Credit Sesame reviews the CFPB analysis of how complaint responses are handled by the 3 major credit bureaus, Equifax, Experian and Transunion.
Consumers continue to have challenges when disputing inaccurate credit report information and fixing it. This is especially true when credit repair organizations (CROs) do this on their behalf, according to a new report by the Consumer Financial Protection Bureau (CFPB). Consumers or CROs can dispute inaccuracies in credit reports, from misspelled names to debts never incurred.
The three largest national credit reporting agencies (NCRAs) or credit bureaus, Equifax, Experian and Transunion, told the CFPB that third parties abused the complaint process by submitting “bogus” complaints.
The CFPB receives an average of 1,000 daily credit or consumer reporting complaints and says it is hard to accurately assess if credit repair companies are involved in a complaint submission without first contacting the consumer.
The CFPB and Federal Trade Commission (FTC) provide sample dispute letters, which consumers can use when filing complaints to the NCRAs. Automated screening software used by reporting agencies cannot distinguish the template language used by a CRO from a template used by a consumer.
The information collected by the NCRAs plays a big role in how consumer credit scores are calculated. A failure to quickly resolve and correct reported inaccurate information may adversely affect credit scores for consumers.
Other findings in the CFPB report
The 54-page CFPB report gave the NCRAs credit for enacting stringent third-party screening of credit repair companies and other third parties in 2022. The “relief” provided by the agencies went from 14% to 56%. Relief is when information on a consumer’s credit report is changed, usually for the better.
Consumers who report the same problem to the three NCRAs sometimes receive three different outcomes. For example, a victim of identity theft fraud reported that a family member opened seven credit accounts using their name years previously. The accounts were still open, charged off, and never paid by the thief. An identity theft report by the FTC was included in the complaints. Each credit agency dealt with the information differently:
- TransUnion verified one account, updated two accounts, and deleted the remaining accounts.
- Experian deleted one account, and confirmed the other accounts as accurate with the companies that provided the data.
- Equifax started an investigation with the data furnishers.
People who ask the reporting agencies to correct information on their reports sometimes have the wrong information changed. The CFPB analysis listed an example of an individual complaining that inaccurate addresses were listed on their reports after two company breaches. Equifax reported when the address was updated on the credit report, but the consumer told the CFPB that the agency had kept the wrong address.
Some issues fixed
In its January 2023 report, the CFPB noted improvements made by Equifax, Experian and TransUnion including:
- More complaints now receive more substantive responses.
- Most describe the outcomes of consumer complaints, with more than 50% closed with an explanation or relief.
- Higher rates of relief (changing information on the reports).
In 2022, TransUnion reported providing relief in most complaints. Experian said it provided relief in nearly half of the complaints. Equifax said its relief did not improve, but the CFPB found that Equifax’s relief rate is comparable to the other two agencies.
CFPB analysis recommendations
The report recommends ways that consumer reporting companies can comply with consumer financial protection laws and better serve consumers. The CFPB is exploring new rules to ensure that the agencies follow the law.
Consider consumers when automation added
Adding automated processes to process complaints, especially those related to a legal right, could result in an added burden to consumers. The agencies should consider if a change requires consumers to do more work to exercise their legal rights.
Do not dismiss template letters
New technologies, such as generating letters, make it less hassle for consumers to write complaints. But can result in similar-sounding complaints that appear to be from unauthorized third parties. The assumption that similar-sounding letters are from third parties is increasingly wrong says the CFPB.
Increase consumer participation
Consumers are several degrees removed from their own data, which may lead to more reported inaccuracies, the CFPB analysis found. Instead, consumers should be allowed to help resolve wrong data more directly.
Let consumers be in charge of their data
Incorrect credit report information can stay on credit reports for years. The CFPB points out that consumers question why information provided by debt collectors is deemed more trustworthy than information they can provide. It seems that sometimes incorrect information is used to coerce people to pay debts they say they do not owe.
Some economies are moving toward open banking rules that put consumers in charge of their data, the CFPB says. Others are calling for more federal involvement.
Startups are using alternative data for loan approval, and some financial firms are considering ways to lend money without credit scores.
There is an overarching move to give consumers more control over their data, the CFPB says. What has been a system of surveillance historically, may become one of participation.
If you enjoyed CFPB Analysis of Complaint Responses by the 3 Major Credit Bureaus, you may be interest in:
- Ten Credit Building Resolutions for 2023
- The Cost of Bad Credit to Consumers
- Credit Explained: Credit, Credi Score, Credit Rating, Credit History and Credit Report
Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.
