Big Reforms Announced by Big 3 Credit Bureaus

Nick Fishman

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Later today, the big three credit bureaus, Experian, Equifax and TransUnion are expected to announce major new reforms on how they will report adverse information on a consumer’s credit report and the steps they will take when a consumer wishes to dispute the information.

What’s The Difference

According to the Wall Street Journal, the credit bureaus have agreed to wait 180 days before adding any medical debt information. During this time, consumers will have the opportunity to clear up the debt. When an insurance company pays off medical debt, they will quickly be removed from report (as opposed to other negative information which can stay on a report for up to seven years).

This reform will provide relief to the nearly 43 million Americans that have past-due medical debt on their credit reports. It is estimated that medical-related debt accounts 52% of all debt found on credit reports.

The other reform will require the credit bureaus to provide more support to consumers when they wish to dispute the information found on their credit reports.

This has been a particular sore spot for consumers because 85% of the time the credit bureaus are referring the disputes to the creditors. Under the new rules, the bureaus will now be required to use trained personnel to review the documentation consumers submit when they dispute the reported information. Even if the creditor says the information is correct, is now still obligated to review dispute and resolve any issues.

Who Benefits?

Not only is this a positive development for consumers, it’s also a big win for employers that conduct pre-employment screening credit reports on prospective job candidates. I’m going out on a limb here, but I would think most employers conducting employment background checks understand the impact medical debt can have on someone and that they wouldn’t treat such debt the same way as they would for someone that has maxed out debt to support a lifestyle they can’t afford.

If so, the credit report findings will make it easier for the employer to filter through the data that has an impact on their hiring decision.

Even the new dispute requirements should be a windfall for employers. Under the current process, a candidate is afforded the opportunity to dispute the findings on their consumer report and clear up the matter in 30 days. That won’t change. But if the credit bureaus become more efficient in resolving such disputes, employers won’t be left in a position where they either have to ignore the findings or move on to the next candidate.

Lastly, I think that these reforms should benefit employers because I think they should stem the tide of states who move to ban the use of pre-employment screening credit checks in the hiring process.  There’s even an on-again, off-again federal measure to do the same that should be avoided.

When Will These Change Take Effect

The Journal is reporting that these modifications will be phased in over the next six to 39 months, so don’t expect to see any immediate changes.

Winners

  • Consumers
  • Employers
  • Credit Bureaus
  • Consumer Financial Protection Bureau

Losers

I’m struggling to find a loser here, at least as it relates to employment. I’m sure the credit bureaus aren’t thrilled about the extra layer of dispute resolution, but in the long-run this measure will create a lot of good will with their customers and their regulators. I’m also interested to hear if there is any backlash from creditors who feel that medical-debt information is pertinent in the lending decision.




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Nick Fishman
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Nick Fishman

Nick Fishman is the co-founder of EmployeeScreenIQ, a leading, global employment background screening provider, and serves as the company’s executive vice president and chief marketing officer. He pioneered the creation of EmployeeScreen University, the #1 educational resource on employment background checks for human resources, security and risk management professionals. A recognized industry expert, Nick is a frequent author, presenter and contributor to the news media. Nick is also a licensed private investigator in the states of Ohio and Texas.
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