On September 15th, 2017, the second phase of the National Consumer Assistance Plan (NCAP) will go into effect, and while you might be reeling from the first phase, it’s important to know what credit changes are on the horizon. This next big push will affect medical debt collection accounts, and the rental industry overall.
What is the National Consumer Assistance Plan (NCAP)?
Announced September of last year, NCAP establishes new standards (also known as personal identifying information or PII) for a record to appear on a consumer credit report. While the assistance plan went into effect on January 1st, 2017, the three major credit bureaus have been implementing the new standards over a three year period (with full implementation expected by March 2018).
Current Credit Changes
As the national consumer assistance plan has been rolling out over a 3 year period, not all of the allotted requirements are in effect yet. Since June 15th, 2016, collection agencies and debt buyers:
- Do not report debt that did not arise from a contract or agreement to pay
- Report the name of the original creditor and creditor classification code
- Reports a full file monthly.
When the plan went into effect on July 1st, 2017, new and existing public record data was required to adhere to these 2 PII standards:
- The minimum is required of consumer identifying information: name, address, social security number and/or date of birth
- The minimum frequency (at least every 90 days) of courthouse visits to obtain newly filed and updated public records is required
The Upcoming Changes in Phase Two
Since July 1st, 2017, the three credit bureaus have been preparing for the second wave of changes. While, according to TransUnion®’s data reporting initiatives, the next, huge shift will be fully effective around September 15th, 2017, it is likely that the bureaus have already implemented parts of the new requirements. The following data reporting changes will be effective on September 15th, 2017:
- Do not report medical debt collection accounts less than 180 days old. This is required for collection agencies and debt buyers.
- Report a delete for accounts that are being paid or were paid in full through insurance. This is required for collection agencies and debt buyers.
- Report full date of birth for new authorized users on all accounts. This is required for reporters of authorized user data.
The Effects of Phase One and Two
As the new PII Standard that requires a consumer’s name, address, SSN and date of birth (bullet point #4) the preliminary analysis done by Experian® projected that about 96% of civil judgement data, coupled with as much as 50% of tax lien data, would not meet these particular new standards. Since the preliminary analysis, TransUnion® released a whitepaper on July 2017 that did not specify the changes to civil judgement data (only stating that there is “significant change”) and that a minimum of 60% of tax lien public record data will be removed. Due to the phase one changes, you’ll want to rely on a tenant screening service like ApplyConnect® to provide eviction data, as the presence of a civil judgement record (like a monetary eviction) is no longer reflected on the credit score.
Unlike phase one, phase two has the potential to drastically affect the rental market, depending on which credit scoring model your property uses. Prior to NCAP, FICO® utilized medical debt within its credit scoring algorithm. Once phase 2 goes into effect, rental applicants with medical debt might see an increase in their FICO® credit score, spurring an increase eligible rental applicants. Properties that utilize VantageScore 3.0® (which ApplyConnect® uses) will not see an increase, since the scoring model excluded medical debt from their algorithm long before NCAP. Regardless of which credit scoring model is used by your tenant screening supplier, you will not see any medical debt that is less than 180 days old, or will be paid in full by an insurance provider, on your credit reports. Depending on your property’s written rental requirements for debt, you might see an influx of eligible rental applicants.
While many have mixed feelings about the National Consumer Assistance Plan (especially in the mortgage industry), it’s important to understand how these changes not only affect your own credit score and your rental applicant’s score, but your property’s rental process. Small changes like these can have a great impact on the rental industry, and the tenant screening reports you rely on. Learn how ApplyConnect’s Tenant Screening protects your properties.
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