Investigation Reveals Fair Credit Reporting Act Unfair to Consumers

A four-part investigation by the Columbus Dispatch found that credit reporting agencies enjoy loopholes and omissions in the Fair Credit Reporting Act that hold them blameless for mistakes that can make or break consumers’ abilities to apply for loans, rent apartments and even receive medical care.

The Fair Credit Reporting Act

The Fair Credit Reporting Act was enacted in 1971 as a way to protect consumers, but has faced criticism over the years for providing more protections to credit reporting agencies than to the public, which cannot opt out of credit reporting practices.

The legislation does not require agencies to produce error-free reports, nor does it penalize them for inaccurate reporting. It does require agencies to investigate errors but it does not regulate how agencies conduct their investigations. These provisions create an environment where consumers’ only option to correct their credit reports is to sue the agencies.

Investigation Finds Many Mistakes, Few Corrections

The investigation looked at data from the nation’s three largest credit reporting agencies: Equifax, Experian and TransUnion. It analyzed 30,000 complaints to the Federal Trade Commission (FTC) between 2009 and 2011 and complaints made to 24 state Attorneys General between 2009 and 2010.

The investigation found a slew of mistakes in personal and financial information that may affect between one percent and 25 percent of all consumers. Of all complaints:

• Five percent of complaints to the FTC and 40 percent to the Attorneys General were for wrong personal information, including name, date of birth, address and Social Security number.
• 25 percent of complaints to the FTC and over half to the Attorneys General were for mistakes in financial account, credit card, mortgage and car loan information. Mistakes included listing paid-off car loans as repossessions and paid-off credit card debt as delinquent.
• Five percent of FTC complaints were for wrongly attributed accounts. For example, some people had debts on their records that were not theirs.
• 200 people complained to the FTC that they were listed as deceased on their credit reports, denying them access to credit.

Several people interviewed during the investigation relayed how it was nearly impossible to get even simple personal information errors fixed since agencies rarely answered phone calls or acknowledged receipt of letters. Incorrect debt information was even more difficult to remove and often required a report to state Attorneys General and the filing of a lawsuit.

These mistakes hurt the American consumers and current law gives them little or no recourse to correct the mistakes. Incorrect information credit reports can prevent eligible borrowers from obtaining car loans, mortgages and student loans and may even bar people from renting an apartment, opening a checking account or even receiving medical care.

In January, the Obama administration created a new regulating agency, known as the Consumer Financial Protection Bureau, to oversee the credit-reporting agencies. It is expected to release a plan for regulation this month.

Individuals should diligently check their credit reports for errors in personal and financial information and contact their Attorney General’s office if they find a mistake. Since the most effective way to get errors fixed is to sue the agency, contact an experienced bankruptcy attorney who can help you build your case against the credit reporting agency.