By
John Ulzheimer - IMS Elite Expert
and
President of Consumer Education for Credit.com Need An Expert?|
877.838.8464
BullsEye Bulletin: April 2009
Few expert witnesses are more in demand and less in supply than
the true consumer credit expert witness. The complexities
of consumer credit dictate that the witness must have firsthand
knowledge not only of the industry, but also of the practices of
lenders, credit reporting agencies and credit score developers.
He or she must be able to provide commentary not only on the credit
report and credit score, but also on any changes in credit reputation
and/or damage caused directly by negligence. Given the unique
nature of the industry, it is unsurprising that witnesses can be
guilty of mistakes and omissions in their work. Two of the
most common that I see are:
1. A lack of systemic understanding of why credit
scores react the way they do to incorrect or negligent credit reporting
One
challenge is to clearly distinguish the credit score impact of
negligent credit reporting from organic credit score movement,
as well as score movement caused by unrelated or legitimate negative
credit reporting. On the plaintiff’s side, this is important
because a qualified expert for the defense can pick apart your damage
assertions if they have systemic understanding of why credit scores
move and react to changes in credit report data, both legitimate
and negligent. On the defendant’s side, this is important
because an ill-equipped expert may be incapable of identifying what
I call “piling on,” which is the process of blaming
all plaintiff’s credit woes on defendant’s actions,
regardless of whether or not their actions are at all responsible
for the credit score damage.
Credit scoring systems do not operate using common sense
criteria. They
use highly complex, empirically derived formulae, which reside within
multiple scoring environments referred to as “scorecards,” where
each formula is different. Understanding exactly what caused
the credit score to decrease or increase is a challenge that really
can be addressed only by someone who has spent time developing
and managing credit scoring models or technology.
2. Not
understanding the differences between the variety of credit reports
and credit scores sold into the consumer market (B2C) versus those
sold into the lender market (B2B)
Each of the U.S. credit
reporting agencies sells credit reports and scores to lenders and
others with a permissible purpose to access such data. They
also all sell credit reports and scores to consumers. And,
in almost all cases the data and scores that are sold to consumers
are not the same as those sold to lenders.
This is especially problematic
when the plaintiff’s understanding
of credit damages is based on credit scores that no lender has ever
seen or aren’t even commercially available to lenders. In
addition, this can cause confusion related to documents because
those produced by plaintiff and defendant during discovery are
almost always sourced from the same credit repository, but are
generally different.
Many experts are unfamiliar with the variety of credit products
that are available only to consumers. They are similarly
unfamiliar with the differences between these products and those
that are available only to lenders.
For example, in a recent case, plaintiffs sued a
mortgage lender for incorrectly reporting a foreclosure. The
plaintiffs correctly claimed credit score damage, yet attempted
to rely on documents that included scores sold only to consumers rather
than scores sold to lenders, which could
have undermined their claim for damages. With competent expert
consult, the plaintiffs refocused on the relevant, lender-specific
credit scores, which strengthened their case.
In another case I was
involved with, the credit report documents that were supplied were
a disorganized collection of credit files purchased on the Internet
and “tri-merge” files from
credit data brokers who sell to mortgage lenders. This made
it more difficult to craft a chronology of relevant events because
of the "apples to oranges" comparisons. Some of
the credit reports contained the erroneous information while others,
seemingly produced by the same credit bureau and at around the same
time, did not. The question that continued to come up was: “Did
the credit reports contain incorrect information or not?” At
any given time, the question could be answered either “yes” or “no,” depending
on which credit report was being examined. The plaintiff’s
case was strengthened once the review was refocused on the core
credit file data as housed and maintained at the credit repository
level, rather than reports sold by resellers and Internet sites.
John Ulzheimer,
an IMS ExpertServices™ Elite Expert,
is the President of Consumer Education for Credit.com, Founder
of The Ulzheimer Group, a CNBC Contributor and 17-year veteran
of the consumer credit industry, which includes time spent at Equifax
and FICO.
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