This a guest post written by Associate Attorney Dan McGarry:
It happens all the time. Inaccurate information routinely finds its way
into the credit file of an unsuspecting consumer. Credit reports contain
financial information, including detailed account payment history, and
are used by lenders and employers to determine an individual's credit
risk or trustworthiness; it's important to make sure it's accurate.
Often times, a consumer is unaware of the inaccurate information until
it results in a credit denial.
In fact, one out of five Americans has an error on their credit report,
and one out of ten has an error on their credit report that might lower
their credit score, according to a Federal Trade Commission (FTC) study
of the U.S. credit reporting industry released in December 2012.
"These are eye-opening numbers for American consumers," said
Howard Shelanski, Director of the FTC's Bureau of Economics. "The results of this first-of-its-kind study make it clear that
consumers should check their credit reports regularly. If they don't,
they are potentially putting their pocketbooks at risk."
Credit Reporting Agencies (CRAs) publish credit account information and
other public records relating to a consumer's financial history. The
most common CRAs are Equifax, Experian, and TransUnion. CRAs obtain information
directly from creditors who own each particular account, known as furnishing
creditors or furnishers of information.
So what can a consumer who finds inaccurate information in their report
do to fix the error and protect their credit rating? Under the Fair Credit
Reporting Act (FCRA), a consumer may dispute items of information with
either the CRA or the furnisher of information directly. The FCRA requires
that CRAs and the furnishing creditors conduct a "reasonable investigation"
into such a valid dispute, including reviewing all relevant documentation
sent by the consumer.
Unfortunately, it is unlikely that the CRAs and the furnishing creditors
will actually conduct a meaningful investigation. Recently,
60 Minutes ran a report titled, "40 Million Mistakes," in which three former Experian
dispute agents at Experian's national consumer assistance center in
Santiago, Chile were asked about Experian's handling of these customer disputes.
According to the former dispute agents, all they did was read the disputes
and reduce them to a two-digit code like "never late" or "not
mine." It was then sent with a two or three-line summary and no documentation
back to the bank or department store that furnished the original information.
Due to the recent exposure of the lack of compliance with the dispute procedure
outlined by the FCRA, last week
the CFPB issued a bulletin clarifying the duties of furnishers. The Bureau cautioned that furnishers
have to review all relevant information they receive about the disputes,
including "documents that the CRA includes with the notice of dispute
or transmits during the investigation, and the furnisher's own information
with respect to the dispute."
Consumers who believe that their credit file contains inaccurate information
should continue to dispute the information with one of the CRAs. The recent
CFPB bulletin makes it clear that a furnishing creditor must maintain
a process by which it reviews all relevant information, and that practices
that violate the FCRA will be subject to corrective measures by the CFBP.