Beginning July 1, the three major credit bureaus will not consider public tax liens or civil judgments in analyzing the consumer creditworthiness unless specific new standards of data reliability are met. This change is pursuant to a settlement called the National Consumer Assistance Plan that involves these bureaus – Experian, TransUnion and Equifax – as well as the attorneys general from 31 states.
Rules to improve credit-score reliability
According to CreditCards.com, the new rules are meant to better the accuracy and currency of data used by the credit bureaus to determine credit scores for consumers. For example, to consider a tax lien or civil judgment against a consumer, a credit bureau must be provided with the person’s name, address and either birth date or Social Security number. This information will now have to be verified on an ongoing basis at a minimum of every 90 days.
Reportedly, two of the credit bureaus have even told clients they will not use civil judgments at all going forward
Relevance to our clients
This could potentially impact some of our clients. For example, we represent consumers with financial challenges who may be considering bankruptcy. If the changes improve their credit scores, it may be easier for them to obtain loans, credit, leases and employment. This could further impact their decisions whether to declare bankruptcy or take other action.
We also represent creditors that seek to collect debts and to determine whether consumers are good credit risks. Among our clients are also banks and other commercial lenders with similar concerns. These changes may make it more complex for these kinds of clients to make these decisions because of the absence of some tax liens and judgments from the credit equation.
They will have to decide if they will change how they weigh credit scores as well as whether they will choose to incur the expense of gathering public data on tax liens or civil judgments themselves since some of this data may not make it to the credit bureaus under the new standards.
Additional changes
The plan has been and will be taking effect over a period of about 15 months. Last year, for example, collection agencies and debt holders had to stop reporting debts like court fines or traffic tickets not tied to contracts or other agreements.
More changes are coming in September concerning medical debt, consumer personal data and authorized users of credit cards.
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