Massachusetts residents filed more than 3,500 complaints with the Consumer Financial Protection Bureau last year, up from less than 1,300 in 2019, according to CFPB data on its website. Nationally, more than 300,000 complaints were filed last year, more than double the amount in 2019, the data shows.
People who filed complaints with the CFPB did so only after first complaining directly to the companies that compiled their credit reports and failing to correct them.
But even with the help of the CFPB, the vast majority of consumers who complained about errors in their credit reports did not get corrections, according to a CFPB report released last week.
Companies – known as credit bureaus – are legally mandated to investigate complaints referred to them by the CFPB. But credit bureaus only corrected errors in about 2% of those referrals, a rate far lower than before the pandemic, according to the CFPB report.
In 2021, credit bureaus reported correction errors “in less than 2% of complaints, compared to nearly 25% of complaints in 2019,” the report said.
A major factor in fewer fixes is a change in how the big three national credit bureaus handle a large portion of the complaints referred to them by the CFPB.
Beginning in April 2020, the three national credit bureaus – Equifax, Experian and TransUnion – began refusing to respond to complaints they claimed were filed by consumer representatives, rather than consumers themselves. , according to new reports from the CFPB.
In recent years, so-called credit repair companies have played an increasingly important role in the industry by charging consumers fees to improve their credit reports.
But many are of dubious legality, according to the CFPB report.
“Many charge illegal fees, act in bad faith, mislead consumers, or are outright fraudulent,” the CFPB report said.
Yet the CFPB report says credit bureaus are too quick to assume that many complaints are the illegitimate product of credit repair companies.
The credit bureaus, the report says, dismiss many complaints “based on unsubstantiated findings of alleged third-party involvement and erroneous guidance that does not apply to CFPB complaints.”
How the credit bureaus dismiss such complaints “raises serious questions about whether they are unable — or unwilling — to comply with the law,” the report said.
Credit repair companies do not identify themselves as such in complaints filed with credit bureaus, according to the CFPB report.
A spokesperson for the Consumer Data Industry Association, which represents credit bureaus and other data companies, released a statement in response to an interview request.
“We are reviewing the CFPB report in detail,” the statement said. “We agree that responding to legitimate consumer complaints and obtaining correct credit reports are paramount. As the CFPB notes, credit reporting plays a vital role in consumers’ lives. That is why we are committed to expanding access to credit for all consumers.
“The CFPB report highlights trends, including increased activity by some credit repair companies, which may inflate the number of complaints and undermine the process for dealing with legitimate requests. We are committed to continuing to work with the FTC and CFPB to protect consumers from these harmful and abusive tactics.
Credit reports compile detailed data from mortgage lenders, credit card companies and other creditors showing whether consumers have paid their bills on time and whether they have defaulted on their accounts. Credit reports produce a credit score – ranging from 300 to 850 – which helps determine whether consumers can obtain credit and what interest rate they should pay.
During the pandemic, credit bureaus are offering free weekly credit reports online. Before the pandemic, consumers could access free reports once a year.
While credit reports are widely used by lenders, they are also used by many landlords and employers who perform background checks.
“It’s absolutely crucial that credit reports are accurate,” Wu said. “Or it will cost you.”
Common reasons for errors in credit reports include the mixing of information belonging to one consumer into another’s file, incorrect or incomplete information provided to credit bureaus by creditors, and the fallout from identity theft.
In a 2019 report she wrote for the National Consumer Law Center, Wu cited a 2012 Federal Trade Commission study that found that “one in five consumers have checked for errors in their credit reports, and one in 20 consumers make mistakes so bad they would.” being denied credit or having to pay more for it.
Wu, in an interview, said she had no reason to believe the accuracy of credit reports had improved significantly since then. “There’s no hard data to show it,” she said.
In a statement, the CFPB said “credit reporting has been and continues to be at the center of the bureau’s oversight work. …We have a range of authorities and will continue to work to improve [credit bureau] compliance.”
“The big question now is what will the CFPB do,” Wu said.