CONSUMER CREDIT REPORTS ARE OFTEN FALSE
People often do not know what information is being reported about them by credit reporting agencies. Unfortunately, the information published in credit reports is often false.
A study sponsored by the Consumer's Union found that almost half of the credit reports examined contained at least one error and many contained multiple errors. Approximately twenty per cent (20%) of these errors were considered substantial enough to adversely affect the subject's application for credit, housing or employment.
Another study found that forty-three percent of the credit reports from Equifax, TransUnion and Experian (formerly known as TRW) contained errors including inaccurate or incomplete credit information, mismerged files, discrepancies among the three bureaus' reports on the same consumer, and erroneous public record information. Of the nine million people who reviewed their credit reports from these agencies in 1988, three million had errors investigated and corrected. Unfortunately, the credit reporting agencies all too frequently fail to independently investigate meritorious consumer disputes and even stubbornly refuse to correct consumer credit reports even after conclusive evidence has been furnished to them. This arrogance can ruin or at least injure people's financial security.
These credit reports are often used for important purposes including: (1) determining whether the consumer is eligible for credit; (2) insurance underwriting (eligibility and rates); and (3) pre-employment or post-employment screening.
Consumers have a right to know what is in their credit report. Consumers may request that the credit reporting agency disclose the contents of the report at any time.
Usually, the credit reporting agencies charge a fee for providing the consumer a copy of their credit report. The Fair Credit Reporting Act ("FCRA") prohibits the credit reporting agencies from charging for the report if: (1) it is requested because the credit reporting agency provided information to a potential lender that took an adverse action against the consumer based information contained in a credit report if the consumer makes the request within sixty days of receiving the notice of the adverse action; (2) the consumer believes the information in the report is inaccurate because of fraud; (3) the consumer is unemployed and seeking employment; or (4) the consumer is a recipient of public welfare.
The three largest credit reporting agencies are:
Equifax
Experian
Transunion
These links contain the contact information to obtain your consumer (credit) report.
I highly recommend that all consumers obtain a copy of each of their credit reports once a year and review them for:
(1) incorrect information; and (2) invasions of privacy (i.e., unauthorized, illegal access).
CREDIT REPORTING AGENCIES AND THE COMPANIES THAT FURNISH FALSE INFORMATION TO THE AGENCIES MAY BE LIABLE FOR FALSE OR MISLEADING INFORMATION
Too often, furnishers of information provide false information concerning consumers to the credit reporting agencies. For example, victims of identity theft often feel that the credit reporting agencies and creditors who were defrauded are willfully ruining their lives while the reporting agencies accept the creditor's "explanation", no matter how superficial or incredible, while refusing to investigate the consumer's complaint themselves. In fact, the credit reporting agencies routinely refuse to carry out their duty to conduct a good faith, independent investigation. Fortunately for consumers, it is often possible to prosecute a civil action against the credit reporting agencies and the companies that furnish the false information.
The consumer reporting agencies are large, highly profitable corporations. Unfortunately for consumers, the consumer reporting agencies are responsive to the demands of their lender constituency. That's who pays them most of their revenues. These lenders have little incentive to provide consumer reporting agencies correct information. Many creditors willfully misrepresent information or even knowingly lie to consumer reporting agencies by continuing to provide incorrect information or verifying that it should appear on a particular consumer's report. The consumer reporting agencies ignore these problems.
A small but important number of consumers have fallen victim to "identity theft". An imposter opens credit accounts usually by using the identity (Social Security Number and name) of a person who has good credit. The imposter directs the creditor to send the statements to an address set up by the imposter. All to often, the creditor doesn't bother to verify that the borrower opened the account or even moved. The creditor has made a cost benefit decision --- implementing anti-fraud measures would probably cost more than it would save the creditor. Unfortunately, the creditor continues to evaluate each step based on the economic cost and routinely fail to correct the problems that its lack of prudent lending practices invited.
Eventually, the victim of the identity theft discovers that someone has stolen their identity and misappropriated it. The identity theft victim should dispute the fraudulent entries with both the creditor and the consumer reporting agency by sending a letter and accompanying documents via certified mail. Many consumers wisely chose to obtain assistance from an attorney at this point.
When the consumer reporting agency receives the consumer's dispute, the consumer reporting agency has thirty days to respond to the dispute although the consumer reporting agency is allowed a one-time extension of up to fifteen days. The consumer reporting agencies routinely fail to send the documents to the creditor and seldom bother to independently investigate the consumer's dispute. The consumer reporting agencies routinely read the consumer's letter, assign it a dispute code, and then send the creditor an e-mail notifying the creditor that the consumer disputes owing the account based on the dispute code. The data processing operators who "investigate" the consumer disputes routinely process dozens (often over 40) of these complaints per hour. Amazingly, the consumer reporting agencies investigation procedures do not provide for sending the documents or even the consumer's dispute letter to the creditor.
The creditors who furnish the disputed information must promptly investigate the consumer's dispute. Unfortunately many creditors routinely investigate the consumer's dispute only by reviewing their records to verify that their records contain the disputed information. Therefore, no matter how amateurish or obvious the identity theft or mistake was, the creditor is unlikely to admit to it. Instead, the creditors often send an e-mail to the credit reporting agency confirming that their records contain the disputed information.
The consumer reporting agencies routinely accept the creditor's statement that the consumer report contains the same information as the creditors files contain as acceptable resolution of the consumer's dispute. The consumer reporting agencies then proceed to send the consumer a letter notifying them that their dispute has been resolved in favor of the creditor. No one from the consumer reporting agency or the creditor ever independently investigated the dispute nonetheless even bothered to call the consumer.
These sham investigations save the consumer reporting agencies and their lender clients the expenses that they would incur if they were to instead implement adequate procedures. Unfortunately, these same procedures often destroy the consumer's credit rating which represent a life time of work and dedication. In other cases, the consumers become victims of corporate extortion.
The creditors who were also victimized by the identity theft often continue to pressure the consumer to pay the debt even if the creditor understands that the consumer has a bona fide dispute. Some consumers attempt to pay the fraudulent claim. Most can not afford to do so.
Even if the creditor does not successfully extort payment of the fraudulent claim from the victimized consumer, the creditor (or the industry as a whole) benefit by forcing the innocent consumer into high interest credit cards or loans that the consumer would not be required to pay if the consumer's credit report was accurate. This is increasingly problematic as lenders consolidate, compete less, and phase out experienced personnel who can manually "rescore" the consumer's credit (often by reviewing the documents that the consumer reporting agency and creditors ignored).
In too many ways, identity theft victims are constantly confronted with "heads I win; tails you lose". The tables often turn, however, after the consumer files a civil action for damages. The credit reporting agencies' practices are often grossly inadequate. Although they will vigorously defend their conduct, jurors can see through their conduct.
I represent consumers against the "big three" credit reporting agencies and furnishers of information for providing false credit reports about consumers. Typically, my clients are victims of identity theft or their credit reports contain information that concerns another person (e.g., another person with a similar name, Social Security Number, etc.) which the credit reporting agency improperly "merged" or included in the consumer's file.
CONSUMERS CAN COMBAT INVASION OF PRIVACY
With certain exceptions, it is illegal for anyone to obtain a consumer's credit report without obtaining the consumer's prior, written permission. My staff and I often review consumers' credit reports and find that many of our clients have been subjected to having their privacy invaded and did not discover this until they checked their credit report.
I represent consumers against companies who illegally obtain access to their credit report. My staff and I hope that by bringing representing these consumers, their illegal practices will become unprofitable and, eventually, rarely occur.
Unauthorized "pulls" damage consumers because they often lower the consumer's credit rating under many "scoring" systems. Therefore, each unauthorized pull impairs the consumer's ability to borrow money or increases the rates that the lenders charge the consumer. Moreover, many lenders illegally obtain consumers' credit reports then use the information that they illegally obtained to target the consumer for predatory or usurious loans.
The vast majority of the "pulls" that I have observed are authorized. Unfortunately, a substantial number of lenders pull these credit reports without having an authorized purpose for doing so. This violates the lenders' subscription agreements with the consumer reporting agencies but the consumer reporting agencies refuse to take any action against these renegade lenders. In fact, the consumer reporting agencies continue to generate fees from large volumes of requests for so called "account reviews" (which usually include the consumer's score or similar indices) without reviewing the consumer's report to verify whether the consumer actually has an open account with the lender. Fortunately, consumers can combat this unholy alliance, although on a case by case basis.
Consumers who discover that third parties have obtained their credit report without their permission and without an exception allowed under the Fair Credit Reporting Act, may bring a civil action for damages. Consumers who prevail may receive actual damages and also often receive substantial punitive damages.
Congress intended for consumers to be able to protect their financial privacy by bringing a civil action against the offending lender. It is not necessary for the consumer to prove actual damages (i.e., that the unauthorized pulls damaged the consumer's credit). Congress correctly presumed that consumers suffer at least some damage and that there is no justification or excuse for invading a consumer's privacy in this manner. It is, however, predatory. These renegade lenders will continue to illegally access credit reports until juries force them to disgorge enough of their ill gotten profits so that their illegal practices cease to be profitable.
If the consumer cannot prove actual damages, the law specifically provides that the consumer shall receive statutory damages and allows the consumer to receive punitive damages. The federal law also provides that prevailing consumers are entitled to recover their attorney's fees and costs.
Many of consumers frequently receive unsolicited applications for credit, especially credit cards at "teaser" rates. These third parties often obtained information about the consumer, including the consumer's name and address from an affiliate of one of the credit reporting agencies. The consumer credit reporting agencies often sell "prequalified" lists to lenders who request mailing lists of persons who own a home, use other credit cards, etc. Amazingly, many of these third parties obtain the consumer's credit score under the pretext that they are "offering" credit to a consumer that hasn't even applied for credit. Colleagues are representing consumers who are seeking damages arising from this outrageous abuse of consumer privacy. Currently, this issue is before at least one federal appellate court.
Until the courts reiterate that the Fair Credit Reporting Act prohibits third parties who do not have an existing credit relationship or permission to access the consumer's credit report, the credit card industry will continue to abuse consumers' rights to privacy for their pecuniary gain.
One method to deter unauthorized access to consumer credit reports is for the consumer to call or send a letter to each of the major consumer credit reporting agencies a letter requesting that the credit reporting agency exclude the consumer's name from the prescreening lists. It is extremely important, even if the consumer sends a letter requesting to be excluded from the prescreening lists, that the consumer also complete, sign and return the "opt out" form provided by the consumer credit reporting agency.
If the consumer simply writes a letter requesting to be excluded from prescreening lists, the consumer credit reporting agency will honor the request for only two years. If the consumer properly executes the "opt out" form, the consumer credit reporting agency should honor the consumer's request for an unlimited period of time. Obviously, the consumer should retain a copy of the completed "opt out" form and send the original to the credit reporting agencies via certified mail with return receipt requested.
CREDIT REPAIR SCAMS
Consumers should avoid "credit-repair" clinics. Some credit repair clinics claim to know about secret techniques. Many promise to eliminate truthful information from the consumer's credit report. Truthful information typically reappears within a few months. Some credit repair clinics even encourage consumers to engage in fraudulent or even criminal conduct by encouraging consumers to initiate a new file with a new address and federal identification number. Consumers who have bona fide disputes would be very short sighted to resort to fraud in a misguided attempt to "repair" their credit.
There aren't any special tricks that these credit repair clinics know. Furthermore, we have found that many consumers can clean up their credit reports themselves, especially if the credit report contains only a few errors. Self-help tends to be most successful when there are few incorrect items and the falsity is shown on the face of the documents created by the company that furnished the false information. But, if the debt has not been paid, as is typical when third parties use false identity to incur debts in the consumer's name, neither the furnisher or the credit reporting agency have sufficient incentive to investigate the dispute until the consumer initiates suit.
Far too often, the credit reporting agency fails to investigate the consumer's dispute and simply turns over the so-called investigation to the defrauded creditor. The defrauded creditor, in turn, conducts only a pretextual investigation and finds almost any excuse imaginable to "confirm" that the consumer owes the debt. The defrauded creditor then reports the results of its "investigation" to the consumer credit reporting agency. The consumer credit reporting agency, in turn, sends a letter to the consumer whose identity has been stolen claiming that the consumer credit reporting agency made an inquiry to the creditor and that the defrauded creditor confirmed that the debt is valid. In other words, the consumer credit reporting agencies imply that they can satisfy their duty to investigate disputed consumer reports by willy nilly delegating their responsibilities to defrauded creditors who have a financial incentive to continue to exert pressure on the defrauded consumer in order to attempt to collect the debt regardless of whether the consumer really owes it. Consumers who are the victims of identity theft and similar problems should seek experienced counsel as soon as possible.
Victims of identity theft and mismerged credit files find that the credit reporting agencies and the companies that furnish the information seldom, if ever, conduct a good faith investigation until after the victim consumer has filed suit. Credit reporting agencies purport to rely on the information supplied by the furnisher of information (e.g., the defrauded credit card company) and repeatedly refuse to conduct an independent, good faith reinvestigation. Consumers who have been defrauded by identity theft should retain experienced counsel who is prepared to file suit.
HOW TO DISPUTE AN INACCURATE CREDIT REPORT
Consumers should write to the credit reporting agencies describing their errors in detail. The letters should provide the consumer's complete name and address. It should also clearly identify each item that the consumer disputes, the facts and explain why the consumer disputes the information on the report. Of course, consumers should send these letters via certified mail return receipt requested and retain a copy of the letter for their files. The consumer should also send a certified letter to the company that furnished the false information.
The consumer's dispute letter should be as polite and succinct as possible. Remember, if the consumer's attempts to resolve the false information fail, the consumer may need to retain counsel to sue the credit reporting agencies; rude or impolite letters seldom make a favorable impression on a jury.
If available, the consumer should attach copies (never the originals) of documents that support the consumer's position (e.g., statements, receipts, cancelled checks).
The letters should ask the credit reporting agency (or furnisher of information) to investigate their errors as soon as possible. It's also recommended to ask the addressee to send a corrected report to anyone who requested the consumer's report within the past six months for credit purposes and during the past two years if made for employment purposes.
If you would prefer to have an attorney assist you during in preparing bona fide disputes concerning your consumer (credit) report, I am available to do so.
In many (probably most) cases, the consumer reporting agency will not correct errors
no matter how obvious or detrimental. Therefore, in many cases, I have not become involved until after the consumer has unsuccessfully contested the disputed item(s) with the credit reporting agencies.