Federal Judge Orders Credit Bureaus To Clean Up Screw-Ups Affecting Consumers' Credit Reports In California Class Action Suit

The Wall Street Journal reports:

• [A] recent court order requires the three major credit-reporting bureaus -- Experian Group Ltd., Equifax Inc. and TransUnion LLC -- to clean up the credit files of millions of consumers who have filed for Chapter 7 bankruptcy. The problem: Old debts, which are typically forgiven by the courts in a bankruptcy filing, are still being reported as active on many consumers' credit reports. The judge for the case, David O. Carter of the U.S. District Court for the Central District of California, has given the bureaus until Oct. 1 to revamp their systems.

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• This ruling is expected to clean up the credit files -- and potentially boost the credit scores -- of an estimated six million to 10 million people who have filed for Chapter 7 bankruptcy but still had errors in their files, according to plaintiffs' attorneys. Consumers with so-called zombie debt -- old loans they may have paid off years ago that can resurface when an aggressive debt collector erroneously demands payment -- are also likely to get some relief, if those debts also were discharged under Chapter 7 protection.

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• The court order stems from a class-action lawsuit alleging that each of the credit bureaus violated the Fair Credit Reporting Act by failing to maintain reasonable procedures to assure the accurate reporting of debts that have been discharged in bankruptcy. The lawsuit could now move to a trial to determine liability and damages if Judge Carter decides later next month to give the damages portion of the case a class-action status.

For more, see Dealing With Debt That Refuses to Die (Court Ruling Requires Credit Bureaus To Wipe Away Bills Incurred Before Bankruptcy; Getting a New Report). zeta