Here's Why Bank of America, JPMorgan Chase Agreed to Improve Credit Scores for Some Consumers

Bank of America and JPMorgan Chase, two of the nation’s biggest lenders, will update credit reports of more than a million Americans to remove debts that have been eliminated in bankruptcy, under an agreement that emerged out of Federal Bankruptcy Court in White Plains, New York.
The move by Bank of America and Chase, as reported by the New York Times, is a big victory for consumers saddled with negative marks on their credit profiles. These charge-offs were legally discharged in bankruptcy and no longer owed, and they can seriously damage a consumer’s credit standing for years.

Bankruptcy is usually an option of last resort for extremely indebted consumers, and the bankruptcy filing itself can linger in credit reports for seven years or more. However, if the individual debts wiped out in bankruptcy continue to surface as past due or charged off, it’s even harder to rebuild a credit profile.
The plans by Bank of America and Chase to update credit reports for consumers arose from lawsuits playing out this week in bankruptcy court White Plains, N.Y., against Bank of America, Chase, Citigroup and Synchrony Financial (formerly GE Capital Retail Finance), the Times reports.
Prosecutors allege the banks ignored bankruptcy discharges to make more money when selling off bad debts. The suit also alleges the banks would refuse to fix the credit reports — if customers complained about their reports or complained that they were being pursued for the debts. The banks allegedly refused to correct the credit reports, unless the debts (which the consumers no longer owe) were paid.
According to court documents, Chase and Bank of America have agreed to make sure debts discharged in bankruptcy are properly recorded as no longer owed on credit reports, the Times reports. The banks have not admitted wrongdoing. The changes could potentially help about 1 million consumers’ credit.
“The bank believes that its reporting on sold credit card accounts to credit reporting agencies is accurate and consistent with credit reporting agency policies,” wrote a Bank of America spokesperson in an email to “However, given the issues raised by the Court, we have made the decision to delete credit reporting for the sold credit card accounts.” Chase declined to comment.

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