Brown urges feds to take action


Brown

With thousands of Ohioans impacted by errors on their credit reports, U.S. Sen. Sherrod Brown (D-OH) today urged federal regulators to better monitor financial institutions that sell debt to debt collectors, particularly “zombie debt.” This is debt that the consumer may have already paid, debt discharged in bankruptcy, or debt that was erroneously incurred through identity theft or fraud. Debt collection and credit reporting are two of the most frequent consumer finance complaints reported to the Consumer Financial Protection Bureau (CFPB), and reports have shown one in five Americans’ credit reports has an error that may impact ability to obtain credit.

“Everyone should have an accurate credit score and no one should be haunted by debts they don’t owe,” said Brown, ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. “But too many Americans are haunted by zombie debts – debts they’ve already paid but still appear on their credit reports. Credit scores are often used for non-credit purposes, like job decisions and rental housing, compounding the problem. That’s why I’m urging federal regulators to do their part to ensure accurate and timely reporting of consumer debt information. These agencies can and must do more to ensure that buyers and sellers of debt aren’t engaging in behavior that exploits consumers.”

Last month, the nation’s largest bank agreed to settle claims regarding allegations that it sold credit card debt that was inaccurate to debt collectors – who then illegally attempted to collect on the debt. These actions impacted half a million consumers, including 14,000 Ohioans. Since the Consumer Financial Protection Bureau (CFPB) opened its doors four years ago, 20,000 Ohio consumers have filed complaints with the CFPB – and roughly 8,000 of those involved debt collection and credit reporting.

In response, Brown [brown.senate.gov/download/letter-to-regulators]sent a letter today to Federal Reserve Chair Janet Yellen, Comptroller of the Currency Thomas Curry, Federal Deposit Insurance Corporation Chairman Martin Gruenberg, and National Credit Union Administration Chairman Debbie Matz. The letter urges specific action by the regulators to strengthen oversight of debt-sale arrangements, including considering what information the financial institutions send to debt buyers and consumers, how that information is verified for accuracy, and whether there are prohibitions on financial institutions selling zombie debt to debt collectors. The letter is below.

“Credit history is critical to home buying and asset building,” said David Rothstein of Neighborhood Housing Services of Greater Cleveland. “Far too many families come to us with dings on their credit that are not real or were taken care of years ago. Without this bill, families are inadvertently being denied access to homeownership.”

Brown also outlined legislation he has introduced that would require banks and debt buyers to notify credit reporting agencies when a consumer’s debt has been extinguished through bankruptcy. In Ohio alone, there were more than 40,000 bankruptcies last year. Introduced last month, Brown’s Consumer Reporting Fairness Act would amend bankruptcy law to require creditors to ensure that a debt discharged in bankruptcy shows a zero balance on the consumer’s credit report in an accurate and timely manner. The bill also would permit consumers to take legal action against creditors that fail to report a discharged debt that is no longer owed.

The Consumer Reporting Fairness Act is supported by Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Federation of America, Consumers Union, Demos, Leadership Conference on Civil and Human Rights, National Association of Consumer Advocates, National Association of Consumer Bankruptcy Attorneys, National Coalition for Asian Pacific American Community Development, National Community Reinvestment Coalition, National Consumer Law Center (on behalf of its low-income clients), National Council of La Raza, Public Interest Research Group, and Public Citizen.

Full text of the letter to regulators can be found at brown.senate.gov/download/letter-to-regulators.

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