The banks' tactics allow them to put pressure on consumers to repay debts they no longer legally owe in order to clear their credit report. Consumers will frequently find out about the debts still showing on their credit reports when trying to buy a car or house or rent an apartment. In order to get a "clear" credit report, consumers face the choice of quickly paying off the debt or going through the lengthy and frequently ineffectual process of trying to correct erroneous information on their credit reports.
The New York Times' report dovetails with 60 MInutes' investigation last year on the frequent errors on Americans' credit reports and the impossibility of getting those errors corrected. 60 Minutes reported that rather than put the infrastructure and processes in place to correct credit report errors, the three big credit bureaus, Equifax, Experian and TransUnion, wait until they are sued before they'll correct errors. It's cheaper for them to settle the lawsuits of the few consumers who will file suit than to be able to fix the credit report errors of everyone else.
Federal Bankruptcy Judge Robert D. Drain believes the failure to report debt as discharged is motivated, in part, by the big banks' practice of selling large pools of debts to third-party buyers. Those third-party buyers can then use the same strong-arm tactics to collect debt that is no longer owed, meaning they are willing to pay a higher price to the banks for the pools of debt. Everybody wins, except the consumer.
The New York Times' article can be read here.
60 Minutes' report can be seen here.