Without Fanfare, Equifax Makes Bankruptcy Change That Affects Hundreds of Thousands
For years, an Equifax policy has treated some Chapter 13 filers differently than the other two major credit rating agencies. After ProPublica asked about it, the company said it would change the policy.
For what appears to be decades, the credit rating agency Equifax has quietly layered three more years of tarnish on the credit histories of hundreds of thousands of people who had filed for bankruptcy under Chapter 13.
While its competitors, TransUnion and Experian, placed a flag on such histories for seven years, Equifax left it on the reports of Chapter 13 filers who failed to complete their bankruptcy plans for 10.
After ProPublica asked about the difference in its policy, the company said it now leaves the flag on for seven years, but refused to say when and why the change was made.
The consequences of Equifax’s harsher policy were likely life-changing for some unlucky people. As Experian warns consumers on its website, “having a bankruptcy in your credit history will seriously affect your ability to obtain credit for as long as it remains on your report. It can also affect your ability to qualify for things like an apartment, utilities, and even employment. Even car insurance rates may be affected.” Without knowing why, consumers could have been turned down for apartments because landlords checked their Equifax report rather than those from Experian or TransUnion.
Why Equifax’s policy was different is unclear and the company would not address it. But that such a discrepancy had gone unnoticed and unaddressed for so long underscores how lightly regulated the industry is.
ProPublica contacted all of the major credit agencies earlier this year as part of our ongoing series on consumer bankruptcy. The policies of TransUnion and Experian were similar: People who filed under Chapter 7, which wipes out most debts, would have a flag on their report for 10 years; those who filed under Chapter 13, which usually involves five years of payments before debts are forgiven, would have a flag for seven.
Equifax had the same Chapter 7 policy. But the company had a key difference in its policy for Chapter 13 filers: Those who were unable to complete their five years of payments and had their cases dismissed were saddled with a flag for three additional years.
This difference had the potential for widespread impact. About half of Chapter 13 cases are dismissed, usually because debtors fall behind on payments. From 2008 through 2010, 574,000 Chapter 13 cases were filed and subsequently dismissed, according to our analysis of filings. Under Equifax’s policy of keeping the flag on for 10 years, all those debtors would have a flag on their Equifax report through the end of 2017, but not on their TransUnion and Experian histories.
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Shared from: propublica.org