No one really likes reading about credit, credit scores and credit reports. As editor of a publication devoted to teaching people about these things, it’s a fact that I’ve had to learn to live with, and it’s not a surprising one. There’s plenty for people to get mad about. Credit is confusing, credit report errors can be hard to fix, and the whole business is generally considerably less fun than watching a kitten escape from one kennel into another one occupied by his/her puppy friend.
I think there’s more to the story, however. There’s often a disconnect between the credit business and the people they report on and score. It’s not that people don’t understand the value of credit reports and scores. They get it. If you haven’t paid some of your bills in the past, banks will think that there’s a greater risk that you won’t pay your bills in the future, so they charge you higher interest rates. It makes sense, and all things being equal, you might understand why, from a bank’s perspective, credit scores are really all about accountability. Except all things aren’t equal.
Credit’s Not a Two-Way-Street
The credit business is a one-way street. Banks can penalize us for failing to pay our bills on time, but what happens when a bank — or any business for that matter — fails to deliver on promises it has made to us? What’s our recourse?
This subject came up in a recent Credit.com editorial meeting. We were discussing a story from Consumerist about a reader who was owed nearly $1,800 by Comcast for almost two years. They wrote:
“Nearly two years after Consumerist reader Robert shut down his business-tier service with Comcast, he’s still fighting with the nation’s largest broadband provider over a $1,775 early termination fee that should not have been assessed. Comcast even admits the money shouldn’t have been debited from Robert’s bank account, but now says it’s his responsibility to sort the mess out with his bank.”
So, Comcast reportedly admitted that it owed him the money, but rather than pay him, the cable company decided to direct the consumer to enlist the help of his bank to try to get the money from them — however that might work. The dispute dates all the way back to 2014, and according to the story, Robert endured multiple rounds of back-and-forth with Comcast before learning that he would ultimately have to try to force them to pay.
The Consumerist reporter, Chris Morran, reached out to Comcast for comment, and they told him “through some error the refund check never generated,” and that a new check would be received within 7-10 days, though they’d reportedly issued similar explanations and guarantees in the past (before telling Robert to ask the bank to help him get his money back). Which brings me to my point …
Let’s assume Comcast does send Robert his money. (I reached out to Comcast, and a spokesperson confirmed that the check was cut.) Let’s say they were to even pay him back with interest (which, if compounded monthly at a 20% APR— not an unreasonable penalty rate— would add up to about $2,639.27 over 24 months … it gets worse for them if you start assessing monthly late charges, too). That’s all fine and good. But what will the long term consequences of this behavior— which arguably demonstrates a high likelihood for default of one form or another in the future?
Well, of course, there are no consequences. And that, my friends, is why people tend to get so angry about credit scores. Because one little late payment by me or you can mean years of higher interest rates (try out this lifetime cost of debt calculator we put together if you need proof), but a company can hold onto your dough for years, and the only consequence for them is that at some point a reporter might shame them into paying you back.
We’re All Creditors
When you think about it, we’re all creditors. We buy goods and services— like cable, cell phone service, internet, etc.— and big companies deliver those services to us. When they fail to do that effectively or at all, we become creditors. We’ve essentially given them money for services they haven’t delivered.
Case in point: My internet service provider/cable company. For the past few months, the internet in my house has been slow and at times, non-existent. How bad, you ask? Let’s ask my 8-year-old daughter how she feels when she can’t watch “Liv and Maddie” on Netflix (this happens about every other day).
“It’s annoying, it’s frustrating and I don’t like it,” she says. “If I have to, I will go to the cable company.”
They don’t want that.
Here’s the thing, if I was slightly less lazy, I’d be on the phone with said ISP and lodge a complaint. I haven’t done that because, as I said, I’m lazy, and beyond that I’m reasonably sure no improvements will come of it (unless of course they manage to up-sell me to their faster service. In addition to being lazy, I am also cheap). But in this case I’m willing to just suck it up. I reckon I’m missing out on about 5% of my service, give or take (though a whining 8-year-old can make it seem like 25%).
I could, I suppose, withhold 5% of my bill payment, in lieu of services not rendered, but the ISP would just carry that balance over to the next month, I might get hit with finance charges, and ultimately, my failure to pay that amount could result in my credit getting dinged, and I might end up paying more for goods and services in the form of higher interest rates as a result.
But do the service providers of the world suffer similar consequences when they fail to deliver or, as was the case with Comcast, allegedly withhold money from a consumer? No. There’s no algorithm that takes this information in and translates it into a score that can impact their bottom line, as credit scores do with us. (You can check your free credit scores, updated every 14 days, on Credit.com, to see how your bottom line is being affected.)
That, I believe, is one of the biggest reasons why credit seems to make people so mad: Consumers are held to one standard, and companies to another.
This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.
[Offer: If you need help fixing errors on your credit report, Lexington Law could help you meet your goals. Learn more about them here.
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