In recent years, thousands of California homeowners sold their homes in short sales. In a short sale, the borrower sells the home to a third party for an amount that falls short of the outstanding loan balance. An open question has been whether the bank or mortgage company may collect the balance of the account from the borrower (absent an agreement to waive the balance). On January 21, 2016, the California Supreme Court held that no deficiency results after a short sale of an owner occupied property of four units or less. Coker v. JPMorgan Chase Bank, 197 Cal Rptr 3d 131. Given that the mortgage company has no right to a deficiency, it follows that the mortgage company cannot legally report to the credit bureaus that the consumer owes the mortgage company for the deficiency. Last year in Kuns v Ocwen Loan Servicing, LLC, 611 Fed. Appx. 398, the 9th Circuit held that Ocwen had no right to report a balance due on a loan subject to California’s anti-deficiency laws. The upshot is that mortgage companies should not now be reporting consumers owe deficiency balances following a short sale. If they are doing so, the homeowner should send dispute letters to Experian, Equifax and Trans Union asking them to change their reports to reflect a zero balance and nothing past due on the mortgage account. If the dispute process fails, please contact this office about the filing a lawsuit seeking damages and correction of his or her credit reports.

The CFPB has published a new report on all of the credit reporting agencies that report information on consumers. Besides the three national agencies, the report includes information on agencies that provide reports on employment screening, tenant screening, consumers’ use of bank accounts, medical histories, and other specialized areas of interest to creditors. Under the FCRA, consumers have a right to ask for a copy of their reports from these agencies.

Credit.com has a report on some relatively unknown credit reports. For example, Equifax has a report it calls “work number” that provides employment and income verification data obtained from private companies. Fannie Mae said mortgage companies could use this report in lieu of pay stubs effective mid-2016.

Landlords often look at applicants’ credit reports before deciding whether to rent an apartment or other living space. There are many such credit reports that include former addresses, eviction history and the like.

Cable companies and utilities have an “exchange” with information on customers’ history of paying their cable or utility bills, connection requests, defaults, and fraudulent information.

Banks and other financial institutions typically won’t open an account if someone has an adverse history as reported by specialized reports on consumers’ account activity.

 

Your credit scores depend on what is in your credit reports. Your credit reports have information on how you have used credit, how much credit you have available, how much credit you are using, whether you made payments when due, and whether any creditor has sent an account to a debt collector.

Credit scores are numbers that designed to predict how likely you are to pay back a loan.

The most basic and important actions you can take to get and keep a good credit score are as follows:

  • Pay your bills on time.
  • Don’t get too close to your credit limit–don’t “max out” your credit cards.
  • The longer your credit history the better.
  • Get your credit reports (free once a year at www.annualcreditreport.com or call 1.877.322.8228) and check for errors. Dispute any errors by going online or by writing a letter to Experian, Equifax and Trans Union. You have a right to get the agencies to correct inaccuracies.
  • Don’t pay fees to credit repair companies. Send in your own disputes to the credit reporting agencies and you’ll achieve better results.

Car Hop is one of the largest “buy-here, pay-here” car dealers with about 50 locations in 15 states. Here in California, Car Hop has retail lots in Daly City, Hayward, Vallejo, Richmond, Sacramento, National City and Escondido. Car Hop, which advertises cars for as little as $99 down, sells very old, high mileage cars at extremely high prices and at extremely high interest rates.

Today, the Consumer Financial Protection Bureau (“cfpb”) announced it entered into a Consent Order with Car Hop and its financial arm, Universal Acceptance Corporation (“UAC”) under which Car Hop and UAC agreed to reform its practices concerning customers’ credit reports. The companies also agreed to pay a $6.4 million civil penalty to the cfpb.

The cfpb said the companies were in violation of the Fair Credit Reporting Act in several respects:

  • Car Hop promised buyers they would report “good credit” to the credit reporting agencies (CRAs), UAC failed to do so;
  • Car Hop gave buyers the right to return cars within 72 hours of purchase, but when they did, UAC often falsely reported to the credit bureaus the cars had been repossessed or the buyers still owed money;
  • Car Hop often settled disputes by taking cars back and promising to negate what was owed, but UAC often kept reporting to the CRAs the buyers owed the loan balance, sometimes in increasing amounts; and
  • Car Hop and UAC did not have a policy or procedure under which customers could dispute inaccurate reports to the CRAs.

 

CreditCards.com is  great source of information on credit issues. A post today discusses data breaches of various descriptions and how each stacks up in terms of their impact on consumers.

The authors first remind people that you are not your credit card–there’s a big difference between a risk or breach involving only one account and a breach that exposes one’s entire identity.  But the risk increases when a breach extends beyond one card or account to include personal information such as your DOB and SSN.

Your credit card is stolen or hacked

Scenario 1. Your credit card is stolen or hacked
Someone stole your wallet and with it, your credit card. Or, maybe you still have the credit card but someone somehow got the number and charged items on your account.
Why:
The thief wants to spend as much money as possible before you and/or your card issuer get wise to the theft.
The good news:
Under the Fair Credit Billing Act, you’re on the hook for only $50 and probably not even that. Most credit card issuers have zero-liability policies that mean you won’t pay a cent. Plus, the thief has access to just that one account number — not other personal info that could put your entire financial identity at risk.
The bad news:
You have to get the card replaced and change any recurring automatic payments made with the card. In the meantime, you don’t have the credit card, which is a problem if that’s your only card.
Takeaway:
 If your credit card is stolen, it’s a hassle but it’s no big deal it’s an inconvenience.

 Your debit card is stolenScenario 2. Your debit card is stolen Someone stole your wallet and with it, your debit card.Why: To clean out your account before you find out about the theft.

The good news: The thief has only your debit card — not anything linked to your identity.
The bad news:
You’re not protected for such theft the way you are with a credit card theft or breach. Under the Electronic Funds Transfer Act if your debit card is stolen, in most cases your liability is limited to $50 if you report the theft within two days. But if you wait more than two days, you could be liable for $500. After 60 days, you could be on the hook for the entire stolen amount, although most banks will review such theft on a case-by-case basis.

Even if you do report the theft right away, the bank account linked to the card will be frozen and you’ll lose access to the funds while the issue is being resolved. Meantime, you can’t pay your bills or get cash. For people who are already living on the financial edge, this can cause a domino effect. No money for gas means no way to get to work, which puts a job in jeopardy.

 You friend a fraudster

Scenario 3. You friend a fraudster
A fraudster posing as one of your friends asks to connect on social media and you quickly accept. Then you realize you’re already connected and this new social media “friend” is a fraudster. Now all the personal info you share with your real friends is available to an identity thief.
Why:
The fraudster may already have some account information on you and now is trying to fill in missing puzzle pieces or get information about your identity that could be used to answer your password security questions, such as “Name your first pet” or “Where did you go to high school?” The fraudster could use this information for full-scale identity theft or to hack one account at a time.
The good news:
You could be safe if you catch the mistake and delete the fraudulent friend right away. If the hacker is doing this on his own, he’ll need time to comb through your account.
The bad news:
If the hacker is using software to scrape personal info from your page, you might be at risk the minute you click accept.
 Change-of-address fraud

Scenario 4. Change-of-address fraud
You haven’t gotten any snail mail for days; you see your mailman as he drives by and he says the post office received a change of address notice from you. You didn’t fill one out.
Why:
The thief first wants access to mail so he can get account information and other personal identifiers. Next, he wants to make sure you don’t receive mail notifications when he changes passwords, PINs or other key information for those accounts, and opens new accounts in your name.
The good news:
You missed a few days of junk mail.
The bad news:
This scenario is a major indicator of ID theft.

 Hackers expose your data in a major federal breach

Scenario 5. Hackers expose your data in a major federal breach
You’re among the millions of victims whose extensive personal information was exposed in the federal data breaches at the Office of Personnel Management.
Why:
Thieves can use that information to open new accounts in your name for apartments, cell phones, car loans and more.
The good news:
You’re not alone; about 22 million people were affected in two separate breaches.
The bad news:
Thieves now have access to a lot of your personal info — the breaches included Social Security numbers and information used for security clearances, as well as employment, educational, residential, financial and health histories.

Medical ID theft

Scenario 6. Medical ID theft
Your doctor’s office gives you a form to sign confirming that you’ve moved; but you’ve lived in the same house for years. This could be a sign of medical ID theft, one of the fastest growing forms of identity theft.
Why:
Medical ID thieves seek to get free medical care, free drugs, free equipment or to commit other fraud.
The good news:
It could be human error.
The bad news:
If it’s medical ID theft, the implications go beyond financial. When your medical history is intertwined with someone else’s, you’re at risk for misdiagnosis, being prescribed a drug that doesn’t work with current prescriptions, having insurance claims denied or even losing your insurance. Nearly two-thirds of victims in a 2014 survey by MIFA paid out-of-pocket expenses averaging $13,500 including services received by the ID thief.
The most severe consequences are not financial — they’re related to a consumer’s health as the result of confusion about the victim’s true medical condition and health history because it’s corrupted with information about the identity thief’s health conditions.

Foiling fraudsters
You can’t prevent some of the scenarios above but you can take action to help prevent being an individual target.

  • Set up your debit card so that it’s only an ATM card and can’t be used to buy things and clean out your account, Weisman says.
  • Choose strong passwords, change them often and don’t keep them written down in an obvious place.
  • For security questions linked to your accounts, make up fake answers that are easy to remember yet have nothing to do with your real first pet, high school or mother’s maiden name. “Give a nonsensical answer,” Weisman says. “For ‘Where did you go to high school?’ answer ‘Grapefruit.’ It’s just silly enough you won’t forget it.”
  • Read the explanation of benefits notices your insurance company sends out, even if they say you don’t owe anything. That will alert you to any procedures or doctor visits that didn’t involve you.

And if your credit check engine light comes on, investigate immediately.

 

We and other consumer advocates have long advised consumers to send disputes to the credit reporting agencies by mail rather than using the agencies’ online option.  The main reason for using old-fashioned mail was that there was no way to send in documents to the agencies to show the consumer is right and the reports are wrong.  Now, however, the bureaus online systems allow consumers the ability to upload documents, such as documents showing proof of payment.

Consumers understandably like the online option because it is easier and faster. There is still a downside to online disputes even if the consumer sends in supporting documents and that is the lack of a paper trail. This problem may be avoided by preparing a detailed dispute letter and upload it along with any documents. In case your dispute doesn’t get immediate results, you should save copies of your dispute letter, documents, and the agencies’ response.

The NY Times covers this subject in an article in its Personal Business section.

  • To the surprise of no one who has watched how furnishers of credit–banks, finance companies, and the like–deal with consumers’ disputes, today the Consumer Financial Protection Bureau said many furnishers lack adequate policies for accurately reporting information to consumer reporting agencies and for responding to disputes. The CFPB press release states that the CFPB examiners “continue to find a lack of reasonable written policies and procedures for accurately reporting deposit account, debt collection, and student lending information to the consumer reporting agencies. The CFPB found that many furnishers did not have systems in place to properly receive, evaluate, and respond to consumer disputes regarding the information provided to consumer reporting agencies. In particular, examiners found that certain furnishers did not notify consumers about the outcome of investigations about disputes over consumer reporting information. In other instances, some furnishers did not notify consumers when they took adverse action against them based on information in their reports.”

 According to a survey commissioned by FICO, 62 % of consumers who received non-FICO credit scores online believe they had received actual FICO® Scores.  More than 8 in 10 consumers believe the scores they obtained from the non-FICO sources are scores widely used by lenders to make credit decisions, which is not the case.

The survey found that 71% of consumers agree it is important that the credit scores they obtain are scores widely used by lenders to make credit decisions.  But the only scores used in 90% of credit decisions is the FICO® score.“Because other credit scores look similar to FICO Scores, consumers have no way of determining, through the credit score itself, whether or not it’s a FICO Score.  Credit scores are unlike other products; the consequences of not recognizing credit scores from different companies can be much more serious,” according to Jim Wehmann, executive vice president for scores at FICO. “The new research findings bring to light an important issue: If the majority of consumers are confused about these non-FICO credit scores being provided to them, then millions of Americans are mistaken about their actual creditworthiness.”

The scores for the same person vary by as much as 100 points because the mathematical formulas used by the scoring companies are significantly different from their FICO Scores. These large differences cause confusion and without an accurate impression of how a lender views his or her credit risk, a consumer may forego a valuable mortgage refinancing, for example.“ For more about FICO Scores, go to www.ficoscore.com. Consumers may get their true FICO scores by accessing FICO’s Score Open Access Program.

 

The credit agencies are eager to sell you credit monitoring at about $20/month. Here are reasons not to buy it. It doesn’t prevent ID theft, it only tells you after the theft has been committed – the proverbial shutting the barn door after the horse has run away.
If you are really threatened with identity theft, you can put a security freeze on your credit files that actually prevents the ID theft by locking out access from the credit reports.
Credit monitoring is not a good value proposition.  You can check your credit report regularly by downloading one from Experian, Equifax or Trans Union every 4 months.
Some believe that daily reports on your credit score will only make you nervous. According to Chi Chi Wu at the National Consumer Law Center, if you really want to monitor your credit score, you can do it for free now with FICO’s Open Access program, as long as you can qualify for a Discover, Amex, or Barclays card.  You can sign up to check your FICO monthly if you want to do so. For information on FICO’s Open Access program, go to  http://www.fico.com/en/node/8140?file=8393