SCHUMER REVEALS: ERRONEOUS DEBT THAT IS INACCURATE OR NO LONGER OWED – CALLED “ZOMBIE DEBT” – IS HAUNTING UPSTATE NEW YORKERS’ CREDIT REPORTS; RECENT DATA EXPOSES TERRIFYING EVIDENCE THAT OVER 2,400 UPSTATE NEW YORKERS HAVE BEEN SPOOKED BY FALSE CREDIT REPORTS OR STALKED BY DEBT COLLECTORS TO PAY DEBT THEY DON’T OWE; BILL SPONSORED BY SCHUMER WOULD CUT OFF THISFRIGHTENING PRACTICE & GIVE NEW YORKERS THE PROTECTIONS THEY DESERVE
Schumer Says New Data Shows that Thousands of New Yorkers Have Reported Issues With Their Credit Reports & The Practices of Debt Collectors, Many Based On Debt that is Either Inaccurate or Was Already Paid
Schumer Urges Colleagues To Support Senate Bill That Finally Cracks Down On So-Called "Zombie Debts” That Displays Debt No Longer Owed By Consumers On Their Credit Reports
Schumer: Senate Bill Would Make Sure Debts That Have Already Been Resolved Stay Dead
On a conference call with reporters, U.S. Senator Charles E. Schumer today said witches, ghosts and vampires are not the only things to be afraid of this Halloween, there is also “Zombie Debt” – debt that has already been resolved and is no longer outstanding, but continues to live on through credit reports. Schumer explained that this debt is sometimes purchased by “debt scavengers” who, either knowingly or unknowingly, try to collect on the debt that is either inaccurate or no longer owed. Schumer said that this problem is not simply an unwelcomed knock at the door, but a devastating error that could impact everything from a consumer’s job application to being denied a mortgage to buy a home.
“Collection agencies can be far scarier than any ghost or goblin, and their efforts to trick unwitting consumers into paying debt that has already been put to rest is just plain wrong,” said Schumer. “That is why I am urging my colleagues to support this legislation, which would require banks and other creditors to ensure that a person’s credit report is immediately revised once a debt has been settled and gives consumers’ legal recourse against these creditors if they are not.”
It has become increasingly common for some creditors to sell their allegedly uncollected debts to third party collection agencies, known as “debt scavengers.” These collectors buy up outstanding debt for pennies on the dollar and can keep whatever is collected. However, this often results in the exchange of debt with incomplete consumer records, which can result in debt collectors pursuing consumers for debts that have already been resolved or repaid. Schumer explained that these inaccuracies allow the debt to live on as “zombie debt” that will not go away and persists as a blemish on a consumer’s credit report. Combined with simple human error and this widespread practice of selling delinquent debt, creditors can unintentionally bring a debt that should be dead back to life.
According to new data, in 2014 alone, more than 2,400 Upstate New Yorkers have lodged complaints with the Consumer Financial Protection Bureau (CFPB) related to issues with credit reporting or debt collection, many of which are based on reported debt that is either inaccurate or has already been settled. Schumer said that millions of Americans who go through bankruptcy are haunted by previously discharged debts due to the fact that they continue to appear on credit reports. Schumer said the settlement or nullification of outstanding debt through the bankruptcy process should be immediately reflected in an individual’s revised credit report. However, this is often not the case. In fact, according to the CFPB, one in five consumers have had an error on their credit report. Schumer said many of these could deal with false reports of unpaid or unsettled debt.
Schumer said this all too common issue is particularly dangerous for consumers who have already settled their debts through the bankruptcy process because it could make it even harder for these individuals to be hired for a job, receive an auto loan or be approved for a mortgage to buy a home. Even for those that are not outright denied a loan, the impact of an inaccurate credit report can still be devastating, as it undoubtedly has a negative effect on the interest rate that an individual is offered. Schumer said recent reports from the CFPB show these problems are increasing, and affecting more and more New Yorkers every year. According to the CFPB, in 2014, 37 percent of all debt collection complaints involved continued attempts to collect debt that is no longer owed – by far the highest percentage of all the complaints. In addition, 77 percent of all credit reporting complaints were in regards to inaccurate reports, which often involve issues with “zombie debt.” Finally, since 2013, debt collection and credit reporting were listed as having the highest increase in complaints.
During the call, Schumer said that, between January 1, 2014 and December 31, 2014, Upstate New Yorkers reported 2,402 cases of inaccurate debt and credit statements to the CFPB:
- In the Capital Region, there were 193 complaints of false debt collections and 85 complaints of false credit reporting.
- In Central New York, there were 199 complaints of false debt collections and 70 complaints of false credit reporting.
- In Western New York, there were 362 complaints of false debt collections and 114 complaints of false credit reporting.
- In the Rochester-Finger Lakes Region, there were 270 complaints of false debt collections and 73 complaints of false credit reporting.
- In the Southern Tier, there were 126 complaints of false debt collections and 31 complaints of false credit reporting.
- In the Hudson Valley, there were 455 complaints of false debt collections and 348 complaints of false credit reporting.
- In the North County, there were 46 complaints of false debt collections and 30 complaints of false credit reporting.
Schumer is urging his colleagues in Congress to immediately pass the Consumer Reporting Fairness Act of 2015, which would require banks and debt buyers to notify a credit reporting agency once a consumer’s debt has been resolved through bankruptcy and ensure that the individual’s credit report reflects a zero balance. Right now, creditors are under no obligation to ensure that credit reports are updated to reflect debts that are no longer owed. Second, the bill would provide consumers the ability to take legal action against any creditor that fails to ensure in a timely manner that debt resolved in bankruptcy is reflected as a zero balance by a consumer reporting agency. This legislation would effectively hold banks and debt collectors accountable to ensure they are not engaging in deceptive credit practices or preying on vulnerable consumers who believe their debt had already been settled. Schumer said that while many major banks have agreed to update borrowers’ credit reports to reflect extinguished debts, this bill would require all creditors do the same to make sure discharged debt is accurately reported.
The Consumer Reporting Fairness Act of 2015 was introduced by Sen. Sherrod Brown [D-OH] and is cosponsored by Senators Jeff Merkley [D-OR], Richard Blumenthal [D-CT], Dick Durbin [D-IL], and Al Franken [D-MN].
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