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Published: January 2009
Reasons you can’t get your credit report fixed
A noted national consumer law organization releases a report documenting the abysmal quality of the credit report dispute system provided for by law to protect consumers from errors in their credit reports.
The National Consumer Law Center (NCLC) has issued an important new report on the credit reporting industry's failure to handle errors in credit reports. While consumer advocates have long realized the problems that plague the system that gives consumers the legal right to correct errors in their credit reports, the NCLC report provides important documentation. (Click here to read the report in PDF format.)
The NCLC report, titled "Automated Justice," details how inaccuracies and errors continue to compromise the credit reporting systems, with estimates of serious errors ranging from 3% to 25%. The errors mean that 6 million Americans (or more) face serious errors in their reports that could result in a denial of credit.
The NCLC points out that typical errors include:
- Credit bureaus mixing the files and identities of consumers.
- Creditors causing mistakes by attributing a debt to the wrong consumer or incorrectly recording payment histories.
- The fallout caused by identity theft.
Forty years ago, Congress enacted the Fair Credit Reporting Act to protect consumers from errors in credit reporting. One of the most important safeguards in the FCRA is the requirement that credit bureaus conduct a reasonable investigation when consumers dispute inaccuracies in their credit files. Unfortunately, the FCRA dispute process has become a travesty of justice, with major credit bureaus (Equifax, Experian, and TransUnion) conducting investigations in an automated and perfunctory manner.
NCLC points out how the bureaus:
- Translate the detailed written disputes submitted by desperate consumers into two or three digit codes.
- Fail to send supporting documentation to creditors and other information providers (furnishers) as required by the FCRA.
- Limit the role of their employees who handle disputes, or of the foreign workers employed by their offshore vendors, to little more than selecting these two or three digit codes. Workers do not examine documents, contact consumers by phone or email, or exercise any form of human discretion in resolving a dispute.
Furnishers, the companies that provide data about their customers' use of credit to the bureaus, are just as bad, according to the NCLC report. While the law is clear that furnishers are responsible for correcting inaccurate information, some furnishers continue to conduct meaningless, non-substantive investigations. The NCLC charges that furnishers' “investigative” activity consists of nothing more than comparing the notice of dispute with the information that is itself under dispute, and the credit bureaus just rubber-stamp whatever the furnishers decide in resolving the dispute.
The NCLC believes that credit bureaus have little economic incentive to conduct proper disputes or improve their investigations because consumers are not the paying customers for credit bureaus – furnishers are the ones who pay the bureaus’ bills.
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