Five Things The Credit Bureaus Don’t Want You To Know

If your name is Judy Thomas, you live in Ohio and you have good credit, you don't want to be mixed up with Judith Kendall who lives in Utah and doesn't have good credit. Last week, Judy explained her story to a U.S. Senate Commerce Committee hearing on credit bureau mistakes. We learned at least five things that the credit bureaus don't want you to know.

If your name is Judy Thomas, you live in Ohio and you have good credit, you don’t want to be mixed up with Judith Kendall who lives in Utah and doesn’t have good credit. Worse, if you are mixed up with her, you hope you can quickly get the mistakes fixed. Unfortunately, Judy’s story of credit bureau ineptitude, recalcitrance and recidivism began in 1999 and still hasn’t ended. After we tell you some of Judy’s story, we’ll tell you five things the credit bureaus don’t want you to know and offer you some consumer tips.

In February, Judy told her story for the CBS 60 Minutes episode “40 Million Mistakes” (watch video). Steve Kroft interviewed Judy and other victims, spoke with Judy’s attorneys, Sylvia Goldsmith and Len Bennett, interviewed Ohio Attorney General Mike DeWine and even traveled to Chile, where the credit bureau Experian sends consumer disputes to die. The 60 Minutes story ran on the eve of the release of a major report by the Federal Trade Commission, which found that “one in 20 of the study participants had an error on his or her credit report that lowered the credit score to a degree that the error likely made getting credit more expensive.” Put another way, 5% of consumers had serious errors in their credit report. While the credit bureaus have been trying to read the FTC numbers a different way, that’s ten times the number of consumer problems they’ve previously admitted to.

Last week, Judy explained her story to a U.S. Senate Commerce Committee hearing on credit bureau mistakes (video and printed statements). At the hearing, we learned at least five things that the credit bureaus don’t want you to know.

First, we learned that even Senators have trouble fixing their own credit reports. “Another committee member, U.S. Sen. Bill Nelson, D-Fla., told the panel that he and his wife had been victims of an erroneous credit report that threatened to hold up their home mortgage. “If this is happening to me, what does it do to the average citizen on the street?” Nelson asked.” (St. Louis Beacon).

Our advice: Get your own credit reports here at the FTC (for free) before you apply for credit or a job, to see if they are accurate.

Second, we learned that, in 2013, over 40 years after enactment of the 1970 Fair Credit Reporting Act, the  credit bureaus are finally getting around to sharing consumer complaint details with creditors: “a new technology will go live later this year to enable nationwide credit bureaus to provide lenders with images of any validating documents submitted by consumers. According to the CFPB 44% of consumers submit a dispute in writing.” (Hearing testimony of Stuart Pratt, chief credit bureau lobbyist at page 14).

Until now, the credit bureaus have had their staff and affiliates (in Chile, India, the Philippines and other places) speed-read consumer complaint documentation, convert pages and pages of it into one single two-digit code, and send that code to the creditor’s computer for review. While the creditor’s computer may beep or burp a reply that “yes, we do have a file on a consumer with that name and that account standing,” often, no actual reinvestigation of the file for accuracy occurs. No verification is made that the file belongs to the actual consumer (Judy Thomas or Judith Kendall?) or that it is accurate. A detailed report on this system by colleagues at the National Consumer Law Center is called Automated Injustice.”

Our advice: Additional NCLC information on fixing credit bureau mistakes is here.

Third, we learned that Senators are just as unhappy as we are with the deceptive marketing of credit monitoring products. Committee chair Claire McCaskill (MO) and other Senators had strong words for both the government witnesses and Mr. Pratt over the Experian-owned website and others that tout “free” trial offers for report and score monitoring products. The catch? First, the trial offers last as little as 7 days, and you may only be able to access the products 5 of those 7 days, and if you fail to cancel properly, you will be billed up to $19.99/month or more for ongoing monitoring. Worse, in an effort to dance around new regulations on deceptive marketing, some “free” credit scores now cost $1. Senator McCaskill even held up her phone, showing that a search for free credit reports doesn’t even show the actual government-mandated free credit report site, but shows all the Experian and other so-called “free trial” websites.

Our advice: Run, don’t walk, away from and its ilk. Go to this FTC website to learn how to get your own annual free credit reports and how to fix mistakes. Get one every several months from each of the Big Three and you’ll have really free credit monitoring. Urge your Senator to support PIRG-backed legislation (S. 471, Senator Sanders(VT)) that will require annual free credit reports to include free credit scores (the new law also would require that these must be the same scores provided to lenders, not the more commonly sold “educational scores).”

Fourth, we learned that the Consumer Financial Protection Bureau is using its new tools to look inside credit bureau black box operations: “for the first time a federal agency has the tools to examine and understand how well all parts of the credit reporting system are working—including both the sources of credit information and credit reporting companies themselves.” (Hearing testimony of Corey Stone, CFPB assistant director for Financial Markets). Unfortunately, the FTC was never given similar tools. Since 1970, the FTC has gone up against the credit bureaus with both hands tied behind its back (previous blog).

Our advice: Take advantage of the CFPB’s “tell your story” and complaint tools if you have a problem with a credit bureau.

Fifth, we learned of other areas “where Congressional action is necessary to ensure our nation’s credit reporting system works fairly for consumers and the general marketplace.” (Hearing testimony of Ira Rheingold, Director, National Association of Consumer Advocates.)

  • Remove Paid Medical Debt From Reports: Millions of Americans have their credit reports damaged by medical debt, even when the debt is the result of insurance disputes or billing errors by providers, or is ultimately settled or paid off. U.S. PIRG strongly support S. 160, the Medical Debt Responsibility Act (Merkley (OR)), which would remove paid or settled medical debts from credit reports.
  • Limit Employment Use of Reports: U.S PIRG urges Congress to restrict the use of credit reports in employment to only those positions for which it is truly warranted, such as those requiring a national security clearance. A companion to HR 645, the Equal Employment for All Act, by Rep. Steve Cohen, is expected in the Senate soon.

Our advice: Urge your Representative and Senators to support these proposals.

Since 1989, U.S. PIRG has published reports, testified and urged reform of the credit bureaus. The Big Three credit bureaus (Experian, TransUnion and Equifax) function as powerful gatekeepers to financial and employment opportunity. Other specialty credit bureaus play an important role in determining who gets car insurance or health insurance or who can open a bank account or rent an apartment or what they pay.



Ed Mierzwinski

Senior Director, Federal Consumer Program, PIRG

Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.

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