CFPB: Credit Bureaus Have Quit Responding to Many Consumer Disputes in 2022Daniel Dobbs2023-05-25T12:47:39-07:00
This is a long post (4-5 minutes) but it will impact your comm. checks, soon.
With the end of the Covid rules for reporting credit histories, the bureaus have decided to quit responding to credit repair corps. Period. Full Stop.
That’s despite all three bureaus’ court settlements in New York state agreeing to be more responsive to the consumer.
Worse, they haven’t (will not?) responded to 75% of all consumer disputes on their reports says the CFPB. That’s going to cost us both comm checks.
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In California, if the consumer debt is over 4 yrs. old no worries, but let us say your buyer has a remaining item on the report that says “consumer disputes ____debt in the last 7 yrs.),
Just the words “dispute” is a deal killer for any Fannie/Freddie/FHA /VA loan until the “dispute” is removed. Even if paid in full – the “actual word dispute” must still be removed; don’t count on the bureaus doing it all or very slowly at best (60 days?).
In the meantime no COE.
How Many Reports have a Dispute Pending or Resolved: 30%
In 40 yrs. I’ve seen 2500-3000k credit reports and about 30% have disputes; with younger/starter home buyers it is higher, as most are younger consumers who haven’t /didn’t comprehend the consequences of small credit issues. My ATT bill for $1.91 in college in 1982 – took 7 yrs. to fall off.
Some disputes an MLO can clear; but it’s a tedious time-consuming process.
In the meantime or before you start reading, just two things:
1) Don’t hire a credit repair company (because the CFPB says so)..If you have used a credit repair service, they may have been successful in removing a few items, but they’ve done more damage than they repaired.
We are going to have to “un-ring” the bell. Your MLO can further explain why.
2) Don’t make any payments to a debt collector until you’ve read the posts below. Homebuyers will need a mortgage (tri-merge) credit report, as consumer credit reports (directly from each credit bureau) are worthless for ascertaining credit scores for the purposes of a mortgage. Worthless!
Past Credit Issues and Credit Scams
are Costly for Buyers, their agents, and their MLOs
Many buyers have passed (often ancient) credit issues from past marriages, co-signed student loans, or a host of problems too numerous to mention.
And when they apply for a home loan, many (past) creditors receive an “update file” alert/message from the credit bureaus. And that alert can delay/ derail your commission check.
Often the debt is so old it’s legally uncollectable – but that doesn’t keep the debt “re-sellers” from trying to “roll the debt forward” to intimidate borrowers into paying the debt off at the last minute to close escrow.
The following is an article directly from the CFPB that I’ve shortened for readability. If you have buyers with any hint of credit issues – put them in touch with an experienced MLO and require them to pre-apply to obtain a Full DU Loan Approval.
The MLO can I.D. heir issues BEFORE you begin showing them properties. Enjoy the read!
Debt collection is consistently one of the top financial issues people have questions about when visiting the CFPB website. While every situation is unique, these answers may help you better understand how debt collection works or help you identify steps that you can take to address your problem.
What should I do when a debt collector contacts me?
There are different ways to respond appropriately to debt collectors.
When contacted, find out:
1) The identity of the debt collector, including name, address, & phone #.
2) The amount of the debt.
3) What the debt is for and when the debt was incurred.
4) The name of the original creditor.
5) Information about whether you or someone else may owe the debt.
We (CFPB) also has sample letters that will help if you’re experiencing common problems that may come up with debt collection.
How can I verify whether or not a debt collector is legitimate?
6) Ask the caller for their name, company, street address, & telephone number. If your state licenses debt collectors, (California does) you can also ask for a professional license number.
7) You can also refuse to discuss any debt until you get a written “validation notice. Please do not give personal or financial information to the caller until you have confirmed it is a legitimate debt collector.
What is the best way to negotiate a settlement with a debt collector?
To negotiate a settlement or repayment agreement with a debt collector, consider this three-step approach:
1. Learn about the debt
2. Plan for making a realistic repayment or settlement
3. Negotiate a realistic agreement with the debt collector
Avoid companies that charge money
in advance to settle your debts.
What should I do if a creditor or debt collector sues me?
If a debt collector sues you, respond to the lawsuit. You can respond personally or through an attorney, but you must do so by the date specified in the court papers.
When you respond to, or “answer,” the lawsuit, the debt collector will have to prove to the court that the debt is valid and that you owe the debt.
If you ignore a court action, a judgment will likely be entered against you for the amount the creditor or debt collector claims you owe. The court will often impose additional fees against you to cover collections costs, interest, and attorney fees.
Learn more about:
What is a statute of limitations on a debt? A statute of limitations is the limited period of time creditors or debt collectors have to file a lawsuit to recover a past-due debt. In California Its 4 years.
Most statutes of limitations fall in the three- to the six-year range, although in some cases, they may vary due to State laws”.
What type of debt do you have?
Whether the state law applicable is named in your credit agreement
If you are having an issue with debt collection, you can submit a complaint online or by calling (855) 411-CFPB (2372).
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