The Checkout

Congress to Hear Earful on Credit Report Errors

Congress is about to get an earful on how hard it is to fix errors in credit reports thanks to incoming House Financial Services Chairman Barney Frank.

Last week, Frank said he plans to hold hearings on the matter after reading a Boston Globe story on the "glacial and ineffectual response of the three giant keepers of consumer credit records -- Experian, Equifax, and TransUnion -- to any errors in their files, even those that appear to result from fraud."

Such errors can wreak havoc on consumers who are denied credit as a result or end up hunted by collection agencies for debts they never incurred.

By law, creditors have to correct mistakes without damaging your credit. In reality, they make it difficult to do so. Thanks to a 2003 law that provides access to free credit reports, consumers can now catch errors faster, but they may not be able to fix them quickly. The Federal Trade Commission received about 255,000 complaints related to credit report screw-ups last year alone, according to the Boston Globe.

"If you can't correct the report, that's a problem," Frank told theBoston Globe.

Whether the hearing will lead to any legislation is iffy. But a public airing of what consumers have to endure to fix a mistake on their credit report is long overdue, says Evan Hendricks, author of Credit Scores & Credit Report.

Hendricks said the credit reporting bureaus promised to clean up their act in the early 1990s. Congress passed amendments to the Fair Credit Reporting act in 1996 and again in 2003, yet many of the same problems persist.

The crux of the problem, Hendricks says, is the credit reporting agencies rely on automated systems to the exclusion of anything else.

When asked what Chairman Frank might focus on during the hearing, Hendricks suggests having the Big Three reporting agencies do a study to figure out how many reports have errors. Estimates over the years have varied from 1 percent to 60 percent. "The credit reporting bureaus themselves will criticize reports yet they've never done their own study and they're sitting on all the data," Hendricks said.

Greg Fisher who has been running creditaccuracy.com since 2000, and creditscoring.com since 1998 hopes Frank will get to the bottom of this question:

Why does an Equifax credit report disclose an account number with fewer digits than the Equifax report consumers can get from a third-party credit report vendor? The law requires that the credit reporting agencies provide "all information in the consumer's file."

What do you want to know lawmakers to focus on at the hearing? And what are your suggestions for fixing the problem of fixing credit report errors?

By Annys Shin |  January 3, 2007; 10:23 AM ET Credit Issues
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Comments

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Happy New Year

Here is one way to fix the credit report problem. Merge all 3 credit reporting agencies into one. When you have 3 of them, you have a great point of failure and less accountability. One agency accountable is more likely to do things right.

Posted by: Radioactive Sushi | January 3, 2007 11:28 AM

Many consumers report they feel too embarrassed to talk about their credit matters, even when they aren't to blame, pay their bills on time and had no hand in whatever caused the problems to begin with. Consumers continue to be harmed when unjust and misdirected shame continues to be placed on innocent shoulders rather than being placed where it really belongs. If misguided shame is allowing the problems within the industry to remain hidden -the actual extent of the problems will remain hidden as well.

For many years consumers have been placed in the role of unpaid, overworked, quality control experts charged with the overwhelming task of overseeing and maintaining a product (us) that the credit bureaus sell for profit and the consumer has very little control of.

It's not time to dance in the streets yet -but thankfully, Rep. Frank has lit a small torch of hope that with any luck can spark a fire under those who have the ability and responsibility to hold the credit industry accountable for ensuring their multi billion dollar industry sells a product that isn't faulty, defective or harmful to the public. It will be interesting to see who supports his efforts...and who does not.

After all, what other industry is allowed to sell a product that requires the consumer to purchase it, inspect it, monitor it and fix it...at the consumer's expense?

Posted by: Denise Richardson | January 3, 2007 12:13 PM

But Sushi, they're private companies. The govies can't just command them to merge (although anti-trust laws can command the opposite action).

Being conservative, I hate more government regulation. However, in this case - how about a government-issued license to allow the credit reporting agencies to operate in the business they're in, with one of the stipulations of keeping the license be a metric on how fast complaints and issues are resolved?

Posted by: JD | January 3, 2007 12:25 PM

The questions to ask are:

1. "What is the benefit to Equifax's business when keeping consumers in the dark about their credit report, their credit information, etc?
2. "Why do the credit reporting agencies view the consumer as adversary, vs information provider?

The answer to the whole mess is actually very simple:

Step 1. Every consumer gets a copy of their credit report with 100% of all information and data held by the agencies on that person (info of any type included), as often as they like for free via the Internet, or once per year upon request on paper as the law requires today.

Step 2. When the consumer sees error or fraud they will file an affidavit of correction. Essentially a correction report submitted online or via USPS, certifying under penalty of perjury and a $10,000 fine per incident of that all information is true and correct to the best of their knowledge.

The credit reporting agencies will fight tooth and nail agencies due to their notion that any change in their practices will cast doubt upon their information and loosen their hammerlock on the economy, mechant lending, and banking.

The reality in a world gone credit and identity theft crazy is we the consumer need control of our information returned to us NOW.

Posted by: Long Beach, CA | January 3, 2007 12:55 PM

Long Beach is on the right track. Only fear of legal liability will spur the agencies into correcting false reports. Expose the agencies to liability for defamation and they will clean up their acts promptly. Punitive damages for defamation have long been part of Anglo-American common law, and this is one case where they are richly deserved.

Posted by: Garak | January 3, 2007 1:14 PM

The solution is simple (which is why it won't happen).

When I have a credit card, and someone steals it (or the number), I am liable for a maximum of $50, so long as I act diligently to report the loss.

With credit reports, why not the same? The consumer is liable for up to $50 in processing fees to correct errors- and after that, the companies have to swallow the costs.

Now, okay, it really should be $0 on the consumer part, but we will allow some leeway (and, given that most estimates I see for fixing mistakes go well into the thousands, $50 is pretty cheap). But, this kind of financial incentive will force the companies to adopt procedures to better protect and keep accurate data.

Simply make the consumer prove that the marks are illegitimate, and, when they do, have the companies pay all associated costs (to include any lawyer fees incurred by the consumer). Make the consumer pay the first $50, and that's it.

Posted by: Castor Troy | January 3, 2007 1:37 PM

"Simply make the consumer prove that the marks are illegitimate, and, when they do, have the companies pay all associated costs (to include any lawyer fees incurred by the consumer). Make the consumer pay the first $50, and that's it."

--Yes, but why is the consumer always responsible for the credit bureaus screw ups.

Posted by: --- | January 3, 2007 1:43 PM

Denise Richardson put it perfectly. We are a product of these companies and they sell us.

JD,

Your right.

I hate more regulation too, but maybe this is something that needs it to an extent. It looks like it is moving that way.

Posted by: Radioactive Sushi | January 3, 2007 1:52 PM

Castor Troy, have you ever tried to prove something is not yours?

The credit burueas Chose collect and sell our reports, they should be held accountable. The consumer is not making money off reports.

Posted by: Julia | January 3, 2007 2:36 PM

Thanks for covering this issue! As an attorney, I have spent many many hours cleaning up credit reports after identity theft. As others have pointed out, the problem is with incentives. If you sue and win, the law is already like what Castor Troy suggests -- but suing is a last resort, not a first resort. Perhaps a beefed-up FTC complaint process could help. Or stronger laws. The reporting agencies are right that if consumers could just remove anything consumers called a mistake or fraud upon request, the system wouldn't work. On the other hand, they promote what is essentially the inverse -- financial institutions and debt collectors can add anything they like simply upon request and then shift the burden to remove it to consumers.

Posted by: Rob | January 3, 2007 2:44 PM

Welcome to the Information Age. I worked as a credit manager for a major retailer for 4 years and continue to study the major players including Equifax et al. Did you know everyone also has a detailed health insurance report? And a car insurance report. And a work history report. And a combined local, state, and federal agency report. Equifax and several other firms efficiently gather every piece of data about you and sell it to anybody willing to pay, every single day. Insurance firms, hospitals, banks, and major employers buy these reports by the thousands, every day. Do not try to find out what is in these reports, by law you are not allowed to see the data. Are they accurate? Hardly, especially if you ever move or have a common name. Are they used to make decisions about your job, hospital care, mortgage, credit, and insurance rates? You bet they are, every day!

Posted by: thw2006 | January 3, 2007 3:05 PM

This summer Visa was hacked and my debit card number was used in Bulgaria. My bank caught it within days and refunded me the money quickly.

To be careful I put a fraud alert on my credit which lasted for 90 days. One of the 3 sent me a copy of my credit report immediately - the other 2 sent letters telling me how I could get copies.

But what I didn't realize until it was too late was that by putting a fraud alert on my account I wasn't able to get an online copy of my credit report anymore (free or otherwise). I had to do it all by paper. I don't know the solution to this but all this does is make it more difficult for people to track their own credit.

Posted by: Fraud Alert | January 3, 2007 3:19 PM

There needs to be a Federal law that allows consumers to put a complete lock on credit access, and only the consumer can un-lock the report. As a minimum, this will help deter identity theft.

Posted by: Anonymous | January 3, 2007 3:20 PM

A few states, including California, do allow consumers to lock their credit reports. The reporting firms like Equifax and credit giants like VISA and Mastercard are spending millions to reverse these laws and stop other states from passing similar laws. They absolutely do not want you to have any control over the way your credit or other personal data is handled. State governments have only recently decided motor vehicle and tax data should be protected in some way.

Posted by: thw2006 | January 3, 2007 3:52 PM

Somebody upstream indirectly pointed out that we should be able to see ALL our data. I didn't realize that when you purchased (or viewed in your annual freebe) that you don't get the same info that other agencies get. I was turned down for an apartment because glorious Equifax said that my social security card was issued 10 years before I was born. I thought the whole point of purchasing a copy was to catch these things BEFORE something like this happened...

And I COMPLETELY agree with being able to freeze your credit. You can in one or two states already (California, etc.) but think that these types of laws should be more common.

Posted by: Current Review Limitations | January 3, 2007 3:58 PM

This whole thing bothers me. I dont like the notion that decisions are made about me based on data I can neither view nor dispute, as thw2006 indicated.

Rob's point that "...they promote what is essentially the inverse -- financial institutions and debt collectors can add anything they like simply upon request and then shift the burden to remove it to consumers," makes me want to stand up and demand that all submissions/changes to my report must be CC'd to me (mail, email, secure profile on the credit bureaus' websites) and I must click agree or something similar for the changes to take effect. If I disagree or refuse to approve a change, the ball goes back to the bank or creditor to prove that what they are trying to put in the report is factually accurate, and if it is, it sticks.

I don't like the fact that the government allows what is essentially entrepreneurship in information related to people's identities and financial histories to go unsupervised. It's things like this that make me want to go back to the barter system! Smiles.

Posted by: CyanSquirrel | January 3, 2007 4:02 PM

And even if you get your 3 credit reports (like I did), it is not guaranteed that everything is on there. The bank I used to get a mortgage seemed to have some other type of credit report (LandSafe, Credco, or something like that) that had some wrong information that I had to clear up. But this information wasnt on the major 3 credit reports that I pulled.

Posted by: Cyber_Kami | January 3, 2007 4:06 PM

So what do I want? The ability to freeze my credit if I don't plan on getting any more debt. The ability to easily and quickly dispute accounts that are not mine. In the information age, why can't the removal of inaccurate accounts be nearly simultaneous with my complaint? Having something like this removed from my record and placed in a "further research required" folder until it is verified would be less stressful than leaving the disputed item in the report. I don't know many people who enjoy disputing information in their records, so I find it hard to believe there is abuse of complaints filing by consumers!

Posted by: C yanSquirrel | January 3, 2007 4:10 PM

After my divorce, there were many adverse items on my credit report that didn't belong there. It took me five years and untold hours of letters, phonecalls, faxes, and hours spent with attorneys in court proving that these items were indeed false. I never was 100% successful, but after five years of fighting all three of the big credit reporting agencies I was exhausted. My credit is terrible now and I doubt it will ever be fixed.

Posted by: Susan L. | January 3, 2007 6:30 PM

I agree that consumers should be allowed to freeze their credit, and that mistakes can be completely removed. I now have an "AKA" by a typo'ed spelling of my last name on my report that I can't remove, all because of some idiot clerk. Also, whenever I have asked for an investigation into a mistake, nothing has happened, and I had to chase down the information to correct the mistake myself, and send it to the credit agency, AND follow up to make sure it gets corrected.

I also love the whole concept of the "fraud monitoring" business: what other industry gets to keep all the info, not necessarily show it to you, make it tough for you to correct it, doesn't allow you to protect it from unauthorized use, yet gets to charge you to protect it. What a scam!

Posted by: CHF | January 3, 2007 6:37 PM

Others have good suggestions: freezes or locks should be allowed, and consumers should have full access. Others have also pointed out common problems -- I too have an alias that is clearly nothing more than an old typo.

But it is clear that the current system needs more radical change. If you are a furnisher of information to the credit reporting agencies, you interact with them through an automated system. If you are a consumer, you get to submit up to 100 characters through an online dispute process. Anyone ever tried to explain a dispute in 100 characters? Consumers should be able to submit complete statements.

And why is it that any sleazy collections company that you have never heard of can cause an instant 50-75 point drop in your credit score by reporting a tiny alleged debt from years ago? Even a freeze would not stop this.

The big 3 are unaccountable and move in shadows. Profit or market motives are unable to solve these problems because the big 3 do not make their money from consumers. Furnishers are generally happy to have a consumer unfriendly system because it means the word of the furnisher prevails.

The big 3 need to be put under the control of a regulatory body that includes decision-makers from outside industry and government. The policies, formulas, and systems of the big 3 need to be subject to FoIA.

Posted by: Josh | January 3, 2007 10:23 PM

For those who really want to know why there has to be tougher enforcement of the CRAs and their response to consumers, just consider how much they violate existing fair debt recporting laws by default and how collectors, junk debt buyers manipulate the agencies for their purposes in collecting illegally from consumenrs. Read the investigative report, "Debtor's Hell" developed and published by the Boston Globe. Here is the spotlight report link: http://www.boston.com/news/specials/debt

The real issue is the helplessness, whether identiy theft or unscrupulous collections practices using the CRAs to do their dirt. My goodness, even with providing proof positive documentation, you can't even get your name accurate on some of these reports. They report data supplied by debt collector's which is too many times deliberately erroneous and their data comes from a source which may not all together be honest. It is an outrage as to how consumers are affected by some of the practices and the violation of the laws which are in place to protect them. The CRAs operate in so many ways which are designed counter to the law. One example is the practice of re-aging debt record dates by junk debt buyers who tack on hundreds and sometime thousands of illegal fees and report such information to force the hand of a consumer to get it off the record. All kinds of bogus information is provided and the CRAs accept it at face value and fail to do due diligence when it is challenged. Why should three third-party collection agencies be allowed to report current collection on the same account? All three cannot possibly own the account. But a Credit Report by the CRAs will allow them to appear on a consumer's report. Why would a CRA report a delinquent debt reported by a collection agency who is not licensed in a state which requires such licensing ?

What is the answer ? I think stiffer penalties as an enforcement tool of the laws currently enforce and that the CRAs bear a greater burden of the data provided.

JMHO


Posted by: seriousbiz | January 4, 2007 1:34 AM

There are several things that Congress could do to correct the problems associated with credit reporting.

1. Make the credit bureaus compete for our business - Consumers should be able to decide which credit bureau maintains their credit file, and each consumer should only have one credit file. That way, if Experian does a bad job, then the conumer could move to Equifax or Trans Union. This would also open up the market for new competitors. One of the biggest problems in the industry today is that there is really no competition.

2. Stop the credit bureaus from selling other services that are a conflict of interest - By law, the CRAs are supposed to insure that your credit report is accurate. When you report an error, they are supposed to correct it for free and within a short time window. Instead, they sell services like credit monitoring and then hide their 800 numbers to make it difficult for consumers to correct problems for free. In essence, they have found a way to make money from inaccurate credit reports. And its no small amount of money. Credit monitoring is a multi-billion dollar product line for the CRAs.

3. The CRAs and government both need to share data they already have with consumers in an effor to prevent identity theft - When multiple people use the same SSNs to file tax returns, both the IRS and the SSA know it. Likewise, when someone uses a different name but your SSN to apply for credit, the CRAs know it. But neither the CRAs or the government will tell you when this happens. The government contends that it would be a violation of privacy to notify consumers when this happens. But the only privacy they are protecting is that of the person illegally using somebody elses SSN. The identity theft victim's privacy has already been violated.

4. Give consumers nationwide the right to have a security freeze placed on their credit file - This is allowed in various states but not nationally. Congress considered several laws last year that would have allowed victims of identity theft to place a freeze on their credit file. But many of these proposals also included provisions that would have usurped state regulatory authority by preventing stronger state laws, like those in California and Florida. Consumers, not businesses, should have the right to decide if their information can be shared or sold. Security freezes are the only reliable way to prevent identity theft. Only allowing those who have already been victimized to have a security freeze is like shutting the barn door after the horse has gotten out.

As I said before, there are several common sense steps the government can take to improve consumer credit reports. Unfortunately, I have little faith that they will take any meaningful action.

Jim Malmberg
American Consumer Credit Education Support Services
http://www.GuardMyCreditFile.org

Posted by: Jim Malmberg | January 4, 2007 12:53 PM

Something just occurred to me: why are we focusing on the middlemen...the CRA's? Why don't we take our anger out on the banks and creditors that report this erroneous information? Why don't we require the banks to shoulder the responsibility of fielding complaints and submitting fixes to the CRA's upon a consumer's request? Oh...that wouldn't do any good. Too many underpaid data entry clerks would be fired for their mistakes.

Posted by: CyanSquirrel | January 4, 2007 2:59 PM

Having had to get credit reporting items from my grandmother, my cousin, and my late husband's ex wife off my credit reports -- not to mention a case of identity theft -- I am just at wit's end. (I did eventually change my name to one unique in the world).

You can read my comments to the FTC on FICO scoring here: http://www.ftc.gov/os/comments/FACTA-implementscorestudy/514719-00083.pdf

Speaking of errors, I'm down to a mere 14 name variations on Experian, some of which are actually correct.

Equifax has as my primary name a middle name I do not legally have, and refuses to remove it. When I send them copies of my social security card and passport so they can correct it, they ask me to send identification. WTF?

Transunion has the bizarre DEIRDRE SAOIRSE SAOIRSEMOEN as my real name. I have no middle name, but some creditors have apparently reported Moen as my surname and Saoirse as my middle name, thus a bizarre fusion resulted. I've had much joy getting that fixed since I've been told they don't need to take documentation from me.

What I want:

1) Private right of action on ALL provisions of the Fair Credit Reporting Act.

2) More than $1000 for violation. Make it so consumer attornies can actually make a living as consumer attorneys.

3) Equifax to stop splitting consumer files and denying consumers their reports because they have "too many inquiries."

4) World peace.

5) No hard inquiries unless I initiated a NEW credit or insurance-related transaction. Hard inquiries for account reviews and collections happen -- and it's wrong, because it drops the FICO score. In the case of collections, it can be used to sneak around the reporting limits of 7 years for derogatory tradelines, too.

6) Counting of agencies like Lexis-Nexis under the FCRA -- because their reports are genuinely scary (and very, very wrong). Mine's 47 pages.

That's all for now.

Posted by: Deirdre Saoirse Moen | January 4, 2007 5:31 PM

Congress should ask the following questions.

1. What kind of priority do the Credit Reporting Companies exercise in disclosing, investigating and resolving consumer complaints about credit report errors?

2. What is the percent of consumer complaint expenses to total gross revenue, to total net revenue?

3. Do you consider complying with provisions of the FCRA a drag on profit and, as such, do you keep the expense down to a deterrant minimum that does not, and cannot provide, the necessary service to eliminate errors and foster accurate reporting. The three entities consider this service as non revenue producing and will spend the least for providing this service as required by Federal Statutes and Regulations. The non-profit generating expense dampens the profit expectations and tends to keep the expense down to a miserable minimum that does not guarantee accurate reporting.

Posted by: Nameless: | January 4, 2007 7:17 PM

About 10 years ago my wallet was stolen while I was on vacation in FL. It had my checkbook in it and as a result I called my bank and cancelled all the checks in that particular book. I had written a check to a pharmacy before going on vacation and it ended up bouncing. I called the pharmacy once I came home, went over there, paid the bill in cash and a week later recieved a letter from the pharmacy that I had paid the bounced check and all extra fees. Despite all of this, this bounced check was fw'ed on to a collection agency, and then onto my credit report. The collection agency refused to accept that I had paid the bill despite the letter from the pharmacy and a copy of the reciept. I offered to pay a small fee to get them off my back but that was also refused. Finally I disputed this charge with the credit agencies and sent in via certified mail copies of all letters from the pharmacy, collection agency etc showing that the charge was not accurate and they needed to remove it from my credir report. The 3 big agencies did not care one bit and one women on the phone told me that I had fabricated all of those letters to get this off my credit record.( The total amount owed was under $50) I ended up paying above market rates for my graduate school private loans and estimate this one thing on my credit record cost me over $5,000 in extra interest payments. I fought it for 4 years and reached the end of all processes with all credit agencies with it still on my record because the collection agency did not want to drop it. I was advised that if I paid the collection agency then it would be an admission of my "guilt" and then this item could never come off my credit report which is why I never paid them. Even after the 7 years period when these things are supposed to come off your credit report, it was still on there and it took me 2 more years of writing letters and referencing the FCRA to get them to take it off the reports. By that time it was too late for me to get better rates on my private loans. So my biggest peeve is this, the credit reporting agencies always seem to take the side of the collection agencies who it seems do not have to show any proof why they are going after you, yet you have to produce so much paperwork and then have someone in the credit agencies call it fake. The whole system is a mess and the consumer is always the one who looses out.

Posted by: DC Grl | January 5, 2007 12:23 PM

A number of good ideas. I have to start questioning the overall value of credit reports. Other than knowing ones total debt limit what good are they. If companies based the loan on ones ability to repay the loan versus deeming many a greater credit risk and upping the interest rate, we would not have such problems. The standards for granting debt need to be revised as well. America is really just a big old debt trap starting at college through adult hood.

Posted by: RobGreg | January 8, 2007 12:15 PM

i'm not a xenophobe but you ever try resolving an issue with one of the indian firms that the CRAs have outsourced customer service to? who is making sure these people who have access to an incredible amount of data are not sharing it with the world...

Posted by: terrence | January 11, 2007 3:12 AM

The government should stop the collection agencies from changing the date of last activity on your reports as it is already the law but most collection agencies change the date of last activity so that old debts look new. The credit bureaus take the debt collection agencies word and never really do any real checking. Being disabled should not be a lifelong struggle to reestablish your credit. At least criminals sometimes get their sentences expunged if they follow their probation. Go after these agencies that do not follow the law. Also how about limiting the amount of interest that can be charged on a credit card. These rates are usuary! Also the arbitration clauses from credit card issuers should be illegal. A contract is usually decided by two people, the credit card companies make their own rules and you have no other choice. It is a shame that our country has allowed big business to buy their way into having laws passed. Restore our civil rights and stop the patriot act. It starts small and then before you know it you have no rights as an individual. Restore our constitution.

Posted by: Bessie | January 14, 2007 5:42 AM

American expats who need to have their credit monitored online should be able to do do. Living in another country should not prevent them from watching for activity that should not even be happening. From what I've read, the 3 major credit bureaus won't accept an IP address from another country. I've been reading Equifax's terms and they say as long as you have an American address and an e-mail address, you can use their monitoring service. But my home is currently being occupied by tenants, and I worry that even if it is true that Equifax will allow you to use their service, any correspondence will not be sent to a mailbox I can set up. But the comments I've seen say that none of the big three will allow IP addresses outside of the US.
I know that they have some bureaus in other countries, but the country I live in is not one of them.
Does anyone have any advice on this?

Posted by: Laura | January 26, 2007 4:45 PM

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