What Really Happens When You Dispute an Item on Your Credit Report: Case Study #1
You may be suprised to learn what actually happens when you dispute an item on your credit report through one of the three major credit reporting Bureaus (Experian, Transunion, Equifax). In this testimony before congress attorney Leonard A. Bennett on behalf of the National Association of Consumer Advocates (NACA) explains that when you dispute an item on your credit report with one of the three bureaus they send all of your information to an hourly employee who reduces your dispute information to a two digit code and forwards it to the company you owe the debt to.
The company you owe is the "furnisher" of the information the bureau uses to 'verify" the debt. But how does the "furnisher" even know what the basis of your dispute is if all they get is a 2 digit code from the bureau. Even if you send a cancelled check to show you paid the debt off the bureau does not forward that to the "furnisher" to validate your dispute. By the way the employees for the bureaus are required to process each claim in a mater of around 5 minutes or less.
Nobody ever digs through the primary documents. As you may already know, what you typically get back as debt verification when you dispute a debt is just an account history. But, often the very thing you are disputing is your liability on the debt in the first place. An account history is utterly useless in proving your liability on the debt.
Understanding the realities of the process can help you make practical decisions. Here is a case study to demonstrate what I mean.
Case Study #1
A client came to me recently who had been divorced. His wife decided to add him as a cosigner on a couple of loans without his permission by forging his signature both electronically and on paper. One of the loans was for a car that was later reposessed which resulted in a judgment against the borrower(s) for the deficiency or in other words the amount of the loan that was still owed after the car was auctioned off.
Navy Federal Credit Union (the lender) came after my client as the cosigner through their collections company Cavalry Portfolio Services. They had essentially discontinued trying to collect from him and put it on hold but he came to me to get the delinquent loan off of his credit reports. I called Cavalry and went through a couple of rounds of them "verifying" the debt by sending me an account history. I had called NFCU but they told me: "You have to talk to Calvary since this is in collections." "We can't talk to you about it." During this time I had my client dispute with all three bureaus. He did so and all three sent back the same one-page account history verifying the debt. Interestingly my clients name was not anywhere on the account history. NFCU/Cavalry did not allege any document he had signed or any evidence that he was a co-signer at all. Of course all of this took several months.
The next option would have been to litigate the case under the Fair Credit Reporting Act. This would likely have put us on a fast track to dealing with NFCU's litigation firm and most likely would have resulted in a year and half of litigation regardless of how good our case was.
Instead I looked on "Linked In" for any attorney that worked with NFCU. I found a paralegal in the "Office of the General Counsel" at NFCU. I "googled" "Office of General Counsel NFCU" and it pulled up a bar directory for the corporate counsel section of the Virginia State Bar. On that list was an attorney for NFCU with all of his contact information.
Below is a redacted version of the email dialogue that I had with him that quickly and inexpensively resolved the case. The whole key it appears is to find a back door to a decision maker who has authority and realizes that it is better to just answer an inquiry than to litigate a matter for no reason.
Dear Mr. Brenner;
I represent *****. He does not have an account with Navy Federal Credit Union, but his ex-wife ****** did. Her charged off loan is appearing on Mr. ****'s credit report although he did not cosign the loan and was not a co-borrower. NFCU is the furnisher of information to the credit bureaus and as such is responsible to verify the debt. Mr. ***** does not have and has not been provided with any promissory note or evidence of why he is allegedly liable on this debt. He is concerned about the credit implications and the potential to lose his security clearance. It must be in NFCU's best interest to minimize litigation costs when something like this can be readily remedied.
Mr. **** has disputed the debt with the credit bureaus and all three have responded by sending him a copy of the account statement (attached) for ******* which does not contain his name. I understand that no real investigation is undertaken when a dispute is sent through the bureaus. If your office has an interest in minimizing useless litigation I request that you please forward this concern to the nearest employee who can verify whether NFCU has any document that would indicate that Mr. *****is obligated on this debt.
Note: Because I am not disputing any collection attempt and there doesn't appear to be a collection attempt at this time I am not interested in being directed to the collection company or in their "verifying" the debt for collection purposes.
I appreciate your professional courtesies and attention to this matter and anticipate that it can be resolved quickly and inexpensively.
Always happy to talk to another attorney Mike. I'll check this out and give you a call. Many thanks. Lou
Thanks, I really appreciate it.
Mike: I looked in to your question. It appears your client actually did promise to pay as a cosigning promisor on the loan. He endorsed the check as such for value received. Although both he and Ms. ********* subsequently failed to return the amended promissory note, security agreement, and perfection documents later on, that's just an additional default, and we do regard this (attached) as an enforceable promise to pay signed by your client. Please review and you may let me know if you have any further question. Additionally, we work very hard for our members to come to terms to pay off any debt and I'd be happy to assist if your client wants to proceed to make a pay off in that regard. Many thanks for consulting and best regards. -Lou.
I have forwarded your email to my client. Again, I really really appreciate you looking into this and getting me results that will hopefully clear this up. If by chance it turns out to be a forgery, and not just a matter of ***** putting something in front of my client where he wasn't aware what it was he was signing, I may have a couple of questions for you regarding how that would be handled. What level of proof NFCU would be looking for, etc.
We could consider a forgery affidavit but it depends on all the facts and circumstances whether we would take that alone as outcome determinative. Our head of security would also review the whole file and he was a criminal investigator for many years and has a keen eye for these things and regularly works with a police task force on financial fraud. We can cross that bridge if we come to it. Just let me know. Thanks Mike. Lou
It appears that this is indeed a case of forgery. I am forwarding you two emails from Mr. **********. The first contains several documents containing Mr. ******'s true signature. More can certainly be provided if necessary. These were just what he had readily available. I asked him to provide ones that he had done over a period of years. I am no handwriting expert but it seems clear that ********* just used a kind of sloppy scribbled imitation in order to make it look different than her own signature. The second email contains a police report filed by Mr. ********** regarding another loan his ex wife obtained using him as a cosigner without his consent.
Please have your investigator look at this and let me know what his opinion is. Also let me know if you have a form of affidavit of forgery or if I should just draft something up.
Thanks again for your help on this.
here are the documents with Mr. ****'s signature to compare against the forged signature. I ask that you handle them with some confidentiality as they contain Mr. *********'s ss# etc. I am assuming that only you and your investigator will have access to them and that you will redact the SS# if you disseminate to anyone else.
Mike, got all three emails. I will loop our head of security in on monday and we will be in touch. Don't worry about confidentiality. This will be handled carefully. Have a good weekend. Lou
Wow!! Can you beleive the difference in the level of communication and cooperation and productive dialogue that is taking place in the above case study compared to what typically happens when you are dealing with the collection company or the bureaus. I think that this really illustrates what the challenges, obstacles and opportunities are when trying to resolve credit reporting cases. In the end it is the company that has the proof or lack of proof of liability. It is only the company that can research its original documents and determine what is going on. But when you dispute through Transunion, Equifax, or Experian, the meat of your dispute will never ever get to the company you owe and you will get nowhere and probably spend a lot of money doing it.