Thanks to a New Law, Righting Credit Wrongs Is Easier

Lance Clem says his credit record once showed a store that no longer existed had closed an account he never had. It took him more than two years to erase that smudge on his credit.

His phone calls to credit bureaus ended up where so many phone calls go to die--in some impenetrable answering system. Letters didn’t help.

“They just weren’t paying any attention to me,” said Clem, of Denver.

Now they must.

Under a law that took effect last year, consumers have a new set of tools to fix what officials say is one of the main frustrations of the marketplace--credit problems created by inaccurate information in credit bureau files.

Bureaus must make employees available--not just recordings--to talk to consumers who call on toll-free lines, the Federal Trade Commission says. They face a 30-day deadline for resolving mistakes, instead of the stretchy “reasonable” time they had before.

And in a big leap for consumer protection, the banks, department stores and other creditors that supply information to the bureaus are legally bound to be accurate or to fix their errors. Before, creditors had little obligation to set things straight, leaving that mostly to the credit bureaus.

“When consumers find mistakes, they should be able to get them corrected promptly and easily now,” said Michelle Meier of Consumers Union, which lobbied for the law for six years.

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Jeri Benner would like to think so. The Frederick, Md., computer consultant was on the eve of closing on her family’s new home in 1991 when the bank issuing the mortgage found what it thought was more than $100,000 in previously unreported debt.

“It wasn’t like I was able to pick up the phone and say, ‘Please help me,’ ” she said. “I was begging, pleading, groveling.”

The home purchase was delayed a week until the error was corrected. But the lapse cost the Benners an extra point on their loan, or $1,300.

The new law may not have made much difference in resolving the Benners’ problem, which developed overnight.

But Jeri Benner said “it would have helped a little, by putting the onus back on them” and by making contact presumably easier with credit officials scattered across time zones.

Consumers Union, publisher of Consumer Reports magazine, found mistakes in almost half the credit files it reviewed for a 1991 study and said 20% were serious enough to risk costing someone a car loan, a mortgage or a job.

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Associated Credit Bureaus Inc., trade group for the industry, says credit bureaus in recent years have voluntarily adopted many of the changes now required by the law.

Among the steps largely in place are the 30-day limit on investigations and an $8 cap on the cost of a routine credit report to consumers, said Barry Connelly, group president.

The law, toughening the Fair Credit Reporting Act, also prohibits employers from getting credit reports on job applicants without their permission.

When they do get a report and find something that concerns them, they must give applicants a copy before telling them they are not getting the job.

The law also might take a bite out of all those credit-card applications in the mail.

It gives people the option of blocking credit bureaus from giving out their names and addresses to credit-card companies that want to use the “pre-screened” lists for soliciting customers.

Applications now must include a credit-bureau phone number that people can call to get off the lists.

Consumers have faced “months of waiting for their credit reports to be fixed, credit-card companies who are unresponsive, and no one to talk to who will listen to their complaints,” said Sen. Richard Bryan (D-Nev.), who co-wrote the legislation with Sen. Christopher Bond. (R-Mo.).

That was Clem’s experience, until he approached Consumers Union and got some help.

Now Clem, who runs a Denver community policing program, is in need again. After becoming a victim of credit-card fraud, he had the bureaus attach a note to his files requiring lenders to hold off on giving him credit until they verify his identity and wishes.

That worked fine in the summer when, forgetting what he had done, he applied for a store credit card and got rejected. He decided to get rid of that special protection.

He’s still trying.