WGN-TV Show Notes — November 18, 2003
How do you know you’ve been suckered in by a predatory lender? Well, one way you know is that your on-time payments are never reported to the three credit reporting bureaus.
But the last thing you’d expect is that Sallie Mae, the premier lender of student loans, would fall into the predatory lending category.
The mortgage and credit business has become extremely cut throat. And the three major credit reporting bureaus sell the information they have on all of us which allows lenders to cherry pick the best borrowers and try to give them better offers. So lenders try to protect their borrowers with sometimes dire consequences for consumers. That’s what happened with Sallie Mae.
Let’s start at the beginning. Most students pile up some school loans as they figure out a way to cope with rising tuition. Sallie Mae is often the lender of choice and has 7 million student loans in its portfolio. Normally, lenders report when you pay on time and when you pay late. For years Sallie Mae did that. About a year ago, it stopped reporting on time payments to two of the three reporting bureaus.
Why is it important to report on time payments? On time payments help you build and establish good credit and can help raise your credit score. If other lenders know you pay on time, they know you are a good customer, the kind every lender wants. Other lenders buy access to your credit history and payment details from the credit reporting bureaus and try to target you with better offers.
But not reporting a borrower’s on time payments is a hallmark of predatory lenders. If it happens to you, it can artificially deflate your credit score. Your payments and sometimes the loan itself simply don’t appear on your credit history.
As reported in the Washington Post, Sallie Mae said the purpose of its policy was to protect its borrowers privacy and shield them from offers from competing lenders. As the public outcry grew over the policy, Sallie Mae announced last week it would again begin reporting students on time payments.
Not surprisingly, Sallie Mae backed down the day before Senate action was scheduled on an amendment proposed by Senator Dick Durbin that would have required Sallie Mae to report everything to all three credit reporting bureaus. But as Congress debates the reauthorization of the Fair Credit Reporting Act, one can only hope that someone in Washington is smart enough to propose an amendment that would require all lenders to fully report all payments, both on time and late to the three major credit reporting bureaus.
And that would significantly help consumers improve their credit histories and raise their credit scores.
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Nov. 18, 2003.