By now we know that credit reporting agencies are notoriously difficult to work with when it comes to fixing errors on one’s credit report. While legislators and consumers groups have long called upon credit reporting agencies to provide better service to disputing customers, little has been done to actually affect change. Now, advocates with Consumers Union are putting the spotlight on how devastating these errors can be for consumers and urging federal regulators to act immediately.
Consumers Union, the advocacy arm of Consumer Reports and colleagues to Consumerist, sent a letter [PDF] Wednesday to the Consumer Financial Protection Bureau detailing problems with credit reports and credit scores, including the challenges consumers face in correcting errors on their reports.
Even small credit reporting errors have been found to have long-lasting negative effects on consumers – and the economy at large. In January, a study from the National Consumer Law Center found that poor credit reports can start a vicious, often devastating economic cycle.
Credit reports and credit scores are often used by bankers, lenders, and others to determine a consumers’ creditworthiness and the rates they will pay for services. Today, the scores and reports are even used to determine a consumer’s employability.
In the letter, Pamela Banks, CU’s senior policy counsel, praises the CFPB for their work in making the credit reporting industry and furnishers more accountable for accurate and fair credit reports, but goes on to reveal that recent surveys have shown more could be done.
“Credit report errors are far too common and consumers are paying a high price for scores that are likely not used in the marketplace,” Banks wrote.
A recent survey conducted by the Consumer Reports National Research Center found troubling results related to the frequency with which consumers request credit reports and credit scores, their expectation and satisfaction regarding this information, and any errors they encounter with their reports.
According to the survey, only about half of consumers are requesting their credit reports, and of those who do, nearly one-third found errors in the data.
Of the consumers with errors, more than one-in-three say they were never able to get the errors corrected to their satisfaction.
Additionally, 58% of Americans who reported trying to resolve errors ran into challenges such as being ignored, confused, rejected or lied to by credit reporting agencies or data furnishers.
Banks says the survey findings, which appear in an upcoming Consumer Reports article, are consistent the same issues consumers have reported to CU in the past.
While CU doesn’t provide any recommendations to the CFPB regarding improvements to credit reporting rules, the group does offer to work with the regulator in the future on such issues.
Still, it appears that the CFPB is already taking steps to improve the accuracy of consumers’ credit reports. Just today, the agency announced that it would put into place new requirements for credit reporting agencies and data furnishers when it comes to medical debt.
Because medical debts are often the result of unpredictable and costly events such as accidents and sudden illnesses, the CFPB believes they should be weighed differently from non-medical debts. After all, people choose to go into debt buying stuff they can’t afford, but they rarely choose to get an appendicitis that will end up costing them more than a luxury sports car.
Often the CFPB has found that consumers do not even know they owe medical debt until they get a call from the collections agency or they discover it on their credit report.
This occurs because in many cases if a medical bill goes unpaid after a certain amount of time, the medical provider may hand over the account to a third-party debt collector. And the majority of those collections items that end up on consumers’ credit reports are furnished to the credit reporting agencies by third-party debt collectors.
To combat issues the CFPB will now require major credit reporting companies to provide regular accuracy reports to the Bureau as part of ongoing examinations, officials with the agency believe consumers’ credit reports will improve.
Consumers Union puts spotlight on problems with credit reports, credit scores in letter to CFPB [Consumers Union]
by Ashlee Kieler via Consumerist
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