In my last article on the “UltraFICO” I touched on the motivation for Fair Issacs Co. to change their scoring criteria to include consumers banking information, of course, only when the consumer provides this information. I also spoke to some of my particular issues of concern, including cybersecurity and creditors deciding to only use the UltraFICO calculation in future lending decisions because they know the consumer supplies banking information. But I have another concern, and it has nothing to do with FICO score or creditworthiness. I want to know what happens when a creditor receives a judgment against a debtor.
I have never met anyone who takes out credit without any intention of paying it back. But I know many people who lost a job, had an accident, had a medical issue, or other personal crisis that forced them to choose between their mortgage and Visa. And that is never a fun decision. But when it happens, sometimes Visa will sue. And Visa can get a court to order a judgment against the debtor. And that judgment has specific procedural rules but can be enforced through garnishment.
Each state has its own rules regarding creditor judgments. Which assets can be garnished, what percentage of a paycheck, whether a bank account can be raided, etc. But read that last statement again. Whether a bank account can be raided. It recently happened in Georgia. A law firm working for a creditor paid a private investigator to find the bank accounts of Connie James, and not only did the PI find the bank accounts, but the balances down to the penny. And they judgement was quickly settled, via a garnishment order, filed by the law firm against one of her bank accounts. Yup, with a court order, the law firm went in and just took the amount of the judgement. The firm recovered $2,624.00 in one fell swoop. And Mrs. James didn’t even know how the raid on her account occurred until she filed a complaint with the Georgia State Bar, which subsequently found that the law firm did not violate ethics rules. So be it.
The Federal Law which is supposed to keep your banking information private, the 1999 Gramm-Leach-Bliley Act, forbids anyone from attaining your bank accounts by “pre-texting” meaning, “under false pretenses.” Where there is a court order to find assets? Hmmm. It appears to be a gray area because the law office that garnished Mrs. James said it was, “common practice” to hire a PI to get the info.
Wow, scary story, but how is this relevant to credit bureau scores, right? Well, why would a creditor or creditor’s attorney with a judgment hire a private investigator if Experian already has your banking info? A court ordered judgment and subpoena straight to Experian cuts out the middle man. Based on judgment enforcement today, each state would need to pass legislation limiting access to account information- but how can you restrict that information AFTER the consumer gives consent to use the information to apply for credit? As I mentioned in my last post- Experian will likely keep the consumer banking information used to calculate scores. And, remember, the summary of bank accounts was already sent to the lender for consideration in the UltraFICO calculation.
Imagine emerging from personal circumstances that caused a financial hardship, only to learn (as you go to pay your bills), that Visa enforced their judgment against you- by emptying your account. They waited on the judgment until you started a new job, received a tax return, or an inheritance, or whatever, then boom. This is the unspoken danger of giving Experian banking information for the calculation of the UltraFICO, one that has, as of yet, been mitigated by legislation to protect consumers