Trying to get an error removed from your credit report can often seem like a futile, time and energy consuming exercise, that is if you can contact the companies that handle your most important financial data in first place.
It is the result of a analysis the Consumer Financial Protection Bureau, which mentioned this week it received more than 800,000 complaints from January 2020 to September 2021 from people about their dealings with Equifax, Experian and TransUnion, the three major credit bureaus. Most of those complaints were about consumers’ inability to contact agencies to resolve disputes, the CFPB said.
“Consumers described the burden associated with trying to correct inaccurate information, which can be compounded when dealing with 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. Thousands of Americans disputed an error on their credit report last year. , filed a complaint with the regulatory agency and ultimately still failed to resolve its issue, the CFPB said.
“Oligopoly” in action
A person’s credit history affects them in multiple ways, from getting a mortgage or renting an apartment to buying a car and even getting a job. . Therefore, correcting errors on a report is essential as it affects your credit score. But the major credit bureaus are failing on this front, according to CFPB director Rohit Chopra.
“The U.S. credit-reporting oligopoly has little incentive to treat consumers fairly when their credit reports contain errors,” the CFPB said in a statement Wednesday, adding that “the report is further evidence of harm serious as a result of their flawed financial oversight business model.”
Problems with credit reporting agencies are beginning to eclipse all other consumer complaints to the CFPB. The agency’s analysis showed that more than half of CFPB complaints in 2020 were about 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 “examines in detail the report of the CFPB”.
“The CFPB report highlights trends, including increased activity by some credit repair companies, which may inflate the number of complaints and undermine the process for dealing with legitimate requests,” the association said.
Three is a crowd
The rise of credit monitoring and repair apps like Credit Karma is central to why credit reporting agencies often fail to correct 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 is the problem? Equifax, Experian, and TransUnion consider these apps to be third-party entities that submit disputes on behalf of a consumer. Although there is a federal government straight which allows consumers to use third parties to initiate disputes, credit agencies “ignore this obligation and, on the contrary, do not respond when they suspect that a third party is involved in the filing of the complaint”, indicates the CFPB in its report.
The three major credit bureaus have long come under scrutiny over their practices, including the difficulty consumers reported in getting companies to fix their credit reports.
The CFPB highlights these shortcomings as the federal government grapples with whether to overhaul the credit reporting process. The Biden administration has proposed create a government-run credit rating agency housed under the CFPB, though federal lawmakers are split on the idea, according to American banker.
A coming crackdown?
Wall Street analysts say the CFPB’s renewed interest in credit bureaus portends a possible government crackdown, including fines.
“We take this statement as a starting point for the CFPB to pursue legal action against Equifax, Experian and TransUnion for what it perceives to be violations of the Fair Credit Reporting Act,” said Jaret Seiberg, financial services analyst for Cowen Washington Research Group, says in a research note. “This will likely result in monetary penalties and commitments to change the way 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 keen to promote competition in credit reporting. Any enforcement action by regulators against the trio would likely occur by the end of the year, he said in a report.