Disputes Ignored: Credit Repair Companies to Blame?

There have been a record breaking amount of complaints from 2020 through 2021, with more than 619,000 in 2021 alone and Rep. James Clyburn, the chairman of the House Select Subcommittee on the Coronavirus Crisis wants credit reporting agencies TransUnion, Experian, and Equifax to be investigated.

The agencies have allegedly failed to respond to consumer complaints during the pandemic and continue to have longstanding problems with consumers raising complaints about credit reporting errors.

In May, the CFPB reported that  4.1% of complaints were resolved in 2021 compared to 25% in 2019 before the pandemic.

It appears that the majority of credit report disputes have not resulted in correction or removal of errors in consumers credit reports. The subcommittee found that between 2019-2012:

• Equifax corrected 43% - 47% of disputed items.

• Experian corrected about 52% of late payment disputes or other inaccurate data.

• TransUnion corrected approximately 49% - 53% of disputed credit reports during this time.

The CARES act, paused loan payments and were supposed to report them as current, though some lenders may have incorrectly categorized them as late.

Consumers have been reporting errors on a larger scale. The CFPB estimated the combined number of dispute submissions among Equifax, Experian and TransUnion to be 8 million in 2011. The subcommittee found that in 2021 Equifax received nearly 14 million complaints alone.

The record breaking amount of complaints consist of nearly 336 million items, including names, addresses and credit accounts on their credit reports. Yet evidence by the subcommittee found that credit raters discard millions of disputes a year without investigation. At least 13.8 million were thrown out between 2018 and 2021.

Discarding disputes violates the Fair Credit Reporting Act (FCRA) if they are submitted directly by consumers to authorized representatives.

The companies defense is that disputes are discarded without investigation when they suspect a credit repair service is making the complaint. Which highlights the importance of why you should make complaints yourself, as they may also be disputing information on your report that is accurate.

The agencies have a criteria that determine which disputes may be submitted by an unauthorized third party. For instance, Equifax, tosses out mail that tends to similar language and formatting and also comes from the same zip code.

Experian takes into account for envelope and letter characteristics, this includes same/similar ink color, same/similar formatting when choosing what disputes to discard.

It was found that credit rating companies referred more than half of the disputes to data furnishers for investigations between 2019 and 2021. TransUnion referred the most.

The prevalence of credit reporting errors have been especially concerning at a time when consumers needed access to their credit to handle difficult economic circumstances brought on by the pandemic. Errors in credit reports have the potential to lower credit scores that could deny access to loans, housing, and possibly employment, among other serious consequences.

Recent reports have noted increased activity among credit repair companies which can inflate the complaint numbers. This seems to be the biggest cause of consumer complaints being thrown out. It highlights the importance of making complaints about credit reporting errors yourself rather than relying on a third party, since many credit repair companies may make illegitimate complaints or dispute information on your reports that are accurate.

The credit reporting industry is continuing to to collaborate with the CFBB and policymakers to better serve consumers and will continue to make better economic opportunity solutions.

Hyundai Hurting Credit Reports

On July 26th on the Consumer Financial Protection Bureau (CFPB) penalized Hyundai Capital America (Hyundai) for providing inaccurate information to nationwide credit reporting companies and did not take the proper measures to address or correct this information when it was identified between 2016 and 2020.

Hyundai Capital America serves approximately 1.7 million drivers of Hyundai, Kia and Genesis vehicles and has agreed to pay a $6 million civil fine and $13.2 million in restitution to current and former customers, making this the CFPB’s largest Fair Credit Reporting Act case against an auto servicer.

The CFPB found that Hyundai used manual and outdated systems, processes, and procedures to furnish credit reporting information. This resulted in Hyundai providing negative inaccurate information over 8.7 million times across 2.2 million accounts from January 2016 to March 2020, damaging customers’ credit reports and often resulting in lowered credit scores.

In a statement Hyundai Capital America stated that it launched an “end-to-end review” of it’s credit reporting, and was committed to giving customers “timely, accurate, high-quality service and care.” In the investigation the CFPB received many consumer complaints that Hyundai was inaccurately reporting their accounts. Hyundai identified many of the issues causing these inaccuracies in its internal audit books but it still took years to address the problems.

The CFPB concluded that between January 2016 and March 2020 Hyundai violated the Fair Credit Reporting Act (FCRA) and it’s implementing regulation, Regulation V, by:

• Failing to report complete and accurate loan and lease account information: Hyundai repeatedly did not take steps to promptly update and correct information it furnished to credit reporting companies that it determined was not complete or accurate, and continued to furnish this inaccurate and incomplete information.

• Failing to provide date of first delinquency information when required: FCRA requires data furnishers to provide credit reporting companies the date of delinquency for when a delinquent account is being charged off or placed for collections. Hyundai failed to report a date of delinquency for many consumers who were more than 90 days delinquent.

• Failing to modify or delete information when required: Hyundai’s furnishing system often overrode manual corrections made by employees in responding to consumer disputes. The furnishing system would provide monthly updates to credit reporting companies that reintroduced the data error after it had been disputed and corrected.

• Failing to have reasonable identity theft procedures: FCRA requires furnishers to respond to any notifications from credit reporting companies about furnished information that is the result of identity theft. Hyundai failed to establish reasonable identity theft and related blocking procedures to respond to identity theft notifications, and continued to report such information that should have been blocked on a consumer’s report.

• Failing to have reasonable accuracy and integrity policies and procedures: Regulation V requires furnishers to maintain written policies and procedures regarding the accuracy and integrity of the information furnished. Hyundai failed to review and update its credit reporting furnishing policies and procedures from 2010 to 2017. It was not until 2021 that the company finally updated some of its credit reporting policies and procedures.

Enforcement Action

The CFPB was created by the Consumer Financial Protection Act, and has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices and violating FCRA, which protects consumers from the transmission of inaccurate information about them. Today’s order requires Hyundai to:

• Pay $13.2 million in compensation to current and former customers: As identified by the CFPB, consumers about whom Hyundai, after determining the information was inaccurate, furnished to credit reporting companies inaccurate information that the consumers were 30 or more days past due on an automobile retail installment contract or lease will receive compensation for the harm incurred.

• Pay a $6 million fine: Hyundai will pay a civil money penalty to the CFPB, which will be paid towards the victims relief fund. This fund provides compensation to consumers harmed by violations of federal consumer financial protection law.

• Take steps to correct all inaccurate account information: Hyundai will review all account files that it currently furnishes to credit reporting companies and correct all inaccuracies and errors described in the order and send updated information to the credit reporting companies. Hyundai will also examine its monthly furnishing data processes for the errors described in the order, take reasonable steps to identify such errors, and resolve identified errors before providing the data to any credit reporting company.

• Address procedures identifying and correcting inaccurate information: Hyundai will establish and implement written policies and procedures regarding the accuracy and integrity of the information relating to consumers that it furnishes to a credit reporting company. Hyundai must specifically include processes for identifying and promptly correcting systemic errors in Hyundai’s credit report furnishing system. Hyundai will also examine current policies and procedures and implement changes to the practices of its employees to ensure that its employees properly route, categorize, investigate, and respond to all direct and indirect credit reporting disputes.

Credit Bureaus Still Failing Consumers

Recently on November 10, 2021, U.S. Senators Senators Brian Schatz (D-HI), Sherrod Brown (D-OH), Ron Wyden (D-OR), Elizabeth Warren (D-MA), Jack Reed (D-RI), Chris Van Hollen (D-MD), and Ben Ray Luján (D-NM), urged the Consumer Financial Protection Bureau (CFPB), to take action to reform the credit reporting industry. 

They want the consumer reporting agencies (CRAs) to improve the accuracy of credit reports, minimize the hassle, and hold the CRAs accountable for errors. 

The smallest of errors could affect millions of people. This could prevent them from getting a job or housing at no fault of their own. These mistakes, consumers may pay more for credit and be denied loans, getting mortgage, or renting an apartment. 

A study that took pace in 2012 found that one in five consumers had an error on their credit reports and five percent had errors that were economically damaging. A followup in 2015 found that nearly 70% of the impacted consumers surveyed three years earlier continued to dispute information. 

If you need information on the disputing process or to seek legal action, contact us for help at anytime. 

What is an Inaccuracy in a Credit Report?

What is an Inaccuracy in a Credit Report? 

Many consumers misunderstand what an inaccuracy is considered on a credit report. 

Here are some examples of Inaccuracies you may find in a Credit Report: 

• Accounts that don’t belong to you

• Addresses that don’t belong to you

• Social security number that doesn’t belong to you

• A name that is not yours

• Current or previous employers you didn’t work for

• Old Records that should have been removed

Examples: 

• Bankruptcies can be reported for ten (10) years

• Civil suits, judgments, and records of arrest can be reported for seven (7) years

• Paid tax liens can be reported for seven (7) years from the date of payment

• Accounts placed in collections can be reported for seven (7) years

Here are some examples that consumers commonly confuse for inaccuracies:

• Accounts that belong to the consumer but claim they didn’t get the bill or didn’t get the chance to pay. 
  

• Being charged with a “Collateral Attack” *example* - an apartment complex charges a tenant  for various things written in the contract but tenant believes they do not owe the charges and refuses to pay - then charges show on credit report. 

• Filing for bankruptcy but still still having negative marks on credit accounts. 
  

• Having a loan extended but still having a late or non payment show up up. 

There are more examples that could effect your credit score. Don’t be afraid to reach out for questions. Many consumers are confused about how credit reports work. It’s a frustrating process.

The e-OSCAR System

When delving into the credit reporting world, it is easy to get lost in the terminology. You see a lot of acronyms in credit reporting such as: CRA, DF, FICO, and FCRA, but this blog will discuss e-OSCAR. 

What is e-OSCAR?

OSCAR stands for “Online Solution for Complete and Accurate Reporting”. The “big three”: Experian, Equifax, and TransUnion owns and created this software in 1993. 

Put simply, e-OSCAR is an automated credit dispute system. This system was created due to the mass amount of manpower needed to process consumers’ claims of mistakes on their credit reports.  According to the Federal Trade Commission, at least 1 in 5 consumers has an error on one of their three credit reports and 1 in 4 of these errors have a negative impact on the consumers’ overall credit scores. It is recommend that you check your credit report at least once a year and report anything that seems incorrect. As of now, consumers are able to obtain their credit reports for free once a week until April 2022 due to the pandemic. 

Consumers can submit a complaint to the credit reporting agency by phone, online, or by mail. It is best to submit your dispute by mail, using certified mail, so that you have verification that they received it and that a real person will look into it. 

The bureaus receive letters topping the thousands each day. The bureaus created e-OSCAR to streamline the dispute process. 

Credit Disputes and e-OSCAR

Credit disputes involve a 3-step process: 

1. The credit bureau receives a credit dispute letter.

2. An employee reads the letter and assigns one of e-OSCAR’s 29 three-digit codes to classify the type of error.

3. The employee enters this code along with basic information about the consumer and creditor. They may also enter one or two lines of explanation.

e-Oscar Coding

When the credit reporting agency receives a dispute they enter it into the e-OSCAR system. Next, an e-OSCAR representatives categorize the complaint in one of 29 three-digit dispute codes. These codes include:

• 001 — not his/hers.

• 002 — belongs to another individual with same/similar name.

• 008 — late due to change of address or never received statement.

• 010 — settlement or partial payments accepted.

• 019 — included in the bankruptcy of another person.

• 038 — claims account closed by consumer.

In addition to the code that best fits the dispute, the agency may enter a few lines of explanation. Once e-OSCAR receives this data, the system creates and records a formal dispute. It then distributes the information to the other credit reporting agencies and to the appropriate data furnishers.

Issues with e-OSCAR 

Credit disputes are unique and complicated. Critics of the e-OSCAR system believe that neither a 3-digit code nor 2 lines of explanation are sufficient. Attorneys encourage consumers to send as much evidence as possible to support their claim. This makes it harder to credit bureaus to later claim that the error is your fault because you didn’t send enough informational evidence. Critics also question whether e-OSCAR staff fully review additional documents that provide support to the consumers complaint. 

What to Know About Disputes

Under the Fair Credit Reporting Act (FCRA), the Consumer Reporting Agency (CRA) has up to 45 days to resolve a dispute. If the error involves an account with your organization, the credit bureau will usually reach out to investigate the item you reported. CRA’s resolve only 15% of complaints without involving the data furnisher. After you provide a response to the dispute, the CRA will notify you of the verdict. The error will either be validated and will be corrected, or they have determined there was no error and the item is reported as accurate. 

Statutory Violations for All Class Members

In a previous blog, I wrote about Plaintiff Sergio Ramirez, who was trying to buy a car in 2011 and found out that he was incorrectly put on a “terrorist list” by TransUnion LLC (“TransUnion”), one of the three major credit bureaus. Ramirez had sued on behalf of himself and 8,184 other TransUnion users who were also wrongfully designated. Ramirez alleged that TransUnion violated the Fair Credit Reporting Act (FCRA) “by placing the false alerts on their credit reports and later sending misleading and incomplete disclosures about the alerts.” A jury found in favor of the case and each class member was awarded $984.20 in statutory damages and $6,353.08 in punitive damages.

TransUnion appealed, in part because the class members (not including Ramirez) lacked standing. The Ninth Circuit held that “each member of a class certified under Rule 32 must satisfy the bare minimum of Article III standing at the final judgement stage of a class action in order to recover monetary damages in federal court.” The Ninth Circuit also held that each class member had requisite standing to obtain damages, even though about 3/4 of the class members did not have their reports disclosed to third parties. The court had found standing in that TransUnion violated the class members’ statutory rights under the FCRA.

On December 16, 2020, TransUnion filed a writ of certiorari, meaning that all Justices have an opportunity to state their views on the case and raise any questions or concerns they may have. The court granted this petition. 

On March 30, 2021, the Supreme Court will hear the arguments on whether a damages class action is permitted by Article III of the Constitution or Rule 23 of the Federal Rules of Civil Procedure where the majority of the class has suffered no actual injury. This will be the first time the Supreme Court will apply the rulings of Spokeo, which held that plaintiff “cannot satisfy the demands of Article III by alleging a bare procedural violation,” to an entire class. 

The Supreme Court’s ruling would make it difficult for larger companies subject to a variety of laws and regulations to defend against class actions. Other companies such as Google, eBay, and several others, have filed a brief in support of TransUnion. They argue that the services provided “are often target for claims under the federal and state laws that confer private rights of action and contain statutory damages provisions similar to the provisions in the FCRA including the Wiretap Act, the Stored Communications Act, the Video Privacy Protection Act, and the Telephone Consumer Protection Act.” If the ruling is in TransUnion’s favor, this could aid those companies in defending against damages claims based only on statutory violations. 

The Supreme Court’s decision could also affect the settlement process inherent in the litigation of class actions. The U.S. Chamber of Commerce and the National Federation of Independent Businesses filed an amicus brief arguing that affirming the Ninth Circuit’s holding “would embolden [enterprising] lawyers to seek out atypical clients in order to leverage their uniquely sympathetic experiences into a multi-million-dollar damages award or settlement – all based on technical statutory violations.” In their view, upholding the lower court’s ruling would encourage settlements even more so than class actions already do.

The Supreme Court’s forthcoming decision will have significant implications on defenses to class actions, and could possibly expand liability for companies most often entangled in class actions with plaintiffs that have tenuous claims based only on statutorily created rights of action.