Experian, Equifax and TransUnion – the three largest companies to collect and disseminate credit information for millions of Americans – must undergo an overhaul of credit reporting practices as part of an agreement with the New York Attorney General’s Office.

The Wall Street Journal reports that over the next three years these credit reporting agencies (CRAs) must make nationwide policy changes regarding the ways they handle errors, resolve disputes and list unpaid medical bills.

The three CRAs will now be required to use trained employees to review documentation consumers submit when they believe there is an error in their credit files, even if a creditor says the information is correct.

To ensure information obtained on credit reports is correct, consumer advocates urge people to obtain their free annual reports from each of the bureaus. Credit reports and credit scores are often used by bankers, lenders, and others to determine a consumers’ creditworthiness and the rates they will pay for services.

In addition to revamping the CRAs’ dispute processes, the agreement addresses the troubling issue of medical debt.

Under the overhaul deal, the CRAs must now abide by a 180-day waiting period before adding any medical debt information to consumers’ reports.

While the Consumer Financial Protection Bureau previously announced a requirement that major consumer reporting agencies must provide regular accuracy reports to the Bureau on how disputes from consumers are being handled, the latest agreement with the attorney general’s office aims to resolve medical debt issues before they even hit consumers’ credit reports.

During the 180-day grace period, consumers will be able to clear up discrepancies and catch other unpaid bills. Once medical debts are paid by an insurance agency, the CRAs must immediately remove the debt from the credit report.

In recent years, medical debt and its placement on credit reports has come under scrutiny by federal regulators and consumer advocates.

Because medical debts are often the result of unpredictable and costly events such as accidents and sudden illnesses, regulators believe they should be weighed differently from non-medical debts. After all, people choose to go into debt buying stuff they can’t afford, but they rarely choose to get an appendicitis that will end up costing them more than a luxury sports car.

Back in December, the Consumer Financial Protection Bureau said it found that consumers often don’t even know they owe medical debt until they get a call from the collections agency or they discover it on their credit report.

This occurs because in many cases if a medical bill goes unpaid after a certain amount of time, the medical provider may hand over the account to a third-party debt collector. And the majority of those collections items that end up on consumers’ credit reports are furnished to the CRAs by third-party debt collectors.

The WSJ reports that the upcoming changes mark the largest overhaul the major CRAs have seen in more than a decade.

Attorney General Schneiderman tells the WSJ in an email statement that the agreement “is a good sign that the reporting agencies are finally willing to step up their game and respond to the needs of hardworking consumers and their families.”

The agreement between the three credit reporting companies and the attorney general’s office comes after a year of talks between the two groups.

Back in 2012, New York Attorney General Eric Schneiderman’s office began investigating the practices of Experian, Equifax and TransUnion upon receiving complaints about errors on state residents’ credit reports and the drawn-out process used to fix the issues.

The CRAs have said in the past that they would take steps to promote accuracy. Back in 2013, the firms began allowing consumers to submit paperwork regarding disputes to lenders or other companies in order to address specific complaints, the WSJ reports.

Last year, a group of senators took action to ensure the agency’s voluntary dispute practices became permanent with the introduction of the Stop Errors in Credit Use and Reporting (SECURE) Act of 2014. The bill, which died in the Senate, would have required credit bureaus to follow tighter rules for ensuring credit reports are accurate and give consumers free access to reliable credit scores each year.

Credit-Reporting Giants Agree to Overhaul [The Wall Street Journal]

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