SAN FRANCISCO-Millions of Americans have been denied mortgages or home refinancing, or paid higher interest rates, when their credit reports have old debts still showing up as unpaid and overdue. Though, as the result of an injunction issued by Judge David O. Carter of the U.S. District Court of the Central District of California, that could change.
Because of Judge Carter’s recent ruling in a lawsuit against credit reporting giants Experian Information Solutions, TransUnion and Equifax Information Services, new rules for the credit reporting industry have recently become operational. The country’s three major repositories of consumer credit information must now follow detailed procedures for the retroactive correction and updating of borrowers’ and consumers’ credit file information concerning debt discharged in Chapter 7 bankruptcy proceedings as well as new procedures to ensure that debts subject to future discharge orders will be similarly treated.
Michael W. Sobol, an attorney at the national law firm Lieff Cabraser Heimann & Bernstein LLP, which represented the plaintiffs in the litigation, called the new procedures a “paradigm shift in credit reporting industry” that will immediately benefit millions of homeowners and borrowers. “No longer can credit reporting agencies merely parrot back this information as provided by creditors but must now reconcile creditors’ information against available public records to assure maximum possible accuracy,” he added.
In the class action lawsuit, the plaintiffs alleged that Experian, TransUnion and Equifax violated the Fair Credit Reporting Act by failing to follow reasonable procedures in the reporting of debts discharged in Chapter 7 bankruptcy proceedings. Plaintiffs allege that defendants continued to report debts as unpaid or overdue even though they had been discharged in bankruptcy and defendants were aware of the existence a Chapter 7 discharge order.
The new procedures for the credit reporting industry were established under to an injunction approved by Judge Carter in August 2008 in the case of White vs. Experian Information Solutions. The court set Oct. 1 as the date the new procedures became in effect.
“Consumer credit is tightening across the nation due to the crisis in the financial industry,” added Mr. Sobol. “It is more important now than ever that consumers’ creditworthiness be assessed upon the most accurate information available.”
The class action lawsuit remains ongoing with the plaintiffs seeking monetary damages for the defendants’ alleged misconduct.
By James Comtois
