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Credit Reports To Remove Tax Liens -- WSJ

Tuesday, March 27, 2018  
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March 23, 2018 | 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)

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