Bank Errors Cause Damage to Credit, Distress to Homeowners
by Marian Wang ProPublica, Jan. 6, 2011, 9:10 a.m.
We’ve pointed out cases in which banks’ miscommunication and disorganization have caused mistaken foreclosures , but as several recent  reports  have noted, that’s not the only way in which bank mistakes have affected homeowners.
Some consumers have been surprised to see damage to their credit score after requesting information from the banks.
One Nevada homeowner told  financial blogger Barry Ritholz that after he asked Bank of America about who owned his mortgage, he suffered a drop in his credit score  even though he’d never missed a payment on his home. Though some advocates expressed concern that it could be a case of bank retaliation, a BofA spokesman told the Huffington Post that it may have mistakenly coded its report  to credit bureaus to reflect a homeowner dispute:
Certain wording used in the letters brought to the bank’s attention may have been interpreted in some cases as raising a possible dispute. The bank is taking steps to clarify the handling of these requests, and when and if a dispute coding should be placed on the account,” the spokesman said. “In any case, once a possible dispute has been researched and the findings result in the removal of the dispute coding, it should no longer be reflected in the customer’s credit profile. Bank of America will review files that may have been impacted and make any necessary corrections in credit reporting.
In another reported case, one Connecticut couple saw their credit score destroyed after they asked Bank of America about refinancing and were mistakenly placed  in the government’s loan modification program, according to Connecticut Watchdog.
They had never been late on a mortgage payment, but because the bank had erroneously put them in a trial modification, it reported an “AC” code to credit bureaus—a code that indicates the couple was making partial payments. Bank of America apologized for the mistake.
“What happens I think is some lenders pull reports periodically, and they see that AC code, and then they go adjust the credit lines [even if borrowers are current on their payments],” said Norm Magnuson, spokesman for the Consumer Data Industry Association, a trade association for credit bureaus. “It’s a complicated topic and it’s caused confusion certainly among consumers but also among some lenders.”
Magnuson told me that the industry has guidelines about credit reporting data, including when banks should use the AC code and when they should use a newer code that has no effect on credit scores. But those guidelines aren’t binding for lenders and servicers, and as we’ve noted , credit scores can take a hit when information is reported incorrectly.
The Connecticut case is one recent example, but it isn’t the first time  that Bank of America has made this particular mistake. The Minneapolis Star-Tribune reported in August that the bank signed up a Minnesota couple—also current on their mortgage—for a loan modification that they didn’t apply for. The mistake caused their credit score to drop 150 points. It was restored  after the couple filed complaints with their state’s attorney general and federal banking regulators.
Something to keep in mind is that State Laws vary on consumer protection regarding their credit some states can exceed that of Federal so consult your local state laws as to what you can do to remedy your situation if you happen to be the victim of your bank’s errors you should also know your federal rights as well as a consumer just Click here.