Credit Reports To Remove Tax Liens -- WSJ
March 23 2018 - 03:02AM
Dow Jones News
By AnnaMaria Andriotis
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 23, 2018).
The three big credit-reporting firms are planning to remove tax
liens from Americans' credit reports, a move that will make some
risky borrowers appear more creditworthy and increase the chance
they will get new loans from banks.
The firms, TransUnion, Equifax Inc. and Experian PLC have
decided to delete the liens from credit reports and to stop adding
new tax lien information, according to a court document and two of
the companies. The changes will go into effect as soon as
April.
The effort to remove the tax liens could affect millions of
borrowers. More than 5.5 million liens will be removed from
consumers' credit reports as a result of the new changes, according
to estimates by LexisNexis Risk Solutions, a unit of RELX Group
that provides lien and judgment information to credit-reporting
firms and lenders.
For consumers, the change means that a negative event that could
have held them back from getting approved for financing will be
wiped off their credit reports. That could increase their credit
score and make them look more creditworthy to lenders.
The three companies, which provide vital, behind-the-scenes
services in consumer credit, have been grappling with class-action
lawsuits over their handling of consumers' tax liens and judgment
information.
In TransUnion's case, the lawsuits are playing a role in its
decision to remove tax liens from credit reports, according to a
court paper. Experian and Equifax say the lawsuits weren't involved
in their decision making.
This would be the second time in approximately nine months that
the credit-reporting firms have moved to remove public records
information from credit reports. In July they began removing most
civil judgments and many tax liens.
That effort was focused on removing judgments and liens on which
the companies didn't have enough personal information to be certain
that they were matching the events to the correct consumer credit
reports.
An Experian spokesman said the company removed approximately
half of tax liens from its credit-report information database last
year and that it has continued to monitor tax-lien submissions for
compliance with a settlement the three credit-reporting firms
reached with state attorneys generals dating back to 2015. "Based
on our monitoring, we made the decision to remove all remaining tax
liens," he said.
An Equifax spokeswoman said that "after a continued review of
tax liens, Equifax determined that with only a small amount of tax
liens remaining on our files, all tax liens would be removed and no
longer be reported."
For lenders, the move creates a potential blind spot for risk.
Lenders rely on credit reports to help determine whether consumers
are likely to pay back loans that they are applying for. A tax
lien, which basically follows when a taxpayer hasn't paid what is
due in taxes, is a negative event that can result in lenders
declining loan applicants.
Lenders who want to keep tabs on such liens and other judgments
will need to take the extra step of finding a company that will
sell them that information or go through public records
themselves.
The latest move comes as credit-reporting firms face
class-action lawsuits. Allegations in those suits include that the
companies haven't been accurately updating tax-lien information to
reflect when the matter is withdrawn or otherwise put to rest.
That has meant that lenders and other parties who review credit
reports could see that a consumer owed a debt even when the debt
was no longer owed. That can result in lenders choosing not to
approve the consumer for a loan. Other entities including insurance
companies and employers often review credit reports to help make
decisions.
TransUnion is in the process of completing a nationwide
class-action settlement to address allegations that it didn't
update tax liens and civil judgments on credit reports. TransUnion
denies the allegations, according to papers filed last week seeking
a preliminary approval of the settlement in the U.S. District Court
for the Eastern District of Virginia.
The proposed settlement states that TransUnion will cease
reporting tax- lien and civil-judgment public records for three
years. TransUnion has also agreed to compensate eligible consumers
who have been adversely impacted by judgments and liens on their
TransUnion reports.
In an email to clients in recent days, TransUnion said that tax
liens will be removed from consumer credit reports the week of
April 16, according to a person who saw the email.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com
(END) Dow Jones Newswires
March 23, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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