Enhanced Standards for Public Records on Credit Reports (and What It Means for Lenders)

//Enhanced Standards for Public Records on Credit Reports (and What It Means for Lenders)
Enhanced Standards for Public Records

Recently, the credit bureaus released a statement that they will be implementing “enhanced standards for public records”. But what does that mean for lenders?

With these “enhanced standards” as part of their National Consumer Assistance Plan (NCAP), TransUnion, Experian, and Equifax appear to be taking aggressive measures to ensure compliance with the Fair Credit Reporting Act (FCRA).

According to the credit bureaus’ press release CDIA public statement:

The new standards will apply to new and existing public record data on their respective credit reporting databases and will require:

• A minimum of consumer personal identifying information (PII): (1) Name, (2) address, and (3) SSN and/or date of birth.

• A minimum frequency of courthouse visits to obtain newly filed and updated public records of at least every 90 days.

 

Enhanced Standards for Public Records
The credit bureaus’ statement announcing “enhanced standards for public records”

Throughout the business media, these “enhanced standards” are being reported as “great news” for consumers. According to John Ulzheimer (via our friends at Credit Repair Junkies):

 

“There is a high expectation that SOME (not all) judgments and tax liens will be completely removed from consumers credit reports.”

Reports claim this will result in a credit score increase of 20-40 points. That said, we think the media has “buried the lead” on the real story here…

What Do These “Enhanced Standards” Mean?

To help everyone understand what all of this truly means, we’ll break it down into plain language. Especially since there are some major points that can be easily overlooked.

Verification of Personal Info

The new standards [for public records]… will require: A minimum of consumer personal identifying information: Name, address, and SSN and/or date of birth.

Enhanced Standards for Public Records
Social Security Card” by 401(K) 2012 (CC BY-SA 2.0)

As part of these “enhanced standards,” the credit bureaus vow they won’t report items whose ownership they cannot verify. While it sounds noble, we question the need to publicly tout this change as if it were a great service.

In fact, what the bureaus are practically admitting is that they have not held to Federal regulations! The FCRA is quite clear that all tradelines: (a) must belong to the person named in the credit report, and (b) must be accurate and verifiable.

That may seem like the bare minimum of what the public should expect from the multi-billion dollar credit reporting industry. We certainly think it is! But apparently, the credit bureaus consider actually meeting Federal regulations to be enhanced standards.

Furthermore, all of this raises an obvious question. If these “enhanced standards” merely meet their legal obligations, what were their previous standards?

Frequency of Updates

The new standards [for public records]… will require: … A minimum frequency of courthouse visits to obtain newly filed and updated public records of at least every 90 days.

A natural reaction to the above announcement might be, “Kudos to them!” It sounds like they’re taking their responsibility seriously. But let’s refer back the requirements of the FCRA: the information they report must be accurate and verifiable.

Again, those are the current standards under the law, as they have been for years. So it’s necessary to “visit courthouses” every three months to verify the accuracy of their public records data? Then that’s what the credit bureaus should have been doing all along! It’s their job.

Isn’t It Ironic (Doncha Think)?

Enhanced Standards for Public Records
By Alex E. Proimos (CC BY 2.0), via Wikimedia Commons

Here at Lenders Choice, the first thing that struck us about this statement was the irony.

By championing their new effort to actually comply with the law as “enhanced standards,” the credit bureaus implicitly admit what we’ve seen for years: their own failure to comply with the FCRA in the first place.

It’s been obvious for a long time that the internal standards of the credit bureaus must be very loose. But to call basic compliance with the law “enhanced standards for public records”? That’s like a car dealership claiming their latest model is “new, enhanced—now comes with wheels!”

The credit bureaus make billions of dollars in revenue, but ultimately, they only have one job. That job is to collect and report information that’s accurate and verifiable. Shouldn’t it have already been at the top of their priority list to verify the accuracy of their data?! We certainly think so!

Courthouse “Visits?”

Golden Lady Justice, Bruges, Belgium” by Emmanuel Huybrechts (CC BY 2.0)

Did it seem odd that the credit bureaus made a point of saying they’d “visit courthouses?” It certainly did to us! Especially since sending people to courthouses to physically verify data isn’t what they do at all.

You may have heard that all three major credit bureaus use the same automated system. Indeed, that’s true: it’s called eOSCAR. Creditors are trained to submit their accounts using eOSCAR, as most lenders know.

However, eOSCAR does not include public records. Rather, public records are updated via—wait for it—another bureau: LexisNexis.

The same laws that regulate credit bureaus also apply to LexisNexis. However, most lenders and realtors aren’t as familiar with LexisNexis due to the kind of data it reports. While the “big three” credit bureaus dominated the market of consumer credit reporting, LexisNexis cornered the legal reporting market. Therefore, LexisNexis is most widely known within the legal industry.

So to break it down this whole convoluted process:

  • A public record, like a judgment or tax lien, is filed in court.
  • That public record is then submitted to LexisNexis.
  • LexisNexis sells the public record data to the “big three” credit bureaus.
  • They, in turn, sell the same information to lenders, car dealers, banks, leasing agents, employers, etc.

This highlights a glaring omission in the credit bureaus’ “enhanced standards” announcement. Is LexisNexis willing and able to update their public records data every 90 days? The consensus among credit gurus, such as John Ulzheimer above, is a resounding “no.”

How Do These “Enhanced Standards” Impact Lending?

We are going to take a transparent approach to this topic: We are credit experts, not mortgage experts. So we can assume that consumers will have a bump in their credit scores. We can also assume that automated underwriting may become a little more in-depth.

What we cannot assume is that anyone with a judgment or tax lien will now qualify for a mortgage. This is due to the verification process involving LexisNexis. If you are a mortgage lender, this would be a great conversation with your underwriter.

A Better Way to Repair Credit

Lenders Choice is working ahead of these “enhanced standards”. For one, we’re taking steps to ensure that we dispute each tax lien or judgment with the correct credit bureau! (Is your credit repair company doing this?) Furthermore, we at Lenders Choice only charge for corrections and deletions. This is a standard part of our Credit Repair services, unlike most credit repair companies.

If you are looking for a partner to help your credit challenged clients, let’s talk! Our unique approach makes credit repair affordable and fair. The best part about it? If we don’t get anything corrected or removed from your client’s credit report, there’s no charge to your clients!


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