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Recourse if creditor takes wrong/misinformed AA?

Super Contributor

Recourse if creditor takes wrong/misinformed AA?

First off, this hasn't happened to me nor has it happened to anyone I know.  It's more of just a hypothetical that I was thinking about as it could happen to someone at any time, although not very likely.

 

Say you've got someone with a perfectly clean file and good FICO scores all around 730.  One of their lenders wrongly reports a 30 day late payment; The account never has been late nor isn't currently late.  Upon the reporting of that payment, this person's FICO scores all drop to 650 on average, causing several other lenders to take AA.  One lender closes a card on them.  Another lender takes their $5000 limit down to $500, but keeps the card open.  

 

My question is what recourse does this person have at that point?  Naturally they'd contact the lender that wrongly reported the 30 day late and have them re-report the correct information.  They'd probably also request an apology letter stating that the wrongful reporting was indeed their mistake and that the account was never late.  I'd imagine this person would then forward that documentation to their lenders that took AA, hopeful that they'd reverse their actions.  

 

In the event of the CLD, getting the original limit returned may not be all too difficult.  With the closed account, some lenders are real strict on "once it's closed, it's closed and that's it."  I guess it would be lender-specific when it comes to that one.

 

Anyway, I'm just curious as to thoughts and opinions on this.  It's a bit scary to think about what could happen if wrongful negative information were introduced to your file.  While the likelihood of this happening is very minor, the potential adverse impact is concerning.  

Message 1 of 9
8 REPLIES
Community Leader
Senior Contributor

Re: Recourse if creditor takes wrong/misinformed AA?

Well, since you are enlisting a hypothetical scenario, I'm curious as to how a lender will "wrongly reports a 30 day late payment; The account never has been late nor isn't currently late"?

Is there evidence that suggests a lender will just nilly-willy report something that would actually not be the case? I can see a negative reporting situation, such as a payment received by the lender, but not credited or applied accordingly to an account thus the late payment outcome and subsequent AA (as applicable), for instance. But, out of the blue 30-day negative reporting to CRAs for no reason?

The "recourse" would really depend on the billing rights as listed by each lender's CCA and any type arbitration clause that may be part of that CCA. Folks also have the option to pursue certain actions through the CFPB or the BBB. Litigation may depend on the extent of "damages" if negligence can be proven beyond a reasonable doubt of course.
Message 2 of 9
Community Leader
Legendary Contributor

Re: Recourse if creditor takes wrong/misinformed AA?

In drafting the original FCRA, congress considered the possible impact of consumers filing civil action against furnishers (creditors and debt collectors) for damages resulting from inaccurate reporting of information to CRAs.

They were concerned that permitting consumers to file their own private civil action seeking liability for reporting of inaccurate information would likely result in reluctance of furnishers to report to CRAs.

Since reporting is voluntary on the part of furnishers, permitting consumers to bring their own private civil action might reduce substantially the reporting to CRAs, thus having substantial negative effect on the completeness of consumer credit files/reports and credit scores.

 

The FCRA thus includes section 623(c), which is a bar against private consumer civil action pertaining to reporting of information to CRAs.

As a substitute, section 623(c) permits civil action contesting the reasonableness of a furnisher's investigation of a dispute filed with a CRA, which effectively then permits consumers to get the matter before the courts.

However, they must first file a dispute with the CRA, thus requiring the furnisher to conduct a reasonable investigation and respond back to the CRA.  If the furnisher verifies the accuracy of the information, then the reasonableness of that investigation can be a cause for private civil action, but not the reporting per se of the informaiton to a CRA.

 

Thus, if you assert that a creditor has reporting inaccurate information, your first step is to file a formal dispute with the CRA and obtain an investigation  and finding.  If the creditor verifies the accuracy, you then obtain the right to pursue civil action and get the issue resolved by the courts.

 

Regarding prior adverse actions in the form of denial of new credit, if you file a dispute and receive a deletion of inaccurate information, you can then reqest the CRA send notice of the deletion to any party who has received a consumer report within the last two years for employment purposes, or who has recieved a consumer report within the last six months for any reason.  See FCRA 611(d).

That will provide the potential creditor with a free revised credit report, and might be adequate for reeavaluation should you re-apply.

 

Message 3 of 9
Super Contributor

Re: Recourse if creditor takes wrong/misinformed AA?


@FinStar wrote:
Well, since you are enlisting a hypothetical scenario, I'm curious as to how a lender will "wrongly reports a 30 day late payment; The account never has been late nor isn't currently late"?

Is there evidence that suggests a lender will just nilly-willy report something that would actually not be the case? I can see a negative reporting situation, such as a payment received by the lender, but not credited or applied accordingly to an account thus the late payment outcome and subsequent AA (as applicable), for instance. But, out of the blue 30-day negative reporting to CRAs for no reason?


It could be anything, who knows.  Perhaps someone is legit 28-29 days late for example, but the creditor reports it as a 30 day late payment.Maybe there's a glitch of some sort.  It happens; isn't that what disputes are for?  I've seen more than a few times people on this forum reporting that a creditor wrongly reported a negative piece of information and they had to dispute it and get it removed.  I don't recall anyone ever stating that they received AA though in one of these situations, but it was something I was thinking about since it could potentially happen to such a person.

Message 4 of 9
Established Member

Re: Recourse if creditor takes wrong/misinformed AA?


 wrote:

It could be anything, who knows.  Perhaps someone is legit 28-29 days late for example, but the creditor reports it as a 30 day late payment.Maybe there's a glitch of some sort.  It happens; isn't that what disputes are for?  I've seen more than a few times people on this forum reporting that a creditor wrongly reported a negative piece of information and they had to dispute it and get it removed.  I don't recall anyone ever stating that they received AA though in one of these situations, but it was something I was thinking about since it could potentially happen to such a person.


@BBS, as an example of something you mentioned, I recently discovered that two separate 29 day late payments from mid-2017 were erroneously reported as 30 day lates due to timing of payment processing by the creditor's system. Getting this corrected gave me a boost of about 65pts on average across the 3 CRAs. 
Unfortunately, my example stops there as I have no proof of any AA, although I hypothesize that it may have kept my CL from being increased with one of my card providers.

Starting Score: EQ 820 TU 821 EX 818 (7/2/2018)
Current Score: EQ 820 TU 821 EX 818 (7/2/2018)
Goal Score: 850 all CRAs


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Total CL $40.2K (3% UTIL) - Citi AAdvantage $15k, Discover IT $14k, USAA $5k, Sears MC $5k, Sam's Club Credit $1.2k
Message 5 of 9
Super Contributor

Re: Recourse if creditor takes wrong/misinformed AA?

Perfect example of what I'm talking about above.  Thank you for that.  I'm glad to hear that you didn't receive any clear AA.

 

 

 

 

Message 6 of 9
Community Leader
Legendary Contributor

Re: Recourse if creditor takes wrong/misinformed AA?

Yes, if you have evidence that a creditor pulled your report as part of an internal account review (i.e., not a request for CLI intitiated by the consumer) and that report was basis for their denial of a CLI, that would be an Adverse Action on their part under the definition provided at FCRA 603(k)(1), last subsection:

 

FCRA 603(k)(1)  Actions included. The term “adverse action”

 

  • has the same meaning as in section 701(d)(6) of the Equal Credit Opportunity Act; and

 

  • means

 

  • a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of insurance;

 

  • a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee;

 

  • a denial or cancellation of, an increase in any charge for, or any other adverse or unfavorable change in the terms of, any license or benefit described in section 604(a)(3)(D) [§ 1681b]; and

 

  • an action taken or determination that is

 

  • made in connection with an application that was made by, or a transaction that was initiated by, any consumer, or in connection with a review of an account under section 604(a)(3)(F)(ii) and adverse to the interests of the consumer.

 

 

Message 7 of 9
Super Contributor

Re: Recourse if creditor takes wrong/misinformed AA?

So then Robert, how would one go about righting the wrong in this situation and ultimately would reverse-AA (legally) have to be taken?

Message 8 of 9
Community Leader
Legendary Contributor

Re: Recourse if creditor takes wrong/misinformed AA?

The issue of compliance with the FCRA requirements of providing notice of an adverse action to the consumer is separate from the issue of reporting of inaccurate information.  One could bring civil action or file a complaint with the CFPB if a creditor takes an adverse action and does not comply with the notice requirements of section 615(a).

 

In a nutshell, if a creditor takes an adverse action that relies, in part, on a review of your credit report (and as discussed previously, an internal account review for that results in denial of credit is an adverse action), they must send notice to the consumer that includes the name of the CRA that they pulled your report from, and the consumer then has the right under section 615(a) to obtain a free copy of their credit report from the named CRA if they send a request to that CRA within 60 days.

 

Violation of that notice requirement can be basis for a formal complaint to the CFPB, and if it is also asserted to be negiligent or deliberate lack of compliance, subject to civil damages under FCRA 616 (willful noncompliance) or 617 (negligent noncompliance).

However, the sole exception is if the asserted FCRA  violation relates to reporting inaccuracies, as a consumer is expllcitly barred under section 623(c) from bring their own civil action for reporting inaccuracies. 

 

Either of  sections 616 and 617 provide for award of actual damages, and additionally, if their noncompliance is shown to have been willful, the award of punitive damages.

Message 9 of 9