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Many lenders will also post their policy on reporting
to the credit bureaus on their Web site, says Lee. And if you find
out your lender's practices don't match the policy statements, that
can be a great tool to use when you ask them to correct your file.
The situation's improving
Five years ago, a number of subprime lenders were not reporting
to the credit bureaus. Consumer advocates believed that the practice
was intentional -- both to keep customers locked in to the high-rate
subprime category and also to keep the competition from poaching
customers as their credit scores improved.
"It used to be pretty common" in the subprime
market, says Jordan Ash, director of the ACORN, or Association of
Community Organizations for Reform Now, Financial Justice Center.
"There were a number of lenders who routinely didn't report
payments."
In 2000, the issue moved to the front burner. Government
regulators -- specifically John D. Hawke Jr., then comptroller of
the currency -- spoke out against the practice, consumer groups
lobbied for reform, credit bureaus promised to limit privileges
to errant lenders and Congress considered legislation to regulate
reporting practices.
The legislation died in 2003. But the reporting situation seems
to have improved, according to several consumer advocates who work
in the areas of credit and housing.
It has "definitely" improved, in terms of reporting,
says Ash. "It was a combination of things -- I don't think
it was any one thing," he says. "It reached the level
where there was enough attention being paid to it."
That's not to say everything is perfect. Some consumer groups are
still seeing signs that there's room for improvement when it comes
to reporting subprime loans.
One company admitted last year that it was monkeying with the balances
it reported to the bureaus, says Ash. Instead of listing the loan
principal as the balance, it was reporting the total of all the
monthly payments due during the life of the loan (including interest),
less any payments made, he says. The company also stated the practice
has stopped, he says.
In 2003, one lender admitted to Congress that it had been reporting
balances but not credit limits, says Ed Mierzwinski, consumer program
director for the U.S. Public Interest Research Group. The result:
Some credit scoring mechanisms could interpret one number for both
categories, making it appear as though the customer is maxed out
even if he is not, he says.
Many payday lenders are not reporting, says Lee. And those customers
"are the people who most need to be showing a positive history
of payment," he says.
Ironically, credit reporting is one area where industry consolidation
may have helped the consumer, according to several advocates. Larger
financial entities were pressured to file complete reports. Then
as bigger companies swallowed up the smaller ones, those practices
prevailed.
Technology has also helped. Thanks in part to the
Internet, says Lee, it's "much easier than it was five years
ago" to check out a lender's official policy on reporting.
Dana Dratch is a freelance writer
based in Atlanta.
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