Trying to fix an error on your credit report? Good luck with that.
Trying to get an error removed from your credit report can often seem like an exercise in futility, sucking up time and energy — that is, if you can reach the companies that manage your all-important financial data in the first place.
That's the upshot of an analysis from the Consumer Financial Protection Bureau, which said this week it received more than 800,000 complaints from January 2020 to September 2021 from people about dealing with Equifax, Experian and TransUnion, the three dominant credit bureaus. Most of those complaints centered on consumers being unable to reach the agencies to get disputes resolved, the CFPB said.
"Consumers described the burden associated with attempting to correct inaccurate information, which can be compounded when they are managing other personal issues," CFPB officials wrote in a report released Wednesday.
In the report, the CFPB said Equifax, Experian and TransUnion collectively resolved less than 2% of the credit report complaints they received in 2021, down sharply from 25% in 2019. Translation: Thousands of Americans disputed an error on their credit report last year, filed a complaint with the regulatory agency and ultimately still failed to get their problem addressed, the CFPB said.
"Oligopoly" in action
A person's credit record affects them in myriad ways, from qualifying for a mortgage or renting an apartment to buying a car and even getting a job. As a result, fixing errors on a report is vital since that affects your credit score. But the major credit bureaus are failing on that front, according to CFPB Director Rohit Chopra.
"America's credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors," said CFPB he said in a statement Wednesday, adding that the "report is further evidence of the serious harms stemming from their faulty financial surveillance business model."
Problems with credit agencies are starting to overshadow every other complaint consumers submit to the CFPB. The agency's analysis showed that more than half of CFPB complaints in 2020 were about the credit agencies — a figure that jumped to more than 60% in 2021.
Equifax, Experian and TransUnion declined to discuss the CFPB report and directed requests for comment to their Washington-based trade group — the Consumer Data Industry Association. The association said in a statement Wednesday that it's "reviewing the CFPB report in detail."
"The CFPB report highlights trends including increased activity by certain credit repair companies, which can inflate complaint numbers and undermine the process of addressing legitimate requests," the association said.
Three's a crowd
The rise of credit monitoring and repair apps like Credit Karma are at the center of why credit agencies often fail to fix errors on a person's report, the CFPB said. A growing number of Americans are using Rapid Credit, Credit360 and Credit Karma to check their scores and dispute inaccuracies.
So what's the problem? Equifax, Experian and TransUnion view those apps as third-party entities that submit disputes on behalf of a consumer. Although there's a federal law that allows consumers to use third parties to initiate disputes, the credit agencies "ignore this obligation and, instead, do not respond when they suspect that a third party was involved in the submission of the complaint," the CFPB said in its report.
The three major credit reporting agencies have long drawn scrutiny for their practices, including the difficulty consumers report in getting the companies to correct their credit records.
The CFPB is highlighting these deficiencies as the federal government weighs whether to overhaul of the credit reporting process. The Biden administration has proposed creating a government-run credit rating agency housed under the CFPB, although federal lawmakers are divided over the idea, according to American Banker.
Crackdown to come?
The CFPB's renewed focus on the credit bureaus augurs a potential government crackdown, including fines, according to Wall Street analysts.
"We take this statement as the starting point for the CFPB to bring enforcement actions against Equifax, Experian and TransUnion for what it perceives to be violations of the Fair Credit Reporting Act," Jaret Seiberg, a financial services analyst for Cowen Washington Research Group, said in a research note. "That likely will translate into monetary penalties and commitments to change how disputed debts are handled."
Edwin Groshans of Height Capital Markets noted that Chopra's description of the three companies as an "oligopoly" suggests that the CFPB is eager to promote competition in credit reporting. Any enforcement actions by regulators against the trio would likely happen by year-end, he said in a report.
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