ARM Industry Included in Credit Report Probe

The debt buying and collection industry came under fire yesterday during Congressional testimony by consumer advocates as the House Financial Services Committee held hearings on consumer credit reports.

The hearings were primarily intended to review the work of the Federal Reserve Board and the Federal Trade Commission, the two agencies given regulatory oversight of the Fair Accurate Credit Transactions (FACT) Act. Congress implemented the FACT Act in 2003 to help consumers gain greater access to their credit reports to ensure their accuracy and to better fight identity theft.

Much of the testimony from consumer advocates concerned the poor quality of credit reports and the difficulties consumes face as they attempt to fix their reports. The debt buying industry was cited as just one group that contributes to the inaccuracy of consumer reports.

Chi Chi Wu, staff attorney of the National Consumer Law Center in Boston, noted that collectors attempting to collect decade-old debt can lead to confusion over accuracies in a report. “Indeed, the fundamental problem is that debt buyers and collectors are often given little more than a list of debts,” according to Wu’s testimony. “There is no account application, original agreement, history of periodic statements, or indication whether any of the debt was disputed with the creditor or settled with a previous collector.”

Wu blamed both debt buyers and original creditors for this poor information.

Evan Hendricks, publisher of Privacy Times journal noted that some credit reports of consumers that have filed for bankruptcy are not updated so that it appears the consumer still owes on debt that she has long since repaid.

Stuart Pratt, president of the Consumer Data Industry Association, testified to the efforts his members make to ensure that credit reports are accurate. The 300-some members of the CDIA include firms in the credit and mortgage reporting industry along with collection services firms.

Executives from the Fed and the FTC didn’t respond to individual complaints that the advocates threw at the committee. Lydia Parnes, director of the FTC’s Bureau of Consumer Protection, devoted much of her testimony to listing the agency’s responsibilities under the FACT Act, its efforts to educate businesses and consumers on the act, and several suits it has filed against firms its claims have violated the act. An executive from the Fed followed a similar tack as Parnes.

Congresswoman Carolyn Maloney (D-NY) cited a study finding that nearly three-quarters of credit reports contain inaccuracies.