Sec. 2. Findings
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Congress finds the following: Consumer reporting agencies ( CRAs ) are companies that collect, compile, and provide information about consumers in the form of consumer reports for certain permissible statutory purposes under the Fair Credit Reporting Act ( 15 U.S.C. 1681 et seq. ) ( FCRA ). The three largest CRAs in this country are Equifax, TransUnion, and Experian. These CRAs are referred to as nationwide CRAs and the reports that they prepare are commonly referred to as credit reports.
Furnishers, such as creditors, lenders, and debt collection agencies, voluntarily submit information to CRAs about their accounts such as the total amount for each loan or credit limit for each credit card and the consumer’s payment history on these products. Reports also include identifying information about a consumer, such as their birthdate, previous mailing addresses, and current and previous employers. In a December 2012 paper, Key Dimensions and Processes in the U.S. Credit Reporting System:
A review for how the nation’s largest credit bureaus manage consumer data , the Bureau of Consumer Financial Protection ( Consumer Bureau ) noted that the three nationwide CRAs maintain credit files on approximately 200 million adults and receive information from about 10,000 furnishers. On a monthly basis, these furnishers provide information on over 1.3 billion consumer credit accounts or other trade lines. The 10 largest institutions furnishing credit information to each of the nationwide CRAs account for more than half of all accounts reflected in consumers’ credit files.
Consumer reports play an increasingly important role in the lives of American consumers. Most creditors, for example, review these reports to make decisions about whether to extend credit to consumers and what terms and conditions to offer them. As such, information contained in these reports affects whether a person is able to get a private education loan to pay for college costs, to secure a mortgage loan to buy a home, or to obtain a credit card, as well as the terms and conditions under which consumer credit products or services are offered to them.
Credit reports are also increasingly used for many noncredit decisions, including by landlords to determine whether to rent an apartment to a prospective tenant and by employers to decide whether to hire potential job applicants or to offer a promotion to existing employees. CRAs have a statutory obligation to verify independently the accuracy and completeness of information included on the reports that they provide. The nationwide CRAs have failed to establish and follow reasonable procedures, as required by existing law, to establish the maximum level of accuracy of information contained on consumer reports.
Given the repeated failures of these CRAs to comply with accuracy requirements on their own, legislation is intended to provide them with detailed guidance improving the accuracy and completeness of information contained in consumer reports, including procedures, policies, and practices that these CRAs should already be following to ensure full compliance with their existing obligations. The presence of inaccurate or incomplete information on these reports can result in substantial financial and emotional harm to consumers.
Credit reporting errors can lead to the loss of a new employment opportunity or a denial of a promotion in an existing job, stop someone from being able to access credit on favorable terms, prevent a person from obtaining rental housing, or even trigger mental distress. Current industry practices impose an unfair burden of proof on consumers trying to fix errors on their reports. Consumer reports containing inaccurate or incomplete credit information also undermine the ability of creditors and lenders to effectively and accurately underwrite and price credit.
Recognizing that credit reporting affects the lives of almost all consumers in this country and that the consequences of errors on a consumer report can be catastrophic for a consumer, the Consumer Bureau began accepting consumer complaints about credit reporting in October 2012. As of February 2017, the Consumer Bureau has handled approximately 185,717 credit reporting complaints, making credit reporting consistently the third most-complained-about subject matter on which the Consumer Bureau accepts consumer complaints.
In the Monthly Complaint Report Volume 20 , released in February 2017, the Consumer Bureau noted that 76 percent of credit reporting complaints involved incorrect information on reports, with consumers frequently expressing their frustrations about the burdensome and time-consuming process to disputing items. Other common types of credit reporting complaints submitted to the Consumer Bureau related to the improper use of a report, trouble obtaining a report or credit score, CRAs’ investigations, and credit monitoring or identity protection.
In the summer 2015 Supervisory Highlights , the Consumer Bureau noted that one or more of the largest CRAs failed to adequately oversee furnishers to ensure that they were adhering to the CRA’s vetting policies and to establish proper procedures to verify public record information. According to the fall 2016 Supervisory Highlights , Consumer Bureau examiners determined that one or more debt collectors never investigated indirect disputes that lacked detail or were not accompanied by attachments with relevant information from the consumer.
Examiners also found that notifications sent to consumers about disputes considered frivolous failed to identify for the consumers the type of material that they could provide in order for the debt collector to complete the investigation of the disputed item. A February 2014 Consumer Bureau report titled Credit Reporting Complaint Snapshot found that consumers are confused about the extent to which the nationwide CRAs are required to provide them with validation and documentation of a debt that appears on their credit report.
As evidence that the current system lacks sufficient market incentives for CRAs to develop more robust procedures to increase the accuracy and completeness of information on credit reports, litigation discovery documented by the National Consumer Law Center ( NCLC ), as part of a January 2009 report titled, Automated Injustice: How a Mechanized Dispute System Frustrates Consumers Seeking to Fix Errors in Their Credit Reports , showed that at least two of the three largest CRAs use quota systems to force employees to process disputes hastily and without the opportunity for conducting meaningful investigations.
At least one nationwide CRA only allowed dispute resolution staff five minutes to handle a consumer’s call. Furthermore, these CRAs were found to have awarded bonuses for meeting quotas and punished those who didn’t meet production numbers with probation. Unlike most other business relationships, where consumers can register their satisfaction or unhappiness with a particular credit product or service simply by taking their business elsewhere, consumers have no say in whether their information is included in the CRAs databases and limited legal remedies to hold the CRAs accountable for inaccuracies or poor service.
Accordingly, despite the existing statutory mandate for CRAs to follow reasonable procedures to assure the maximum possible accuracy of the information whenever they prepare consumer reports, numerous studies, the high volume of consumer complaints submitted to the Consumer Bureau about incorrect information on consumer reports, and supervisory activities by the Consumer Bureau demonstrate that CRAs continue to skirt their obligations under the law. Consumers are entitled to dispute errors on their consumer reports with either the CRA, who issued the report, or directly with furnishers, who supplied the account information to the CRA, and request that mistakes be deleted or removed.
Consumers, who believe an investigation has not correctly resolved their dispute, however, have few options, other than requesting that a statement about the dispute be included with their future reports. CRAs have a statutory obligation under the FCRA to perform a reasonable investigation by conducting a substantive and searching inquiry when a consumer disputes an item on their report. In doing so, CRAs must conduct an independent review about the accuracy of any disputed item and cannot merely rely on a furnisher’s rubber-stamp verification of the integrity of the information they have provided to CRAs.
The Federal Trade Commission ( FTC ), in a Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003 released in December 2012, found that 26 percent of survey participants identified at least one potentially material error on their consumer reports, and 13 percent experienced a change in their credit score once the error was fixed. Consumer Bureau examiners have identified repeated deficiencies with the nationwide CRAs’ information collection.
In the summer 2015 Supervisory Highlights released in June 2015, the Consumer Bureau noted continued weaknesses with CRAs’ methods and processes for assuring maximum possible accuracy in their reports. Examiners also found, with certain exceptions, no quality control policies and procedures in place to test consumer reports for accuracy. In its Credit Reporting Complaint Snapshot released in February 2014, the Consumer Bureau found that consumers were uncertain about the depth and validity of the investigations performed about a disputed item.
Consumers also expressed frustration that, even though they provided supporting materials that they believed demonstrated the inaccuracy of the information provided by furnishers, errors continued to remain on their reports. In the winter 2015 Supervisory Highlights released in March 2015, the Consumer Bureau reported that one or more nationwide CRAs failed to adequately fulfill their dispute-handling obligations, including by not forwarding to furnishers all relevant information found in letters and supporting documents supplied by consumers when they submitted disputes failing to notify consumers that they had completed investigations, and not providing consumers with the results of the CRAs’ reviews about their disputes.
Consumer Bureau examiners also noted in the fall 2016 Supervisory Highlights released in October 2016 that one or more entities failed to provide adequate guidance and training to staff about how to differentiate FCRA disputes from general customer inquiries, complaints, or debt validation requests. Consumer Bureau supervisors also directed one or more entities to develop and implement reasonable procedures to ensure that direct and indirect disputes are appropriately logged, categorized, and resolved.
Consumers’ increasing frustration about the difficulties of trying to fix credit reporting errors, evidenced through the volume of consumer complaints related to errors submitted to the Consumer Bureau, are also echoed in another FTC study issued in January 2015. In the Report to Congress under Section 319 for the Fair and Accurate Credit Transactions Act of 2003 , the FTC found that nearly 70 percent (84 people) of participants from a previous survey that had filed disputes with CRAs continued to believe that at least some of the disputed information remained inaccurate at the time of the follow-up survey.
Despite these views, 50 percent (42 people) of the survey participants decided to just give up trying to fix the errors, with only 45 percent (38 people) of them planning to continue to try to resolve their disputes. The consistently high volume of consumer complaints submitted to the Consumer Bureau about credit reporting errors, coupled with the largest CRAs’ repeated quality control weaknesses found by Consumer Bureau examiners, show that the nationwide CRAs have failed to establish and follow reasonable procedures to assure maximum accuracy of information and to conduct independent investigations of consumers’ disputes.
These ongoing problems demonstrate the need for legislation to— enhance obligations on furnishers to substantiate information and require furnishers to keep records for the same amount of time that adverse information about these accounts may appear on a person’s consumer report; eliminate CRAs’ discretion to determine the relevancy of materials provided by consumers to support their dispute claims by instead requiring them to pass all material onto furnishers and eliminating CRA’s discretion to deem some disputes frivolous or irrelevant when a consumer resubmits a claim that they believe has been inadequately resolved; enhance educational content on CRAs’ websites to improve consumers’ understanding of the dispute process and to make it easier for all consumers to initiate claims, including by providing these disclosures in other languages besides English; and create a new consumer right to appeal reviews by CRAs and furnishers of the initial disputes.
Despite the fact that the FCRA currently provides implicit authority for injunctive relief, consumers have been prevented from exercising this right. Legislation explicitly clarifying this right is intended to underscore congressional intent that injunctive relief should be viewed as a remedy available to consumers. Myriad findings by the courts, regulators, consumers, and consumer advocates make clear that CRAs have failed to establish adequate standards for the accuracy and completeness of consumer reports, yet the nationwide CRAs have demonstrated little willingness to voluntarily retool their policies and procedures to fix the problems.
Providing courts with explicit authority to issue injunctive relief, by telling the CRAs to remedy unlawful practices and procedures, would further CRAs’ mandate under the FCRA to assure the maximum possible accuracy and completeness of information contained on credit reports. Absent explicit authority to issue injunctions, history suggests that the nationwide CRAs are likely to continue conducting business as usual in treating any monetary settlements with individual consumers and fines imposed by State attorneys general and Federal regulators, simply as the cost of doing business .
The Consumer Bureau’s February 2015 report titled Consumer Voices on Credit Reports and Scores found that some consumers did not obtain a copy of their consumer report due to concerns about security or of being trapped into purchasing unwanted products like an additional report or a credit monitoring service. In January 2017, the Consumer Bureau fined TransUnion and Equifax for deceptively marketing credit scores for purchase by consumers as the same credit scores typically used by lenders to determine creditworthiness and for luring consumers into costly subscription services that were advertised as free or $1 that automatically charged recurring fees unless cancelled by consumers.
The Consumer Bureau also found that Equifax was illegally advertising its products on webpages that consumers accessed through AnnualCreditReport.com before consumers obtained their free disclosures. Because of these troubling practices, TransUnion was ordered to pay $13.9 million in restitution to harmed consumers and a civil penalty of $3 million to the Consumer Bureau. Equifax was ordered to pay more than $3.7 million to affected consumers as well as a civil money penalty of $2.5 million to the Consumer Bureau.
As part of the consent orders, the CRAs are also supposed to change the way that they sell their products to consumers. The CRAs must also obtain consumers’ express consent before enrolling them into subscription services as well as make it easer for consumers to cancel these programs. The Consumer Bureau fined the other nationwide CRA—Experian—in March 2017 for deceiving consumers about the use of credit scores that it marketed and sold to consumers as credit scores that were used by lenders and for illegally advertising its products on web pages that consumers accessed through AnnualCreditReport.com before they obtained their free annual disclosures.
Experian was ordered to pay more than $3.7 million in restitution to harmed consumers and a civil monetary penalty of $2.5 million to the Consumer Bureau. The Consumer Bureau’s January and March 2017 consent orders with the three nationwide CRAs show that these CRAs have enticed consumers into purchasing products and services that they may not want or need, in some instances by advertising products or services free that automatically converted into an ongoing subscription service at the regular price unless cancelled by the consumer.
Although these CRAs must now change their deceptive marketing practices, codifying these duties is an appropriate way to ensure that these companies never revert back to such misleading tactics. Given the ubiquitous use of consumer reports in consumers’ lives and the fact that consumers’ participation in the credit reporting system is involuntary, CRAs should also prioritize providing consumers with the effective means to safeguard their personal and financial information and improve their credit standing, rather than seeking to exploit consumers’ concerns and confusion about credit reporting and scoring, to boost their companies’ profits.
Vulnerable consumers, who have legitimate concerns about the security of their personal and financial information, deserve clear, accurate, and transparent information about the credit reporting tools that may be available to them, such as fraud alerts and freezes.
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