Jim Clyburn, a Rep., has accused TransUnion, Equifax and Experian of breaking credit reporting rules
By: April Carson
A leading Democrat has called for an investigation into credit reporting agencies Equifax, Experian and TransUnion, claiming that they have failed to respond to consumer complaints during the pandemic.
"The data suggest that the credit rating companies may not be fulfilling all of their obligations to consumers and to the Consumer Financial Protection Bureau (CFPB) under the Fair Credit Reporting Act (FCRA)," wrote Senator Warren in an Oct. 13 letter to Rohit Chopra, Director of the Consumer Financial Protection Bureau.
"The Bureau should investigate these companies' compliance with the FCRA, their customer service practices during the pandemic, and whether they are properly investigating and responding to consumer disputes," she added.
In May, Clyburn asked for information from the chief executive officers of Equifax, Experian and TransUnion about the companies’ responses to complaints issued by customers in the early days of the pandemic.
According to the CFPB, in 2021, 4.1% of complaints were resolved--a significant drop from 2019's rate of almost 25%.
According to Clyburn's October 13 letter, the majority of credit report disputes have not resulted in correction or removal of errors from reports. The subcommittee found that between 43% and 47% of disputed items were changed each year by Equifax from 2019-2021. The subcommittee discovered that, during this time period, Experian corrected around 52% of the disputed late payments or other negative information while TransUnion fixed between 49% and 53%.
Part of the subcommittee's reasoning for the rise in credit reporting errors was due to pandemic-related identity theft and a pause on student loan payments.
Clyburn is now asking for a response from the credit reporting agencies by November 3 about what they are doing to improve the accuracy of their reports and how they plan to prevent future errors. He also wants to know what the companies are doing to help consumers who have been affected by incorrect information on their credit reports.
According to the CARES act, halted loan payments should have been reported as current, though some lenders may have categorized them as late without realizing it. Additionally, consumer fraud can often cause incorrect reporting on consumer credit reports.
The subcommittee found that, on a larger scale than previously known, consumers have been disputing information found in their credit reports. According to the panel, the CFPB estimated the combined number of dispute submissions among Equifax, Experian and TransUnion to be 8 million in 2011. However, data obtained by the subcommittee showed that - in 2021 -Equifax alone received nearly 14 million complaints.
Founded in 2011, the CFPB is a US government agency that regulates credit reporting companies. From 2020-2021, the agency received more complaints about these organizations than ever before - 619,000 in 2021 alone. Additionally, consumers disputed nearly 336 million items on their credit reports from 2019 to 2021.
These numbers are staggering, and they show that something is clearly wrong with the way credit reporting companies are operate.
The credit raters discard millions of disputes a year without investigation, according to evidence obtained by the subcommittee. The subcommittee found that at least 13.8 million were thrown out between 2019 and 2021.
If companies get rid of disputes that consumers send in to their authorized representatives, it breaks the fair credit laws. According to the subcommittee, businesses try to say that they only throw out complaints when they think a credit repair service is behind them.
According to the subcommittee, each agency uses unclear standards to figure out which disputes an unauthorized third party submitted. As an example, Equifax dismisses complaints that “frequently have the same language and format [and] come from similar zip codes.”
The agencies have 30 days to investigate complaints and correct any errors. But the subcommittee found that they often close cases without speaking to the consumer or taking a “meaningful look” at the complaint.
Experian envelopes are "characterized" by containing similar ink colors and fonts, making it easy for the company to decide which disputes to ignore. Additionally, TransUnion employs a criteria-based process that also takes envelope characteristics into account when disregard claims.
The subcommittee found that, between 2019 and 2021, the credit rating companies referred more than half of disputes to data furnishers for investigation. TransUnion had the highest referral rate, at 80% to 82%.
According to the CFPB, data furnishers (providers of credit information, like credit card companies and lenders) have been cited for not conducting adequate investigations. The bureau also mentioned that the credit reporting companies accepted these findings without an independent investigation.
Clyburn highlighted the importance of accurate credit reporting, particularly during the pandemic when many Americans have turned to credit to weather the economic turmoil. Credit report errors can reduce consumers' credit scores and block them from accessing loans, housing, and employment opportunities - all serious consequences that Clyburn hopes to see addressed.
The trade association which encompasses Equifax, Experian and TransUnion-the Consumer Data Industry Association (CDIA)- mentioned that every dispute related to consumers which the three aforementioned credit raters received are processed in compliance with federal requirements. In other words, CDIA is confident that allCreditsite investigations will rule in favor of their members.
The credit repair companies highlighted in recent reports have been increasing their activity, which subverts the process of addressing valid requests and inflates complaint numbers, as stated by a representative for the association. He also said that thecredit reporting industry will continue to work closely with the CFPB and policymakers to serve consumers more effectively and deliver innovative solutions that give more economic opportunities to consumers.
It’s also important to note that, while the credit reporting companies are required by law to investigate disputes, they are not responsible for correcting inaccurate information. That responsibility falls on the companies that provide the information to the credit bureaus. So even if a dispute is found in favor of the consumer, the onus is on the lender or other company to correct the mistake.
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About the Blogger:
April Carson is the daughter of Billy Carson. She received her bachelor's degree in Social Sciences from Jacksonville University, where she was also on the Women's Basketball team. She now has a successful clothing company that specializes in organic baby clothes and other items. Take a look at their most popular fall fashions on bossbabymav.com
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