When it comes to hard-to-fix credit report errors, not even U.S. senators are immune.
At a Senate hearing held Tuesday to discuss the country’s controversial credit reporting system, three Democratic senators sitting on the panel, Sen. Claire McCaskill of Missouri, Sen. Brian Schatz of Hawaii and Sen. Bill Nelson of Florida, confessed that they, too, had found errors on their credit reports.
In all three cases, the errors were caused by other consumers’ credit information getting mixed up with theirs. In Nelson’s case, the error held up two separate mortgages, and it took him at least two tries to get the error cleared from his reports.
“When I was going to do some refinancing a couple of years ago on a home, I suddenly found that I had purchased a refrigerator in Wisconsin and hadn’t paid on it for over a year,” Nelson said during the hearing. “Well, of course, that held up the financial transaction and we got it all straightened out. But it took some haranguing to get it,” he says.
A year later, the senator tried to apply for another mortgage, but soon found that his score was being dragged down by the same error that he thought he had successfully disputed. “One of the three credit reporting agencies, they never had taken it off,” he said.
Nelson was eventually able to get the error resolved, but the experience stuck with him. “If this is happening to me, what is it doing to the average citizen out there on the street who doesn’t know how to go about straightening out something like this?” asked Nelson.
An ongoing problem
It’s been fewer than eight months since the Consumer Financial Protection Bureau (CFPB) formally began overseeing credit reporting agencies and seven months since the agency began accepting complaints.
Since then, the big three credit reporting agencies — Experian, Equifax and TransUnion — have come under heavy fire on Capitol Hill for their mechanized credit report dispute systems, which crunch consumers’ complaints into three-digit codes and ignore consumers’ evidence.
So far, both the CFPB and the credit bureaus have taken a number of steps to help resolve the problem. The CFPB, for example, forwards consumers’ complaints to the company in question and pushes for the errors to get fixed. “As of the end of April, we’ve received over 10,000 credit reporting complaints, and we’ve obtained resolutions on most of those,” said the CFPB’s Corey Stone at Tuesday’s hearing.
The Consumer Data Industry Association (CDIA), meanwhile, is working on improving the bureaus’ automated dispute system, known as e-Oscar, so that whatever evidence consumers supply with their dispute can be scanned by the credit bureaus and sent to the lender that is furnishing the misinformation. (The new technology is expected to launch by the end of the year, said CDIA spokesman Stuart Pratt.)
Despite the steps that are being taken to improve the system, however, it was clear on Tuesday that at least four of the five senators who attended the hearings and aggressively questioned the panelists (including Sen. Amy Klobuchar, of Minnesota) still aren’t satisfied.
“This is a system that consumers are captured by,” said an angry Sen. McCaskill to the CDIA’s Stuart Pratt. “They have no choices here. And once they’re captured with bad information, it costs them money,” said McCaskill, adding: “The consumers aren’t in a position individually to fight you.”
What else needs to be done to fix consumers’ complaints, however, was less than clear, even to the senators. Some pushed for monetary penalties against the credit reporting agencies so the agencies would have a financial incentive to clean up their act.
Others questioned why the agencies use just seven out of nine digits of a consumer’s Social Security number to match them to a file.
Several senators also advocated for a free score to be included with consumers’ annual reports. A bill was introduced in March that would require it so consumers at least have an idea of where they stand.
However, even that was met with resistance from some in the room who noted so many scores with different algorithms exist, it would be tough to choose just one. “Consumers need to understand you do not have one credit score,” said J. Howard Beales, a business professor at the George Washington University. “You have hundreds of credit scores.”
As the panelists debated the practical implications of so many different scores, Sen. McCaskill lamented how baffling the whole system was. “So much of this is so daunting and confusing to the consumer,” remarked McCaskill.
No kidding. If U.S. lawmakers are struggling to understand the country’s labyrinthine — and mostly opaque — credit reporting and credit scoring systems, how is the average consumer supposed to make sense of it?