payments on those loans for six months, with the interest waived during that period. But borrowers will still need to make up the payments later. Holders of Perkins Loans, FFEL loans held by a bank or other financial institution, and private student loans are not eligible for forbearance. CFA continues to call for all student loan payments to be canceled for the duration of the crisis, with the government making payments on their behalf.

Missing from the bill are the following critical consumer protections:

• The bill does not curtail high-cost lending schemes. CFA had called for new consumer protections against high-cost credit, such as payday loans, refund anticipation loans, and car title pawns, to prevent vulnerable COVID-19 impacted consumers from being trapped in a cycle of debt. The bill failed to address this concern and CFA continues to call for a 36% usury limit on such loans.
• The bill fails to suspend debt collection or place a moratorium on negative credit reporting. The bill does little to protect consumers’ credit records during the crisis. The bill’s provision on credit reporting is actually weaker than the current industry standard for disaster victims.
•  The bill fails to protect against utility shutoffs. CFA will continue to push for a moratorium on all utility shutoffs during the crisis.

• The bill fails to maintain consumers’ access to affordable communications services. At a time when remote communications are more critical than ever, the CARES Act failed to provide broadband subsidies for low-income Americans and failed to require broadband providers to drop data caps, overage fees, and throttling practices for services needed during the crisis. Nor does it take any steps to require big data platforms to promote public interest messaging or to crack down on misleading advertising and price-gouging.
• The bill does nothing for hotel customer and airline passengers while providing extensive financial assistance to corporations. It does not require the airlines to provide refunds or eliminate price-gouging change fees during the crisis. It also fails to address the airline industry’s lack of price transparency. Nor does it condition support for hotel chains on their agreement to honor requests for room and event cancellations without penalty.

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Our nation’s comprehensive COVID-19 response must include a strong paid sick leave policy and protecting consumers by ensuring affordable access to communications services, preventing utility shutoffs, mortgage foreclosures, student loan defaults, negative credit reporting effects, overpriced insurance, and making sure that airline and hotel customers’ rights are protected in any financial bailout of these industries.

The Consumer Federation of America has identified critical consumer protection issues that must be addressed as part of a comprehensive response to this crisis. Many of these items are focused on protecting those hardest hit by the economic fallout. Doing so is not just a matter of economic justice; it is the best way to stabilize the economy.

CFA and it’s over 250 national, state and local organizations are committed to working with policymakers at all levels to implement a “Comprehensive Consumer Agenda to Address the COVID-19 Crisis”.  For the details behind the following agenda, please see our LINK March 20, 2020 letter to the President and Congress.

A Comprehensive Consumer Agenda to Address COVID-19

1. Create a comprehensive national paid sick leave policy to reduce the spread of the disease. Lack of paid sick leave encourages tens of millions of workers to continue working when they are sick, which can nullify the critically important benefits of social distancing.

2. Protect those hardest hit from economic hardship by:

• Providing forbearance to economically distressed mortgage borrowers. Any homeowner experiencing economic hardship because of the virus must have access to 180 days of forbearance on mortgage payments.
• Halting evictions and foreclosures. There must be a 180 day moratorium on evictions of tenants experiencing economic hardship because of the virus, with support provided to property owners who suffer rental income losses.
• Canceling student loan payments for the duration of the crisis. It is not enough to pause monthly payments, the government must make tax free payments on holder’s behalf so millions of Americans can continue to make progress reducing their student debt as the economy struggles.
• Suspending debt collection. Debt collection activities, including legal proceedings, garnishments, repossessions, and debt selling, must be prohibited during the state of emergency.
• Curtailing high-cost lending schemes: A rate cap of 36% must apply to high-cost credit, such as payday loans, refund anticipation loans, and car title pawns to ensure that vulnerable consumers aren’t trapped by overpriced debt.
• Placing a moratorium on negative credit reporting. To protect consumers’ credit records during the pandemic, there must be, at least, a four month moratorium on negative credit reporting.
• Maintaining consumers’ access to affordable communications services. As remote communications become critically important, service providers must abandon pricing practices that maximize revenues, suspend overcharges for “excess” data usage, terminate service cut-offs, and increase network availability to the public.
• Requiring big data platforms to promote the public interest. Big data platforms must remove misleading information. Their big microphones must promote the public interest, not the corporate bottom lines. Non-commercial pandemic information from public health, safety and governmental entities must be given a prime location on all screens.
• Preventing misleading advertising and price-gouging. Advertisers, and the media carrying ads, must ensure that claims related to the coronavirus are completely accurate. Online marketplaces must reject products and services making misleading claims or that offer basic necessities at unfairly inflated prices.

3. Ensure that consumers’ interests are protected as industries seek federal financial support by:

• Mandating fairness in the skies. Airlines must waive cancelation and change fees for all consumers during the federal state of emergency. As a condition of an airline bailout, Congress must require price transparency, make future fees for cancelations, changing flights, and checking bags proportionate to actual costs, lift state preemption, and provide consumers with private rights of action.
• Accommodate hotel customers. As organizations and individuals heed requests to limit non-essential travel and cancel events, some hotels have continued to charge consumers and organizations. As a condition of a hotel bailout, Congress must require hotels to honor requests for room and event cancelations without penalty and to refund deposits until the federal state of emergency is suspended or travel limit recommendations are lifted. Going forward they must provide full price transparency on charges and extra fees.
• Reduce auto insurance premiums to reflect reduced driving. Insurers should be required to offer discounts to people driving less due to COVID-19.  Miles driven, a key factor in claims costs, will drop dramatically as workers are laid off, switch to telework, or self-isolate. This should be a consumer benefit, not an insurer windfall. See CFA’s letter to Insurance Commissioners.

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Another crucial step is to annually check one’s credit report, which is free to do from each of the three credit bureaus (Equifax, Experian and TransUnion). “Despite the increasing importance of checking one’s credit reports, our recent research shows a disturbing trend: the percent of consumers who believe it’s important to check one’s credit report has declined from 2012 to 2019, from 82% to 67%,[1]” said Jack Gillis, Executive Director of the Consumer Federation of America.

A potential cause of the steep decline can be attributed to the improving economy and consumers’ financial condition. When CFA started surveying consumers on credit score knowledge in 2012, many Americans faced challenging credit card and mortgage debts, so checking one’s credit score was top of mind. As personal finances have improved, consumers have become less vigilant about checking their credit scores and reports.  “The problem,” said Gillis, “is that with the increase in data breaches, it’s never been more important to keep a watchful eye on your credit reports.”

To help increase consumer knowledge of credit scores and reports, CFA and VantageScore Solutions® developed the Credit Score Quiz, an on-line tool for consumers to test and improve their credit score knowledge.

By using the Quiz, over 230,000 consumers have learned about the damage identity theft can cause and the many ways a credit score can affect one’s life.  Problematic credit scores effect consumers by:

• Denying them access to needed credit.
• Increasing the costs of consumer, auto and mortgage credit.
• Increasing deposits required by utilities and cell phone companies to obtain service.

With free access to credit reports, and a multitude of inexpensive or even free credit monitoring services, consumers can stay on top of their personal credit status.  Consumers who have been involved in a data breach, can often get free credit monitoring. “There are few things that have more impact on your personal finances than your credit status—staying on top of it needs to be a number one priority for all of us,” said Gillis.

[1] The research reported the findings of eight annual surveys of consumer knowledge about credit scores and reports.  The most recent survey was conducted by the Engine Telephone CARAVAN survey, who on April 25-28, 2019, interviewed 1,002 representative adult Americans by landline or cell phone.  The survey’s margin of error is plus or minus three percentage points.

Contact:

Jack Gillis, Consumer Federation of America, 202-939-1018

Jeff Richardson, VantageScore Solutions, 203-363-2170

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Support letter for ‘Accurate Access to Credit Act’

The post CFA along with other Consumer Groups Voiced Support for the Accurate Access to Credit Information Act of 2019 appeared first on Consumer Federation of America.

• 78% of respondents in 2012, but only 62% in 2019, correctly indicated that people have more than one credit score.
• 85% in 2012, but only 66% in 2019, correctly answered that keeping a low credit card balance helps raise a low credit score or maintain a high one.

However, in the same period, the proportion of respondents who said they considered their knowledge of credit scores excellent or good rose from 54% to 60%.

“Consumers know less about credit scores but think they know more,” said Stephen Brobeck, CFA senior fellow.  “Taking our online credit score quiz provides an easy way for consumers to update their credit score knowledge,” he added. More than 230,000 individuals have taken the Credit Score Quiz, developed and maintained by CFA and VantageScore.

“We are pleased that many consumers now have free access to their credit scores, but consumers must also take advantage of all the additional information about credit scores and credit files in order to make better credit decisions,” said Barrett Burns, president and CEO of VantageScore Solutions.

Consumer knowledge levels may have deteriorated, in part, because of improvements in the overall economy and consumers’ financial condition. In 2012, large numbers of Americans faced challenging credit card and mortgage debts, so consumers may have been especially concerned about credit scores. Since then, as the nation’s economy and family finances recovered, and as consumers reduced unsustainable credit card and mortgage debts, consumers may have felt that it was less important to fully understand credit scores. Reports of increases in average credit scores nationwide may also have lessened people’s feelings of financial vulnerability and the need to fully learn about their scores and its impact.

Despite overall rising score levels – now averaging 680 according to Experian – a large minority of consumers have fair or poor scores (below 670).  Low scores can especially harm these people by:

• Denying them access to needed credit.
• Increasing the costs of consumer and mortgage credit they can obtain. Subprime auto loans will likely cost several thousand dollars more, and subprime mortgage loans can cost over ten thousand dollars more, compared to conventional loans.
• Increasing deposits required by utilities and cell phone companies to obtain service.

Low credit scores also are an indicator that people may have difficulty obtaining a job.  While credit scores themselves are not used by employers, the credit reports the scores are based on are frequently utilized.  “Those with low credit scores should be aware that they are at risk not only for paying higher costs for credit and utility services, but may also struggle to obtain a good job with which to afford those higher costs,” noted CFA’s Brobeck.

While consumers’ knowledge of their actual credit scores has declined overall, the latest survey shows large majorities of consumers did correctly answer key knowledge questions related to important facts:

• Mortgage lenders and credit card issuers use credit scores (83% and 82% respectively).
• Missed payments are used in calculating credit scores (86%).
• Making all loan payments on time helps a consumer raise a low credit score or maintain a high one (87%).

However, significant minorities of respondents did NOT know other key facts, for example:

• Cell phone companies might use credit scores in pricing services (41%).
• Borrowing from a 401k retirement account or paying a parking ticket late will not lower your credit scores (30% and 22% respectively).
• Opening several credit card accounts at the same time might lower scores (38%).
• Frequently checking credit scores will not lower their scores (38%).
• Checking the accuracy of one’s credit reports is very important (33%). Lenders may have provided inaccurate information or failed to supply accurate information to credit bureaus; thus, the bureaus may have made mistakes such as adding information to the wrong file of a person with the same name.

In brief, consumers can raise their credit scores or maintain high scores by:

• Consistently making loan payments on time every month. A late payment may lower one’s credit scores by dozens of points.
• Using a small portion of the credit available on a credit card. In general, the higher the percentage of credit line that is drawn down, the lower one’s credit scores.
• Paying down credit card debt rather than just shifting it to another credit card or to a home equity loan.
• Regularly checking one’s credit reports to make sure they are error-free. This can be done for free annually by going to com or by calling 800-322-8228.

The survey was conducted by the Engine Telephone CARAVAN survey, who on April 25-28, 2019, interviewed 1,002 representative adult Americans by landline or cell phone.  The survey’s margin of error is plus or minus three percentage points.

Historical Results

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All Americans are entitled to request free copies of their credit reports once every 12 months. It’s simple to do by going to the website operated by “big three” credit reporting agencies, Equifax, Experian and TransUnion, or calling 1-877-322-8228. Since identity theft can strike at any time, it’s also a good idea to check your credit and other financial accounts regularly for signs of unusual or unauthorized activity. But for people on active military duty, it may not be so easy to get their credit reports or keep a close eye on their accounts. Free credit monitoring will be a big help to these military members.

Before it can start, however, the Federal Trade Commission (FTC) must write rules to define “electronic credit monitoring services,” “material additions or modifications” to credit reports, and other terms. The rules will also cover what information can be required for members of the military to prove their identities and active duty status and bar unfair practices such as misrepresenting that it’s necessary to buy a product or service in order to get the free credit monitoring.

The comments that CFA and other consumer groups made to the FTC about the proposed rules included these important points:

• When military members receive alerts from the credit monitoring services, they should have free online access to their credit reports. Not all events will trigger alerts – for instance, people won’t be notified every time their credit reports are updated to show they’ve paid a bill on time. So when something does result in an alert, people are going to want to check their credit reports to see if there is a problem – that’s the reason for offering the free credit monitoring in the first place. They should be able to do that without having to use their free annual reports or paying a fee.
• The definition of “material additions or modifications” that would trigger alerts should include a significant drop in the person’s credit score. This could be a sign of fraud; for example, it could be caused by an identity thief taking over an existing account and drastically increasing use of the credit limit.
• The proof of identity required to request the free credit monitoring should accommodate the special circumstances of active duty military personnel. Questions like what addresses have you lived at in the last two years may be too burdensome for members of the military who’ve had to move around frequently. It’s relatively easy for people to prove their identities when they purchase credit monitoring services; it should be just as easy for active duty military members who request free credit monitoring.
• The personal information that military members must provide to get free credit monitoring services shouldn’t be used for marketing or other unrelated purposes. Limits must be put in place to protect military members’ privacy and prevent inappropriate uses of their personal, confidential information.
• Advertising for other products and services shouldn’t be allowed during the process of enrolling in free credit monitoring. Military personnel should be able to sign up for the free credit monitoring without being distracted by come-ons for other things. And even after enrolling, they shouldn’t be solicited to buy identity theft insurance, which, as a government study found, have very little value.
• Military members shouldn’t be asked to agree to terms and conditions such as “forced arbitration” in order to get the free credit monitoring. Congress gave active duty military members the right to request free credit monitoring. It’s not appropriate to ask them to give up other rights in return, such as the right to take legal action if they’re treated improperly.

Americans in active duty military service have enough to worry about without having to wonder if they’re identity theft victims. While credit monitoring doesn’t detect all fraudulent uses of one’s personal information, it can alert people to some of the most common types of identity theft and give them a head start on resolving the problems that may result. We all should be able to check our credit reports, any time we want to, for free. This new law is a good first step.

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• The FTC should include as part of any “electronic credit monitoring service” free online access to credit reports when an active duty military consumer receives notification of a material addition or modification to their credit file. Otherwise, there is a significant risk that the nationwide consumer reporting agencies (CRAs) will entice active duty military consumers into paying expensive monthly fees to subscribe to paid access to their own credit reports. Our men and women in uniform deserve free access to online credit reports as part of their right to electronic credit monitoring.
• We support the FTC’s proposed definition of “material additions and modifications,” including the exclusion of prescreening and account review inquiries.
• The FTC must tailor the requirement for “appropriate proof of identity” to accommodate the special circumstances of active duty military consumers. In general, the nationwide CRAs’ identification requirements are overly difficult for consumers to meet, and are more demanding than what the nationwide CRAs require from consumers paying for their reports.
• We support the use, disclosure and advertising restrictions proposed by the FTC, which are appropriate and necessary to protect the privacy interests of active duty military consumers and prevent inappropriate use of their information.
• We support the FTC’s proposal to prohibit the nationwide CRAs from asking or requiring an active duty military consumer to agree to terms or conditions in connection with obtaining the free electronic credit monitoring service that the CRAs are obligated to provide. This prohibition is necessary and appropriate, especially to prevent active duty military consumers from being compelled to agree to forced arbitration provisions in order to exercise their right to electronic credit monitoring services.

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“State Farm Bank is one of the largest 1% of all banks in America,” said Christopher Peterson, Consumer Federation of America’s Director of Financial Services and senior fellow. “Nevertheless, they paid less than a parking ticket to resolve a federal investigation into serious, widespread violations of our consumer protection laws.”

“State Farm wrongly reported accounts as past due, or marred the credit reports of the wrong consumer, depressing their credit scores,” stated National Consumer Law Center attorney Chi Chi Wu. “What’s worse, State Farm should have known this information was inaccurate because it allegedly conflicted with the company’s own records – yet State Farm will not pay one penny for its reckless behavior.”

Peterson also noted that State Farm apparently took months to clear up the errors, even after customers complained or the company otherwise knew the information was inaccurate. In the meantime, customers may have been rejected for credit, jobs, insurance or other benefits because of this false information. As for the illegally pulled reports, in behavior reminiscent of the Wells Fargo scandal, State Farm agents made up nonexistent loan applications in order to make a credit inquiry.

“It is reasonable for a bank with over sixteen billion dollars in assets to pay a substantial fine and reimburse every customer harmed by the bank’s illegal practices. Instead, on his last day as Acting Director of the Consumer Financial Protection Bureau, Mick Mulvaney didn’t even slap the bank on the wrist,” added Peterson. “In over 200 CFPB enforcement cases, I cannot recall another case that was so obviously incomplete.”

Wu advised consumers who are State Farm customers or have “shopped” with the company to immediately obtain their credit reports from www.annualcreditreport.com (consumers are entitled to one free report per year for each of the “Big Three” credit bureaus: Equifax, TransUnion, and Experian). Consumers should check if State Farm or its agents unlawfully pulled their credit reports by reviewing the section called “Hard Inquiries” or “Inquiries Shared with Others” for unfamiliar names.

Existing State Farm customers should check the account history on their credit reports for their State Farm accounts. If there is any inaccurate information in the history, the consumer should submit a dispute to the credit bureau reporting the information, with a copy to State Farm. “It’s important to send the dispute to the credit bureau if you want to preserve your legal rights,” said Wu. “With the exception of California, you can’t go after State Farm in court for messing up your credit report unless you first dispute with the credit bureau.”

More information on how to send a dispute to a credit bureau is available in the National Consumer Law Center’s guide Disputing Errors in a Credit Report.

Contacts:
National Consumer Law Center: Jan Kruse or Chi Chi Wu; (617) 542-8010
Consumer Federation of America: Christopher L. Peterson, (202) 387-6121 x1020

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The post Consumer Groups Support the ‘Control Your Personal Credit Information Act’ appeared first on Consumer Federation of America.

The survey also reveals that, over the past four years, the percentage of consumers who have recently obtained at least one credit score has risen significantly. The proportion who said they “obtained or received any credit scores” in the past year, has risen – from 49 percent in 2014 to 57 percent in 2018.

According to the survey, potential borrowers are more likely to have obtained their score than non-borrowers. Seventy percent of those who intend to purchase a consumer or mortgage loan in the next year, compared to 57 percent who were not planning to borrow, said that they had obtained a credit score in the past year. And not surprisingly, these potential borrowers know somewhat more about credit scores than non-borrowers, with scores on individual questions that are typically 5-10 percentage points higher.

“The rising percentage of consumers who have obtained their credit scores is encouraging because those who have accessed their scores know much more than those who have not,” noted Steve Brobeck, executive director, CFA. “It is also encouraging that those who plan to borrow are more likely to have obtained their credit scores and know more about scores than non-borrowers,” he added.

To improve their credit knowledge, nearly 200,000 individuals have taken an online credit score quiz (www.CreditScoreQuiz.org) developed and maintained by CFA and VantageScore.

“CreditScoreQuiz.org is one of the only resources that is free from commercial conflicts and created with both industry and advocacy input,” said Barrett Burns, president & CEO of VantageScore Solutions. “Whether you are an educator or a consumer, it’s a terrific resource that can enable financial empowerment.”

Other key survey findings include:

• A large majority correctly identify key factors used to calculate credit scores but have an incomplete understanding of all the factors.
• Similarly, a large majority correctly indicate some, but not all of the ways to raise credit scores.
• Over the past four years, even though the percentage recently obtaining their credit reports (versus their credit scores) in the past year has increased (from 29 percent in 2014 to 36 percent in 2018), the percentage who say it is important to check these reports has declined (from 72 percent in 2014 to 67 percent in 2018).

The survey was commissioned by CFA and VantageScore and undertaken by ORC International, which from May 31 to June 3, 2018, interviewed 1005 representative Americans by cell phone and landline. The survey’s margin of error is plus or minus three percentage points.

Those Recently Obtaining Their Credit Score Know Much More About Scores Than Do Those Who Have Not

Those who say they have obtained at least one credit score in the past year are much more likely to say that their knowledge of scores is good or excellent than those who have not (68% vs. 45%).

In fact, those obtaining their scores recently do know more, as the table below reveals:

Consumer Understanding of Factors Used to Calculate Credit Scores and How They Can Raise a Lower Score Is Incomplete

Large majorities correctly identify three key factors used to calculate credit scores – missed payments (86%), high credit card balances (81%), and personal bankruptcy (79%).

But significant minorities also incorrectly think that age (41%) and marital status (38%) are used in this calculation. And majorities incorrectly believe that tax liens (64%), medical collection accounts less than six months old (62%), and civil judgments (63%) are used in the computation of credit scores.

Similarly, majorities correctly identified individual actions that help raise a low credit score or maintain a high one – make all loan payments on time (89%), keep credit cards balances under 25 percent of the credit limit (72%), and do not open several credit card accounts at the same time (66%). Yet, little more than half of respondents (56%) correctly identified all three factors.

And, only 21 percent know that on a $20,000, 60-month auto loan, borrowers with a low score would typically pay more than $5,000 in interest charges than would a borrower with a high score.

How Consumers Can Raise Their Credit Scores

In brief, consumers can raise their credit scores or maintain high scores by:

• Consistently making their loan payments on time every month. A late payment may lower one’s credit scores by dozens of points.
• Using a small portion of the credit available on a credit card. In general, the higher the percentage of a credit line that is drawn down, the lower one’s credit scores.
• Paying down credit card debt rather than just shifting it to another credit card or to a home equity loan.
• Regularly checking one’s credit reports to make sure they are error-free. This can be done for free annually by contacting www.annualcreditreport.com or by calling 877-322-8228.

Contact: Jack Gillis, 202-939-1018; Jeff Richardson, VantageScore Solutions, 203-363-2170

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