The credit reporting industry was supposed to have cleaned up its act by now.
Thanks to the Consumer Financial Protection Bureau (CFPB) and aggressive state attorneys generals, the industry has made a number of promising changes in recent years. They include updating its dispute system so that it accepts and forwards evidence, improving procedures for investigating consumer complaints and establishing a 180-day waiting period before overdue medical debt is reported.
However, according to an August 25 report from the CFPB, credit reports continue to be a major headache for consumers — and complaints about the industry are surging, despite the industry’s efforts to improve.
According to the document, the number of credit reporting complaints the CFPB received this summer jumped by roughly 45 percent compared to the previous year. Month-over-month, the increase was even steeper: Complaints rose by an eye-popping 56 percent between June 2015 and July 2015.
The CFPB didn’t speculate on why the number of complaints increased so sharply. But it did say that the vast majority — around 77 percent — are gripes about credit report accuracy. Often, the complaints centered on questionable debt collection marks or about debts consumers insisted were already paid, according to the report. Consumers also complained about debt that’s too old to be reported or that belonged to someone else.
In addition, a substantial number of people complained about the credit report dispute process, which has come under intense scrutiny in recent years over its cursory investigations of consumer complaints. Around 9 percent of complaints received were about the industry’s investigation process. Identity theft victims, in particular, reported having significant trouble getting mistaken information off their reports. “Victims of identity theft often encounter difficulty correcting inaccuracies in their reports with both the lenders and the credit reporting companies,” according to the CFPB.
Many consumers also had a hard time accessing their credit reports because they couldn’t pass the bureaus’ online identity verification tests. People can get around the tests by mailing a credit report request instead, but many resist using snail mail because it’s so inconvenient, said the CFPB. Some also worry mailing personal documents to verify an identity is potentially risky.
The vast majority of the complaints the CFPB received this summer revolved around the three biggest credit bureaus, Experian, Equifax and TransUnion, which also receive the most attention from regulators, lenders and consumers.
More improvements on the way
The good news is the big three credit bureaus aren’t done making improvements. It’s only been five months since the bureaus announced a deal with the office of New York State Attorney General Eric T. Schneiderman that would improve the credit reporting and dispute processes. In March, the credit bureaus announced that specially trained employees would be hired to investigate credit report errors rather than rely on a largely automated process. The bureaus also agreed to not report medical debt until it had been overdue for roughly six months, in addition to doing a better job of monitoring data furnishers and workinh harder to notify people about the free annual reports they’re eligible to receive from annualcreditreport.com. It’s not clear, however, how many of those promises have been implemented so far since the bureaus have up to three years to meet those requirements.
The credit bureaus also cut a deal with 31 states earlier this summer that requires lenders and other data furnishers who frequently submit inaccurate information be flagged. In addition, the top three credit bureaus promised to stop reporting delinquencies resulting from minor infractions, such as library fines and unpaid traffic tickets.
In a news release accompanying this week’s report, CFPB director Richard Cordray says the agency will continue to monitor the credit reporting agencies and pressure them to continue to improve. “As we see a rise in the number of consumers complaining about this issue, the bureau will continue to work to ensure that credit reports are fair, accurate and readily available to all consumers,” said Cordray in the release. However, it’s possible that we’ll see a substantial drop in credit report complaints in the coming year as more improvements are implemented.
Here’s hoping, anyway.