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Credit Reporting Issues Highlighted in the FTC’s and CFPB’s Workshop

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On Tuesday, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) held a workshop titled Accuracy in Consumer Reporting. The workshop consisted of four different panel discussions as well as individual remarks from several speakers. Below is a summary of the discussions relevant to the ARM industry.

Panel 1: Furnisher Practices and Compliance with Accuracy Requirements

The first panel discussed the different issues related to furnishing data to credit bureaus. The panel was moderated by two CFPB representatives: Susan Stocks (Office of Enforcement) and David Wake (Office of Supervision Policy). Panelists included:

  • Leslie Bender (Chief Strategy Officer and General Counsel, BCA Financial Services)
  • Francis Creighton (President and Chief Executive Officer, Consumer Data Industry Association)
  • Syed Ejaz (Policy Analyst, Consumer Reports)
  • Nessa Feddis (Senior Counsel and Vice President, American Bankers Association)
  • Elisabeth Johnson-Crawford (Chief Technical Officer, Credit Builders Alliance)

The panel discussed how credit reports are used: decisions regarding extending credit, rental agreements, employment, and other uses. It was noted that this list is expected to expand as time goes on. Due to this, accuracy in furnishing practices is paramount, done through policies and procedures related to accurate furnishing of data and the ability to monitor for disputes and anomalies.

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The issue of mass credit report disputes from credit repair organizations, which are both mailed directly to data furnishers and filed as complaints in the CFPB’s online portal, was brought up by Creighton. The flood of disputes and the sharp rise in Fair Credit Reporting Act (FCRA) litigation—most of which is on minuscule technicalities—harms the credit reporting process. Ejaz responded to this by saying when he worked in a Congress mailroom, they likewise received a lot of form letters and were able to sift through those to pick out the letters that pointed out legitimate concerns.

The use of alternative data in credit reporting was discussed related to both its benefits and risks. Alternative data can be a way to bring those who are currently unbanked or underbanked into the fold, especially considering the increased uses of consumer credit reports for different stages of a consumer’s life. On the other hand, alternative data needs to be closely analyzed and considered before it is included because of risks of inaccuracy and unintended consequences, such as data that allows for disparate impact for certain groups of consumers.

Panel 2: Current Accuracy Topics for Traditional Credit Reporting

The second panel focused on issues related to accuracy in credit reporting. The panel was moderated by Tony Rodriguez and Kiren Gopal, both from the CFPB’s Office of Supervision Policy. Panelists included:

  • Roberto Cera (Senior Manager, Data Acquisitions, TransUnion)
  • E. Michelle Drake (Shareholder, BergerMontague, PC)
  • Troy Kubes (Vice President and Deputy Chief Compliance Officer, Equifax)
  • Ed Mierzwinski (Senior Director, Federal Consumer Programs, U.S. Public Interest Research Group)
  • Donna Smith (Chief Data Officer, Consumer Information Services, Experian North America)
  • Michael A. Turner (President and Chief Executive Officer, Policy and Economic Research Council)

All speakers on the second panel agreed that accuracy in credit reporting is important to both consumers and industry. However, there was a contentious discussion about how serious this is for consumers, industry, and regulators. 

The biggest critics were Drake and Mierzwinski. Drake presented a need for regulators and private attorneys who work on consumer protection issues. She mentioned that currently there is a conflict of interest between industry and the credit reporting bureaus, where the data furnishers are the primary customers of the bureaus. She says, “the credit bureaus only do as little as possible to keep their business partners happy.” She further stated that consumers act as a “canary in a coal mine,” where the onus is on them to spot errors, rather than on the furnishers and credit bureaus.

This position was countered by Smith, who pointed out that the profitability of the credit bureaus’ customers is based on the accuracy of the data. It’s in everyone’s interest, says Smith, to minimize inaccuracy in credit reports. Turner concurred, stating that banks primarily deal with credit reports for the purpose of extending credit, so inaccurate data would harm the bottom line. Drake replied that if such economic incentives were sufficient, then there wouldn’t be a need for regulators and consumer advocates, which is not the case. 

Editor’s Note: Panel 3, related to background screening, is omitted from this article.

Panel 4: Navigating the Dispute Process

Credit report disputes and dispute investigation procedures are a hot button issue for the industry, so this discussion is timely. This panel was moderated by representatives from the FTC: Amanda Koulousias, (Division of Privacy and Identity Protection) and Beth Freeborn (Bureau of Economics, FTC). Panelists include:

  • LaDonna Bohling (Chief Compliance Officer, Receivable Solutions)
  • Eric J. Ellman (Senior Vice President, Public Policy and Legal Affairs, Consumer Data Industry Association)
  • Stephanie Froelich (Chief Executive Officer, True Hire)
  • Kristi C. Kelly (Attorney, Kelly & Guzzo)
  • Rebecca Kuehn (Partner, Hudson Cook) 
  • Chi Chi Wu (Staff Attorney, National Consumer Law Center)

The threshold issue brought up here is that in order to be able to dispute an incorrect item on a credit report, the consumer must first be able to access his or her credit report. Ellman mentioned that today, consumers have more access to their credit reports than they ever did before. The consumer advocates countered that the rise in credit reporting agencies—or even data gathering companies who may not consider themselves credit reporting agencies—also increases the difficulty of eliminating inaccurate information. The consumer might dispute and get deleted an inaccurate item with one credit reporting agency, only to find out that this agency got their information from a different company that continues to report the inaccurate information.

The different types of disputes were discussed. Bohling shared that while consumers have the ability to submit credit report disputes with the credit reporting bureaus, a direct dispute with the data furnisher can usually be resolved more efficiently since the data furnisher possesses a lot more information related to the situation than the bureau does. Wu, however, mentioned that there is a lot of variability in how data furnishers handle disputes. The credit reporting agency, according to Wu, is supposed to be the check that balances out this variability, and the credit reporting agency is supposed to be the check to balance out this variability. Wu cited the most recent CFPB Supervisory Highlights, which states that the credit reporting agencies are not doing that, and instead are relying solely on what the furnisher states.

The consumer advocates mentioned that the larger data furnishers require their representatives to complete a certain amount of disputes within a specific amount of time, which can lead to investigations of disputes being done in haste. Bohling, however, countered that some of the key performance indicators for these representatives are quality and accuracy.

insideARM Perspective

All in all, the workshop presented a robust discussion about credit reporting issues. Leslie Bender, who appeared on the first panel, provided the following comment to insideARM:

We are grateful that the FTC and CFPB hosted this group of stakeholders all dedicated to defending the integrity of consumers’ credit files. The workshop confirms that common ground among all the participants is that it is critical for information in consumers’ credit files to provide an accurate, complete and portable economic picture. 



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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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