60 Minutes: Dispute Processes At Credit Reporting Agencies Fail To Fix Errors in Consumers' Credit Reports
Recently, the 60 Minutes television news magazine reported about the credit reporting industry. The report focused on problems with the dispute process: failures by the largest three credit reporting agencies to correct errors reported by consumers on their credit reports.
Basically, one out of every five Americans has an error on their credit report. That is a massive amount of credit reports with errors, since the companies archive credit reports for about 200 million Americans and since each person has at least three credit reports (e.g., one report each at Equifax, Experian, and TransUnion, plus regional credit reporting agencies). That is an unacceptably high error rate.
Few other businesses would remain operating with such a high error rate. Think of it this way: if one out of every five airplane passenger was killed or injured during a crash, then that airline would be out of business. At a minimum, the public wold demand changes and accountability. If one out of every five credit card purchases were incorrect or lost, that bank would be out of business. And, consumers would demand changes and accountability. But somehow, credit reporting agencies remain in business despite high error rates. If you made an error in one out of five projects at your job, your employer would likely suspend or fire you.
If you are unfamiliar with what credit reporting agencies do, here's what you need to know. The banks and lenders you already have loans or credit accounts with, provide your history to the credit reporting agencies about your loans, payments you've made (or failed to make), outstanding loan balances, and the associated dates. When a loan is paid off, your credit report should indicate that. Like social networking websites, you are the product since credit reporting agencies make money by selling your credit reports to potential lenders (e.g., banks, retail stores, phone companies, educational loan companies), both when you apply for credit and when potential lenders request credit reports in order to send out offers via e-mail or snail mail.
Credit reporting agencies also make money by selling to consumers both credit scores and credit monitoring services, whose monthly fees can be as high as $18. 60 Minutes reported that these credit monitoring services don't provide consumers with the exact same credit reports that the credit reporting agencies sell to potential lenders. I'd like to hear more about that.
Your credit report is the basis of future lending decisions made by potential lenders. A bad or inaccurate report will affect and lower your credit score, the overall number used to indicate your credit worthiness. A low credit score can cost you money: denied credit applications, or approved loans but with a far higher interest rate. Bad reports can include valid late or non-payments on your loans. The errors in credit reports can include another person's data co-mingled with yours (obviously, that should never happen), a dead person's data co-mingled with yours, or a credit report that doesn't accurately reflect a loan you truly paid off on time and/or in full.
The $4 billion credit reporting industry is dominated by three huge companies: Equifax, Experian, and TransUnion. What 60 Minutes didn't mention is that credit reporting agencies regularly do business with data brokers, such as Acxiom, to buy and sell your personal information. Credit reporting agencies experience data breaches, just like other companies.
The reality is that information in your credit report is transmitted around the globe, since much of the credit report maintenance and customer service operations are outsourced to firms in other countries (e.g., Argentina, Brazil, Canada, Chili, Costa Rica, El Salvadore, Honduras, India, Ireland, Jamaica, Peru, Portugal, Spain, United Kingdom, Uruguay). The work is often performed by low-wage workers. Readers of this blog are already know this, since this blog reported a 4-part series in 2008 about offshore outsourcing within the industry. The 60 Minutes reporter interviewed several former credit reporting agency workers in Chile, who admitted that they really didn't have any way to investigate errors, and were directed to simply assign number codes to error disputes submitted by consumers, and then rubber-stamp inputs from lenders; regardless of whether that input was correct or incorrect.
If this makes you mad, it should. The 60 Minutes report included concerns by the Attorney General for the state of Ohio, Mike DeWine. He is concerned that the credit reporting agencies don't fix mistakes in consumers' credit report, that the high error rates are the industry's fault (and not the banks'), and that the industry violates the Fair Credit Reporting Act (FCRA). While the industry claims that it adequately protects the credit reports of children, DeWine's office has taken action to check the accuracy of the credit reports of youth in the state's foster care system.
60 Minutes reported that some consumers have sued credit reporting agencies to get a resolution and errors fixed. Consumers shouldn't have to go to that extreme to resolve errors in their credit reports. Perhaps, some enterprising class-action attorney will take up the challenge.
Want to learn more? Read:
- Equifax And Its Customers To Pay $1.6 Million In FTC Settlement About Alleged Improper List Sales
- FTC Survey: The Good And Bad Experiences Of Identity-Theft Victims With Consumer Reporting Agencies
- Data Breach At Experian Credit Reporting Service
- Ohio Attorney General helps foster youth with credit report errors
- How to dispute errors in your credit reports (video)
- The website with truly free credit reports for consumers