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Joe had a high-balance loan from Acme Bank and paid it off. Acme reported to the credit bureaus about every 30 days during the loan, up until the day after the scheduled payoff. On that last day, Acme cancelled the payment and reported the high balance still outstanding. Joe contacted Acme and got them to complete the payment a few days later. Joe also asks about credit reporting and is assured that the bank will report the updated (paid-off) balance to all three major credit bureaus the following month in the regular cycle.

A month later, the bank reports updated information to two of the three major credit bureaus but not the one that is used by Lender B. The report makes a significant difference in Joe's credit score, which Joe knows is used to set loan terms when applying for credit.

Lender B has a valuable (e.g. $1K) limited-time offer for someone in exactly Joe's situation who applies for a loan from Lender B. Joe would like to take advantage of this, and knows he would benefit from doing so if the loan application were based on current credit information. (Since Lender B's model for issuing credit & setting terms is opaque, Joe cannot quantify with certainty the risks or differences in terms associated with filing an application while the credit report has known incorrect information.)

Acme Bank does not want to file updated balance information and when Joe explains the need for it, the bank's rep says "Sorry, we can't do anything about it." While Joe is pleading with and waiting for Acme Bank to update information, and awaiting the 1-month initial response period for a dispute filed with the credit bureau, the limited-time offer expires.

Is that just Joe's loss, or did the bank have any practical obligation to provide an accurate update?

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    If Joe had actually applied for the loan and been denied due to this outdated credit history then he'd be getting an ECOA/FCRA "Adverse Action Notice" from this lender which would at least partially explain which criteria caused them to not offer him the loan. – brhans Aug 15 '17 at 21:24
  • But then Joe would be in a similar situation of not being able to prove that he would have gotten the loan after the fix - because once he's been denied, he'd be much more likely to be denied again especially by the same lender with an application only a short time later. Or, suppose Joe just got terms that were not as good as he could have gotten if his credit information was more accurate. That does not generate an adverse action notice. This may be a case where Joe's lack of ability to simultaneously prove everything eliminates any practical obligation regardless of legal obligation. – WBT Aug 16 '17 at 0:32
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Yes, that's just Joe's "loss." Loss is in quotes because the lending criteria is admittedly opaque, which is fairly normal, so Joe really doesn't even know the severity of the damages or if there even were any. Further, a practical obligation is irrelevant, there needs to be a legal obligation in place for Joe to seek remedy.

Generally speaking, lenders like to report prompt information because lenders all rely on it to some extent. It's in all lenders' best interest for data to be as close to real time as possible. In a number of cases the credit bureaus buy the data from lenders or it's included in the agreement for the lender's access to reported data; so the lender may even have a contractual incentive to report in some specified time-frame. But, the underwriting departments of various lenders use the data they get in different ways. Would this piece of reporting have changed your score, it's probably likely. Would it have changed to the extent that you think, maybe but it's somewhat impossible to say. Would that have changed the underwriting outcome, that's really impossible to say. Lender B's underwriters might not value credit report data as high as they value the industry you work in and your income level.

  • Joe really doesn't even know the severity of the damages or if there even were any. Well, Joe does know he's not getting the benefit of the limited-time promotion. Further, a practical obligation is irrelevant, there needs to be a legal obligation in place Federal law might establish a legal obligation, that should be mentioned in a good answer, but a practical obligation requires more than just a law on the books. – WBT Aug 15 '17 at 18:13
  • You can't sue on a practical obligation, you can sue on legal obligation. Lender A is not part of Lender B's limited time offer, and again, it's not clear Joe would have been approved by Lender B anyway. – quid Aug 15 '17 at 18:18
  • You can sue on a legal obligation, and if the law is simply not enforced (by suing or by any other means, because there are methods of enforcing laws other than lawsuits), no practical obligation exists. A legal obligation is usually necessary but not sufficient to create a practical obligation. Further, it might be clear that after the correct information was reported to other bureaus, Joe's credit score was great, and would have led to approval. – WBT Aug 15 '17 at 18:23
  • Was Joe turned denied the loan from Lender B? – quid Aug 15 '17 at 19:00
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    The question come down to whether Lender A is by regulation obliged to report to all credit rating agencies and the time period to correct the reporting in case incorrect statement was made. There is a hardship sustained by Joe due to this. It is irrelevant whether Joe was granted/denied loan by lender B. The relevance only come in if you want more than "X" as additional damage. – Dheer Aug 16 '17 at 3:07

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