Opinion: A Low Score for Credit Bureaus

(Aug. 18) -- When President Barack Obama signed the financial reform bill into law in July, it definitely seemed like a sign of real change. But, as it stands now, it just looks like more of the same.

We all want to see Wall Street excesses reined in and a future financial collapse avoided, but, as it turns out, the new reforms do next to nothing to address one of the biggest sources of frustration and hassles for everyday consumers: the credit bureaus.

How many of us have fought with Equifax, Experian or TransUnion to get errors removed from our credit reports? For five years running, my own report has included an account with American Express I've never had, which, of course, I keep telling the credit bureaus, to no avail.

How many of us continue to see our current status tarnished by a late payment from before Jesus was a baby? Or have to fight with landlords or corporations for false reports they make to these bureaus?

While this new reform deals with just about everything else in the financial world, it leaves this side of the picture largely untouched. As a result, too many consumers will continue to be subject to higher rates, or have less access to credit, than they should.

Sure, as White House blogger Michael Barr states, the new reform makes a few feeble attempts at neutering this 800-pound gorilla.

Among them: It gives the new Consumer Financial Protection Bureau authority to regularly examine large credit bureaus to make sure they're complying with the law, and to study variations in credit scores to see whether they are hurting consumers. It also gives consumers the right to get their credit scores for free if they're turned down or charged a significantly higher price for credit than most other consumers because of their scores.

Big whoop. For way too long now, the Big Three have been able to operate with an air of impunity when it comes to the sadistic pastime of keeping us struggling like Sisyphus, trying to push old, or completely fabricated, items off our all-important credit reports. And this new law does little to change that.

The credit bureaus know there is a 30-day rule in place, which requires them to address complaints about mistakes on credit reports within a month. But that rule still gives the bureaus way too much wiggle room.

An attorney at one of the major credit advocacy groups, who spoke with me in confidence, said the reason the bureaus take so long to respond, and mire you with ambiguous paperwork when they do, is that these companies make money by selling your data. And the more data that's on your report -- true or not -- the more money they can charge. So what's the rush?

Here's my suggestion for the next round of financial reforms. May they come swiftly:

1. Strictly enforce the "30-day rule" the bureaus have to respond to a consumer's request.

As things stand, there are no "real" consequences to the bureaus' delinquency in fixing mistakes, other than the Federal Trade Commission allowing you to sue them if they take longer than the 30 days allotted. I'm sure they're running scared from that one.

Instead of just letting the consumer deal with it, why not fine the bureaus $10,000 a day for each day they don't respond?

2. Reduce the amount of time a "late payment" stays on your report from seven to three years.

Other than driving your mortgage rates up, is there any reason a late payment needs to stay on your credit report seven long years? Could this be the reason 25 percent of the country -- more than 43 million people -- have a credit score of 599 or less.

Do we really deserve that? Are most of us that much of a "risk"? Of course not. But one single late payment four years ago and creditors treat you as if you filed for bankruptcy yesterday.

3. Force a landlord or corporation to prove their allegations against you.

As it stands now, all it takes to ruin years of good standing is a five-second phone call from a slumlord, or a fax from "Rent-a-Wreck," and bingo!, your pristine record is toast and you'll spend the next year, or more, trying to get it removed.

Just as PayPal does, why not give consumers 30 days to provide a rebuttal if they dispute such a claim? Especially if there's no previous pattern of negative behavior. Why not assess fines and/or penalties if the allegations are proved false?

Bottom line: Real reform would mean stripping the credit bureaus of their long-established arrogance. Sadly, it appears that even with the current financial reform bill, we, the consumers, will continue to remain at the mercy of the "Information Mafia." Thus, if we want to see any real changes in FICO anytime soon, we'll definitely need to make some serious changes to RICO.