JD got a letter in the mail just before Christmas, telling him his student loan application had been denied because an independent credit search agency had uncovered a $120 debt he'd allegedly incurred four years ago -- when he would have been a teenager. The bank said it wasn't responsible for the credit information, and the collection agency that listed his debt wasn't responsible for the loan denial.
With his University of Minnesota tuition money held up, he couldn't register for classes, access his grades or eat at the cafeteria. When he called the bank loan officer (it took three days to reach her), she told him a computer credit agency in Arkansas had red-flagged his loan. All she could tell JD was that the debt had showed up in an online collection agency's files; she didn't know the details. "We don't really have anything to do with it," he remembers her telling him in an odd farewell. If the bank didn't have any responsibility, he wondered, who did?
When JD called the number for the credit firm listed on his loan rejection form, he got a recording: the firm didn't take telephone calls about credit information, supposedly for security reasons (but probably to evade enraged callers.)
The message instructed those people questioning their credit problems (JD had no debts, so far as he knew; he was too young at the time of the alleged problem to have credit cards) to write registered letters, then submit the overdue payments by mail. In the meantime, there was no way he could learn the details of the alleged delinquency, or even how to pay up.
JD wrote the letter -- his tuition payment was past due by this point, and desperation was setting in -- only to get a form saying he owed the $120 for music ordered by mail. He could challenge or appeal the debt, but that would take at least another 30 days, by which time, he'd be suspended, a "ghost" student, allowed to stay in his dorm and attend classes, but not to register or get grades.
I've gotten a number of e-mails like this in recent months, raising serious questions about growing databases, the way financial firms share personal information and use tracking software, and the impact these factors have on privacy, personal dignity and consumer's rights.
We've heard some public discussion about "identity theft," and about credit ratings damaged by thieves and crackers, but there may be an more widespread problem: privacy invasions of people who have minor legal or financial problems -- all now collected and instantly reported by credit and collection agencies using high-powered tracking software -- and institutions' often disproportionate responses. Sophisticated software and growing computer networks and databases mean that no transgressions of any sort are private, or truly past. Rack up a debt or commit a crime, no matter how minor or long ago, and you're tagged for years, perhaps for life.
Suddenly, we all seem to live at the mercy of credit-tracking companies. Companies and organizations -- especially those, like insurance firms, that rely on stats and formulas -- are no longer able to make sensible or humane judgements about what these agencies uncover. Instead, software seems to be making the calls on consumers' reliability and integrity.
For instance, JP56 at earthlink writes that she was denied a teaching job because of a drunk driving arrest that occurred a few weeks after she'd turned eighteen (she's now twenty-eight). She had gotten drunk at a high school graduation party, and drove afterward. Dumb behavior, for sure, but she says she isn't a regular drinker, has had no other violations, and that her penalty was a 60-day license suspension.
Dan was denied car insurance after he hit two deer in Pennsylvania within a six-month period. "Because of mild winters, there are tons of deer around," he wrote me. "I was doing a lot of driving -- I was working two jobs to pay for school -- late at night. One time a deer ran into the side of the car, another I hit it straight on. Then I moved to San Francisco. Three years later, I get a letter from my insurance company referring me to this credit tracking company. My insurance is denied, says the insurance company. It was years ago, and it wasn't my fault. But there wasn't anything I could do. I had to get into this state pool and pay three times the going rate. And I've never had a traffic ticket in my life."
Peter agreed to buy some vintage comic books from a phone-order firm on a monthly payment plan. He says he didn't realize how elaborate a procedure was required to stop getting the comics. He went off to college, not realizing the bills were still piling up (plus his family had moved), until he applied for a car loan and got turned down because a collection agency had red-flagged him in a computer database. No car. "First off, this comic place took advantage of kids like me. I did order the comics, but didn't understand the complexity of the arrangement. Then I moved and didn't get any more bills or comics. I had no idea this was building up, and no way of straightening it out that wouldn't cost a fortune and take months and months. Now my name is in some computer and I owe a lot of money. And the original company has changed hands a dozen times. Nobody there wants to hear about this. It's a nightmare."
AndyP wrote two months ago that he'd been arrested for vandalism after one Halloween mischief night when he was sixteen. An online tracking agency dug up the arrest -- even though it was a misdeanor offense, was supposed to be kept sealed, and had happened a decade earlier. "I was turned down because my company was working on a government project and we all needed a moderate security clearance. I never got it sorted out, because it was technically true. But jeez, it was a spray-painting incident. I guess in certain quarters, I'm unemployable for the rest of my life."
My e-mailers complain that even though appeals and application procedures exist, there are few checks on these agencies devoted to rummaging through people's pasts. Most of us have messed up a bit at one point or another, and now those incidents can be dredged up and used against us without much in the way of due process. Some are in blatant defiance of supposed federal consumer-protection laws, laws which seem porous, to say the least. Do people have the right to own the details of their own lives?
Students in particular have sent me a stream of stories like JD's, but the issue is getting much broader than student loans. Credit and collection companies run down past traffic tickets, immigration problems, child support payment histories, arrests and debts, all being fed into rapidly expanding databases as records are digitalized. Banks, insurers, employers and government agencies can hire these companies to run credit and security checks, then claim they have nothing to do with the resulting decisions. For the people trapped in this tightening net, it's a procedural nightmare.
Under the federal Fair Credit Reporting Act, consumers have the right to contact these companies and get some details of their supposed crimes or debts. But since almost any financial agency can enter information into these growing and increasingly-linked data banks, it can take weeks or months to figure out exactly what the alleged problems are.
You might be surprised to know what your credit "rights" are under the U.S. Fair Credit Reporting Act, especially considering how often they seem to be ignored. You can find the complete text of the FCRA 15 U.S.C. 1681-1681u at the Federal Trade Commission's web site. Among the protections provided to you by law:
- You can dispute inaccurate information with the consumer reporting agency (CRA) involved. Anyone who uses information from a CRA to take action against you -- denying an application for credit, insurance or employment -- must give you the name, address and phone number of the CRA.
- Inaccurate information must be corrected or deleted, assuming you can prove it's inaccurate and the CRA agrees it's inaccurate, but the CRA is not required to remove accurate data from your file unless it is outdated.
- You can dispute inaccurate items with the source of the information (if you can reach them).
- Outdated information may not be reported. In most, but not all cases, a CRA may not report negative information that is more than seven years old; ten years for bankruptices. (My e-mail suggests this is wantonly ignored. Some institutions don't always have to say precisely why they took an action, and in many cases, you'll never know).
- Your consent is required for reports that are provided to employers, or reports that contain medical information. And you may choose to exclude your name from CRA lists for unsolicted credit and insurance offers, assuming you know where the CRA is and what it's doing and can reach them.
(Note: Credit rights are also covered by the Fair Debt Collection Practices Act; thanks to reader William Lockwood for the reminder.)
It doesn't sound half bad, but trying reaching a CRA for yourself to test how easy it is or how responsive they are. Notice also that there are no restrictions on selling information or passing it along to agencies the CRA deems appropriate.
And where there are disputes, people often have no recourse but time-consuming and expensive legal action. Even then, there are no clear guidelines for resolving disputes. Simply because a consumer says he never incurred that debt, banks and other institutions aren't required to accept his word. There are no uniform national laws requiring credit companies to respond in a particular way. Although I have no hard statistics, many of the people e-mailing me said they paid these debts rather than fight or challenge them, simply because they couldn't afford not to and were afraid of a time-consuming process. "It's an unconscious kind of extortion," write Jan, a student from the University of Florida. "They don't threaten you, but they don't have to. How can you prove you didn't owe $100 bucks five years ago, and can you afford to have your loan held up in the meantime? Not me."
There's scant protection for people who might have been victims of theft or simple error, or who made a minor mistake earlier in their lives, or who need issues resolved quickly. Only perfect people, it appears, are safe.
Next: Technology is eroding some rights, as the reasons for collecting data on citizens grows. Is privacy worth keeping in the country that invented the idea? Some other countries think so.