A long-running strategy by illegitimate credit repair operations is throwing a wrench into the already-beleaguered credit report dispute process, making it harder for the big three credit bureaus to keep up with legitimate disputes. However, they will discover to fix this loop hole soon.

Credit reporting agencies complain they are inundated with dispute letters bulk mailed by fraudulent credit repair clinics, accounting for an estimated one-third of the mail credit bureaus receive. Some credit repair companies, for a fee, sometimes add an illegal promise: to boost credit scores by erasing legitimate but negative information from credit reports.

The longstanding strategy is to send multiple letters disputing exactly the same thing on a person’s credit report, even though they know the information is accurate.

The goal is to flood the processing centers and to try to get a dispute to fall through the cracks. Credit reporting agencies call the practice “jamming” because they say it jams up the credit report dispute process.

“What they’re hoping is the data furnisher will not respond,” says Norm Magnuson of the Consumer Data Industry Association (CDIA).

It works, temporarily
The strategy does get results, at least for a while. Here’s why: When any consumer sends a dispute to a credit bureau, the bureau will forward it to a lender (known in credit reporting circles as a data furnisher) for verification.

Under the Fair Credit Reporting Act, a credit reporting agency has to review and respond to every dispute it receives within 30 days.

In “jamming,” a repair firm will challenge everything, including records of debts that the consumer failed to pay. If the review isn’t complete because, as commonly happens, a data furnisher doesn’t get back to the credit bureau in time, the agency is obligated to remove the disputed record. On Day 31, the credit report is cleansed of disputed but unverified items, and the bad debt vanishes from the consumer’s report.

The removal of valid items won’t be permanent, though. Generally, lenders report monthly to credit bureaus. So in a few days or weeks, when the lender reports back, the disputed, but now verified item comes right back. The record of the bad debt gets reinserted onto the credit report.

In addition to reinserting verified negative marks, credit bureaus may refuse to investigate disputes if they figure out they are frivolous. So even if a credit repair agency succeeds temporarily at striking legitimate items.

Problems for Consumers:
The results won’t last.

Following the law
Not all credit repair companies spam credit reporting agencies with excessive and fraudulent disputes. As for the Credit Consultant Association, Inc. (CCA), the industry’s leading trade group, for example, we have a “no jamming” policy, and urges both member and non-member companies to refrain from sending an excessive number of legitimate disputes.

Our member consultants should take a more strategic approach to fixing customers’ credit histories and focus on information that’s truly inaccurate,

What’s next?
The credit reporting industry has already taken steps to deal internally with the large volume of disputes, says the CDIA’s Magnuson. So even though the jamming scam may gum up the process, the credit bureaus are still able to respond to the disputes they receive within 30 days — and sometimes even faster. “They’re doing pretty well,” he says, estimating that 70 percent of all disputes are resolved within 14 days.

Nevertheless, the Federal Trade Commission continues to crack down on fraudulent companies that jam — when they can catch them.