The Consumer Financial Protection Bureau slammed the nation’s credit reporting bureaus over their handling of complaints in a report that could serve as a precursor to stricter oversight of the industry.
The CFPB said that Equifax, Experian and TransUnion often fail to help consumers resolve issues or to give them adequate responses. The consumer agency received more than 700,000 complaints about Equifax, Experian and TransUnion between January 2020 and September 2021, accounting for more than half of all the consumer complaints submitted to the CFPB during that period, according to the report.
The report said consumers are often “caught in an automated system” that fails to fix incomplete or inaccurate information on their credit reports, and that their issues are getting solved far less often than in the past, ultimately hurting their credit scores and making it more expensive for them to borrow.
“America’s credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors,” CFPB Director Rohit Chopra said in a
The report provides the agency a “starting point” to bring enforcement actions and regulatory changes to the credit reporting industry, said Jaret Seiberg, an analyst at the Cowen Washington Research Group.
Such moves could include new CFPB rules on how the companies resolve errors, including the possibility that they will be required to treat any debt under dispute as an error until they can show it is legitimate, Seiberg wrote in a note to clients. The latter change could lead to “consumers flooding the bureaus with demands for corrections,” he warned.
The CFPB
In its latest analysis, the CFPB said the credit bureaus often ignore complaints when they think a third-party credit-repair company is involved, or they forward complaints to their general dispute channels, where the CFPB is less able to track results.
Those two factors appeared to be major contributors behind a sharp drop in the percentage of complaints that the companies reported led to relief for consumers. That metric fell to less than 2% of cases in 2021 from 25% in 2019, according to the report.
The templates that the credit bureaus use to respond to complaints in some situations do not meet the CFPB's expectations, and they "raise serious questions” about whether the companies “are unable — or unwilling — to comply with the law," the CFPB said in its report.
Chopra, who was sworn in as CFPB director last October, has been an outspoken critic of the credit reporting industry.
“In markets like credit reporting,” he said in written testimony to the House Financial Services Committee last fall, “consumers are not the customer and lack the leverage to get problems fixed in a timely manner. The inability to cut through red tape and get help in one’s financial life can be a major obstacle when seeking a job or when applying for credit.”
The scant relief that Equifax, Experian and TransUnion provided last year in response to complaints referred from their regulator underlines that it is “way past time for reform,” Chi Chi Wu, staff attorney at National Consumer Law Center, said Thursday in a press release.
“What other industry would dare refuse to provide meaningful relief in 98% of the consumer complaints referred to them by their supervisor?” Wu said. “This level of impunity against its own regulator must be met with swift, assertive, and uncompromising action that fundamentally reforms the credit bureaus in a deep, structural manner.”
The Consumer Data Industry Association, a trade group whose members include Equifax, Experian and TransUnion, said it is reviewing the CFPB report in detail.
“We agree that responding to legitimate consumer complaints and getting credit reports right are paramount,” spokesman Justin Hakes said in a statement sent on behalf of the three companies. “As the CFPB notes, credit reporting plays a critical role in consumers’ lives. That’s why we are committed to expanding credit access to all consumers.”
Hakes noted that the CFPB acknowledged that certain credit-repair companies have become more prominent, which he said “can inflate complaint numbers and undermine the process of addressing legitimate requests.”
Last year the trade group’s CEO, Francis Creighton, blamed “predatory” credit-repair companies for the rise in complaints.
Hakes said Thursday that the Consumer Data Industry Association is committed to continuing to work with the Federal Trade Commission and the CFPB “to protect consumers against these harmful and abusive tactics.”
