by footloose » Wed Nov 21, 2012 08:48:23 AM
Often those with the least income, skills and means will have the most to lose when it comes to disputing information on a credit report. Not only will this demographic likely to be the least educated about consumer rights and the laws surrounding consumer reporting agencies, they will also be the demographic most harrassed by creditors and collection agencies. Not all creditors and collection agencies are bad. However, one of the threats available in their collection strategy arsenal is to threaten to destroy one's credit history. Since credit bureaus have no statutory obligation to "look behind" a debt, this often leaves the most vunerable section of society at the mercy of unscrupulous creditors and collection agencies.
As was discussed in a previous post, the Small Claims Court of Ontario, a more accessible court, lacks the jurisdiction to order corrections to credit reports. The only option available to correct information on credit reports is to proceed to the Superior Court of Justce. Unfortunately, not having enough to pay a creditor likely means one does have enough to pay a lawyer, let alone court fees or a process server to deliver court documents once an action is commenced.
In Ontario, access to justice issues has been acknowledged and addressed in the creation of administrative bodies such as the Ontario Rental Housing Tribunal, now the Landlord and Tenant Board. The creation of an administrative tribunal to handle credit reporting complaints would be another way to ensure greater access to justice for Ontarians, particularly those on a low income.
An administrative tribunal dedicated to credit report appeals would provide a forum for individuals to resolve a dispute with a credit bureau expeditiously and inexpensively. A tribunal can also process a high volume of cases inexpensively, with less formality and with an emphasis on mediation.
An amended Act and a new Credit Report Appeal Tribunal would also give creditors, consumers and credit bureaus an incentive to ensure ongoing accuracy of information on credit reports. As orders could be binding and legally enforceable, it would be good business and good economics to avoid a proceeding before the Tribunal. The cost and time savings alone would provide enough incentive to ensure compliance.
While credit bureaus may argue that a Tribunal would be another added level of regulation, credit bureaus currently operate in a regulation-free environment in Ontario. The exclusive income source of credit bureaus is information collected about people, often without their consent. Given this incursion into individuls' privacy and financial well-being, it is not unreasonable to require that credit bureaus adhere to a standard of accuracy that permits individuals to effectively challenge their information.
The creation of a new appeal tribunal would require wholesale amendments to the Consumer Reporting Act.
The Act woluld be separated into two distinct parts, with powers clearly delineated. For example, Part 1 would be specifically dedicated to "registration" of credit reporting agencies. This would not be a difficult task, considering there are currently only two true national consumer reporting agencies, Equifax and TransUnion. Part 2 of the Act would be dedicated to the statutory creation of the new Tribunal. It would establish membership, powers, jurisdiction and order-making power. References to the "Director" would be limited to Part 1 of the Act, and powers of the "Registrar" constrained to dealing specifically with consumer reporting agencies' registration issues and concerns.
The amended Act would include a new section requiring a consumer to write the credit bureau requesting an amendment or deletion in the credit report. If the credit bureau denies the request, the credit bureau is required to send a letter to the consumer. The letter would include a statement directing the consumer to file an appeal with the Tribunal if unsatisfied with the credit bureau's response. An appeal could be requested within thirty days of the credit bureau's response. The fee for the appeal would be reasonable. Hearings could be written or oral, at the request of any party to the appeal if permitted by the Tribunal, or on the consent of all parties. A new set of Regulations would have to be enacted through order-in-council establishing the Rules of Procedure of the Credit Report Appeal Tribunal.
It must be kept in mind that the Tibunal would not be a Superior Court. As such, it's jurisdiction and powers would have to be specifically worded and conferred. The Tribunal would be subject to the Statutory Powers Procedure Act. The Tribunal would operate on a civil burden of proof; balance of probabilities. The Tribunal's jurisdiction would be limited to making a decision on whether a debt, judgment or remark or any other piece of information on an individual or corporate credit report is, in fact, permitted to be registered on a credit report. This means a negative remark regarding payment of a debt would have to be supported by documented proof that the debtor actually authorized the debt. Creditors would have to present proof of a bona fide belief that the said debtor actually owes the debt named in the credit report. Further, judgments on a credit report would have to be proved with a certified court order verifying a judgment, and negative remarks would have to be supported by reasonable proof.
Unliquidated debts are debts where an amount owing is not specifically ascertained. An amount "may" be owed but it is not specifically an agreed-to debt. An example would be late fees at a video store. Perhaps under a contract a video renter agreed to pay for "any late fees" incurred, but the amount is not agreed upon. When the video rental company then arbitrarily sets a late fee, reasonable or not, and attempts to collect it, the debt is unliquidated. Unliquidated debts would be prima facie unacceptable to register on a credit report and any reference to them would be struck without any countervailing proof that the debtor specifically agreed to the said debt. A reverse onus would apply to the creditor.
Unliquidated debts are especially concerning in current times as private parking lot operators and "shoplifting recovery companies" ( effectively security guards ) regularly register unliquidated debts on credit reports. For example, private parking lot operators will present persons with "tickets" for trespass if they fail to pay for parking on the private lot. The damages for trespass stipulated on the ticket are arbitrarily set by the parking lot operators, despite the matter never having gone before a judge. Shoplifting recovery companies, on the other hand, will send out demand letters to individuals they have caught and accused of shoplifting, requesting a specific sum of money to compensate the store for the cost of the security service. These individuals may or may not have been convicted of shoplifting. If either the parking ticket or the demand letter is not satisfied, the unliquidated debts are then reported to a credit bureau.
On the other hand, the Tribunal's jurisdiction would not include the ability to decide the merits of the debt itself. For example, if a cellular phone company provided services and rendered a bill to a customer and had a copy of that bill it could present, that bill would satisfy proof of the debt. If the debtor disputed the quality of the service, the debtor would have to take the dispute to the Superior Court of Justice. The Tribunal would have no powers to award damages or compensation for any corresponding economic loss due to incorrect information on a credit report. This is especially important for victims of identity theft who are often viewed suspiciously when they attempt to clear their credit reports of fraudulent information.
Under the amended Act, the Tribunal would have order-making power, and these orders would have a binding effect on credit bureaus. Order-making power would involve orders to amend, delete or add information to a credit report, orders to change a credit rating in a credit report ( i.e. a creditor reports a debtor as 60 days late "R3 Rating" when, in fact, the debtor is only 30 days late "R2 Rating" ) and orders to appoint an investigator ( in cases of systemic problems arising in a credit bureau that affect many people at the same time ).
Orders that were not followed by the credit bureau would be registered in the Superior Court of Justice, and failure to follow the registered order would then be treated as contempt of court.
A proceeding would be commenced by a creditor or a consumer. The creditor may want to register information that the credit bureau refuses to register. The consumer may want to amend or delete information that the consumer believes should not be on the credit report. The named credit bureau would always be a party to the proceedings and would have the choice whether or not to make submissions.
The Tribunal would be led by a chairperson, appointed by order-in-council. The Tribunal would then have a membership body appointed by order-in-council. The membership would be split evenly into quarters: one-quarter of members appointed from a list of nominations from creditors, banks or collection agencies; one-quarter appointed from a list of nominations by Equifax and TransUnion; one-quarter appointed from a list of nominations from consumer groups and one-quarter appointed from the general public.
A hearing panel of the Tribunal would consist of four members ( one creditor, one bureau, one consumer and one public member ). In the event of a tie, the chairperson would make the final decision, considering the reasoning of all of the panel members.
Appeals from the Tribunal could be brought before the Divisional Court, either by express wording in the amended Act or pursuant to the Judicial Review Procedure Act.
The Tribunal would be funded by a hybrid user-pay and government-funded model. For example, a consumer or creditor who initiates a proceeding at the Tribunal would pay an application fee. This fee would then be matched by the responding credit bureau. The fee would also help to limit unnecessary or unmeritorious complaints which are an inevitable reality in any Tribunal.
The reasoning for this funding model is economics and efficiency. Rather than having another level of taxation or fees levied upon a credit bureau, the bureau would be responsible only for responding to matters upon which it is challenged. Considering a credit bureau's unique and priviledged near-monopoly position to hold, sell and share consumer's personal information, it is not an unreasonable cost of doing business to require the bureau to defend the legitimacy and correctness of it's product. The hybrid user-pay model would not, however, be enough to offset the necessary funding from the provincial government to ensure the complete operations of the Tribunal. There would likely, however, be long-term cost savings since courts would be unburdened by any matters dealing with credit reports.
Subsection 96(3) of the Courts of Justice Act states: Only the Court of Appeal and the Superior Court of Justice, exclusive of the Small Claims Court, may grant equitable relief, unless otherwise provided. In effect, despite the Small Claims Court's limitation on equitable relief, a section could be added to the Act permitting the Small Claims Court to make equitable orders in amending, deleting or adding information on a credit report. The Small Claims Court already has an established judiciary and accessible fees and procedures. Second, despite the Court's lack of equitable relief jurisdiction, judgments of the Small Claims Court on the merits of a debt could be submitted to the Tribunal as persuavise evidence to remove remarks on the credit report. Going back to the example of the cellular phone customer, if the Small Claims Court determines that the service was unsatisfactory and the judge orders that the debt should not exist, this judgment could be presented to the Tribunal for consideration in ordering the removal of the debt from a credit report.
In a world where efficiency and speed rule, quick ways to make informed judgments on business and risk are preferred. Verifying information on a consumer credit report is a logical way of doing this. Unfortunately, there is no practical way for a consumer to appeal and correct information on a consumer credit report resulting in an unequal and potentially oppresive situation where creditors can unilaterally punish an alledged debtor simply by sending information to a credit bureau.
Credit bureaus are middlemen that choose to distance themselves from creditor-debtor disputes, characterizing their operations as reporting agencies that report the facts alone.
Since 2000, Ontario alone has seen an unprecedented rise in Superior Court litigation aimed at credit bureaus and creditors that report allegedly incorrect credit information. There have also been privacy complaints to the federal privacy commissioner regarding credit information.
The Ontario Court of Appeal has recently recognized the inherent importance that credit reports play in our lives. Realistically, only well-informed, substantially wealthy Ontarians have the knowledge, time and money to exercise their rights and challenge creditors and credit bureaus on information contained in their credit reports. The average Ontarian is left at the mercy of creditors and collection agencies-----some of whom choose to report debts that, in good conscience and at law, should rightfully, not be reported.
A Tribunal would be a public acknowledgment by the Government of Ontario that consumers have solid rights to control information about themselves------information that affects the ability to get a mortgage, find accommodation and secure things as basic as employment. Enough time has passed without the law addressing the need to treat credit reports as a fundamental piece of personal information that directly affects an individual's ability to secure housing and employment in Ontario. A Tribunal would provide a forum where individuals can resolve disputes regarding their personal credit information.
Expensive and time-consuming litigation should not be the only option to protect an individual's personal information contained in a credit report.
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Educating one Consumer at a time