The Consumer Financial Protection Bureau (CFPB) has sued credit bureau Experian, citing instances where the organization failed to adequately address inaccuracies in credit reporting.
Experian, TransUnion, and Equifax are the three main credit reporting agencies in the U.S. responsible for maintaining the files used to gauge a consumer’s creditworthiness. In Experian’s case, the CFPB found instances where the organization only gave a cursory “sham investigation” into customer complaints about inaccuracies in their credit score, and even reinserted false information back into some credit scores.
“Consumers are entitled to accurate credit reports, and lenders need data that accurately represents the quality of borrower payment habits,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “Accurate reporting issues have been around since the Fair Credit Reporting Act was created 55 years ago.”
“What is interesting about the CFPB’s case is that the concern is not about the ongoing issue of pristine reporting, which generated more than half a million complaints, but rather about the failure of one of the three major credit reporting agencies to handle disputes,” he said.
Bad Habits
Two years ago, the CFPB issued a report that examined the credit dispute processes at all three credit bureaus. It found that the bureaus had largely improved their credit dispute protocols, and were taking a more proactive, personalized approach to complaints.
The CFPB’s new action against Experian alleges the firm has reverted to its previous bad habits regarding disputes, and it prohibited the organization from further misconduct. The lawsuit would require Experian to reimburse any affected customers, pay a penalty, and return any funds it received because of unfair practices.
An Isolated Case?
Accurate credit scores are critical, because they could do significant damage to a consumer’s financial position. However, Experian released a statement noting that it had done nothing wrong. The firm said it had attempted to cooperate with the CFPB, but those efforts were ignored.
Experian called the lawsuit “completely without merit,” and noted that it had a strong legal position and that it was confident it would prevail against the CFPB’s action.
“CFPB points to inaccurate logging and resulting in complaint resolution for America’s almost 200 million adults that hold credit cards,” Riley said. “We will have to wait and see if Experian was an isolated case or will suits also follow for their competitors Equifax and TransUnion.”