Over 25% of consumers are screwed by Credit Reporting Agencies
February 13, 2013 8:00 AM Subscribe
As reported in the Washington Post and NYTimes, the FTC recently reported to congress in a 370 page report (pdf link) that the consumer reporting agencies do a poor job of accurately reporting consumer's credit. Millions of people pay higher rates than they need to, mostly because correcting a credit report is so excruciatingly difficult.
Here's a pull quote from CRM News an industry blog from Michael Salinger, a Boston University professor who previously served as director of the FTC's Bureau of Economics.
Here's a pull quote from CRM News an industry blog from Michael Salinger, a Boston University professor who previously served as director of the FTC's Bureau of Economics.
It is therefore surprising that the push to reform credit bureaus only seems to come from consumer advocates, Salinger said. "I would expect the credit bureaus' customers -- business users -- to want that information to be as accurate as possible."
Clearly, mistakes affecting consumers have a greater impact. A person could be required to pay a much higher interest rate for a car loan, or tens of thousands of dollars more for a mortgage, or be shut out of the lending market altogether.
Auto insurers also routinely use credit scores in developing their pricing methodologies, Salinger said.Previously, Matt's bumped in to the same issue, which was featured on Marketplace.
Here's the FTC's page on how to fix errors on your credit report.
But private corporations are always more efficient and competent than government!
posted by Pogo_Fuzzybutt at 8:07 AM on February 13, 2013 [13 favorites]
Oh my goodness! I am shocked - shocked! - that credit reports are wrong in such a way that the credit reporting agencies' biggest customers will make more profit off their wrongness.
posted by Mary Ellen Carter at 8:11 AM on February 13, 2013 [8 favorites]
posted by Mary Ellen Carter at 8:11 AM on February 13, 2013 [8 favorites]
I'm done. I just can't care anymore.
This endless parade of reports exposing this shit has just burned me out. I can't care anymore and it's pointless even if I did. No one will get punished for this beyond some slaps on the wrist. Nothing will happen or change. If one of the world's largest banks can have been found to be laundering money for drug cartels, terrorists, and dictators and walk away with just a token fine, what hope is there that anything will come of reports like these?
The banks have been found to be lying and cheating. The credit ratings agencies. The consumer credit reporting agencies. The loan processors. Everyone. How can this possibly even be begun to be rectified?
And that quote from the article just infuriates me:
It is therefore surprising that the push to reform credit bureaus only seems to come from consumer advocates, Salinger said. "I would expect the credit bureaus' customers -- business users -- to want that information to be as accurate as possible."
Clearly, mistakes affecting consumers have a greater impact. A person could be required to pay a much higher interest rate for a car loan, or tens of thousands of dollars more for a mortgage, or be shut out of the lending market altogether.
Is this guy a fucking moron? He's surprised that businesses don't care about errors that let them make a shit ton more money?
For instance, there have also been no major federal government studies of whether the errors on consumers' credit reports skew in both directions -- that is, whether credit bureaus are missing late or defaulted payments that should be included in a report but aren't, thus giving lenders a false picture of a consumer's risk profile.
Bullshit. Of course it doesn't skew both ways, just like how a business can fuck me over by not delivering on time or providing shitty service but the fury of Hell arises if I miss a payment.
I guess impotent anger is all that's left. I just can't feel motivated by stuff like this anymore.
posted by Sangermaine at 8:16 AM on February 13, 2013 [26 favorites]
This endless parade of reports exposing this shit has just burned me out. I can't care anymore and it's pointless even if I did. No one will get punished for this beyond some slaps on the wrist. Nothing will happen or change. If one of the world's largest banks can have been found to be laundering money for drug cartels, terrorists, and dictators and walk away with just a token fine, what hope is there that anything will come of reports like these?
The banks have been found to be lying and cheating. The credit ratings agencies. The consumer credit reporting agencies. The loan processors. Everyone. How can this possibly even be begun to be rectified?
And that quote from the article just infuriates me:
It is therefore surprising that the push to reform credit bureaus only seems to come from consumer advocates, Salinger said. "I would expect the credit bureaus' customers -- business users -- to want that information to be as accurate as possible."
Clearly, mistakes affecting consumers have a greater impact. A person could be required to pay a much higher interest rate for a car loan, or tens of thousands of dollars more for a mortgage, or be shut out of the lending market altogether.
Is this guy a fucking moron? He's surprised that businesses don't care about errors that let them make a shit ton more money?
For instance, there have also been no major federal government studies of whether the errors on consumers' credit reports skew in both directions -- that is, whether credit bureaus are missing late or defaulted payments that should be included in a report but aren't, thus giving lenders a false picture of a consumer's risk profile.
Bullshit. Of course it doesn't skew both ways, just like how a business can fuck me over by not delivering on time or providing shitty service but the fury of Hell arises if I miss a payment.
I guess impotent anger is all that's left. I just can't feel motivated by stuff like this anymore.
posted by Sangermaine at 8:16 AM on February 13, 2013 [26 favorites]
I'm done. I just can't care anymore.
I'm wanting to care enough to figure out a way to sue over violations of the fed credit laws - claim they are not competent and the remedy I seek is to be removed from their databases and that they are barred from using my name or reporting on me anymore.
Opt out and be removed. Any known people or case law who's pulled that off?
posted by rough ashlar at 8:24 AM on February 13, 2013
I'm wanting to care enough to figure out a way to sue over violations of the fed credit laws - claim they are not competent and the remedy I seek is to be removed from their databases and that they are barred from using my name or reporting on me anymore.
Opt out and be removed. Any known people or case law who's pulled that off?
posted by rough ashlar at 8:24 AM on February 13, 2013
It's not that I don't care. It's that it's so overwhelmingly depressing, and I feel so utterly powerless and hopeless about it, that I choose to think of happier things.
Of course, I'm also not trying to buy a house.
posted by Glinn at 8:27 AM on February 13, 2013
Of course, I'm also not trying to buy a house.
posted by Glinn at 8:27 AM on February 13, 2013
Matt's bumped in to the same issue, : A couple months ago my credit score was barely above 700, and the main negative flag on my account was having no open credit card accounts
Funny that. Having 2 properties worth over 1/2 a million and no morgages - I get dinged for that.
(Go screw CRA's!)
posted by rough ashlar at 8:28 AM on February 13, 2013 [1 favorite]
Funny that. Having 2 properties worth over 1/2 a million and no morgages - I get dinged for that.
(Go screw CRA's!)
posted by rough ashlar at 8:28 AM on February 13, 2013 [1 favorite]
60 Minutes just did a pretty infuriating piece on this very subject last Sunday. Embedded video, may autoplay.
posted by nevercalm at 8:29 AM on February 13, 2013
posted by nevercalm at 8:29 AM on February 13, 2013
Well, in theory lenders do have a motivation to have accurate information; if they wanted to just charge everyone higher rates without regard for their actual creditworthiness then they wouldn't be paying for credit report information in the first place. Credit report information that errs on the side of assigning worse credit scores to consumers costs lenders money to the extent that they lose business because the rates they offer are too high or because they've wrongly decided not to lend to an individual at all.
On the other hand, it does seem very plausible that any costs from lost business are outweighed by increased revenue from higher rates + savings from not paying for more accurate credit reporting, giving lenders and credit reporting agencies little incentive to fix this without regulation. Right now the cost of making sure credit information is accurate is being born by individual consumers, which seems like a super inefficient way to do it.
posted by yarrow at 8:33 AM on February 13, 2013 [3 favorites]
On the other hand, it does seem very plausible that any costs from lost business are outweighed by increased revenue from higher rates + savings from not paying for more accurate credit reporting, giving lenders and credit reporting agencies little incentive to fix this without regulation. Right now the cost of making sure credit information is accurate is being born by individual consumers, which seems like a super inefficient way to do it.
posted by yarrow at 8:33 AM on February 13, 2013 [3 favorites]
What the framing of this FPP is missing is that while 25% of reports contain errors, only a much, much smaller percentage of those errors actually make a difference to the person's credit score (that is, resolving the error did not result in an increase in the person's calculated score). While one would certainly want credit scores to be as accurate as possible, the actual takeaway here seems to be that 95% of them are, in fact, accurate.
posted by yoink at 8:47 AM on February 13, 2013 [2 favorites]
posted by yoink at 8:47 AM on February 13, 2013 [2 favorites]
Well, in theory lenders do have a motivation to have accurate information; if they wanted to just charge everyone higher rates without regard for their actual creditworthiness then they wouldn't be paying for credit report information in the first place. Credit report information that errs on the side of assigning worse credit scores to consumers costs lenders money to the extent that they lose business because the rates they offer are too high or because they've wrongly decided not to lend to an individual at all.
I guess this is the kind of theoretical nonsense that led that Salinger guy from the quote to say what he said about being surprised. What you've written is theoretically sensible but has nothing to do with reality.
First, the value of the credit report to lenders isn't the actual data, it's the creation of a facade of having done vetting. This then provides them with a screen to charge as they wish, and they can point to the report to justify themselves. It's the same thing that happened with the credit ratings agencies: banks didn't give a shit about the actual risks of the securities they were issuing, they needed something to point to to justify their sale. That's all that matters.
Second, this idea that "[c]edit report information that errs on the side of assigning worse credit scores to consumers costs lenders money to the extent that they lose business because the rates they offer are too high or because they've wrongly decided not to lend to an individual at all" exists only in the magic libertarian free market. People need loans for lots of things, desperately. Sure it might keep some people out, but most people will just accept worse loans at terrible rates because they have no choice.
posted by Sangermaine at 8:51 AM on February 13, 2013 [7 favorites]
I guess this is the kind of theoretical nonsense that led that Salinger guy from the quote to say what he said about being surprised. What you've written is theoretically sensible but has nothing to do with reality.
First, the value of the credit report to lenders isn't the actual data, it's the creation of a facade of having done vetting. This then provides them with a screen to charge as they wish, and they can point to the report to justify themselves. It's the same thing that happened with the credit ratings agencies: banks didn't give a shit about the actual risks of the securities they were issuing, they needed something to point to to justify their sale. That's all that matters.
Second, this idea that "[c]edit report information that errs on the side of assigning worse credit scores to consumers costs lenders money to the extent that they lose business because the rates they offer are too high or because they've wrongly decided not to lend to an individual at all" exists only in the magic libertarian free market. People need loans for lots of things, desperately. Sure it might keep some people out, but most people will just accept worse loans at terrible rates because they have no choice.
posted by Sangermaine at 8:51 AM on February 13, 2013 [7 favorites]
The credit agencies had my birth date wrong by two years. I emailed them and they fixed it. It probably didn't affect my credit worthiness. I wonder if that puts me among the 25% with erroneous reports? If so, many of the others in that 25% group probably also have fairly minor errors.
posted by Triplanetary at 8:56 AM on February 13, 2013
posted by Triplanetary at 8:56 AM on February 13, 2013
What the framing of this piece is missing is that while 25% of reports contain errors, only a much, much smaller percentage of those errors actually make a difference to the person's credit score (that is, resolving the error did not result in an increase in the person's calculated score).
Along that vein -
I'm right now looking at one of my credit reports (the one from Transunion), and what they have down for my employment history is COMPLETELY wrong (I was employed, but not by the two entities they have listed). Everything else is accurate - should I bother fixing that?
Also, there was one month for one of my credit cards where I missed the due date, but only because the post office screwed up and returned my payment to me as "undeliverable" - I put it right back in the mail and it got there fine. That's showing up as the one lone "past 30 days" ding on an otherwise perfect record. Should I bother fixing that?
posted by EmpressCallipygos at 9:00 AM on February 13, 2013
Along that vein -
I'm right now looking at one of my credit reports (the one from Transunion), and what they have down for my employment history is COMPLETELY wrong (I was employed, but not by the two entities they have listed). Everything else is accurate - should I bother fixing that?
Also, there was one month for one of my credit cards where I missed the due date, but only because the post office screwed up and returned my payment to me as "undeliverable" - I put it right back in the mail and it got there fine. That's showing up as the one lone "past 30 days" ding on an otherwise perfect record. Should I bother fixing that?
posted by EmpressCallipygos at 9:00 AM on February 13, 2013
NO SHIT.
posted by papercake at 9:09 AM on February 13, 2013 [2 favorites]
posted by papercake at 9:09 AM on February 13, 2013 [2 favorites]
I'm right now looking at one of my credit reports (the one from Transunion), and what they have down for my employment history is COMPLETELY wrong (I was employed, but not by the two entities they have listed). Everything else is accurate - should I bother fixing that?
You should verify that these are mistakes and not somebody using (stealing) your social security number.
posted by zug at 9:12 AM on February 13, 2013
You should verify that these are mistakes and not somebody using (stealing) your social security number.
posted by zug at 9:12 AM on February 13, 2013
Your credit score will jump 50 points if it's within the last couple of years, Empress. Mine increased 100 and brought me to rockstar credit status when I corrected a massive error an idiot organization (the same Canadian Student Loan jackasses responsible for leaking hundreds of thousands of people's personal information), so it's worth it.
posted by Yowser at 9:13 AM on February 13, 2013
posted by Yowser at 9:13 AM on February 13, 2013
Oh, and the only way I corrected it was to write the credit bureaus. The actual aforementioned Canada Student Loans assholes lied and said they fixed it on their end. No they didn't.
posted by Yowser at 9:15 AM on February 13, 2013
posted by Yowser at 9:15 AM on February 13, 2013
Your credit score will jump 50 points if it's within the last couple of years...
Is there a free way to get this credit score that seems to be so valuable? I just got my free credit report from Equifax and they wanted $7.95 to give me my credit score. Do the other credit bureaus provide it for free?
posted by exhilaration at 9:41 AM on February 13, 2013
Is there a free way to get this credit score that seems to be so valuable? I just got my free credit report from Equifax and they wanted $7.95 to give me my credit score. Do the other credit bureaus provide it for free?
posted by exhilaration at 9:41 AM on February 13, 2013
Creditkarma.com will give you your score for free. You only get one of the bureaus (TransUnion) but you can check it pretty frequently. They try to sell you new credit cards but it's easy to just ignore everything but the score.
posted by Skorgu at 9:50 AM on February 13, 2013
posted by Skorgu at 9:50 AM on February 13, 2013
I can give you your credit score for free: seven.
posted by blue_beetle at 9:50 AM on February 13, 2013
posted by blue_beetle at 9:50 AM on February 13, 2013
Upon reflection I'm not that worried after all about the one lone "more than 30 days" thing on only one account showing up in the middle of 22 years worth of on-time payments in a total of four accounts, and the two successfully paid-up-in-full-and-always-on-time loans. But I did update the employment data directly (they also had three phone numbers associated with me that I have never had in my life). Also, all the other info checks out (all the "recent requests for credit" are things I know about, etc.), so I'm fairly sure that the employment data things was just a fluke.
The real question now is, how the hell did my credit score end up being so good when I've been so broke for all this time. (marvels)
posted by EmpressCallipygos at 9:51 AM on February 13, 2013
The real question now is, how the hell did my credit score end up being so good when I've been so broke for all this time. (marvels)
posted by EmpressCallipygos at 9:51 AM on February 13, 2013
There can be consequences for furnishers of credit information who report inaccurately--specifically there may be a cause of action under the FCRA and applicable state laws depending on the nature and effect of the inaccuracy. Depending on size, banks may get sued hundreds or thousands of times a year for inaccurate reporting. The cost of litigating and resolving those matters is not zero.
posted by monju_bosatsu at 10:00 AM on February 13, 2013
posted by monju_bosatsu at 10:00 AM on February 13, 2013
how the hell did my credit score end up being so good when I've been so broke for all this time.
You were broke all this time but managed to steadily pay.
Credit score is a measure of "how likely is the lender to get the payments."
posted by the man of twists and turns at 10:15 AM on February 13, 2013 [2 favorites]
You were broke all this time but managed to steadily pay.
Credit score is a measure of "how likely is the lender to get the payments."
posted by the man of twists and turns at 10:15 AM on February 13, 2013 [2 favorites]
You were broke all this time but managed to steadily pay.
Yeah, that's the part I'm talking about (my reaction isn't about "why do they categorize me this way", it's "how the hell did I manage to do that").
posted by EmpressCallipygos at 10:20 AM on February 13, 2013
Yeah, that's the part I'm talking about (my reaction isn't about "why do they categorize me this way", it's "how the hell did I manage to do that").
posted by EmpressCallipygos at 10:20 AM on February 13, 2013
exhilaration: "Is there a free way to get this credit score that seems to be so valuable? I just got my free credit report from Equifax and they wanted $7.95 to give me my credit score. Do the other credit bureaus provide it for free?"
Nope. Credit agencies make their money collecting that data across a large pool of borrowers and selling condenced statistical evidence of repayment we call a credit score. Giving away the score leaves them with no revenue. They also carefully guard the formulas, but in an America where few people can explain how Social Security benefits are calculated, I doubt it would help anyone. Plus there's a growing set of tailored scores; a score for car insurance, car loans, home mortgages, consumer credit, etc. It would make sense that unsecured debt has a different repayment probability per person than a car loan.
It's a strange monopoly Fair Issac has. One of the agencies is trying to push a different score, and getting crucifified by personal finance experts for it. Perhaps rightly so, given how they're probably selling more TrueScores to consumers than lenders.
posted by pwnguin at 10:22 AM on February 13, 2013
Nope. Credit agencies make their money collecting that data across a large pool of borrowers and selling condenced statistical evidence of repayment we call a credit score. Giving away the score leaves them with no revenue. They also carefully guard the formulas, but in an America where few people can explain how Social Security benefits are calculated, I doubt it would help anyone. Plus there's a growing set of tailored scores; a score for car insurance, car loans, home mortgages, consumer credit, etc. It would make sense that unsecured debt has a different repayment probability per person than a car loan.
It's a strange monopoly Fair Issac has. One of the agencies is trying to push a different score, and getting crucifified by personal finance experts for it. Perhaps rightly so, given how they're probably selling more TrueScores to consumers than lenders.
posted by pwnguin at 10:22 AM on February 13, 2013
This reminds of a wonderful situation experienced with Bank of America (aka The McDonalds of Finance) in 2002. There was an "internal error" in processing the company's weekly payroll – 150 people at an average of $1,500 a week – which was a $200k+ error.
The fallout was rather excruciating for a lot of the staff. As it was an end-of-month payment, many people with automatic payments for mortgages, credit cards, etc. received a double-whammy of fees. The first were bank fees for overdrawn accounts, and the second was for fees from late or incomplete payments.
The error was obviously on Bank of America's side. The $200k had been transmitted to the payroll service, but then the aforementioned "internal error". Bank of America's reply was simply that it was an error, covered in their terms and conditions, and they suffered no liability in this matter. When the point was made that this "internal error" initiated the aforementioned fees for some of their own customers, their replies ranged from "We're very sorry" to "they should have had enough money to cover their bills".
To keep this from becoming a detail, the example is relevant for it shows the single-sided liability in which most financial institutions operate. That which is your fault is your problem. That which is their fault is also your problem.
In the case of the credit agencies, we must ask "who the primary customer" of the data is. Consumers do not pay anything to be rated, thus the "customer" must be the institutions. Therefore is it any surprise that it's very easy for data to be collected and very hard to be changed?
Further, is there a surprise that credit reporting information is slanted toward the bank's profitability?
posted by nickrussell at 10:28 AM on February 13, 2013 [5 favorites]
The fallout was rather excruciating for a lot of the staff. As it was an end-of-month payment, many people with automatic payments for mortgages, credit cards, etc. received a double-whammy of fees. The first were bank fees for overdrawn accounts, and the second was for fees from late or incomplete payments.
The error was obviously on Bank of America's side. The $200k had been transmitted to the payroll service, but then the aforementioned "internal error". Bank of America's reply was simply that it was an error, covered in their terms and conditions, and they suffered no liability in this matter. When the point was made that this "internal error" initiated the aforementioned fees for some of their own customers, their replies ranged from "We're very sorry" to "they should have had enough money to cover their bills".
To keep this from becoming a detail, the example is relevant for it shows the single-sided liability in which most financial institutions operate. That which is your fault is your problem. That which is their fault is also your problem.
In the case of the credit agencies, we must ask "who the primary customer" of the data is. Consumers do not pay anything to be rated, thus the "customer" must be the institutions. Therefore is it any surprise that it's very easy for data to be collected and very hard to be changed?
Further, is there a surprise that credit reporting information is slanted toward the bank's profitability?
posted by nickrussell at 10:28 AM on February 13, 2013 [5 favorites]
"Clearly, mistakes affecting consumers have a greater impact. A person could be required to pay a much higher interest rate for a car loan, or tens of thousands of dollars more for a mortgage, or be shut out of the lending market altogether.
Is this guy a fucking moron? He's surprised that businesses don't care about errors that let them make a shit ton more money?"
Except that with accurate scores, they can conduct more efficient business, e.g. making more credit available to better risks, loaning more; holding less reserves to cover riskier loans; compete better on price to people who want loans… I mean, credit cards and the raters are kind of a shitshow, but not all businesses are evil. My wager would be that most of them don't know that these are inaccurate and just take the ratings at face value.
posted by klangklangston at 10:45 AM on February 13, 2013
Is this guy a fucking moron? He's surprised that businesses don't care about errors that let them make a shit ton more money?"
Except that with accurate scores, they can conduct more efficient business, e.g. making more credit available to better risks, loaning more; holding less reserves to cover riskier loans; compete better on price to people who want loans… I mean, credit cards and the raters are kind of a shitshow, but not all businesses are evil. My wager would be that most of them don't know that these are inaccurate and just take the ratings at face value.
posted by klangklangston at 10:45 AM on February 13, 2013
I mean, credit cards and the raters are kind of a shitshow, but not all businesses are evil. My wager would be that most of them don't know that these are inaccurate and just take the ratings at face value.
This is both right and wrong. I used to work in credit cards and its not like the companies just take the credit scores and set their rates based off of them. The credit scores are one input among many that determines the initial and eventual rate, bolstered by tons and tons of in-house statistical analysis. So they're aware they have flaws, but use them anyway.
The argument that the flaws in the credit scores allow companies to charge higher rates forgets that they could do that anyway. I mean, it's not like they need to external validation to screw you - they charge exactly how much the market can bear, no more or less.
posted by There's No I In Meme at 12:00 PM on February 13, 2013 [1 favorite]
This is both right and wrong. I used to work in credit cards and its not like the companies just take the credit scores and set their rates based off of them. The credit scores are one input among many that determines the initial and eventual rate, bolstered by tons and tons of in-house statistical analysis. So they're aware they have flaws, but use them anyway.
The argument that the flaws in the credit scores allow companies to charge higher rates forgets that they could do that anyway. I mean, it's not like they need to external validation to screw you - they charge exactly how much the market can bear, no more or less.
posted by There's No I In Meme at 12:00 PM on February 13, 2013 [1 favorite]
The argument that the flaws in the credit scores allow companies to charge higher rates forgets that they could do that anyway. I mean, it's not like they need to external validation to screw you - they charge exactly how much the market can bear, no more or less.
Do they include it as liability protection then? If there was ever a question on rates, the obvious answer would be to point back to the credit score. "The rating agency assured methis investment was AAA-rated (oops, that kind of error is okay now, right?) this individual was rated 420. That's why their rate is 28%."
posted by nickrussell at 12:12 PM on February 13, 2013
Do they include it as liability protection then? If there was ever a question on rates, the obvious answer would be to point back to the credit score. "The rating agency assured me
posted by nickrussell at 12:12 PM on February 13, 2013
For three years, I worked for a company that purchased charged-off consumer loans. I was among other things, responsible for maintaining my company's policies and procedures on credit reporting. I completely rewrote our procedures on responding to credit reporting disputes from the ground up. Honestly, that the consumer credit reporting agencies are allowed to continue to operate as they do is a powerful testament to the regulatory capture the financial industry has achieved.
The CRAs use consumer privacy concerns as an excuse to hide the nature of their operations and as a shield to keep public attention away from the disaster that is the Metro 2 format and the ACDV system. The CRAs get away with offenses to the proper management of personal data that Google or Facebook would be publicly flayed for. The systems they use are outdated, inadequate to begin with, and universally terribly implemented.
In my experience (granted, my sample was biased) the kinds of errors people have described upthread, like a birthdate being off by a few years or inaccurate employment info were present in more than 90% of the credit reports I saw. Any skiptracer would tell you the employment section of a CB is basically always wrong. I am sure the 25% number refers only to serious errors. Want to see what serious errors look like? Get familiar with blended files:
I imagine most people with blended files don't even know they are sharing a credit report with someone else. I would be very surprised if there were less than 100,000 Americans in this situation. I can think of one case off hand where someone with a common name lived in the same zip code as two other people with very similar names and SSNs (probably due to being born around the same time and in the same place). All three shared one credit report, and at least one of them had likely been the victim of identity theft, meaning that effectively, all three were.
Disputes regarding tradelines (the parts of a credit report that lenders furnish to the CRAs) are handled through the ACDV process[pdf], something I am unlucky enough to be familiar with. Section 611 of the Fair Credit Reporting Act (FCRA) requires that when a CRA recives a consumer dispute about the accuracy of reported information that they must "conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file" within 30 days. They also have 5 business days to provide to the data furnisher "all relevant information regarding the dispute that the agency has received from the consumer or reseller".
In practice, this means taking 30 pages of documentation and boiling it down to one of 27 numeric dispute codes, typically one of the catch-all big three: 1:not his/hers, 103:fraud, 109:disputes amount, regardless of whether this reflects the nature of the dispute at all. If the person at the CRA routing your dispute is hating their life a little less that day, or if they are a new person who is a little stupid and doesn't get that their sole performance metric is throughput, you might get some free-form info sent to the furnisher in a VARCHAR(255) field. If you fill out a dispute online, the process is all automated, so you get to choose which code matches your dispute, and you get to choose how to use those precious 255 characters, NO UNICODE! They tried to implement unicode in 2012, but that program was ended when half of all disputes submitted "(╯°□°）╯︵ ┻━┻" as the only text.
When the data furnisher (typically a bank or debt buyer/collector, sometimes another kind of lender like a car dealership) receives the ACDV, that's all they have to go on, so when someone submits ironclad proof that the date of delinquency is wrong, and a derogatory item should be off their credit report, all the permatemp at the bank sees is a line of meaningless text, just one of 100 or more disputes they are expected to process that day by alt-tabbing between a terminal emulator without copy/paste hotkeys and a shitty web interface that will time out if you actually spend time investigating a complaint. All they can do to keep their job is to just mindlessly compare data between systems. The bank would automate it, but that would be illegal.
Maybe that person is hating their life a little less that day, or they are new and don't understand that only throughput matters, and sees that the date of delinquency is indeed wrong. For some reason it's listed the same date as charge-off, but the records show that the account first went delinquent 9 months before then. Then they correct the date of delinquency in the e-OSCAR browser window. Because they didn't just quickly report the account as accurate, they now have to process the next 60 accounts SUPER FAST, or they'll be written up.
The problem is, though, is that the account was charged-off before the original issuer was bought by the current owner, and the new system interprets the charge-off as a payment, re-aging the account. An automated process the next day updates the date of delinquency to charge-off, and next month's normal Metro 2 cycle reports the inaccurate information to the CRA, which then reimports the bad data. You notice the problem has reappeared, and the cycle continues anew.
Technically, the FCRA requires the CRAs to have procedures in place to prevent the reinsertion of bad data, but in practice this is nothing more than license for the CRAs to alter tradelines on the basis of rules they don't disclose without informing anyone.
My company was misreporting balance information in dozens of ACDVs per day for years, until I discovered the problem. We never heard from the CRAs anything like, "hey, we notice that whenever you correct a balance on an ACDV, the old balance keeps getting reported in the next cycle". They just kept on keepin' on with business as usual.
The Federal Reserve thinks this process is just fine:
posted by [expletive deleted] at 12:29 PM on February 13, 2013 [158 favorites]
The CRAs use consumer privacy concerns as an excuse to hide the nature of their operations and as a shield to keep public attention away from the disaster that is the Metro 2 format and the ACDV system. The CRAs get away with offenses to the proper management of personal data that Google or Facebook would be publicly flayed for. The systems they use are outdated, inadequate to begin with, and universally terribly implemented.
In my experience (granted, my sample was biased) the kinds of errors people have described upthread, like a birthdate being off by a few years or inaccurate employment info were present in more than 90% of the credit reports I saw. Any skiptracer would tell you the employment section of a CB is basically always wrong. I am sure the 25% number refers only to serious errors. Want to see what serious errors look like? Get familiar with blended files:
About 6 percent of nearly 21,500 consumers who complained to the Federal Trade Commission during a 30-month period beginning in 2009, and nearly 8 percent of 1,842 who complained to state attorneys general in 2009 and 2010, said that their credit reports had been mixed with another person’s.Consider that few people complain to the FTC or the AG in these cases. At work, I never encountered a case of a blended file where a complaint was made to the FTC or the AG, but I can count a handfull of cases where someone hired a lawyer to threaten the CRAs and the data furnishers on the reports with suits under the FCRA. Most of these are settled without suit being filed, but they are huge messes that take years to resolve. I saw many more cases of blended files that the consumers weren't even trying to resolve. Most of these were cases of close family members, but not always.
I imagine most people with blended files don't even know they are sharing a credit report with someone else. I would be very surprised if there were less than 100,000 Americans in this situation. I can think of one case off hand where someone with a common name lived in the same zip code as two other people with very similar names and SSNs (probably due to being born around the same time and in the same place). All three shared one credit report, and at least one of them had likely been the victim of identity theft, meaning that effectively, all three were.
Disputes regarding tradelines (the parts of a credit report that lenders furnish to the CRAs) are handled through the ACDV process[pdf], something I am unlucky enough to be familiar with. Section 611 of the Fair Credit Reporting Act (FCRA) requires that when a CRA recives a consumer dispute about the accuracy of reported information that they must "conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file" within 30 days. They also have 5 business days to provide to the data furnisher "all relevant information regarding the dispute that the agency has received from the consumer or reseller".
In practice, this means taking 30 pages of documentation and boiling it down to one of 27 numeric dispute codes, typically one of the catch-all big three: 1:not his/hers, 103:fraud, 109:disputes amount, regardless of whether this reflects the nature of the dispute at all. If the person at the CRA routing your dispute is hating their life a little less that day, or if they are a new person who is a little stupid and doesn't get that their sole performance metric is throughput, you might get some free-form info sent to the furnisher in a VARCHAR(255) field. If you fill out a dispute online, the process is all automated, so you get to choose which code matches your dispute, and you get to choose how to use those precious 255 characters, NO UNICODE! They tried to implement unicode in 2012, but that program was ended when half of all disputes submitted "(╯°□°）╯︵ ┻━┻" as the only text.
When the data furnisher (typically a bank or debt buyer/collector, sometimes another kind of lender like a car dealership) receives the ACDV, that's all they have to go on, so when someone submits ironclad proof that the date of delinquency is wrong, and a derogatory item should be off their credit report, all the permatemp at the bank sees is a line of meaningless text, just one of 100 or more disputes they are expected to process that day by alt-tabbing between a terminal emulator without copy/paste hotkeys and a shitty web interface that will time out if you actually spend time investigating a complaint. All they can do to keep their job is to just mindlessly compare data between systems. The bank would automate it, but that would be illegal.
Maybe that person is hating their life a little less that day, or they are new and don't understand that only throughput matters, and sees that the date of delinquency is indeed wrong. For some reason it's listed the same date as charge-off, but the records show that the account first went delinquent 9 months before then. Then they correct the date of delinquency in the e-OSCAR browser window. Because they didn't just quickly report the account as accurate, they now have to process the next 60 accounts SUPER FAST, or they'll be written up.
The problem is, though, is that the account was charged-off before the original issuer was bought by the current owner, and the new system interprets the charge-off as a payment, re-aging the account. An automated process the next day updates the date of delinquency to charge-off, and next month's normal Metro 2 cycle reports the inaccurate information to the CRA, which then reimports the bad data. You notice the problem has reappeared, and the cycle continues anew.
Technically, the FCRA requires the CRAs to have procedures in place to prevent the reinsertion of bad data, but in practice this is nothing more than license for the CRAs to alter tradelines on the basis of rules they don't disclose without informing anyone.
My company was misreporting balance information in dozens of ACDVs per day for years, until I discovered the problem. We never heard from the CRAs anything like, "hey, we notice that whenever you correct a balance on an ACDV, the old balance keeps getting reported in the next cycle". They just kept on keepin' on with business as usual.
The Federal Reserve thinks this process is just fine:
With respect to the FCRA's requirement that CRAs forward to the furnisher "all relevant information," it appears that CRAs generally do not convey to furnishers documents that some consumers give CRAs in connection with their disputes. By itself, however, this does not mean that CRAs fail to convey "all relevant information" to furnishers. It is unclear how often consumers submit documents along with their disputes, or how often these documents contain relevant information. When consumers do submit documents, the CRAs summarize the information in a numeric code supplemented, in some instances, by a narrative in a free-form field. Although this process may be sufficient in most cases to resolve the dispute properly, in certain situations, the failure to convey the actual documents may lead to incorrect outcomes. The information that the FTC and the Board have obtained on this subject is inconclusive as to the prevalence of this result.Read that over a few times; savor it like you would a fine brandy or port.
posted by [expletive deleted] at 12:29 PM on February 13, 2013 [158 favorites]
they lose business because the rates they offer are too high or because they've wrongly decided not to lend to an individual at all.
This only works if someone who needs a loan can go to a lender that offers them a lower rate. But if all the lenders are getting the same bad information from the bureaus, why would a different lender offer a lower rate?
posted by kenko at 12:30 PM on February 13, 2013
This only works if someone who needs a loan can go to a lender that offers them a lower rate. But if all the lenders are getting the same bad information from the bureaus, why would a different lender offer a lower rate?
posted by kenko at 12:30 PM on February 13, 2013
Oh, I should add, anyone feel free to send me a PM if you'd like some advice on how to deal with credit report problems. I know a fair bit about this from a side most people never see, but keep in mind, IANAL.
posted by [expletive deleted] at 1:08 PM on February 13, 2013 [12 favorites]
posted by [expletive deleted] at 1:08 PM on February 13, 2013 [12 favorites]
The idea that the free markets should save us from these sorts of things seems incredibly laughable, especially after the housing crisis. I give you Alan Greenspan:
"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms," said Greenspan.posted by funkiwan at 2:18 PM on February 13, 2013 [1 favorite]
Opt out and be removed. Any known people or case law who's pulled that off?
People do this simply by growing up in another country. Other countries don't exist in the world of credit bureaus, it's like Narnia. Anyway, it's not recommended. In the USA, a credit rating check that fails to turn up a file on you (because you just got here) seems to translate roughly to "OMG! HE MUST HAVE MAXED FIFTY CREDIT CARDS ABANDONED UNDERWATER MORTGAGE THEN WEND BANKRUPT THEN STOLED A DEAD BABIES IDENTITY! RUN DON'T WALK!"
How about we outlaw the credit rating system altogether? Other countries seem to be able to sell cars and rent apartments just fine without any of this nonsense.
posted by anonymisc at 2:35 PM on February 13, 2013
People do this simply by growing up in another country. Other countries don't exist in the world of credit bureaus, it's like Narnia. Anyway, it's not recommended. In the USA, a credit rating check that fails to turn up a file on you (because you just got here) seems to translate roughly to "OMG! HE MUST HAVE MAXED FIFTY CREDIT CARDS ABANDONED UNDERWATER MORTGAGE THEN WEND BANKRUPT THEN STOLED A DEAD BABIES IDENTITY! RUN DON'T WALK!"
How about we outlaw the credit rating system altogether? Other countries seem to be able to sell cars and rent apartments just fine without any of this nonsense.
posted by anonymisc at 2:35 PM on February 13, 2013
This only works if someone who needs a loan can go to a lender that offers them a lower rate. But if all the lenders are getting the same bad information from the bureaus, why would a different lender offer a lower rate?
No, even the same lender might offer a substantially smaller amount, based on the false rating, thus the car dealership only sells a cheap car instead of the luxury car sale they would have got if their info was accurate.
posted by anonymisc at 2:41 PM on February 13, 2013
No, even the same lender might offer a substantially smaller amount, based on the false rating, thus the car dealership only sells a cheap car instead of the luxury car sale they would have got if their info was accurate.
posted by anonymisc at 2:41 PM on February 13, 2013
Which Consumer Financial Education Programs Are Most Effective?: Assuming a Fact Not in Evidence
I'll start today with financial education. The CFPB would like your comments on “effective financial education approaches that create opportunities for consumers to improve their financial decision making capabilities.” I thought I had blown up this myth already. And others keep proving me right. If you were at this past year’s Boulder Summer Conference on Consumer Financial Decision Making you know that a soon-to-be released exhaustive meta-analysis of past studies demonstrates that financial education does not produce better financial outcomes, and another study using a much larger dataset and a more robust set of controls than past work finds that financial literacy does not lead to improved financial outcomes.posted by the man of twists and turns at 5:54 AM on February 14, 2013 [2 favorites]
I mean, blended files? really? At what point is this behavior on the part of CRA's libel? Or worse outright fraud?
I mean, if they are reporting false information about me to third parties, aren't they committing libel?
"The elements of a defamation suit; whether slander or libel, are:
1. A defamatory statement;
2. Published to a third party;
3. Which the speaker knew or should have known was false;
4. That causes injury to the subject of the communication
"
source:Laws.com
If this ever happened to me (I'm going to check now), I would sue for libel and defamation on the spot. Hell, I'm surprised some enterprising law firm isn't taking this up right now as a class action.
posted by Freen at 12:04 PM on February 15, 2013
I mean, if they are reporting false information about me to third parties, aren't they committing libel?
"The elements of a defamation suit; whether slander or libel, are:
1. A defamatory statement;
2. Published to a third party;
3. Which the speaker knew or should have known was false;
4. That causes injury to the subject of the communication
"
source:Laws.com
If this ever happened to me (I'm going to check now), I would sue for libel and defamation on the spot. Hell, I'm surprised some enterprising law firm isn't taking this up right now as a class action.
posted by Freen at 12:04 PM on February 15, 2013
I'm no expert, but I think the Fair Credit Reporting Act, which is the law that governs the insanity described upthread, preempts libel law, or purports to.
posted by yarrow at 12:42 PM on February 15, 2013
posted by yarrow at 12:42 PM on February 15, 2013
Correct. For the curious, 15 USC 1681(h)(e) is the code section you're looking for and it preempts state law.
posted by snuffleupagus at 7:47 PM on February 20, 2013 [1 favorite]
(e) Limitation of liability
Except as provided in sections 1681n and 1681o of this title, no consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence with respect to the reporting of information against any consumer reporting agency, any user of information, or any person who furnishes information to a consumer reporting agency, based on information disclosed pursuant to section 1681g, 1681h, or 1681m of this title, or based on information disclosed by a user of a consumer report to or for a consumer against whom the user has taken adverse action, based in whole or in part on the report [2] except as to false information furnished with malice or willful intent to injure such consumer.posted by snuffleupagus at 7:47 PM on February 20, 2013 [1 favorite]
(As the linked article discusses, there can be alternative claims under state debt collection statutes that may escape preemption. California appears to offer one, the utility of which is debatable. But plain old libel isn't one of them.)
posted by snuffleupagus at 7:58 PM on February 20, 2013
posted by snuffleupagus at 7:58 PM on February 20, 2013
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posted by the man of twists and turns at 8:04 AM on February 13, 2013 [3 favorites]