A plaintiff’s loss of credit reputation is increasingly included in tort actions as an economic damage. As in any specialized field, it is important to select the professional with the appropriate skills and to consider the level of expertise, or lack of it, regarding credit damage for evaluation and valuation purposes. These skills may be equally useful to Plaintiff or Defense.
One of the reasons that credit damage valuation is mistakenly viewed as ‘speculative’ is that the wrong professionals are engaged to evaluate the economic credit related issues. Such inappropriate expertise can cause confusion rather than clarity. The economic damage expert must be able to address, review and evaluate the individual categories of economic damage so as to reduce the necessity of hiring many “single vision” experts such as a banker, accountant, debt counselor, or economist.
It is not necessary, or even desirable, for the credit damage evaluator to have work experience in any of the common financial industries. Instead, the expert must be focused on the compensable economic damage that can be understood and accepted by a judge and jury. In order to do this, it is essential to be able to recognize, and understand, the credit granting related documents that confirm causation(s) of loss of credit accounts, increased out-of-pocket borrowing costs, and loss of ability to replace pre-existing credit capacity.
Everyone knows that the worse your credit history or score, the more credit will cost – if it is even available. But credit damage is much more than comparing interest rates. It deals with the impact of the inability to obtain replacement credit on out-of-pocket costs and quantifiable reputation and employment OPPORTUNITY/WAGE DIFFERENTIAL damages.
Bankers have been used as experts in credit damage and they are excellent at understanding banking rules and regulations. However, loan underwriting knowledge is not the key to an expert witness’ value regarding credit damage. Even if they have multi-lender experience, a banker’s professional vision is limited to their industry experience and the lenders point-of-view.
Accountants are excellent at record keeping for an individual or business, and some have knowledge in preparing financial records for loan application purposes. Like bankers, accountants may be familiar with lending guidelines regarding debt-to-income ratio, confirmation of employment, confirmation of assets, and other required confirmations, loan procedures and related documentation. Accountants are also able to organize financial records for tax purposes. Beyond historical record keeping, however, accountants generally lack expertise regarding loan requirements, valuation of impact of denied credit, and impact of inflicted collection accounts.
A Debt/Credit Counselor is experienced in reorganizing the financial relationship between income and financial obligation(s), usually by guiding the debtor toward modifying monthly discretionary spending and negotiating lower monthly payments. This valuable service, however, has little involvement with the credit granting process or its requirements.
Economists are well trained professionals who are able to apply proven formulas regarding loss of income but there is no college level training regarding the calculations of credit damage. Most lack experience or training regarding economic damage valuation. Economists may address the issues of lost opportunity which results from credit reputation damage, but not the reputation damage itself.
A Credit Damage Evaluator (CDE) is court accepted as an expert witness. The CDE is able to organize and review credit related documentation to develop and monetize, with great specificity, the change in credit reputation and the several economic areas where the economic credit damage may be measured. It is not the purpose of the Credit Damage Evaluator to “second guess” the reasons for change of credit reputation, but rather to develop a financial impact profile of economic change in actual dollars. Unlike other professionals, only an expert CDE can reliably deliver the granular and verifiable analysis that establishes an approximate dollar value to credit damage which may be relied upon for negotiation or demand purposes.