When cosigning on a loan for your friend or family member, you’re taking a big risk. Why? Because you’re taking your credit which you’ve worked so hard to build and putting it into someone else’s hand. Most cosigners do not receive monthly statements in the mail, neither do they receive any notification if the primary borrower failed to make a payment. But, even so, the late payments still show up on the cosigner’s credit report.

This is the exact problem my client had. He had two 30 day late payments on his credit report, which was due to a mortgage loan which he cosigned on.

He asked me to fight the late payments for him. Here are some of the behind the scenes of how I got it done.

NY State General Obligation Law

New York States General Obligations Law (“GOB”) §15-702 (2) states, “The creditor shall before a co-signer becomes obligated on a consumer credit transaction, deliver to the co-signer a completed copy of the agreement establishing the account, any other writing evidencing the co-signers obligation and a written notice that identifies the account the co-signer may have to pay and reasonably informs the co-signer of his or her obligation with respect to it.” GOB §15-702 (2) goes on to state “If the creditor does not comply with the provisions of this section, the co-signer shall not be obligated as a guarantor of payment as described in subdivision one of section 3-416 of the uniform commercial code.” 

GOB §15-702 (3) states, “The notice must be in at least ten point type and may be on a separate sheet, attached to a guarantee or similar instrument, or part of the note, contract, or other writing evidencing the consumer credit transaction, or agreement establishing the consumer credit account. A separately signed written acknowledgment of receipt in substantially the form below is prima facie proof of such receipt in any action by or against the co-signer.

No Obligation Without The 10 Point Notice

My client lives in NY, and therefore he should not be obligated to pay the mortgage payments until he is given this notice. Now, its possible that my client did receive such notice at the time of closing, but when I asked him he did not remember. So now it’s up to the credit bureaus to prove if he received the notice or not.  If they cannot prove it, then my client has every right to claim that he did not receive the notice, and therefore is not obligated to make payments under the NY state laws.

Dispute

I sent in a dispute for my client to all three credit bureaus stating that my client has no record of receiving the required disclosure which complies with (“GOB”) §15-702 (2) Under NY state law he is not currently a legally obligated cosigner on the loan. Reporting a late payment on my client’s credit report for a loan which he is not currently legally obligated to pay is against the FCRA. MY client demanded the immediate removal of the late payment marks found on his credit report.

The credit bureaus have 30 days to investigate a dispute. In these 30 days they will need contact the bank and ask them to provide the needed documents. The bank will need to dig it up and send it back to the credit bureaus. What we hoped for was that either the bank would not be able to find it, or more likely they will not have patience to go back and sift through all the closing doc’s in order to find this one needed document.

Deleted

As predicted, 30 days later, the credit bureaus were still empty handed. Without the needed document, under the FCRA, the credit bureaus were forced to delete the late payments from my client’s credit report. Bingo!

Remember, it’s all about who knows how to play the game better!

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