Under 15 USC 1681c, a credit reporting agency must remove information that is too old to be reported.  Such information that must be removed includes:

• Bankruptcy:  10 years from the date of entry of the order for relief or the date of adjudication, as the case may be;
• Civil suits, civil judgments, and records of arrest:  7 years after date of entry or until the governing statute of limitations has expired, whichever is longer;
• Paid tax liens:  7 years from date of payment;
• Credit cards, store cards, and other consumer debt:  7 years from the date on which the account was placed for collection or charged off.

So if you’ve got credit information that is nearing the end of the reporting period, sit tight - it should come off soon enough.  And if it doesn’t?  Then it’s time to consult with a lawyer who knows his or her way around credit reports.

Non-profit credit counseling organizations, creditors trying to restructure a consumer’s debt to it, and banks and credit unions are not CRO’s.

The Federal Credit Repair Organizations Act provides for very specific disclosure requirements before a CRO can provide services, including the need for a written contract, and a three-day right to cancel the agreement.

The following articles discuss the risks associated with CRO’s:

Credit Repair:  Beware of Predators!

Credit Repair:  What They Don’t Tell You

Credit Repair - Watch Out!

In the case of In re Luedtke, the debtor had filed a Chapter 13 bankruptcy case showing a automobile loan from the University of Wisconsin - Oshkosh Credit Union.  Though the debtor was paying the claim through her Chapter 13 Plan, the post-petition payments were not being credited on her credit report.

Mrs. Luedtke tried to refinance her mortgage so she could pay off her Chapter 13 Plan, and claimed she was unable to complete the refinancing due in large part to the incorrect information on her credit report.  Although she requested correction of the report to the credit union, her request was denied.  She did not, however, report the allegedly inaccurate information to the CRAs.

So Mrs. Luedtke went to court, claiming that the Credit Union must report the loan as modified by her Chapter 13 plan and should report as current payments the Debtor makes on the loan under her plan.

This is a rare sort of case because most decisions hinge on whether reporting a balance due after a bankruptcy - not during an active one - is a violation of the U.S. Bankruptcy Code.  And though the argument makes sense, it’s not one that many lawyers have made.  After all, most consumer are concerned about their credit report after bankruptcy.

The bankruptcy court looked to a number of cases involving violations of the discharge order - including a few of my cases on the subject - and found that the Credit Union did violate the confirmation order by its affirmative reports to credit reporting agencies.

Just as a creditor can violate the discharge injunction for deliberately refusing to submit accurate information, the confirmation order prevents those same actions during the course of the  Chapter 13 case.  See McKenzie-Gilyard., 2008 U.S. Dist. LEXIS 50262. When the Credit Union reports that the Debtor owes amounts according to the original loan, those reports are not accurate, and violate the confirmation order.

There is a take-away to this case, and a practice tip for all lawyers who handle Chapter 13 bankruptcies.  As the court states:

Moreover, the Credit Union correctly notes that neither the plan nor the order confirming the plan expressly requires the creditors to report plan payments to CRAs.  In a plan which depends on a balloon payment at the end in order to satisfy the claims, such a provision would be wise.  On the other hand, the confirmation order should not have to tell a creditor whose claim has been reduced or payment stream altered to report the correct amount and payment history to the CRAs; the creditor is bound by the confirmed plan to the new provisions, and if the creditor is going to report at all, the creditor should report the pendency of the bankruptcy or the history of the payments under the plan.

A copy of the decision can be found here.

In an article entitled “Fraud-prevention pitchman becomes ID theft victim“, CNN reports that Lifelock CEO Todd Davis is being sued by customers because his service didn’t work and he knew it wouldn’t because Mr. Davis has been a victim of identity theft.  The article cites that Mr. Davis acknowledges that in 87 instances in which people have tried to steal his identity…one succeeded:  a guy in Texas duped an online payday loan operation into giving him $500 using Davis’ Social Security number.  The article goes on to say that Mr. Davis said it is possible that driver’s licenses have been issued to other people in his name.

As Carmen Dellutri said in a post Fraud Alerts Under the Fair Credit Reporting Act Create Lawsuit, “we are going to keep our eyes on this one and see where it goes.”

But his identity has run 90,000 times in the first 9 months since the commercial aired on television, according to MSNBC writer, Helen A.S. Popkin, in her amusing article, “Sing it, FreeCreditReport.com guy!”  And all of America knows his song.

So the free credit report ain’t; and the Dude is a figment of an ad agency imagination.  Does that mean we should not believe everything we see advertised on TV?  P.T. Barnum once said, “There is a sucker born every minute”.   

Many believe they need help — either after bankruptcy or in lieu of filing bankruptcy — to “clean up” credit reports. That’s where the snake oil salesman come in. Go to any large city’s Craig’s List and check out all the “Credit Repair” ads in the Financial and Legal Services sections. Watch late night TV, listen to the radio, just watch your junk mail! You will hear the sweet sound of easy redemption from credit problems. Get rid of negative accounts, delete judgments and even bankruptcies — whether or not those entries are truthful.

Want to bet how many of them were around 10-years ago? Or how many will be around in another 10-years?

Most of these credit repair organizations offer pie-in-the-sky services but they don’t come cheap. And that’s the rub: Most “credit repair” services fail to comply with the law. As Pam Stewart, a member here and Texas bankruptcy attorney, has pointed out, much of the accurate (but negative) information in a credit report does not have to be removed except under specific circumstances. And, under the Credit Repair Organizations Act (CROA), the providers of these services are not entitled to be paid until after they provide the services.

Our colleague, Jay Fleischman, a New York consumer attorney, has provided important additional details about CROA and credit repair hype on our companion site, the Credit Law Network, which I encourage you to read as well.

And if you genuinely believe something is incorrect on your credit report, you may have the right to have that corrected under the Fair Credit Reporting Act (FCRA). Read more about credit reporting. Visit the FTC’s website about credit repair scams and rebuilding your credit. Talk to the lawyer who handled your bankruptcy, if you have filed. Or contact the attorney in your area to see if they handle this sort of issue - or if they can refer you to someone who does.

But don’t throw money at credit repair “deals” that sound too good to be true. They usually are.

Can the mortgage company do this? The Fair Credit Reporting Act (Federal Legislation to protect consumers from abuses of the credit reporting agencies) generally governs the actions of the reporting agencies. It is not designed to control creditor abuse of the reporting process.

Nonetheless, there are provisions requiring the reporting agencies to verify information as accurate, particularly after inquiry from the consumer, and other provisions requiring truthful reporting and a requirement to provide accurate information.

But, since the loan was once in bankruptcy, simply indicating that on the credit report and refusing to change it may not fall within the provisions of the act. At least that’s the argument that the mortgage companies are using. I don’t agree – I think it is false reporting and the mortgage companies and reporting agencies need to be taken to task. If this is happening to you, consult a competent consumer attorney in your vicinity that is familiar with the Fair Credit Reporting Act.

Clearly, not a lot of information about credit freezes is getting out. I first heard the term “credit freeze” on a radio show hosted by a local consumer advocate. I have mentioned the concept to several of my clients, but no one has heard of it. What exactly is a credit freeze and how does it work?

A credit security freeze works by restricting access to your credit reports. If an identity thief gets hold of your personal information (date of birth, social security number, full name, etc.) he will generally make use of that information by opening new accounts in your name and by using a mailing address that he controls. On the credit application, he will include your old address along with a “new” address for the new account. Usually this new address is a post office box, making it untraceable. The identity thief knows that word of this new account will not filter back to you for two or three months and a lot of damage can be done in that period of time.

In the absence of a security freeze, the credit bureau will consider a new account (based on your legitimate, good credit) and will note a change of address. The credit issuer will submit your name and identification information to the credit bureau database and the new account will be approved based on a pre-determined credit criteria.

With a credit freeze in place, however, this new account creation will not happen. Firstly, a credit freeze will prevent the credit bureau from changing your address. Secondly, the credit freeze will prevent the credit bureau from making your information available to the credit issuer. Therefore, no new accounts will be approved or opened.

Every credit transaction will be blocked. If the identity thief tries to use an existing account on the Internet (planning on having the items purchased delivered to an address of his choosing), the freeze will prevent the transaction from going through.

The bottom line - a credit freeze will put a halt to all access to credit in your name. If your identification really is in the hands of bad guys, you will still have a lot of work to do in reestablishing your identity. Imagine, for example, the hassle of starting over with a new social security number.

Ideally, you should request a freeze the instant you realize that your identity has been stolen. In reality, however, people don’t act that fast. You may only act after you receive the first report of improper activity. If you can’t find your wallet, for example, you may spend a day or two searching before concluding that it is really gone, and even then you may not think to request a security freeze until after unpleasant things have started to happen.

Credit freezes (called “Security freezes” by the credit reporting agencies) go a long way to stop identity theives from using your good credit to create bogus accounts that can tie up your time for months.   Here are direct links to the security freeze sections of the major credit bureaus:

Equifax - placing a voluntary freeze on your account

Experian - requesting a security freeze

Trans Union - eligibility for a security freeze

Interestingly, the public has been slow to take advantage of credit freeze opportunities.  In October, 2007, consumer advocate Clark Howard (who hosts a popular syndicated radio show) wrote on his web site that only 50,000 people nationally have used this tool, while at the same time identity thefts number 10 million annually.

If you have had any experience using a credit freeze, or if you have been a victim of identity theft, it would be interesting to hear your story - please send us an email.

The Federal Trade Commission is concerned about identity theft and has developed a program called “Deter, Detect, and Defend”.   Today, let’s talk about detering a thief.   

1.   Personal information should stay confidential and should never ever be given out over the phone, the mail, or over the Internet, unless you are positive that you are dealing with the correct person.

2.  Keep your personal information confidential and safe at home or at work.   Your personal information should not be in your purse/wallet, being carried about town with you.

3.  All financial documents should be shredded once they are no longer useful to you, and you are ready to throw them out.

4.  Don’t put your social security card in your wallet, don’t write it on a check, don’t provide it over the phone, don’t put it in an email.

5.  Read every bill that comes to your house, especially credit card statements, and look for those suspicious charges.

6.  Go to www.annualcreditreport.com and get a copy of your free annual credit report.   Look for strange creditors whose names you don’t recognize.

Part Two of this series will deal with Defending Yourself Against An Identity Thief.