The Seamier Side of the Credit Reporting Business

“Our department – in fact this entire conapt building – is now programmed against an extension of services and/or credit to such pathetic anomalies as yourself, sir.”

Philip K. Dick, Ubik.

The credit reporting system in this country is inherently irrational, with a warped sense of truth and justice radiating at its core. Two unfounded assumptions are made by the consumer reporting agencies (Experian, Equifax and Trans Union are “the Big Three) that demonstrate where their allegiance lies. The first is: one can assume creditors and debt collectors are telling the truth about your financial information that they are furnishing. The second and corollary assumption is: one can automatically assume that alleged debtors are liars or, less harshly, simply mistaken. In short, the assumption that the debt is owed, despite the customer’s disputing it, is unmistakable. Only with these two assumptions in mind can one begin to fathom how the credit reporting industry operates in practice.

In particular, these assumptions come into play when a consumer disputes an account being reported on his credit report as not his/hers, or simply that he/she does not owe anything on it.

After the alleged debtor disputes the account appearing on his credit report to the consumer reporting agencies (“CRAS”), the CRAS may note on the next credit report that the account in question is being disputed by the customer. This may be better than nothing, but there remains the lingering doubt that, even though the consumer is disputing it, it is or was still owed. If a consumer is trying to obtain a mortgage on a home, for instance, and is told that the disputed derogatory needs to come off his credit report as a first step toward eligibility for the financing, then in actuality “disputing” doesn’t help at all.

The CRAS are legally required to send to the entity furnishing the negative information a form instructing that entity to “investigate” and “verify” to them within 30 days that the disputed debt is accurate; otherwise, by law the disputed account must be automatically deleted.

Good intentions by lawmakers aside, in practice this procedure is deeply flawed. It is flawed because such entities as debt collection companies want to collect on debts, they don’t want to spend any of their precious time “investigating” to determine whether or not the customer really owes the debt! Their reactive assumption is, of course they owe the debt! How else could debt collection entities justify the often abusive, harassing and sometimes plain illegal tactics they use? And how could they get paid?

They believe the words that Rom said to Grimp in a Deep Space Nine episode, “Never allow doubt to tarnish your lust for latinum”; or Odo to Quark, “There’s no profit in kindness.” In short, lacking strict enforcement this procedure gets abused constantly: the furnishing entity often sees little or no motivation in doing a proper and thorough investigation so instead it just rubber-stamps the form “Verified” and returns the form when in fact no investigation ever occurred. The harsh reality is that greed (whether of the human or extra-terrestrial variety) and not a desire to do the right thing is what motivates many of these entities, whose words are somehow deemed to be more trustworthy than those of the disputing consumers!

The reader may wonder why I keep employing the term “entity.” The reason is that some of the so-called sources of information that furnish derogatory information on your credit report do not even deserve the term company, agency or firm – they are “bottom feeders” that purchase bad or disputed debts and then scam everyone they can (including the ones they purchased the debts from) in an effort to line their own pockets.

In one case I worked on our client had attempted to reach the derogatory furnisher for almost a year and they never answered, nor did they give any means of leaving a message. I tried myself and the phone just rang with no response. Our investigation finally disclosed that the addresses the entity gave were for: 1) a shoe store, and 2) the post office. And yet the CRA in this case continued smugly and robotically to assure us that the furnisher had “verified” that the debt was correct. When I asked them when the last time was that they had spoken to the furnisher, and if they were sure the verifying entity even existed, the game was all but over. To this day, to my knowledge, no one has tracked down this phantom entity, the one whose word was to be trusted implicitly over our client’s word, even though the original creditor subsequently admitted that our client did not owe the disputed debt.

Following are a few case highlights to delineate what one is up against when dealing with this amoral world.

Scenario A: Susan’s otherwise immaculate credit was blemished by a derogatory on her credit report for a telephone bill that she never owed. Susan was the victim of identity theft; she herself had never in her life used the telephone service provider. The phone company eventually sold the account to a credit collection entity that harassed Susan and falsely furnished the derogatory account information to the CRAS, and they published it. It was later discovered in deposition that the phone company itself had learned from their own fraud investigation that, indeed, the debt was invalid. However, they claimed they were contractually forbidden from interfering with the debt collector’s collection efforts on the debt, even though they knew if was bogus! A representative of the phone company, when asked in deposition if this guilty knowledge ever caused her to lose sleep at night, candidly replied, “Sometimes.”

Scenario B: Lisa was initially dunned by a law firm for a debt she did not owe; the debt actually belonged to her impecunious brother. Nevertheless, Lisa continued getting dunned by the law firm and then later by a “phantom” collection entity. Even though the law firm later admitted it was mistaken and Lisa did not owe the debt, the phantom
collection entity outrageously kept verifying that the debt was valid, and the CRA just as outrageously used this so-called verification to justify its continued false reporting of the invalid debt.

Scenario C: Julian received a telephone bill for almost $1,800 about three years after the date of the bill from a debt collection company after Julian disputed the bill. He wanted to know what it was for and had asked for corroboration. The only documentation he was sent on the bill was some local billing totaling about $25. Julian continued asking for an actual itemized statement that corresponded to the amount of the bill. He was rudely informed by the debt collection company that he was already provided with all the evidence he needed and to stop bothering them. The CRA, meanwhile, witlessly continued reporting the derogatory account because the debt collector had “verified” that Julian owed the debt.

And so it goes – all variations on a theme. The consumer in each case is assumed guilty of owing the debt until he or she makes extraordinary efforts and suffers extreme stress, in many cases, to prove the obvious, and then only after having to initiate a lawsuit.

As it now exists, our nation’s credit system is badly rigged against the consumer. This is due to false assumptions the CRAS have made about who they should trust, and these assumptions directly result from the CRAS own vested interests. Thus the CRAS find themselves caught in the middle of a maelstrom of false reporting, especially by disreputable debt collection entities, a situation that they themselves had a big hand in creating. Sad to report to consumers at this date, a fair and level playing field in the credit reporting business is nowhere in sight.