Dear Liz: I watched 60 Minutes last night regarding the 3 credit bureaus and was amazed at what I learned. I was hoping to spend time trying to repair our credit score, but according to the report last evening, it sounds like a total waste of time as the three credit bureaus basically are not accountable to anyone and they very rarely take action in your defense. Was this a one-sided view?
Answer: The credit bureaus would tell you yes, but the answer is way more complicated than that.
The show reported that 40 million Americans have errors on their credit reports. That’s about one in five U.S. adults covered by the credit bureau industry. About half (one in 10) have errors serious enough to hurt their credit scores.
(Update: A Federal Trade Commission report released today said one in four had at least one “potentially material error” on at least one of their three credit reports and that one in 20 consumers had significant errors on their credit reports that could cause them to pay more loans.)
That’s a pretty high error rate, but an even bigger problem is that the process to fix mistakes is almost completely automated and structured to favor the data provider (the banks, lenders and others supplying information) over the consumer. Here’s how the Ohio attorney general described it:
“The federal law says that if you believe that there is a mistake, you can go to them and they have an obligation to do a reasonable investigation. They’re not doing a reasonable investigation. They’re not doing an investigation at all.”
The show interviewed former bureau employees in Chile who confirmed what others have reported: that their jobs were to assign two-digit codes to the complaints. That’s it. Then the complaints are forwarded to the lenders and other data providers for response.
People can and do get errors fixed if the data provider acknowledges the error or simply fails to respond to the credit bureaus’ queries. If the data provider continues to insist it’s right, however, it’s pretty tough (if not impossible) to get the bureaus to step in.
That’s how people get caught in seemingly endless cycles of disputing mistakes only to have them reappear, or never disappear, from their reports.
The credit bureaus, which apparently turned down opportunities to respond on camera, now point to a study by the Policy and Economic Research Council that found 95% of consumers were satisfied with the outcome of their disputes. The study was paid for by a grant from the Consumer Data Industry Association, which represents the credit bureaus.
It’s not exactly pointless try to fix errors. The FTC report said four out of five people who dispute errors get results. You should still try, and you may well find it’s possible, but you should plan to be tenacious if your initial efforts are rebuffed. (You should get your free credit reports directly from www.annualcreditreport.com. Don’t go to other, lookalike sites, some of which are owned by the credit bureaus but that aren’t the federally-mandated site that gets you your free reports.)
You should also support efforts by regulators and consumer advocates to require the credit bureaus to put a more responsive system in place.
I realize this article is short and focused on a different question, but what it says makes me wonder about a bigger (and seemingly very relevant) question – why do we make charge the messenger with investigating the matter when it is the data PROVIDER that makes the errors?
IF there is a mistake in the data reported, why is it the legal duty of the company that collects and classifies the data to take up the task of validating that data in response to a consumer complaint?
If a book makes a false claim, do we demand that the book store or library investigate the facts?
The credit reporting agencies notify the data provider that their report has been questioned – if the data provider does not respond, the questioned data is removed. If the data provider confirms the data, the report isn’t changed. If the consumer still believes the data is incorrect, they can attach a statement to that effect to their report, and they SHOULD (but aren’t required to!) pursue the data provider in getting the errors corrected.
What, exactly, are we expecting the credit reporting agency to do that they aren’t doing now? HOW exactly are they supposed to “investigate” suspected errors? And why do we expect THEM to do this and not require the company sending them the report to do it?
This sounds like I must work for a credit reporting agency, but I don’t – I work in consumer finance, but I STILL think we are barking up the wrong tree in making the credit reporting agencies responsible for “investigating” consumer claims about the data sent to them.
Under the Fair Credit Reporting Act, both information providers and credit bureaus are responsible for correcting inaccurate information. Since the bureaus make money from gathering and selling this data, Congress thought they had an obligation to make sure what they were reporting was factual.
You’ve made my point for me, although unintentionally… the FCRA doesn’t actually make credit reporting agencies “responsible for correcting inaccurate information” – it makes them responsible for assuring they don’t knowingly include errors in their reports (which is fundamentally different than correcting the information) and it requires them to provide a process for consumers to question the validity of any information included in what they report.
So, again, if we’re damning them for the error correction process they have not being adequate, what exactly should we have them do that they aren’t doing now?
The FCRA requires credit bureaus to investigate consumer disputes, and consumer advocates say that’s not happening. Credit bureaus typically don’t review or forward documents that consumers provide regarding errors. There’s no appeals system if data furnishers insist on reporting errors. There have been several federal reports on the weaknesses of the automated investigation process; here’s one from 2006 that describes the situation, which hasn’t changed much: http://www.federalreserve.gov/boarddocs/rptcongress/fcradispute/fcradispute200608.htm