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Fixing Mistakes on Your Credit Report
Plus, pressure mounts to regulate Buy Now, Pay Later
In the wake of news that most medical debt will be removed from consumer credit reports this summer, you may be wondering how to be sure your credit report is accurate going forward.
An accurate credit report matters because your credit score is used for things like getting a mortgage or renting an apartment and can come into play when financing a car or even when getting insurance.
According to this article at CNBC, having medical debt removed from a credit report could improve your score by as much as 100 points.
If medical debt that has gone to collections is the only blemish on your report, once it comes off, your score could increase by about 100 points, Rossman (of Bankrate) predicts. The impact will be lower for someone who has other missteps, he said.
Sometimes, though, the credit reporting agencies (Experian, Equifax, TransUnion) make mistakes. This means your medical debt might not be removed as expected OR there may be other errors on your report.
More than one-third of Americans found at least one error on their credit report, according to a 2021 Consumer Reports investigation.
Here’s how you can start the work of ensuring your credit report is accurate.
“You should always be checking your credit report,” said Chi Chi Wu, staff attorney at the National Consumer Law Center.
The reports are available through AnnualCreditReport.com.
Also, don’t be tempted by credit repair companies. Many of them (illegally) charge upfront fees and most of them do work that you can do yourself.
You can and should file a dispute if there are errors.
“We generally recommend that you mail a dispute through certified mail,” NCLC’s Wu said.
Include documentation showing that the debt was satisfied, she said. It should go to both the credit reporting firms and the debt collector. (Here’s a sample letter from the FTC for disputing errors on credit reports.)
Here’s how to contact the bureaus:
You can also freeze your credit to prevent fraud. It can be unfrozen any time you are seeking new credit (buying a car or house, for example) and refrozen once the transaction is complete. This will prevent new accounts from being opened up in your name without you knowing it.
The end of most medical debt on credit reports is positive news for many Americans. It’s also an opportunity to check out your credit report and ensure it is accurate.
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Buy Now, Pay Later Products face Call for Regulation
A coalition of consumer groups issued a joint letter to the Consumer Financial Protection Bureau (CFPB) urging action to regulate buy now, pay later products such as AfterPay, Klarna, Affirm, and others.
The groups — including Consumer Federation of America (CFA) and National Consumer Law Center (NCLC) — have expressed alarm at the rapid growth of the largely unregulated consumer credit products. In their letter, the coalition recommends that buy now, pay later products be subject to federal Truth in Lending (TILA) rules and be treated like credit cards.
“BNPL products have largely evaded oversight by federal and state regulators,” the groups stated. “Although these products could have a place in meeting consumer needs if they operate as promised, they pose a risk to consumers and should be covered by basic consumer protections.”
The consumer advocacy groups raised a number of concerns including: a lack of meaningful underwriting for a consumer’s ability to repay, which could lead to unmanageable debt; hidden fees and absence of clear disclosures; problems with disputes and refunds; confusing payment schedules for multiple purchases; deceptive claims about credit building or potentially negative impact on credit reporting; and debt collection issues.
“Marketing of Buy-Now-Pay-Later credit is enticing, with promises of instant approval and no impact on a consumer’s credit,” said the groups. “However, many providers are not conducting meaningful underwriting to assess a borrower’s ability to repay, allowing consumers to accumulate unaffordable amounts of debt.”
The call for regulation from consumer groups comes as a separate survey of consumers indicates that many who use buy now, pay later ultimately regret the decision.
The survey revealed:
More than 45% of Americans have now signed up for at least one Buy Now Pay Later plan. That’s compared to 31% as of April 2021 — a 41% increase in usage over 10 months. Of those who’ve used the plans, 22% regret their decision, saying they wish they’d never signed up for a plan at all.
More than 50% of respondents have been paying off multiple Buy Now Pay Later plans at one time.
The consumer groups, in their comment letter, recommend five specific action steps to improve consumer protection when it comes to buy now, pay later:
● Apply credit card protections of the Truth in Lending Act (TILA), including the provisions of the Credit Card Accountability Responsibility and Disclosure (CARD) Act. Applying credit card rules to BNPL credit would provide consumers with basic protections, such as dispute and chargeback rights, cost transparency, uniform disclosures and statements, reasonable penalty fees, and underwriting for a consumer’s ability to repay.
● Issue a larger participant rule to bring the BNPL market (along with other installment loan markets) within the CFPB’s supervision.
● Prevent or take action against unfair, deceptive or abusive acts and practices (UDAAPs) and ensure compliance with fair lending laws.
● Enforce the Electronic Fund Transfer Act’s ban on compulsory repayment of credit by preauthorized electronic fund transfer.
● Conduct research on the impact of the BNPL market on consumers and on their credit reports.