Why consumers just can't stop complaining about credit bureaus
For the past four years, credit reporting has generated the most complaints in the Consumer Financial Protection Bureau's complaint database. It makes up 43% of all grievances in the database, a jump from 23% in 2016, according to an analysis by the U.S. PIRG Education Fund.
The vast majority of those complaints (61%) are about inaccurate information in credit reports. In 61,731 cases last year, customers said the information on their file belongs to someone else. Other issues were around incorrect account status, wrong account information, wrong personal information, inaccurate public records, old information that reappears or never goes away, and information that should be on the report is missing.
With the three major credit bureaus at the top of the list of companies complained about, the question is being raised: Why do these problems persist year after year, and what is being done about it?
Complaints about credit bureaus accelerated after the Equifax data breach in 2017, but credit bureaus were the top complaint category before that breach occurred.
“We know that consumers have long had problems with the credit bureaus, particularly with mistakes on their credit reports, which is what we are still seeing,” said Mike Litt, consumer campaign director at U.S. Public Interest Research Group . “Consumers also have problems with not being able to get those mistakes fixed.”
While legislative fixes have been proposed, including by Democratic presidential candidate Sen. Elizabeth Warren, D-Mass., who reintroduced a bill last month to put credit bureaus on the hook for data breaches, none have yet gained significant momentum.
Credit bureau defense
TransUnion, Equifax and Experian all declined to speak for this article, but referred questions to Francis Creighton, president and CEO of the Consumer Data Industry Association.
Creighton said the problem is simply one of scale. The credit bureaus each store 220 million files.
“The three national credit reporting agencies are uniquely positioned in the market,” he said. “There’s no company the CFPB regulates that has more individual U.S. people involved than the three credit bureaus. When you have that many files, it’s really not surprising that the scale of these companies results in the highest number of raw complaints. If you were to look at the percentage of complaints, I think you would find that our percentage is lower than any other company.”
But Litt and some other industry observers don't find this argument convincing.
“That still means too many consumers are facing problems with credit reporting,” Litt said. “The credit bureaus collect all of that data and create those files without our permission. The least they can do is get the files right.”
Sometimes errors in credit reports come from the lenders that supply that data, Creighton said.
“If a problem appears on your credit report — let’s say you’ve gone through a mortgage, maybe a car loan, and you didn’t get the best rate — you get told you should check your credit report because something has prevented you from getting the best possible rate,” he said. “So you look at your credit report and you go to the credit bureau and you complain. That dispute is not really with the credit bureau, it’s really with the bank.”
The bureaus take such complaints back to the lenders to try to determine who’s right.
“A lot of times the dispute is over correct information, but the consumer is disputing whether it should have been included at all,” he said. For example, a consumer might co-sign a credit with a family member who didn’t pay their credit card bill, and then say, that’s not my credit card.
Creighton also blamed credit repair firms for complaints in the CFPB database, because he says they encourage consumers to use the complaint portal to challenge correct information to try to have it removed from credit reports.
“The credit repair industry has very few barriers to entry,” he said. “They tell people, if you have a problem with your credit, we’ll help you clean up your credit. They tell people to challenge adverse records, like a late payment, even when they’re correct, and challenge them over and over again, including in the complaint database.”
Credit bureaus have to respond within 30 days, and if they’re not able to confirm the information within 30 days, that information has to come off the report, Creighton said.
“The credit repair firms’ tactics inflate our numbers and make it harder for us to be responsive to the real problems, because finding the real problems is like finding needles in a haystack,” he said.
In early May, the CFPB filed a lawsuit against CreditRepair.com and Lexington Law, two of the country’s largest credit repair companies, alleging that they violated the Telemarketing Sales Rule by requesting and receiving payment of prohibited upfront fees for credit repair services.
Litt acknowledged that credit repair services do push consumers to challenge adverse records even if they’re right, but he doesn’t see this as a rationale for credit bureau complaints in the CFPB database.
“The sleaziest credit repair doctors do that, but I don't know how many, and that certainly doesn't excuse the credit bureaus for the mistakes they do make,” he said. “Many credit reporting complaints in the database result in relief for consumers, indicating that even the credit bureaus think there are mistakes to be fixed.”
Brad Leimer, co-founder of Unconventional Ventures, also doesn’t see credit repair companies as the culprit here.
“The people who complain to the CFPB and other sources tend to be the ones who feel they have the most injustice toward them,” he said. “I don’t think it has anything to do with credit repair services directing people to make any sort of statement to criticize the bureaus.”
Creighton acknowledges that the credit bureaus do sometimes make mistakes.
“When they do, we try to address them very quickly,” he said. “Credit bureaus have among the best satisfaction rates after the complaint is made and they’ve had the opportunity to get it fixed. This idea that somehow the credit bureaus are not focused on accuracy is just wrong.”
Some credit repair services, like Balance Financial, have helped people, Leimer said.
“I wouldn’t say there aren’t bad actors in that space, but why wouldn’t consumers challenge and complain when we have black boxes of credit bureaus put on top of black boxes of credit decisioning by banks?” he said. “The more we add transparency to the way it’s collected, the way that it’s used and the way that it impacts us every day, the less complaints we’ll have.”
Leimer would like to see credit bureaus forced to explain credit reports to consumers.
“Even though companies like Credit Karma are doing their best to explain what that means, the average consumer still does not understand all of the factors that go into that,” he said.
What the bureaus are doing about it
Creighton said all three credit bureaus have a tab on their home page for filing disputes.
“We want you to come to our site and file a dispute,” Creighton said. “The hardest part of doing that is confirming your identity, and that should be hard because we want to make sure that the people who are doing this are who they say they are.”
Once a dispute is filed, the bureaus have 30 days to log it, make sure it’s legit, have the lender look into it, and respond. Most are handled within two weeks, Creighton said.
“If you are correct, and the information is incorrect, we’ll correct it,” he said. “The problem is when you think something is incorrect and someone else doesn’t.” For instance, if a consumer makes a late payment and their credit score drops, the consumer may think that’s not right, but it’s not an error.
The reporting agencies also encourage people to download a free copy of their credit report at annualcreditreport.com every year and look for anything that shouldn’t be there.
Creighton also pointed out that over the last two years, under the terms of the National Consumer Assistance Plan, an agreement the three bureaus made with the attorney general to improve credit report data, they have turned off certain public records, like liens and judgments, where they could not be assured the data was correct. They also agreed not to record medical debt for six months so that insurance questions could be settled.
“We’re in the business of making sure information you provide is correct,” he said. “The incentives are for us to get it right. We are under tremendous pressure to get it right.”
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