California Credit Law Blog

The Fair Credit Reporting Act currently requires consumers to send dispute letters to the credit reporting agencies even though the inaccuracy originated with a bank or other creditor. This twist in the law is confusing to many consumers as it is counter-intuitive. A consumer should be able to ask the creditor to fix the inaccurate information it sent to the credit reporting agencies in the first place.

The good news is that, starting July 1, 2010, consumers will have the right to send a dispute letter directly to the creditor. This change is due to a new Federal Trade Commission rule. It will still be advisable to also send dispute letters to the credit bureaus, Trans Union, Experian and Equifax.

More or more job seekers are being turned down for employment based on a bad credit report. The WSJ reports that 47% of employers check credit history for at least some positions. Most do so with respect to jobs with fiduciary or financial responsibility or for senior positions.

Employers can legally check credit if the applicant authorizes them to do so. Employment agencies point out that if the applicant refuses, there is little chance of getting a job.

Credit checks create a vicious cycle that prevents those who most need jobs from getting hired. At least one bill in Congress and some in the state legislatures would restrict credit checks except for specified positions.

In 2003, the federal Government required the three national credit agencies to establish a website where consumers could download their credit reports free, once a year. Unfortunately, the Government foolishly allowed the agencies to include advertising on the site, www.annualcreditreport.com. The agencies' advertising confused consumers into believing they had to pay for a credit score or credit monitoring services to get their free report.

The three agencies also set up their own "free" sites where consumers could download their credit reports. For example, Experian's site, www.freecrdeditreport.com, was heavily advertised on TV and purposely designed so consumers thought they were going to the true free site. Once there, consumers ended up paying for their credit score or worthless credit monitoring services.

Too late, but better than never, the FTC has imposed new rules effective April 1, 2010, to reduce the confusion. Under the new rule, any website that mentions free reports has to have a notice across the top of the site that the consumer may have the right to a free credit report at annualcreditreport.com. Similar disclosures will be required for TV and radio ads effective September 1, 2010.

On the Government site, beginning April 1, the credit agencies cannot advertise until after the consumer gets his or her free credit report from the site.

Question is, why did it take 7 years for the Government to get this right? I suppose one answer is that the Bush Administration did next to nothing for the consumer.