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Why is there an OFAC Alert on my credit report?

Discovering an OFAC Alert on Your Credit Report: What It Means and What to Do

Opening your credit report only to find an unexpected OFAC Alert can be a stressful and confusing experience. You may be wondering why there is an OFAC alert on your credit report. You need to understand what OFAC is, why they have anything to do with your credit, and how this alert could impact your financial life. Most importantly, you need to know what steps to take to understand the alert and get it resolved.

Read on to learn essential information about OFAC Alerts on credit reports and your rights to ensure your report is accurate. For specific advice and assistance regarding your case, contact a credit card defense attorney near you for a free consultation.

What Is OFAC?

OFAC stands for the U.S. Department of Treasury’s Office of Foreign Assets Control. This government agency is tasked with enforcing economic and trade sanctions against foreign countries, terrorists, international narcotics traffickers, and those engaged in activities threatening U.S. national security or foreign policy.

As part of its enforcement efforts, OFAC publishes a list of Specially Designated Nationals and Blocked Persons (the “SDN list”). The list includes individuals and companies owned, controlled by, or acting on behalf of targeted countries, as well as individuals, groups, and entities designated under sanctions programs that are not country-specific, such as terrorists and narcotics traffickers. U.S. persons and companies are generally prohibited from dealing with anyone on the SDN list.

What’s an OFAC Alert?

An OFAC Alert, or “OFAC Name Screen Alert,” is a notification that your name is either a match or similar to a name on the OFAC SDN list. Credit reporting agencies like Experian, Equifax, and TransUnion routinely screen consumer data against the SDN list and place these alerts on the credit reports of any presumptive matches.

It’s important to understand that an OFAC Alert is not an accusation of wrongdoing. Many people are flagged simply because they have the same or similar name as someone on the SDN list. In fact, an OFAC Alert doesn’t even necessarily mean that your name matches a name on the list – just that it is similar enough to merit the alert. Kevin Johnson, senior vice president of public policy and legal affairs at the Consumer Data Industry Association notes that credit bureaus have “cast a very wide net” with the OFAC Alert program.

Why Is an OFAC Alert on My Credit Report?

If you have an OFAC Alert on your credit report, one of two scenarios likely applies:

  • Your name matches or is similar to a name on the OFAC SDN list. This could be an exact match (e.g. your name is Robert Johnson and there is a Robert Johnson on the SDN list) or a partial match (e.g. your name is Abdul Matin and there is an Abdul Matin Sadr on the list). The sheer number of names on the SDN list makes it likely that many Americans share names with listed individuals.
  • There’s an error in the credit bureau’s OFAC screening process or in your credit file leading to a false alert. Credit reporting errors are alarmingly common. An FTC study found that 1 in 5 consumers had a verified error on at least one of their credit reports. Errors related to OFAC screening, while not specifically quantified, are a known issue that can result in unwarranted OFAC Alerts.

Regardless of how it got there, an OFAC Alert can have serious implications. Many lenders have policies against extending credit to individuals with OFAC Alerts, even if the alert is just a name match. An alert can therefore result in credit denials, and sometimes even account closures or asset freezes, until the alert is resolved. Resolving a false OFAC Alert is thus critical.

How Common Are Incorrect OFAC Alerts?

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Incorrect OFAC Alerts on credit reports are more common than many people realize. While there are no definitive statistics on the frequency of false OFAC Alerts, several factors contribute to the prevalence of this issue:

  • Size of the SDN List: The OFAC SDN list contains over 6,000 names as of 2021. With such a large list, the odds of an individual sharing a name or part of a name with a listed person are significant.
  • Screening Methodology: Credit bureaus use automated screening systems to match names in their databases against the SDN list. These systems often prioritize “over-inclusion” to avoid missing a true match, leading to many false positives for partial name matches.
  • Lack of Identifying Data: OFAC Alerts on credit reports are based on name alone, without using other identifying data like date of birth or social security number to confirm a match. This increases the likelihood of false matches.
  • Common Names: Individuals with common names are more likely to face incorrect OFAC Alerts. For example, a New York Times article reported that over 14,000 Maria Hernandez’s were flagged as potential matches to Maria de la Luz Maggi Hernandez, a Colombian national on the SDN list.
  • General Credit Reporting Errors: Credit reporting errors are a widespread problem. An FTC study found that 26% of participants identified at least one error on their credit reports, with 5% having errors serious enough to risk higher borrowing costs. OFAC screening is not exempt from the general accuracy issues in credit reporting.

While the exact prevalence of incorrect OFAC Alerts is unknown, the confluence of these factors suggests it’s a significant issue impacting many Americans. If you find an OFAC Alert on your credit report, don’t assume it’s correct. Investigate and dispute the matter with the help of a lawyer if you believe it’s in error. Speaking with a consumer protection attorney can help you understand your rights and options for getting a false alert removed.

What Are My Rights to Remove an Incorrect OFAC Alert from My Credit Report?

Under the Fair Credit Reporting Act (FCRA), both the credit reporting agencies (CRAs) and the data furnishers that supply information to the CRAs have obligations to ensure the accuracy of credit report information. This includes an obligation to conduct a reasonable investigation of any disputed information and correct anything found to be inaccurate or unverifiable.

If you find an OFAC Alert on your credit report that you believe is incorrect, your first step should be to directly dispute the alert with the CRA reporting it (the agency’s contact information will be on the credit report). You can do this online, by phone, or by mail. Explain in your dispute that you are not the individual on the OFAC SDN list and request that the alert be removed.

The CRA then has 30 days (45 if you provide additional information during the initial 30-day period) to investigate your dispute. As part of this investigation, they should compare your identifying information to the OFAC SDN list information to verify whether a true match exists. If they find the alert is inaccurate or unverified, they must remove it.

If the CRA does not resolve the dispute in your favor, you have the right to add a statement to your credit file explaining the dispute. You can also escalate the issue to the Consumer Financial Protection Bureau (CFPB) or your state Attorney General’s office.

Can I Sue for Unresolved Errors on My Credit Report?

Yes. If a CRA or data furnisher fails to properly investigate your dispute or continues reporting information you’ve shown to be inaccurate, you may be able to sue them for damages under the FCRA. The Act allows recovery of actual damages (such as lost opportunities or emotional distress), statutory damages of $100 to $1000 per violation in some cases, punitive damages for willful violations, and attorney’s fees if your case is successful.

FCRA lawsuits can be filed in federal or state court within two years of the violation (five years for willful violations). However, the FCRA’s requirements and the litigation process are complex. It’s advisable to consult with an experienced consumer protection attorney before proceeding with a lawsuit.

How Can an Attorney Help?

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Enlisting the help of a knowledgeable FCRA attorney can be invaluable in navigating an OFAC Alert dispute and understanding your legal options. An attorney can:

  • Communicate with the CRAs and data furnishers on your behalf to ensure your dispute is being handled properly 
  • Gather evidence to demonstrate the inaccuracy of the alert, such as identity documents and proof of residence
  • Advise you on the strength of your potential legal claims and likely outcomes
  • Prepare and file a well-supported lawsuit if litigation becomes necessary
  • Represent you in court to pursue the maximum compensation available

While not all credit report errors require legal action, having a dedicated advocate in your corner can alleviate stress and help bring a swifter resolution to a frustrating situation.

Contact an Experienced OFAC Alert Attorney Today

If you’re dealing with the burden of an inaccurate OFAC Alert on your credit report, contact Kazerouni Law Group, APC for a free consultation. Our consumer protection attorneys have extensive experience handling FCRA cases and are committed to protecting consumers’ credit rights.

We’ll work tirelessly to get a false OFAC Alert removed from your report so you can move forward with your financial goals. We also work on a contingency fee basis, which means you won’t pay attorney fees unless we recover compensation on your behalf.

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