Actual Payment Information Suppressed

The biggest credit card companies are suppressing actual payment information on credit reports.

The CFPB reported in 2020 that the largest credit card companies are purposely suppressing customers’ actual payment amounts from their credit reports.  Actual payments are the amounts the borrower repays each month, as opposed to the minimum payments or balance. This means that millions of borrowers are missing key information of their repayment behaviors that impacts their credit. This suppression harms the opportunity to receive better financial offers and costs billions of dollars in interest expenses.

As of 2022, the CFPB reported that Americans paid over $120 billion annually in interest and fees on credit cards and since then the average interest rates charged by credit card companies have been quickly increasing.

Last May, the CFPB sent letters to the CEOs of the nation’s largest credit card companies - JPMorgan Chase, Citibank, Bank of America, Capital One, Discover, and American Express - asking if they furnished actual payment information. They asked why they stopped sending complete data and if they had plans to change their practice.

They learned that:

• One large credit card company took the move first, and the others started suppressing their data shortly after.

• The companies didn’t say when they intended to restart reporting actual repayment information.

• Companies suppress data to limit competition. By withholding information it made it harder for competitors to offer more profitable and less riskier customers better rates, products, or services.

Credit card companies are making it difficult for people to shop for credit and to save money. People expect that their credit behaviors - like paying credit card bills in full each month will be reflected in their consumer reports and credit offer they receive.

More Information from the CFPB: CFPB Summary

Fraud: Verification vs. Authentication

As we evolve to a virtual format, we are threatened by new forms of fraud. Providing confirmation that a consumer, customer, or organization  is who they say they are usually requires that they provide identity verification and authentication. These terms are not used interchangeably and not knowing the difference can make you vulnerable to fraud.

A verified identity proves that this identity exists, whereas an authentication proves that this user is who they claim to be. However, it is important to note that verifying an identity exists does not prove that it belongs to the person putting in the information.

When creating and securing an account online a combination of a name, address, phone number and email on a form can provide enough information for a company to verify a consumer’s identity to establish trust upon creation of an account. The information can be cross-checked among multiple data sources such as utilities or phone carriers, to ensure the name matches the data on file.

Fraudsters can illicitly obtain identifying information to apply for new accounts in their victims’ names. Some create synthetic identities and fabricate credentials that are not associated with a real person which can fool the verification process.

Some organizations recognized this type of identity theft and have shifted toward a better authentication process that require more than just simply verifying that an identity exists. Organization’s work to confirm that the person who created the new account provide some proof of identity by asking to provide a government photo ID for facial recognition.

Authentication is still an on-going identity-proofing process that checks both the identity of the digital user and ensures the integrity of the device they are using. The most notable system in place currently is the two-factor authentication and one-time passcode method that grant account access to the right person in real time.

A study from CMO Council in 2021 showed that authentication frustration caused 61% of consumers to abandon a transaction. Another report from TransUnions 2022 Global Digital Fraud Trends showed that approximately two-thirds of consumers would switch companies for a better digital experience.

Hyundai Hurting Credit Reports

On July 26th on the Consumer Financial Protection Bureau (CFPB) penalized Hyundai Capital America (Hyundai) for providing inaccurate information to nationwide credit reporting companies and did not take the proper measures to address or correct this information when it was identified between 2016 and 2020.

Hyundai Capital America serves approximately 1.7 million drivers of Hyundai, Kia and Genesis vehicles and has agreed to pay a $6 million civil fine and $13.2 million in restitution to current and former customers, making this the CFPB’s largest Fair Credit Reporting Act case against an auto servicer.

The CFPB found that Hyundai used manual and outdated systems, processes, and procedures to furnish credit reporting information. This resulted in Hyundai providing negative inaccurate information over 8.7 million times across 2.2 million accounts from January 2016 to March 2020, damaging customers’ credit reports and often resulting in lowered credit scores.

In a statement Hyundai Capital America stated that it launched an “end-to-end review” of it’s credit reporting, and was committed to giving customers “timely, accurate, high-quality service and care.” In the investigation the CFPB received many consumer complaints that Hyundai was inaccurately reporting their accounts. Hyundai identified many of the issues causing these inaccuracies in its internal audit books but it still took years to address the problems.

The CFPB concluded that between January 2016 and March 2020 Hyundai violated the Fair Credit Reporting Act (FCRA) and it’s implementing regulation, Regulation V, by:

• Failing to report complete and accurate loan and lease account information: Hyundai repeatedly did not take steps to promptly update and correct information it furnished to credit reporting companies that it determined was not complete or accurate, and continued to furnish this inaccurate and incomplete information.

• Failing to provide date of first delinquency information when required: FCRA requires data furnishers to provide credit reporting companies the date of delinquency for when a delinquent account is being charged off or placed for collections. Hyundai failed to report a date of delinquency for many consumers who were more than 90 days delinquent.

• Failing to modify or delete information when required: Hyundai’s furnishing system often overrode manual corrections made by employees in responding to consumer disputes. The furnishing system would provide monthly updates to credit reporting companies that reintroduced the data error after it had been disputed and corrected.

• Failing to have reasonable identity theft procedures: FCRA requires furnishers to respond to any notifications from credit reporting companies about furnished information that is the result of identity theft. Hyundai failed to establish reasonable identity theft and related blocking procedures to respond to identity theft notifications, and continued to report such information that should have been blocked on a consumer’s report.

• Failing to have reasonable accuracy and integrity policies and procedures: Regulation V requires furnishers to maintain written policies and procedures regarding the accuracy and integrity of the information furnished. Hyundai failed to review and update its credit reporting furnishing policies and procedures from 2010 to 2017. It was not until 2021 that the company finally updated some of its credit reporting policies and procedures.

Enforcement Action

The CFPB was created by the Consumer Financial Protection Act, and has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices and violating FCRA, which protects consumers from the transmission of inaccurate information about them. Today’s order requires Hyundai to:

• Pay $13.2 million in compensation to current and former customers: As identified by the CFPB, consumers about whom Hyundai, after determining the information was inaccurate, furnished to credit reporting companies inaccurate information that the consumers were 30 or more days past due on an automobile retail installment contract or lease will receive compensation for the harm incurred.

• Pay a $6 million fine: Hyundai will pay a civil money penalty to the CFPB, which will be paid towards the victims relief fund. This fund provides compensation to consumers harmed by violations of federal consumer financial protection law.

• Take steps to correct all inaccurate account information: Hyundai will review all account files that it currently furnishes to credit reporting companies and correct all inaccuracies and errors described in the order and send updated information to the credit reporting companies. Hyundai will also examine its monthly furnishing data processes for the errors described in the order, take reasonable steps to identify such errors, and resolve identified errors before providing the data to any credit reporting company.

• Address procedures identifying and correcting inaccurate information: Hyundai will establish and implement written policies and procedures regarding the accuracy and integrity of the information relating to consumers that it furnishes to a credit reporting company. Hyundai must specifically include processes for identifying and promptly correcting systemic errors in Hyundai’s credit report furnishing system. Hyundai will also examine current policies and procedures and implement changes to the practices of its employees to ensure that its employees properly route, categorize, investigate, and respond to all direct and indirect credit reporting disputes.

Changes in Medical Debt Reporting

The nation’s largest credit reporting agencies; Equifax, Experian, and TransUnion announced on Friday that many U.S. consumers will have their medical debt wiped from their credit reports. 

In a joint statement, they stated that nearly 70% of medical collection debt accounts from consumer credit reports would be removed after conducting months of market research. The changes will take effect July 1, 2022.

Paid medical debt will no longer be included on consumer credit reports. Credit bureaus plan to extend the timeline reporting how long a medical bill is sent to collections. Typically a medical bill is sent to collections after 180 days. Consumers will now be given up to one full year. This will give consumers more time to work with insurance and/or medical providers to address their debt before it is reported to their file without it impacting their credit score.

 Most medical debts in collection on consumer credit reports are under $500. Beginning in the first half of 2023 Experian, Equifax, and TransUnion will no longer include unpaid medical collection debt that is under $500, though that threshold may increase. 

This does not change the responsibility of the consumer to pay, but it may alleviate some of struggle consumers face when trying to apply for credit.