The U.S. Congress is looking into mistakes on credit reports and how disputes are being handled by all three major credit reporting agencies, Equifax, Experian and TransUnion, as a result of payment deferment programs and rising cases of identity theft during the pandemic.
In May, U.S. Rep. James Clyburn, D-S.C., chairman of the House Select Subcommittee on the Coronavirus Crisis, wrote letters to all three credit reporting agencies, pointing out the increase in complaints about errors and asking them to explain their response and dispute process.
In the U.S., credit reporting agencies hold enormous power over consumers. The information they collect is used by banks, auto dealers, retailers, sometimes insurance companies and employers to make decisions about credit or for millions of Americans. This can affect who does or doesn’t get a credit card, car loan, insurance, an apartment lease, a mortgage or even a job.
“We are focused on ensuring that the American consumer can emerge from the pandemic on a solid economic footing,” said U.S. Rep. Dwight Evans, D-3rd District. “Obviously, Chairman Clyburn is doing the right thing. Accuracy on credit reports is very important and we need to be vigilant.”
Evans, who sits on the small business committee, said, “The implications could affect the availability of capital for small businesses, housing loans and those type of things.”
The agencies claim to have information on about 200 million Americans and credit profiles on almost every credit-using consumer in the U.S. During the pandemic many lenders, such as banks, real estate owners and other creditors offered various types of payment deferments and other types of debt arrangements. Congress had barred lenders from reporting the missed payments, under these programs, as late.
The Consumer Financial Protection Bureau (CFPB) a federal consumer watch dog agency, said it received 500,000 consumer complaints about credit reporting agencies between January and September 2021, up from 319,000 in the previous year.
The CFPB estimated that 37% of all consumers have been affected by identity theft and have probably had at least one account opened in their name.
None of the credit bureaus have commented to media, but their trade group, the Consumer Data Industry Association (CDIA) issued a response:
“The credit reporting industry is reviewing the House Select Subcommittee on Coronavirus’ letters in detail. We agree that accurate credit reporting is vital to consumers and to a healthy economy. We are committed to helping consumers resolve discrepancies on their credit reports. We are working diligently across the financial ecosystem to make sure data on consumer credit reports is accurate and comprehensive.”
The CDIA also said: “The dispute process is an important tool to notify credit bureaus about any data that may have been furnished inaccurately, so that we can correct those errors.”
According to the Federal Trade Commission, 1 in 5 Americans have some kind of error in the credit reports.
Cary L. Flitter, Esq. a partner in the Montgomery County law firm of Flitter & Milz, has sued banks, insurance companies, debt collectors and credit reporting agencies, on behalf of consumers.
“Probably the most common problem is what is called a mixed file,” Flitter said. “This can happen to people with similar names and similar addresses. It comes with similar names, similar address, Srs. and Jrs. and a whole variety of reasons. That is a recurring problem. The credit bureaus don’t do a nine-figure Social Security number match.”
The second most common problem, he said, is identity theft.
“I would say identity theft is very big,” Flitter said. “A fraudster opens an account in your name and a bill comes, maybe you dispute it, maybe you don’t. Maybe you are away. You don’t pay the bill and it shows up late on your credit report. They want to put the burden on the consumer to prove it’s not their account. No, you prove it is my account.”
Then you have factual inaccuracies from furnishers, he said.
“Furnishers are usually banks, or any company that furnishes data to the credit reporting bureaus. Sallie Mae is a furnisher for student loans, debt collectors, debt buyers, Flitter said. “All the banks are furnishers for credit cards, mortgages and car loans. A lot of times, they’ll furnish information, say it’s 60 days late and it was never 60 days late.”
According to the CFPB’s January 2022 report on credit reporting errors, the dispute process can be burdensome and frustrating to consumers.
In 2017, Equifax reported a data breach that put the personal information, such as Social Security numbers, some driver’s license and passport information of 145 Americans at risk.
In April, CFPB filed a lawsuit against TransUnion, two of its subsidiaries and a former executive, for violating a 2017 order to stop engaging in deceptive marketing practices.
The lawsuit, filed in U.S. District Court of Northern Illinois, alleged that TransUnion was using “deceitful digital dark patterns,” or hidden tricks or trapdoors that companies sometimes build into their websites to cause customers to inadvertently click links, sign up for subscriptions or purchase products or services. Dark patterns can also complicate or hide information, for instance, making it difficult to cancel a subscription service.
“TransUnion is an out-of-control repeat offender that believes it is above the law,” said Rohit Chopr, CFPB director, at the time in a statement.
Last week, Congress grilled the CEOs of the three major credit reporting agencies on Capitol Hill.
There aren’t many issues that Democrats and Republicans agree on in Washington, D.C., but this is one: The system that credit reporting agencies are using isn’t working correctly.
U.S. Rep. Patrick McHenry, R-N.C., said the “system is broken and in need of major repair.”