Credit Score

Are you trying to correct a mistake on your credit report? Good luck with that.

Trying to eliminate an error from your credit report can often seem like a futile, time-consuming and energy-consuming exercise – that is, if you can contact the companies that handle your very important financial data by first place.

This is the result of an analysis by the Consumer Financial Protection Bureau, which this week said it received more than 800,000 complaints from January 2020 to September 2021 from people regarding relationships with Equifax, Experian and TransUnion, the three main offices of credit. Most of those complaints were about consumers not being able to contact agencies to resolve disputes, CFPB said.

“Consumers have 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 that 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.

“The oligopoly” in action

A person’s credit history affects them in so many ways, from being eligible for a mortgage or renting an apartment to buying a car and even getting money. a job. Therefore, correcting errors on a report is essential as it affects your credit score. But major credit bureaus are failing on this front, according to CFPB director Rohit Chopra.

“The US credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports contain errors,” CFPB said in a statement Wednesday, adding that “the report is further evidence of the serious damage resulting from their failure. flawed financial monitoring business model. “

The problems with the credit bureaus are starting to eclipse all the other complaints consumers bring to the CFPB. The agency’s analysis showed that more than half of CFPB’s complaints in 2020 concerned credit agencies – a figure that rose to over 60% in 2021.

Equifax, Experian and TransUnion declined to discuss the CFPB report and sent requests for comment to their Washington-based business group – the Consumer Data Industry Association. The association said in a statement on Wednesday that it was “examining the CFPB report in detail.”

“The CFPB report highlights trends, including increased activity by some credit repair companies, which can inflate the number of complaints and undermine the process for handling legitimate claims,” ​​the association said.

Three is a crowd

The rise of credit monitoring and repair applications like Credit Karma is at the heart of why credit bureaus often fail to correct errors in 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 view these applications as third party entities that submit disputes on behalf of a consumer. Although there is federal law that allows consumers to use third parties to initiate disputes, credit bureaus “ignore this obligation and, instead, do not respond when they suspect that a third party has. been involved in the submission of the complaint, “CFPB said. in his report.

The three major credit bureaus have long been under scrutiny in their practices, including the difficulty consumers report in getting businesses to correct their credit records.

The CFPB highlights these shortcomings as the federal government considers whether it should revise the credit assessment process. The Biden administration has proposed creating a government-run credit rating agency hosted by the CFPB, although federal lawmakers are divided on the idea, according to American Banker.

Repression coming?

According to Wall Street analysts, the CFPB’s renewed focus on credit bureaus bodes well for potential government repression, including fines.

“We see this statement as the starting point for the CFPB to take legal action against Equifax, Experian and TransUnion for what it considers to be violations of the Fair Credit Reporting Act,” 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 coercive action by regulators against the trio would likely occur by the end of the year, he said in a report.