Mississippi’s Suit Against Experian Draws Attention to the Credit Bureau’s Policies

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By Consumers Union on Wednesday, June 25th, 2014

Mississippi Attorney General Jim Hood’s lawsuit against top consumer reporting agency (“CRA” or “credit bureau”) Experian, which we reported on last week, is continuing to make waves.

As a New York Times article posted over the weekend points out, the lawsuit alleges that Experian consistently provided incorrect information on credit reports and often failed to correct mistakes, compromising consumers’ ability to obtain credit. The Times notes that while many consumers, in addition to the Federal Trade Commission (FTC), have filed lawsuits against the credit bureaus over these errors, the CRAs have not enacted the kinds of policies needed to ensure credit reports are accurate.

Mississippi’s lawsuit is the latest attempt to force Experian to change its ways. Its complaint validates many of the concerns about credit reporting that we raised in a recent policy brief, and highlights additional concerns about the credit bureaus during the dispute investigation process.

If a consumer discovers an error on one of their credit reports, they have the right under federal law to file a dispute with the credit bureau. Upon receiving the complaint, the credit bureau typically forwards it to the creditor, or “data furnisher” that provided the disputed information for investigation. The data furnisher then makes a decision about whether the dispute is valid, and the credit bureau usually accepts their determination.

Mississippi’s complaint alleges that, despite guidance from the FTC, Experian failed to forward information provided by consumers, such as receipts or cancelled checks, to the data furnishers during the dispute process “as a matter of policy.” As a result, it’s very difficult to convince the data furnishers that they have made a mistake and have the errors corrected.

The Consumer Financial Protection Bureau (CFPB) raised concerns about this issue in September 2013. And consumers have told us that the data furnishers and credit bureaus don’t thoroughly check into disputes. Greg, from Broadview Heights, Ohio, reports:

“Creditor erroneously reported account as delinquent. Disputed account with credit bureau. Creditor ‘verified’ report by repeating same erroneous information. Credit bureau refused to accept second dispute, referring to creditor. Creditor refused to discuss case, referring to attorney.”

Further, the Mississippi lawsuit alleges that Experian employees testified that they were pressured to quickly process complaints, which “created an environment ripe for data entry errors and failures to accurately reflect consumers’ disputes.” The lawsuit also pointed out that Experian requires consumers to get a copy of their credit report and supply the report’s identification number before being allowed to process a dispute – even though many consumers are only allowed one free Experian report per year.

Experian likely won’t change its policies on its own – that’s why Congress should pass the Stop Errors in Credit Use and Reporting (SECURE) Act, which would require the CFPB to develop stronger rules to ensure credit bureaus maintain accurate credit reports. It will also help consumers by requiring that consumers get a free credit score, one that is actually used by lenders, when they request their free annual credit reports. You can do your part to help us support this bill by sharing your credit reporting story!

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