Consumer Law

NCLC Report on Credit Report Dispute System

By Jeff Sovern

by Jeff Sovern

The National Consumer Law Center released a report authored by Chi Chi Wu last week, Automated Injustice: How a Mechanized Dispute System Frustrates Consumers Seeking to Fix Errors in Their Credit Reports, that charges that Equifax, Experian, and TransUnion handle credit reporting disputes "in an automated and perfunctory manner." Here's an excerpt from the accompanying press release:

* * * The report details how credit bureaus: tr

anslate detailed disputes painstakingly written by desperate consumers into two or three digit codes; 

Fail to send documents submitted by consumers, such as cancelled checks or payoff statements, to creditors and other information providers involved in the dispute; [and]  Limit the role of their employees who handle disputes, or of the foreign workers employed by their offshore vendors, to little more than selecting these two or three digit codes. Workers do not examine documents, contact consumers by phone or email, or exercise any form of human discretion in resolving a dispute.

The New York Times coverage of the report is here.  I'm inserting below two excerpts from the Times' story: first the industry response, which personally I found unpersuasive, and a paragraph on planned federal rules:

Stuart K. Pratt, the president of the Consumer Data Industry Association, said consumers were partly to blame for the lack of detail about their discrepancies. He acknowledged that the credit bureaus ?do have the opportunity to add some granularity to the coded dispute that goes off to the lender.? But 55 to 60 percent of consumer disputes contained no supporting documentation, he said.

And most consumers who supply documentation, Mr. Pratt added, include only standardized forms offered on a credit bureau?s Web site, rather than extensive documentation of their own.

?Most consumers don?t want to work too hard to have it taken care of,? he said.

* * *

The Obama administration is expected to announce new rules later this year that would allow consumers who find mistakes in their reports to contact the creditors directly. The creditors would be required to respond to the consumers. ?That way,? [assistant director of the Federal Trade Commission?s division of privacy and identity protection] Ms. Kuehn said, ?we won?t be cutting out the most important line of information ? from the consumer to the company that?s providing the information in the first place.?

Given the at least theoretical independence of the FTC from the Obama administration, it seems odd to characterize the proposed rules' source as the Obama administration, but they sound like an improvement over the current situation.  For what it's worth, my own view is that credit bureaus should be strictly liable for reporting errors, to give them an incentive to improve accuracy, as stated in The Jewel of Their Souls: Preventing Identity Theft Through Loss Alloaccation Rules, 64 University of Pittsburgh Law Review 343 (2003).

[Sorry about the formatting; as you can see, I'm having some trouble getting the post to appear correctly.]

Full post as published by CL&P Blog on February 08, 2009 (boomark / email).