Ask The Attorney Webinar 2015 Regulations, New Models and Q&A

Transcription

1 Ask The Attorney Webinar 2015 Regulations, New Models and Q&A May 12, 2015 Chad Kusner

2 The Evolution of Credit Reporting: What s Inside The first credit scores. Nobody messes with New Yorkers! In with the new and out with the old? Credit scoring impact basics Credit Repair vs Credit Restoration Sample "Report Card" CRR Contact information Questions and Answers throughout. 2

3 The Birth of a Credit Score: 1956 Created with the belief that risk can be mitigated mathematically without bias One of the first questions asked to Bill Fair and Earl Isaac: What is the Likelihood a consumer will be 90 days delinquent over the next 24 months? 3

4 The Feds Step In to create the FCRA Fair Credit Reporting Act Enacted October 26,1970 Provided guidelines of what information can be collected Ability for consumers to dispute their information if believed inaccurate Create rules for Data Furnisher in which they have to follow 4

5 FCRA Amendments: FCRA Major Amendments 1999: Graham-Leach-Bliley Act (GLBA) 2003: Fair and Accurate Credit Transactions Act (FACTA) 2009: Credit Card Accountability and Disclosures Act (CARD) 5

6 2014 The CRA s get added to The List 6

7 BREAKING: Schneiderman Announces CRA Settlement 7

8 Improve Credit Reporting Accuracy Require data furnishers to replace antiquated software Data Furnishers must provide birthdays to avoid mixed files Furnishers to verify docs indicating that consumer is deceased Credit Reporting Agencies will share information to reduce mixed files 8

9 Improve fairness and efficacy in dispute system Train employees to review supporting docs provided by consumer Require CRA s to forward supporting docs to the Data Furnishers Implement Escalation Team with discretion to resolve dispute Give New York AG direct access to address consumer disputes filed with the State 9

10 Treatment of Medical Debt There few but highly effective changes that should prove to be invaluable to consumers. 6 Month moratorium on reporting to the Bureau Medical debt paid by insurance company must be removed 10

11 Weeding out Bad Actors The Bureaus agree to create metrics to test data furnishers in the effort to identify those not in compliance or abusing the system 11

12 FICO Expansion Score 1.0 Pros Report rent payments Track utility and other non-traditional payments Give lenders more information to make decisions Cons No real demand at the time Little government pressure Big Players not involved 12

13 Fico Expansion 2.0: FICO Alternative Data Credit Score 12 Credit Card issuers have been testing it Score should be available by the end of the year Increase market size 53 million have no credit history 15 Million will now be scored with the new data Research shows that over 5 million would have scores over 620 FHA already has alternative credit guides. It is only fitting that some HUD and conventional products may benefit from it. People with negative credit should not be considered under this model. Someone with no history should not have the same result when someone with bad credit applies for credit. 13

14 FICO 9 and Vantage 3.0 Freddie: We study scoring model refinements on an ongoing basis, Fannie Mae We are studying the costs and benefits of incorporating Vantage 3.0 or FICO 9 into our process, said spokesman Andrew Wilson. However, he added, we are confident that the tools we use today accurately consider a borrower s credit history. The Last Samples Used to Build Reports Used By Fannie and Freddie BEACON 5.0 = July 1998 through July 2000, Experian = July 1995 through July 1997, TU/Classic 04 = Oct 1998 through Oct Comical. 14

15 What impacts a credit score: The Infamous Wheel In a perfect world we would use this as the template for good credit 15

16 Fantasy Versus Reality: The visuals we are sold often times do not depict the reality we face. Credit is no exception to this rule. 16

17 What is the perfect mix: 2 Seasoned credit cards with balances consistently at 10% or less of the available limit 1 Mortgage seasoned more than 12 months with on time payments 1-2 Small installment loans seasoned with on time payments: Car or Personal loans Misuse of any one of the above accounts can have severe consequences on credit scores 17

18 What we do know about score impact: Positive Credit Accounts New revolving credit must season 6 months Authorized user accounts can help but Balances over 50% may lower credit scores How many cards should we have? Creditors vs finance companies A healthy mix of credit is like a well balanced diet: 18

19 What can improve a score? Reduce balances AS MUCH AS POSSIBLE Remove inaccurate negative items Open new accounts and season them Add Authorize User accounts Settle delinquent accurate accounts* 19

20 Rapid Rescore is Credit Repair? (3) Credit repair organization. -- The term 'credit repair organization'-- (A) means any person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of-- (i) improving any consumer's credit record, credit history, or credit rating; or Exemption: (ii) any creditor (as defined in section 103 of the Truth in Lending Act),(5) with respect to any consumer, to the extent the creditor is assisting the consumer to restructure any debt owed by the consumer to the creditor Why the Statement Date is Your New Friend 20

21 Who We Are Chad Kusner President Bob Willis Esq. Vice President Licensed Loan Officer 10 years FHA, VA, USDA and Conventional Credit Expert Witness Accredited Credit Instructor NACSO Board Member Ohio Supreme Court CLE Instructor Consumer Attorney 19 years MBA Business CSU JD John Marshall College of Law Accredited Credit Instructor Ohio Supreme Court CLE Instructor 100% Federal and State compliant Licensed CSO (Credit Service Organization) Fully bonded and insured Employees background checked and NASCO Certified Proven performance with nationwide referral agents A Rated with BBB with no complaints ever filed WHO, WHAT & WHY 21

22 Credit Restoration vs Credit Repair Bad Actor Credit Repair Companies Typically: Letter jamming techniques Set unrealistic expectations Take advance fee payment Outsource their work and acting otherwise Providing false statements to the bureaus and furnishers. Credit Restoration Involves: Compliant, legitimate services Consumer advocacy Managing ALL data on a report (positive and negative) Setting realistic expectations Team effort culture (consumers must participate) Consistent follow through (proactive servicing) Transparent process Being an asset to both consumers and referral partner Consumer protections (warranty or guarantee) 22

23 What Legitimate Credit Service Providers Offer Legitimate CRO s Offer: NO ADVANCE FEE PAYMENT Free Objective Pre-Screen Expert Case management Detailed action plan to rebuild credit Credit education for long term well being Compliant debt validation audit (NO LETTER JAMMING) Scheduled updates, report cards and consistent communication Pipeline Access and ease of use Performance Warranty or consumer protection clause 23

24 CRR Report Cards: Scores 24

25 CRR Report Cards: Results and Utilization 25

26 CRR Report Cards: New Reporting Items 26

27 Credit Repair Resources Contact Information Credit Repair Resources LLC Emery Road Cleveland, Ohio TF