Select Subcommittee Requests CFPB Review After Investigation Finds Nation's Top Credit Bureaus Failed to Address Errors in Consumer Credit Reports
Washington, D.C. (October 14, 2022) – Yesterday, Rep. James E. Clyburn, Chairman of the Select Subcommittee on the Coronavirus Crisis, sent a letter to Director of the Consumer Financial Protection Bureau (CFPB) Rohit Chopra to request that the agency review the nation’s three largest nationwide consumer reporting agencies (NCRAs)—Equifax, Experian and TransUnion—for possible violations of the Fair Credit Reporting Act (FCRA), including potentially failing to investigate legitimate consumer disputes. Yesterday’s letter follows Chairman Clyburn’s May 2022 letters to Equifax, Experian and TransUnion requesting information on the companies’ failures to efficiently respond to and resolve credit reporting inaccuracies raised by consumers during the pandemic.
“Information obtained by the Select Subcommittee indicates that there are longstanding problems with the NCRAs’ practices for responding to consumers who challenge credit reporting errors. These data also raise concerns about whether the NCRAs are fulfilling all of their obligations to consumers and to the Consumer Financial Protection Bureau (CFPB) under the Fair Credit Reporting Act (FCRA). Accordingly, I write to share this new evidence and request that CFPB use its supervisory authority to further investigate and address these important issues,” wrote Chairman Clyburn.
The Select Subcommittee began investigating the sufficiency of the NCRAs’ dispute investigations after CFPB found that the NCRAs’ rate of correcting or removing errors in consumer credit reports dropped dramatically during the pandemic. In 2019, around 25% of credit reporting complaints to CFPB resulted in relief. By 2021, this figure had dropped to just 4.1%. In addition to filing complaints with CFPB, the FCRA allows consumers to submit disputes directly to the NCRAs or relevant data furnishers—such as a credit card company or lender—to contest potentially flawed information. The FCRA requires NCRAs and data furnishers to investigate disputes submitted by consumers. The Select Subcommittee’s investigation found that the NCRAs may not be satisfying their FCRA obligations to investigate all legitimate disputes.
“The prevalence of credit reporting errors has been particularly concerning at a time when Americans have needed access to credit in order to weather difficult economic circumstances brought on by the pandemic. Errors in credit reports can reduce consumers’ credit scores, potentially blocking access to loans, housing, and employment, among other serious consequences,” continued Chairman Clyburn.
The Select Subcommittee found:
Consumers Dispute Credit Reporting Errors Far More Often Than Previously Known
- Consumers have been disputing information in their credit reports at a scale much greater than previously known, at least double previous CFPB estimates of disputes filed directly with the NCRAs. Data obtained by the Select Subcommittee showed that Equifax alone received nearly 14 million dispute submissions in 2021, far more than the eight million previously estimated by CFPB for the three NCRAs combined.
- The number of disputes filed with the NCRAs by consumers each year from 2019 to 2021 was also at least 22 times higher than the number of credit reporting complaints filed through CFPB each year. CFPB received a record-breaking number of complaints about the NCRAs in 2020 and 2021, including more than 619,000 in 2021 alone, but disputes are far more common than complaints.
- The Select Subcommittee determined that consumers disputed nearly 336 million items—such as names, addresses, or credit accounts—on their credit reports across the three NCRAs between 2019 and 2021.
The NCRAs Disregard Millions of Disputes Based on Speculative or Overly Broad Criteria
- The Select Subcommittee obtained evidence indicating that the NCRAs discard millions of disputes each year without investigation. At least 13.8 million dispute submissions were discarded without investigation between 2019 and 2021 alone.
- Each of the NCRAs claim that they discard disputes without investigation when they suspect unauthorized third-party involvement. The Select Subcommittee determined, however, that each of the NCRAs uses vague and speculative criteria to determine that a dispute was submitted by an unauthorized third party, such as multiple disputes using similar language or arriving in similar envelopes. Equifax disregards mail that “tends to use identical language and format [and] come from the same zip code”. Experian discards disputes based on “envelope characteristics” and “letter characteristics,” including factors such as “same/similar ink color,” “same/similar font,” and “same/similar verbiage.” TransUnion has a reference guide for disregarding disputes based on envelope-related criteria.
- While the NCRAs are not required to investigate illegitimate disputes, discarding these disputes runs contrary to the FCRA if any of them have been submitted directly by consumers or their authorized representatives. The Select Subcommittee’s findings suggest that the NCRAs could be improperly discarding millions of disputes per year, unfairly punishing consumers who take advantage of government-furnished or other publicly available support services.
- Consumers are often not experts on credit reporting and may use online resources when disputing information with the NCRAs, such as sample template letters with similar language, some of which are provided by CFPB itself. The NCRAs’ criteria can lead to disputes that have used such online resources being discarded.
The NCRAs Overly Rely on Data Furnishers to Investigate Disputes
- The Select Subcommittee obtained evidence showing that all three NCRAs referred more than half of their disputes to data furnishers for investigation. Specifically, between 2019 and 2021, Equifax referred between 61-62% of disputes to data furnishers each year, Experian referred between 54-56%, and TransUnion referred between 80-82%.
- This reliance is concerning because CFPB itself and other stakeholders have previously cited data furnishers for often conducting insufficient investigations, and the NCRAs for often accepting the data furnisher’s response without independent investigation.
The Majority of Disputes Do Not Result in Relief for Consumers
- The Select Subcommittee obtained evidence to suggest that the NCRAs may not be allocating enough staff to adequately investigate disputes. Despite each NCRA reporting a similar number of disputed items in 2021, the number of staff and staff time that each NCRA allocated to responding to disputes and CFPB complaints varied greatly.
- Ultimately, the majority of credit report disputes have not resulted in relief—i.e., correction or removal of reported errors—for consumers. From 2019 to 2021, Equifax made no changes to 53-57% of disputed items each year, Experian made no changes to around 48% each year, and TransUnion made no changes to 47-51% of disputed items in the three years reviewed.
- While some portion of disputes are likely meritless, some are not. CFPB and others have documented cases of consumers experiencing stress, frustration, and financial hardship as a result of the NCRAs’ failure to correct legitimate errors on their credit reports. Unresolved errors in credit reports can in some cases cause consumers to lose access to loans, housing, and employment.
Chairman Clyburn requested that CPFB conduct a review to determine if NCRAs are meeting their obligations under the FCRA to identify and correct errors on consumer reports and take appropriate action, if warranted.
Click here to read yesterday’s letter from Chairman Clyburn to the Consumer Financial Protection Bureau.