How Should Lost or Stolen Credit Cards Be Reported?

When a credit card is lost or stolen, the account must be reported in a way that ensures the consumer’s credit history is not negatively impacted. Properly handling these situations protects the consumer’s rights and ensures compliance with the Fair Credit Reporting Act (FCRA). Accurate reporting helps preserve the integrity of the consumer’s credit report while clearly indicating the nature of the account change.

Steps for Reporting Lost or Stolen Credit Cards

1. Retain the Original Account History:
   • When a credit card is replaced due to loss or theft, the new card should retain the original account’s open date, payment history, and other key details. This ensures continuity in the consumer’s credit report and prevents any negative impact on their credit score.
2. Report the Replacement Card Correctly:
   • The replacement card should not be reported as a new account. Reporting it as a new account can reduce the consumer’s average credit age, which could negatively affect their credit score. Instead, update the existing account information to reflect the issuance of the replacement card.
3. Use Appropriate Special Comment Codes:
   • Apply Special Comment Codes to indicate the reason for the card replacement. For example:
     • “Lost or Stolen Card” clarifies that the replacement is due to a security issue rather than consumer default or account closure.
   • These codes provide transparency to lenders reviewing the consumer’s credit report, ensuring that the replacement is understood as part of a security update.
4. Ensure the Original Account Is Not Closed Incorrectly:
   • Do not mark the original account as “Closed” unless the entire account is being terminated. Instead, indicate that the card has been replaced due to loss or theft, while keeping the account status as “Open” if the replacement card remains active.
5. Notify Consumer Reporting Agencies (CRAs):
   • Report the updated account information to all relevant CRAs. Consistent reporting across all agencies ensures that the credit report accurately reflects the status of the account and the reason for the card replacement.

Compliance with the FCRA

The FCRA mandates that credit reporting must be accurate, complete, and verifiable. For lost or stolen credit cards, compliance involves:

• Accuracy: Ensure that the replacement card details are linked to the original account, preserving its history and preventing unnecessary negative impacts on the consumer’s credit profile.
• Transparency: Clearly indicate the reason for the card replacement using Special Comment Codes, helping lenders understand the nature of the account change.
• Consumer Protection: Inform the consumer about how the lost or stolen card will be reported, providing clarity and reducing the likelihood of disputes.

Impact on the Consumer’s Credit Report

1. Credit Score Considerations:
   • Properly reporting lost or stolen credit cards ensures that the consumer’s credit score is not negatively affected. The continuity of the account’s payment history and open date is crucial for maintaining a strong credit profile.
2. Lender Perception:
   • Accurate reporting provides transparency for lenders. By clearly indicating that the card was replaced due to loss or theft, lenders can make informed decisions without misinterpreting the account change as a negative event.

Conclusion

Handling lost or stolen credit cards requires precise reporting to ensure compliance with the FCRA and to protect the consumer’s credit history. By preserving the original account details, applying Special Comment Codes, and providing consistent updates to CRAs, data furnishers can ensure that these situations are reported fairly and transparently. Proper reporting benefits both consumers and lenders by maintaining trust and accuracy in the credit reporting system.