Credit Dispute Letters

Know the new rules and file your disputes properly or else...

credit-dispute-letters

There's something you should know when writing credit dispute letters. You now have the right to direct dispute credit report errors with your creditors. That's right. If a creditor or debt collection company provides inaccurate information to the credit bureaus, you can file a dispute directly with them.

This is somewhat of a big deal, because it gives you another tool to help legally improve your credit. It forces the furnisher of information to do an investigation of the information they are reporting.

Of course you can still file credit disputes with the credit bureaus, but the new regulations give you an added right to send credit dispute letters directly to the merchant or debt collection company that furnishes your credit information to the credit bureaus.

However, there is a catch - you have to follow the proper procedures or they can simply disregard your credit dispute letters as "frivolous" complaints.

New Rules

Effective July 1, 2010, you can file credit dispute letters with "any" company that furnishes information to the credit bureaus concerning you. In response, they are obligated to conduct an investigation under the new rules and regulations prompted by the Fair and Accurate Credit Transaction Act of 2003.

Once the investigation is complete, they have to notify the credit bureaus of the results of their investigation if it reveals that the information is being reported inaccurately.

Before the Federal Banking Regulators finalized these new rules, you didn't have the right to direct dispute credit report errors with the furnisher of the information. The new rules were implemented to improve the accuracy of information being furnished to the credit bureaus.

Accurate credit reporting is becoming increasingly more important considering the "new normal" of credit scores. Your credit scores are now being used for more and more decisions affecting your life (e.g. employment, insurance rates, utility deposits).

Per the Fair Credit Billing Act and the Real Estate Settlement Procedures Act, credit card companies and mortgage lenders already have some level of responsibility to investigate information concerning your accounts or payments. However the new rules now impose broader obligations on "all" companies that furnish information to credit bureaus.

Additionally, the new rules now impose an obligation that the information, furnished by companies, have "integrity". Information is considered to have "integrity" if it adequately identifies you, is provided in a clear and understandable way, in a standardized format, and specifies the time period to which it relates.

government-regulations

The new rules now require the furnishers to report the credit limits on your accounts. Reporting the credit limits is important because it can significantly affect the calculation of your credit scores. If the credit limit is missing, some credit scoring models may substitute the high balance for the credit limit and miscalculate your credit scores.

Another benefit of the new rules is, by filing dispute errors directly with the furnisher of the information, you can be sure that any supporting documentation you provide actually reaches them.

When you file your disputes thru the credit bureaus they usually forward the dispute to the furnisher electronically, using a 2 digit code. Oftentimes, in violation of the Fair Credit Reporting Act, they do not forward your supporting documentation.

So the furnisher never even considers it as a part of their re-investigation. Hopefully, the new rules will help the furnishers to conduct a real investigation of your credit dispute letters rather than systematically "parroting" the information originally provided to the credit bureaus.

How to Direct Dispute Credit Report Errors

In order to properly direct dispute credit report errors with the furnishers of information, there are 3 types of data you have to include in your credit dispute letters:

  1. Enough information to identify your account. Make sure you provide your name and account number.
  2. The credit information you are disputing and the basis for your dispute. Clearly state that you are disputing the "credit limit" or "date of last activity" as inaccurate. Be specific.
  3. Information that supports your position. Provide any documentation that supports your credit dispute. This may include a copy of a bank statement, correspondence, etc.

If the furnisher of information provides an address for you to send your credit dispute letters you have to use that address. If no address is provided, you can send the credit dispute letters to any address where they normally receive mail.

After sending your credit dispute letters to the furnisher of information (e.g. your credit card company, lender, or debt collection company) they are required to conduct a "reasonable" investigation and respond to you within 30 days.

However, if you send them additional information to consider, they get an additional 15 days to respond. If they fail to respond within that time, the data must be deleted.

But If you don't properly provide the required information, they can disregard your credit dispute letters as "frivolous" and send you a letter stating so within 5 days of receiving your credit dispute letters.

There is one aspect of the new direct dispute credit report rules that I find disappointing. As a consumer, you don't have the legal right to bring a law suit against the furnisher of information for failure to comply. Only the FTC, State Attorney General or Bank Regulators can bring a case on behalf of consumers. They can collect up to $3500 for each violation. But you have to rely on one of these entities acting on your behalf.

Conversely, under the current provisions of the Fair Credit Reporting Act, if you file credit dispute letters with the credit bureaus and the furnisher fails to comply, you can bring a legal action against the furnisher yourself for violation of the act.

So in that regard the new rules fall short of providing additional legal rights for you as a consumer. In any event, you now have the right to direct dispute credit report errors with the furnishers of information themselves or choose to still go thru the credit bureaus.

You can consider the following sample dispute letters when developing your own dispute letters to file with the credit bureaus, creditors, and debt collection companies:




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