There is an ongoing and spirited debate regarding the accuracy of consumer credit reports, the impact of errors on consumers and the responsiveness of the three national credit reporting agencies (Experian, Equifax & Transunion - collectively “the bureaus”) to consumer disputes.
Progress has been made over the last few years but most would agree, that there are still things we can do to improve the accuracy of reports. This is good news for all three parties to the tenant screening transaction (applicants, landlords and the bureaus). The benefit of improved accuracy extends to the validity of the various scoring models and the number of consumer disputes!
The National Consumer Assistance Plan (NCAP) is an industry initiative – borne out of settlement discussions between the bureaus and 31 state attorneys general. NCAP defines itself as follows:
“The National Consumer Assistance Plan is an initiative launched by the three nationwide consumer credit reporting companies – Equifax, Experian and TransUnion – to make credit reports more accurate and make it easier for consumers to correct any errors on their credit reports.
Under the plan, which was launched in March, 2015, the three companies are taking a number of steps to improve data accuracy and quality and make it easier for consumers to understand their credit information. The companies are implementing the plan over a three year period with full implementation of the plan expected by March 2018.
July 2017 – Restrictions on Reporting of Civil (Eviction) Judgments
On July 1, 2017, the bureaus deployed the first of those steps when they limited reporting of tax lien and civil judgments to those records that:
- Include the consumer’s name, address and SSN (or DOB); and
- Have been verified (by courthouse visit) within the last 90 days.
The purpose of this step is to reduce the number of false positives. Those familiar with civil records know well the challenge associated with record matching due to the lack of personal identifiers – data elements like full name, SSN and DOB. What is the impact of this action?
“Eric J. Ellman, interim CEO of the Consumer Data Industry Association, said in an e-mailed statement a “vast majority” of all civil judgment data and about half of all tax lien records will not meet the new standards. In separate client notices sent out last summer, both Experian and TransUnion said civil judgments would likely no longer be part of their consumer credit databases.”
Relying on credit reports alone for civil (eviction) records data was never a good idea. First of all, it takes time for judgments to find their way onto the credit reports – due to the lack of identifiers in the civil record. Rarely (as in almost never) are SSN’s (even last four) or DOB’s included or accessible in the civil record.
And then there is the well-known but often ignored fact that almost no eviction filings result in judgments. This is because the majority are settled (the resident pays or simply moves out) and dismissed by the plaintiff (landlord), not because they lack merit, but because the odds of collecting are not likely.
The point is, reporting of fewer judgments on credit reports is of little consequence to landlords who work with tenant screening companies who conduct thorough eviction records searches and include record matching and examination of filings - by contacting the plaintiff or plaintiff’s attorney if necessary – to surface the reasons for those filings.
September 2017 – Restrictions on Reporting of Medical Debt
Beginning September 15, 2017, medical debt will not be reported until 180 days after the date of delinquency. Medical data furnishers will be required to include full name, address, SSN and DOB as part of their credit feed to the bureaus.
This change is intended to reduce false positives and to prevent reporting of medical debt (and its impact on consumers) when due to insurance claims processing delays.
A large percentage of derogatory credit is associated with medical debt and much of that is due to processing delays – which in turn puts downward pressure on credit scores. As we see it, there is little downside to this change.
Landlords often exclude medical debt from their rental criteria – by basing their criteria on credit detail alone or in combination with one of the scores. Good idea since those with medical debt are often solid rental risks.
Conclusion
The bureaus have made considerable progress in response to CFPB “activities” and legal pressure at the state level – and recognizing that anything we can reasonably do to improve the quality of our reports is a good thing.
Screening of prospective tenants remain an essential business function for the landlord. Doing so is increasingly challenging due to changes in state and federal consumer reporting law and consumer demand for transparency. You can (and certainly should be able to) rely on your tenant screening company to stay informed and tweak your processes to remain compliant and continue to thoroughly vet prospective residents.