There’s no doubt that it is vital to keep your credit bureau data current. Good hygiene suggests that you review your credit report frequently, using the centralized site at www.annualcreditreport.com. And, if you find an error, use the existing process to dispute an item. I’ve seen the process work well and frankly never experienced an issue with the few mistakes I’ve found. Having a regular cadence is essential – that way, if you want to apply for credit, you have the opportunity to be in front of the issue.
This year, bureau accuracy is a top CFPB issue, as evidenced by the recent Annual Report of Credit and Consumer Reporting Complaints. A follow-up blog mentions that the Report illustrates how the big three credit reporting companies give consumers the runaround.
The Report revealed that the NCRAs had relied mainly on vague, unhelpful form letters in response to consumer complaints filed with the CFPB. This practice, which surged in 2020, left families and communities vulnerable at the height of an unprecedented global pandemic and economic crisis, all while the NCRAs made more than a billion dollars in profits selling consumer data. That is unacceptable.
By April 2020, the NCRAs responded to more than half of the complaints submitted by consumers against them with form letters. The NCRAs stated that they would take no further action in these form letters because they suspected that third parties had submitted complaints without consumers’ authorization. As the CFPB’s Report clarifies, however, the NCRAs rely on faulty, speculative criteria to decide not to respond to consumers’ complaints.
There’s no doubt that credit reporting disputes impact consumers. Using a fraction of the number of bureau updates that CFPB mentions, which “cover more than 1.6 billion credit accounts for over 200 million adults every month,” is a large universe.
But the inverse of the issue is also important. Shouldn’t there also be tracking of spurious dispute items? Credit Reporting Agencies (CRA) must flush out dubious claims when people file unfounded disputes. This sometimes happens when consumers use credit repair firms that promise to “remove negative items from your credit score today.”
Investopedia estimates that consumers pay lots of money for those services.
Credit repair doesn’t cost anything if you handle the process yourself. However, if you hire a credit repair company to assist you, you’ll typically pay fees of $19 to $149 per month.
There is nothing a credit repair company can do for you that you can’t do for yourself. Unfortunately, there are also scam artists posing as legitimate credit repair businesses.
Only inaccurate information can be removed from your credit reports. You can find step-by-step instructions for disputing errors on the three major credit bureaus’ websites.
But even the CFPB knows the credit repair business is fraught with firms that make money on desperate people.
In addition to CFPB’s focus on credit bureau accuracy, there should probably be a study on abuses to the credit reporting dispute process. For example, was the consumer duped by a credit repair agency into paying unnecessary fees? Is the consumer gaming the system using something like the “saturation technique?”
There’s no question that consumers deserve accurate credit reports. But do regulators understand how dubious claims clog workflows? Are companies making money by accelerating disputes in the interest of circumventing reporting facts?
And to what extent should regulators hold businesses accountable when government agencies do not do much better than private businesses? The Washington Post mentioned last year that the IRS “has a backlog of 29 million tax returns it’s holding for manual processing, according to the national taxpayer advocate.” Also, the Post reports:
So far this tax season, only about 1 out of every 50 calls have gotten through to an IRS customer service representative on the agency’s 1040 toll-free line (800-829-1040), according to Erin M. Collins, the national taxpayer advocate for the independent Taxpayer Advocate Service, an organization within the IRS that helps taxpayers resolve issues with the agency.
Indeed, the credit reporting issue needs to be pristine, but hopefully, CFPB filters all the root causes, including consumer abuse. Keep an eye on volumes. Even the IRS sweats that one.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
