One of the more hot-button topics for consumer advocates is the damage done by a ‘hard inquiry’ to a person’s credit bureau when a collection agency pulls their data. Some consumers believe that agencies do this on purpose to damage consumers, which I don’t believe is the case, but there is certainly an effect of pulling bureaus.
If a collection agency is pulling data on a consumer with a recent debt, the matter is straight forward, but what if an agency or debt buyer pull a bureau inquiry on a consumer with a debt older than six years? While the debt itself isn't reported to the bureau, the inquiry itself has an indirect effect on the consumer’s credit score, and certainly anyone looking at that consumer’s bureau will see the inquiry by the agency.
This issue was recently challenged in the Province of British Columbia, and the Supreme Court of BC issued a ruling stating that Trans Union could not keep inquiries on bureaus where the inquiry is related to a debt older than six years. The finding of the court is here: http://www.consumerprotectionbc.ca/pdf.php?file=62
In response to this case, Equifax issued a bulletin recently to their commercial subscribers regarding collection inquiries:
“… Equifax will be amending all collection type inquiries to "soft" inquiries effective Monday May 5th 2014. Soft inquiries are displayed only to consumers and have no impact to any scoring products available through Equifax. The collection lines will continue to display to all members and consumers, as per existing protocol.”
‘Soft inquiries’ only show to the consumer when viewing their own credit report, and are not viewable in the list of inquiries on a bureau report. It’s also my understanding that soft inquiries do not affect the credit score of a consumer.
Obviously it’s a challenge for a credit bureau agency such as Equifax or Trans Union to track the ‘provenance’ of a credit inquiry, and by moving all collection inquiries to soft inquiries, it solves the issue of asking for related debt data to be included along with every single inquiry and an overhaul of their entire credit databases. Equifax stated this will be implemented nationally, to satisfy BC consumer reporting laws but affect consumers across Canada.
Currently, there is no news release from Trans Union but I imagine they will follow suit shortly with a similar practice.
I’d be interested to hear what other people have to say about this change, and how it will impact the credit industry going forward. Feel free to post a comment or contact me directly – I can be reached at 226-946-1730.
Kingston Data and Credit