Equifax’s Credit Monitoring Service Is Misreporting Charge Offs as “Civil Actions”

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Equifax has come under a great deal of pressure from regulators and class action lawsuits after their monumental data breach, which exposed the credit bureau data and personal information of 143 million Americans to hackers. To put that in perspective, there is estimated to be 44 million total student loan borrowers – so this hack exposed the personal information of over 3 times the total amount of Americans who owe student loans. 

In a damage control attempt, Equifax has offered membership to it’s “Premier Trusted ID” credit monitoring service for one year for anyone who is worried that they’ve been affected by the breach. After the year is up, the service will expire and those who’ve enrolled will have to pay for the next year of monitoring. Websites such as NextAdvisor have warned against enrolling in this service, but I’ve already talked to several clients who have joined. I personally think it makes sense to not enroll in a credit monitoring service offered by the same credit bureau involved in the massive hack/breach, but enrolling in some sort of credit monitoring service is a good idea; whether or not you think you could be one of the 143 million affected by the Equifax hack. I don’t have any personal experience with this service, and I use a different credit monitoring company to keep an eye on changes to my credit. However, one glaring shortfall in Equifax’s service has become apparent to me after receiving rather panicked emails from two separate clients. 

Apparently, some sort of glitch in the “TrustedID” system causes a charge-off (default) to be reported as a “New Civil Action” – unnecessarily scaring people into thinking they are facing legal action, when they are not. There are even sections for a “case number” (which do not have an actual case number). Even though it does say “Charge-off” under “Grid Code”, it certainly makes the normal process of an unsecured loan defaulting (in these cases, a private student loan) look like a much more serious legal claim. 

A charge-off is simply the point when a debt becomes a non-performing asset for a creditor: essentially, a loss on their books. This does not invalidate the debt or make it uncollectible, and lenders do not receive any type of insurance or reimbursement for charge-offs (unless they have purchased an indemnity guarantee or bond for the loans). In fact, lenders can continue to pursue charged-off debt for 3-6 years under most states’ statutes of limitation (SOL), and lenders do pursue these debts with varying degrees of aggressiveness. The most aggressive form of collection activity is legal action, which usually, but not always, is a last resort for the lender. In most situations, a settlement or payment plan can be implemented long before legal action becomes a threat. It can already be difficult for borrowers who are going through this process for the first time to discern fact from fiction when it comes to collection threats and attempts, so this major flaw in the “TrustedID” monitoring service is extremely unhelpful.

This severe misrepresentation of a simple charge off as a “Civil Action” unnecessarily complicates borrowers’ understanding of their situation and scares them into thinking that they are facing some sort of lawsuit. Equifax should fix their “Trusted ID” monitoring service to more accurately reflect charge-offs for what they really are – the point in a lending cycle when an account becomes a non-performing asset and is classified as a business loss by the lender (like how every other credit monitoring service and credit bureau shows them).

It is absolutely inaccurate to refer to a charge-off as a “New Civil Action”. Until Equifax works out the glitches in this service, borrowers should be aware that a notification of a new civil action when a debt is charged off is not an actual civil action, unless they are being sued by an actual attorney for the lender. It is extremely rare for a private loan lender to file a civil action on or immediately after the date an account defaults. I have yet to see that happen. 

This post is meant as a commentary on the Equifax’s credit monitoring service and nothing in this post is meant to be construed as legal advice. If you need legal advice, be sure to consult with a reputable attorney in your state. If you have a private loan you’d like to settle (and would like to make sure it stays settled), fill out my evaluation form here for a free consultation.


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About Andrew Weber, NACCC Certified Student Loan Counselor

Andrew Weber is a NACCC Certified Credit Counselor and a NACCC Certified Student Loan Counselor. He is the only certified student loan Counselor who specializes exclusively on private student loan issues in the US. He's helped over 2,500 borrowers drastically reduce their debts.

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