Understanding the Impact of the National Consumer Assistance Plan 13 Sep 2017

Definition of National Consumer Assistance Plan: The National Consumer Assistance Plan is an initiative launched by the three nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. Its purpose is to make credit reports more accurate and make it easier for consumers to correct any errors on their credit reports.

As of July 1, 2017, a policy change impacting all new and existing public record data furnished by Experian®, Equifax®, and TransUnion® will be held to the new standards set for by the NCAP. Therefore, the implementation of these standards will occur over a three year period (with full implementation expected by March 2018). However, the three major credit bureaus are starting to take steps to improve data accuracy and quality right now.

Why the policy change?

Nevertheless, the three national credit bureaus are still silent about the details of their July 1 changes. Mortgage lenders say they’ve heard nothing from the three bureaus and are in the dark about the possible ramifications. David H. Stevens, president and CEO of the Mortgage Bankers Association, said that “nobody” in the mortgage industry “knows about this.”

In response to a request for comment, the bureaus’ national trade organization, the Consumer Data Industry Association, provided a statement. And, it indicates that the changes are part of the bureaus’ “National Consumer Assistance Plan.” Moreover, there was a settlement in 2016 with 31 state attorneys general over alleged problems with credit reporting accuracy and correction of errors on credit reports.

Eric J. Ellman, the group’s interim president and CEO, said the bureaus have adopted “enhanced public record data standards for the collection and timely updating of civil judgments and tax liens.” The standards will apply to new and existing data in files. It will require that the public records sources include the individual’s name, address and Social Security number or date of birth. Updating public records on time is necessary in order for them to be eligible for inclusion in credit files. Most civil judgment data and half of tax lien information cannot meet these tests, according to one industry estimate.

What is the National Consumer Assistance Plan (NCAP)?

Established in September 2016, NCAP establishes new standards for a record to appear on a consumer credit report. Moving forward, new and existing public record data will have to adhere to these two standards:

1. The minimum of consumer identifying information: name, address, social security number and/or date of birth.
2. The minimum frequency (every 90 days) of courthouse visits to obtain newly filed and updated public records.

Experian® and the other bureaus “anticipate no change to bankruptcy public record data”. This is because bankruptcies are filed with the minimum consumer ID information. It includes documents like SSN, civil judgment, public record, and tax lien data. In fact, the preliminary analysis by Experian® projects that about 96% of civil judgment data might not meet the new standards. For tax lien data, they’re expecting “as much as 50% of this data may not meet the enhanced PII requirements.”

Information that will no longer appear on credit reports:

• Debts that did not arise from a contract or agreement to pay (think library late fees, parking tickets, etc.) can no longer appear on credit reports.
• Tax liens that do not contain a full SSN or DOB on the public record.
• Civil judgments that do not contain a full SSN or DOB on the public record.

The upcoming changes in Phase Two

On September 15th, 2017, the second phase of the National Consumer Assistance Plan (NCAP) will go into effect. Consequently, this next big push will affect medical debt collection accounts. Additionally, the following data reporting changes will become effective:

• Medical debt may not be reported until 180 days past due. This is to ensure there is enough time for insurance appeals. Also, it is in order to go through prior to negatively affecting a consumer’s credit report.
• NCAP will remove paid medical debt immediately.
• The bureaus will begin requiring all furnishers to submit full SSN/DOB data. Any trade line/judgment data that does not contain the required information will not appear on a credit report. Eventually, this should greatly reduce the number of mixed file or “not my account” disputes.

The effects of Phase One and Two

Experian® conducted an analysis of the new PII Standard that requires a consumer’s name, address, SSN and date of birth. In particular, it projected that about 96% of civil judgment data would not meet these particular new standards. Additionally, TransUnion® released a whitepaper in July, 2017 that did not specify the changes to civil judgment data. Also, removing a minimum of 60% of tax lien public record data is a significant change that will take effect. Due to the phase one changes, you’ll want to rely on your screening vendor to provide other options. This is crucial as the presence of a civil judgment record no longer reflects on the credit report.

What you can do to protect yourself

Finally, the full effect of these changes won’t be applicable for months (or even a year or more). Hence, moving forward you should rely on additional methods to vet applicants. If the initial estimate of 96% of civil judgment data and ½ of all tax lien data do not meet the new standards, it’s likely that a removed civil judgment record will not be reflected in the credit profile.

You’ll want to inquire with your screening service to see if manual civil record searches can be provided to supplement your existing package. Trusted Employees offers a wide variety of screening services that can help you stay protected.