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Judgments and Tax-Liens being
Removed from Credit Reports
According to major credit reporting agencies, starting July 2017 they will be deleting Judgments and Tax-Liens in order to improve individual’s credit scores as a part of the National Consumer Assistance Plan. This plan was a result of a settlement brokered with 31 state attorneys general back in 2015. In average, the individual's credit score will jump 11-20 points once the derogatory mark is removed according to studies conducted by VantageScore. VantageScore is a consumer credit-scoring model, created through a joint venture of the three major credit bureaus, but it is maintained by and independent company, VantageScore Solution, LLC since it was founded in 2006. Under these parameters, Vantage found 11% of the sample population had tax liens or civil judgments removed. Approximately 8% of the sample received an average score increase of 11 points when all tax liens and civil judgments were removed.
With this new rule being implemented, consumers could find themselves newly able to secure a mortgage. Federal Housing Administration-backed and U.S. Department of Veterans Affairs-backed loans generally require a minimum credit score of 580. And most mortgage experts say conventional loans (one not backed by a government agency) generally require a minimum score of 620. When prior to this new rule most mortgage companies or brokers would not allow a person with a judgment to obtain a loan due to the fact that the borrower is was considered to be a liability to the lenders.
I understand that the consumers need help, but for the collection industry, and other lending institutions, how is that helping us? Is this really to assist the consumers to improve their credit scores, or are the credit reporting agencies covering their own interest because due to the reports, a lot of consumers are reporting that civil judgments are being reported incorrectly due to the same individuals with the name, Jr. and Sr., or the raw data being pulled by the agencies.
CALIFORNIA IS AT IT
Making it almost
impossible to collect!
By Farida Jhabvala Romero / KQED
The California Assembly rejected SB 298– with only 28 yes votes out of 41 needed. But the Assembly will revisit the bill next year, said Sen. Bob Wieckowski, the bill’s author. “It’s very disappointing because we could have prevented people from having their bank accounts emptied to cover debts that often aren’t even theirs,” said Wieckowski. “If we are serious about combating poverty in California, we cannot continue to allow this cruel ‘take it all’ practice.”
A state bill that would prevent debt collection agencies from completely emptying a person’s bank account to reclaim debts, may also provide some relief to people who are mistakenly targeted by collectors, sometimes because identity thieves rack up debt in their names.
The state assembly is expected to vote on the bill today as the legislative session ends.
SB 298, by Sen. Bob Wieckowski (D-Fremont), would automatically exempt up to $2,250 per debtor from bank levies — that’s when a judge gives a creditor approval to seize money from an account. More than 100,000 bank levies are served every year statewide, according to research by the East Bay Community Law Center.
Currently, creditors can seize 100 percent of the money in a person’s account. The new bill wouldn’t cancel anyone’s debt, but Wieckowsk says it could give low-income Californians relief while they repay what they owe.
“People won’t be evicted from their homes or apartments because their funds have been wiped out,” Wieckowski said.
The bill could also help people like Sharon Randall, who have money collected from their accounts to settle debts that aren’t even theirs.
In 2014, Randall went to her regular Bank of America branch to withdraw money from her account. But she discovered her account was empty. The teller said a collection agency had put a levy on her account. Randall, a single mom, was left penniless.
“It was a nightmare,” said Randall, who works at the Port of Oakland. “That should never happen to anyone, period.”
Randall borrowed money from relatives to pay her bills and was later able to straighten out her case in court and recover her money. She believes her case was either one of ID theft or just a mistake by the collection agency.
“Do you know how many Sharon Randalls there are?” she asked.
She’s concerned with news of the Equifax hack and other data breaches, more people could go through the experience of having their accounts emptied for a debt that is not theirs.
“I mean, we are hearing of so much more identity theft in 2017, that nobody is protected,” she said.
Sharon Djemal, an attorney with the East Bay Community Law Center, says she has seen dozens of cases like Randall’s in recent years. Often it happens because an individual’s identity has been stolen to make purchases and rack up debt.
Djemal says that attorneys at her organization have been able to win or settle collection cases against their clients because the creditor is unable to prove the person who they are targeting actually owns that debt.
While creditors are supposed to notify individuals in writing that they are in debt-collection proceedings, sometimes people never get those letters, at times because they’ve changed addresses, she said.
“I’ve had clients who the first time they heard they had a debt was when they got a bank levy,” Djemal said.
The California Association of Collectors declined to comment on the issue of mistaken debt collection cases pursued by its members. But the association’s website says they are committed to correcting collection cases where an individual’s identity has been stolen.
The group opposes the bill, along with the California Bankers Association. They argue that bank levies are a last resort, legitimate measure to recover debt. They say the bill is unnecessary because people can already ask the courts for an exemption, and that process provides sufficient protections for people who cannot afford to pay a debt.
An earlier version of the bill, which the state senate passed, shielded up to $4,800 from bank levies, but negotiations in the Assembly reduced the amount that would be exempted.
Sixteen states provide protection from bank levies, according to supporters of the bill.