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TransUnion, Equifax, Experian could have violated credit reporting rules: Rep. Clyburn

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A key Democrat wants credit reporting agencies Equifax, Experian and TransUnion investigated for allegedly failing to reply to consumer complaints through the pandemic.

Rep. James Clyburn, the chairman of the House Select Subcommittee on the Coronavirus Crisis, said the nation’s three largest nationwide consumer reporting agencies have “longstanding problems” with responding to consumers who raise complaints about credit reporting errors.

“These data also raise concerns about whether the [credit rating companies] are fulfilling all of their obligations to consumers and to the Consumer Financial Protection Bureau (CFPB) under the Fair Credit Reporting Act (FCRA),” the South Carolina Democrat wrote in an Oct. 13 letter to Consumer Financial Protection Bureau Director Rohit Chopra.

Clyburn asked the chief executive officers of Equifax, Experian and TransUnion in May for information concerning the firms’ responses to consumer complaints within the early days of the pandemic.

CFPB reported then that 4.1% of complaints were resolved in 2021, compared with nearly 25% of complaints in 2019, before the pandemic.

Clyburn said in his Oct. 13 letter that the vast majority of credit report disputes haven’t resulted within the correction or removal of reported errors from credit reports. The subcommittee found that Equifax modified between 43% and 47% of the disputed items annually from 2019 through 2021. Experian corrected about 52% of the disputed late payments or other bad data and TransUnion fixed between 49% and 53% of disputed credit reports during this time, the subcommittee found.

The subcommittee partly credited the pause on student loan payments and a rise in pandemic-related identity theft to credit reporting errors.

Under the CARES act, paused loan payments were presupposed to be reported as current, though some lenders could have incorrectly categorized them as late. Consumer fraud may result in faulty consumer credit reports.

But consumers have been disputing information present in their credit reports on a bigger scale than previously known, the subcommittee found. The CFPB estimated the combined variety of dispute submissions amongst Equifax, Experian and TransUnion to be 8 million in 2011, based on the panel. But data obtained by the subcommittee showed Equifax alone received nearly 14 million complaints in 2021.

CFPB also received a “record-breaking” amount of complaints concerning the credit standing firms from 2020 through 2021, with greater than 619,000 in 2021 alone. Consumers disputed nearly 336 million items, including names, addresses or credit accounts, on their credit reports from 2019 through 2021, the subcommittee found.

Yet based on evidence obtained by the subcommittee, the credit raters discard thousands and thousands of disputes a yr without investigation. A minimum of 13.8 million were thrown out between 2019 and 2021, the subcommittee found.

Discarding disputes violates the fair credit laws if any are submitted directly by consumers to authorized representatives. The businesses’ defense, says the subcommittee, is that disputes are discarded without investigation when they believe a credit repair service is the one making the grievance.

However the subcommittee says each agency uses vague criteria to find out which disputes are submitted by an unauthorized third party. Equifax, as an example, tosses out mail that “tends to make use of equivalent language and format [and] come from the identical zip code.”

Experian accounts for “envelope characteristics” and “letter characteristics,” including “same/similar ink color,” and “same/similar font,” when selecting which disputes to disregard. TransUnion also uses envelope-based criteria in its discard process.

The subcommittee also found that the credit standing firms referred greater than half of the disputes to data furnishers for investigation between 2019 and 2021. TransUnion referred probably the most, 80% to 82%.

Data furnishers — the providers of credit information, reminiscent of bank card firms and lenders — have been cited by the CFPB for conducting insufficient investigations. The bureau also cited the credit reporting firms for accepting these findings without an independent investigation.

“The prevalence of credit reporting errors has been particularly concerning at a time when Americans have needed access to credit to be able to weather difficult economic circumstances brought on by the pandemic,” Clyburn wrote within the letter to Chopra. “Errors in credit reports can reduce consumers’ credit scores, potentially blocking access to loans, housing, and employment, amongst other serious consequences.”

The Consumer Data Industry Association, the trade association that represents Equifax, Experian and TransUnion, said that each one disputes the three credit raters receive directly from consumers are processed based on federal requirements.

“Recent reports have highlighted trends including increased activity by certain credit repair firms, which might inflate grievance numbers and undermine the means of addressing legitimate requests,” a representative for the association told CNBC. “The credit reporting industry will proceed to collaborate with the CFPB and policymakers to higher serve consumers and proceed to deliver progressive solutions to extend economic opportunities for consumers.”

Correction: This text was updated to reflect that the CFPB had 8 million complaints against all three credit raters in 2011, not 2021, after the subcommittee corrected the yr.

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