On May 1, 2014, the Consumer Financial Protection Bureau published action letters for child welfare caseworkers to send to credit bureaus if they find errors on the credit reports of the children in their care. The CFPB stated that the nearly 400,000 children in the United States foster care system often lack a permanent address, and their personal information is frequently shared among numerous adults and agency databases. As a result, that population is vulnerable to credit reporting errors.
Federal law requires that state child welfare agencies—in order to become eligible for federal grants—ensure that youth in foster care who are 16 years of age and older receive free copies of any credit reports annually. The law also requires that the agencies ensure that these youth receive assistance in interpreting and resolving any inaccuracies in the reports. As a result of this law, child welfare agencies have begun coordinating with credit bureaus to establish an online portal that caseworkers can use to request credit reports for the youth in the care of their agencies.
To account for these issues and the large scale of the foster care system, the CFPB published three action letters that are designed to assist those working with youth in foster care if they discover an error in youths’ credit reports. The letters apply to certain situations, including the following:
- A credit report should not exist for the minor: Minors generally cannot legally enter into contracts for credit, which means that credit reporting agencies do not knowingly create reports on them. Consequently, any credit reports on minors are typically the result of fraud or error. Caseworkers should use this letter if they find that a minor in foster care has a credit report when they should not have one. This letter informs the credit bureau that the credit report has been reviewed and that the youth is disputing all items because he or she does not recognize any of the accounts.
- The credit report has errors for foster care youth younger than age 18: Although there are some limited circumstances when individuals under 18 would have a credit report (for example, when they are an authorized user on a credit card), this generally is not the case. Caseworkers should use this letter if someone in foster care, who is now 18 or older, has activity on their credit report, from when they were a minor, that is inaccurate. This letter informs the credit bureau that the credit report has been reviewed and that there should not be credit activity for any period prior to the youth having reached age 18.
- The credit report has errors for foster care youth age 18 and older: In some circumstances, foster care extends past the age of 18. Individuals who have reached the age of 18 have more access to credit and more opportunities for credit damage. This letter should be used if a caseworker needs to dispute a credit reporting error for someone in foster care who is 18 or older and the error is related to accounts that were opened when he or she was an adult. This letter informs the credit bureau that the credit report has been reviewed and that an error has been found on the credit report.
The CFPB will also be publishing “tip sheets” for parents and foster care caseworkers to help young people establish and maintain good credit.
The publication of these letters is consistent with the CFPB’s recent emphasis on the regulation of credit reporting. In its press release, the CFPB also noted that “it will continue to coordinate closely with the Federal Trade Commission as well as other agencies and institutions involved in addressing credit issues facing children in the United States who age out of foster care every year.” Therefore, credit reporting agencies should carefully review the action letters to ensure compliance with the CFPB’s mandates.