Following his introduction of the Consumer Reporting Fairness Act last month, Senator Sherrod Brown (D-Ohio) this week urged federal government agencies to more closely monitor the selling of so-called "zombie debt" by financial institutions to debt collectors, according to an announcement on Brown's website.
The large number of zombie debts – which are debts paid or discharged but continue to appear on credit reports, or debts incurred through erroneous credit reporting or fraud – in Brown's home state of Ohio prompted the Senator to write a letter to Federal Reserve Chair Janet Yellen, Comptroller of the Currency Thomas Curry, Federal Deposit Insurance Corporation Chairman Martin Gruenberg, and National Credit Union Administration Chairman Debbie Matz. Brown's letter urges the regulators to strengthen oversight of debt sale arrangements, which includes information that financial institutions send to debt buyers and consumers and how that information is verified for accuracy. Brown also asked for regulators to consider whether or not financial institutions are prohibited from selling zombie debt to debt collectors.
"Everyone should have an accurate credit score and no one should be haunted by debts they don’t owe," said Brown, Ranking Member of the Senate Banking Committee. "But too many Americans are haunted by zombie debts – debts they’ve already paid but still appear on their credit reports. Credit scores are often used for non-credit purposes, like job decisions and rental housing, compounding the problem. That’s why I’m urging federal regulators to do their part to ensure accurate and timely reporting of consumer debt information. These agencies can and must do more to ensure that buyers and sellers of debt aren't engaging in behavior that exploits consumers."
Reports have shown that one in five Americans have an error on their credit report that would affect their ability to obtain credit, and debt collection and credit reporting are two of the categories for which the Consumer Financial Protection Bureau (CFPB) receives the most complaints.
Brown introduced the Consumer Reporting Fairness Act in mid-July in response to the number of Ohioans affected by JPMorgan Chase agreed earlier in the month to pay $136 million to settle claims that the bank sold inaccurate credit card debt to debt collectors. The new law would not only require creditors to make sure a discharged debt is removed from a consumer's credit report in an accurate and timely manner, but it would allow the consumer to take legal action against creditors who fail to do so.
At the time Brown introduced the bill, he said, "During the financial crisis, more than 50 million people saw their credit scores fall due to foreclosures and financial hardships. Many turned to bankruptcy, but are still haunted by debt on their credit report that they no longer owe. This bill would ensure that debts prior to bankruptcy aren’t in effect double counted and don’t continue to make it difficult for consumers to get a job or secure a loan for a home."
To view a copy of Brown's letter, click here.