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Repossessions: 6.6.4.7 Credit Repair Laws

A creditor marketing an electronic disablement device may violate state and federal credit repair laws. Some dealers may advertise these devices as a way of helping people with poor credit ratings gain access to credit.

Repossessions: 6.6.4.8 Privacy Concerns

A number of new technologies used to aid repossessions raise privacy concerns. GPS tracking may be used alone or in combination with a remote disablement device. Other devices also exist which are not installed on the car. Repossession agents now use high speed license plate scanners and recognition software to track cars. This information is fed into centralized databases to track the position and habits of cars and drivers.481

Repossessions: 6.6.5 Electronic Self-Help for Computer Software

Electronic self-help repossession may be practiced by computer software companies to restrict the use of software by a licensee. For example, computer software may contain a code which will disable the software on a set day (following the original licensing and installation) unless an update code is received prior to that date (in exchange for payment or other obligation, as stipulated by the licensing agreement).486

Truth in Lending: 2.7.9.9 Investments, Letters of Credit, and Option Contracts

The official interpretations recognize a final set of exclusions concerning letters of credit, option contracts, and investment plans.605 These exclusions appeared in the first official staff commentary to Regulation Z issued by the Federal Reserve Board in 1981. The discussion in the relevant Federal Register notices did not expand upon the FRB’s rationale for each exclusion beyond the words of the text.606 The text of these exclusions has remained unchanged since 1981.

Fair Credit Reporting: 14.4.8 ECOA Protections When Raising Federal Statutory Rights

The Equal Credit Opportunity Act prohibits creditors from furnishing adverse credit information on consumers because of the consumer’s good faith exercise of rights under the federal Consumer Credit Protection Act.57 The federal Consumer Credit Protection Act is an umbrella name for many of the federal consumer protection statutes, including the Truth in Lending Act, the Fair Credit Billing Act, the Consumer Leasing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Garnishment Act, the Credit Repair Organizations A

Fair Credit Reporting: 14.5.1 Credit Repair

Credit repair organizations (sometimes referred to as credit clinics or credit service companies) offer an expensive service that may not do anything to improve a credit record. A consumer’s own efforts may be more effective than that of the credit repair organizations, because consumer reporting agencies ignore dispute letters coming from such organizations, or even coming from consumers using forms provided by such organizations. What such organizations provide may in fact make matters worse or lead the consumer to violate the law.

Fair Credit Reporting: 14.5.2 Debt Elimination, Settlement, and Adjustment

Debt termination or debt elimination companies claim to eliminate debts, for a charge, usually through specially prepared documents with names such as “Declaration of Voidance,” “Bond for Discharge of Debt,” and “Redemption Certificate.” These documents are based on outlandish theories, such as challenging the authority of the Federal Reserve Board or the legitimacy of the U.S. currency. Other times, phony arbitration proceedings will claim to cancel the indebtedness.

Fair Credit Reporting: 14.5.4 Taking on New Debt

Opening new accounts, even if they are paid on time, is not an advisable way to bulk up a credit record. The creditor may not even furnish information to CRAs, particularly “buy here, pay here” car dealers and other lenders targeting those with a marginal credit history.

Fair Credit Reporting: 14.5.5 File Segregation Is Not Recommended

“File segregation” is not a recommended tactic to clean up a blemished consumer report, even if “credit repair clinics”63 and even some consumer self-help manuals suggest this approach. This tactic involves a consumer trying to confuse the CRA about their identity, so that the CRA will create a new, “clean” file that does not contain the negative credit information.

Fair Credit Reporting: 14.6.1 First Considerations

Probably the best way to improve a credit record is to establish a pattern of stability in employment and income and a reasonable debt burden in relation to income. For example, continuous employment for the last two years may be a better indicator of a consumer’s ability to repay a loan than a debt that was once delinquent for several months four years ago.

Fair Credit Reporting: 14.6.2.1 Disputing the Information

A consumer report may contain a number of inaccurate or incomplete items that will adversely affect the consumer’s credit standing. Negative information about a consumer with a similar name may be mixed in with the consumer’s report, or consumer payments will not be reflected in the report, indicating a delinquency that does not exist.

Fair Credit Reporting: 14.6.2.3 Contacting the Creditor

Disputing a debt with the creditor is not a substitute for disputing the item with the CRA, but the consumer does have the right to send a dispute directly to the creditor.79 A dispute sent directly to the creditor may clear up the problem. If not, the consumer’s notice to the creditor will make the consumer’s case stronger if the matter goes to litigation, by establishing that the creditor had full information about the dispute.

Fair Credit Reporting: 14.6.3 Dealing with Public Record Information

Some of the most damaging information in a consumer report results from CRAs retrieving public record information, such as criminal records, eviction filings, judgments against the consumer, foreclosures, tax liens, and the like. It is best to improve public record information at its source, and then to make sure that the CRA deletes the outdated information in its files.

Fair Credit Reporting: 14.6.4.2.1 Introduction

Settlement negotiations should always include a discussion of consumer reports, even if it is unlikely that the final agreement will provide a more accurate report. At best, the creditor may be amenable to the consumer’s concerns. At worst, the consumer may be able to obtain the names of any CRA used by the creditor. Then, after settlement, the consumer or counsel may write the CRAs directly to correct or dispute any inaccurate or incomplete information remaining on file.104

Fair Credit Reporting: 14.6.4.2.2 Creditor reluctance to address credit reporting issues

Creditors may be reluctant to agree to cease furnishing unfavorable credit information to the CRAs. They may harbor resentment of “irresponsible” consumer behavior and wish to avoid any “generous” concessions. The creditor may also feel a moral obligation to report its experiences to preserve the supposed integrity of the consumer reporting system.

Fair Credit Reporting: 14.6.4.2.3 Ability of creditors to delete or modify information

Some practitioners have encountered creditors who assert that they are unable to withdraw the entire report. On the contrary, however, the deletion can be accomplished through the Consumer Data Industry Association’s Universal Data Form or through the Metro 2 Format.105 A creditor or other furnisher need only enter “DA” into Field 17A (Account Status Field) to delete the entire account for reasons other than fraud.106

Fair Credit Reporting: 14.6.4.3 Selecting the Correct Settlement Language

Appendix K, infra, presents two alternative settlement provisions. Often the simplest and safest alternative is a deletion provision that requires the creditor to contact the CRA and request that the entire report of the disputed debt be withdrawn. The consumer report will then be silent about the debt and will not even provide a basis for another creditor to inquire further about the debt.

Fair Credit Reporting: 14.6.4.4 Obtaining Court Approval

Practice varies by jurisdiction and by case status as to whether courts must approve a settlement agreement. Regardless, consider where possible obtaining court approval of any settlement involving correction of a consumer report. A CRA is not required to take any action requested by a creditor, but only has an obligation to ensure maximum possible accuracy. Having the request for correction appear in a court-approved document may prove more persuasive to a CRA.

Fair Credit Reporting: 14.6.4.5 Court Orders Should Cover Consumer Reporting Issues

Consider a consumer’s credit record not only while drafting settlement agreements, but also when the dispute will be resolved through a court order. If the consumer has prevailed or partially prevailed in an action, the consumer should seek a court order that the creditor clear up the consumer’s credit record relating to the dispute. Otherwise, even if the debt is no longer listed as currently due, an indication that the debt was once considered delinquent and once subject to a collection action may remain on the consumer’s record.

Fair Credit Reporting: 14.6.4.7 Monitoring the Consumer’s File After Resolution of a Dispute

Check that the creditor and CRA follow through with their settlement obligations. If the file does not accurately and completely reflect the dispute’s resolution, the consumer can also dispute with the CRA the inaccurate or incomplete information. If the consumer disputes a debt and the CRA deletes it, the FCRA requires the CRA to notify the consumer if it reinserts it.115 At the same time, the consumer should notify the creditor that, under the settlement agreement, it should not verify the inaccurate information when requested by the CRA.