In a move that could have significant implications for consumers and the credit reporting industry, the Consumer Financial Protection Bureau (CFPB) has taken legal action against Experian, one of the nation's largest credit reporting agencies. The lawsuit, filed on Jan. 7, 2024, alleges Experian has been conducting "sham investigations" of consumer report errors, potentially jeopardizing millions of Americans' access to credit, employment, and housing.
The allegations: A closer look at Experian's practices
The CFPB's lawsuit paints a troubling picture of Experian's handling of consumer disputes. According to the bureau, Experian has fallen short in several key areas pertaining to managing and accurately evaluating the data it receives and communicating transparently with consumers.
Faulty intake procedures
When consumers dispute information on their credit reports, Experian allegedly fails to accurately convey all relevant information about these disputes to the original furnishers of the data, per the lawsuit. This breakdown in communication can lead to incomplete or inaccurate investigations.
Uncritical acceptance of furnisher responses
The CFPB claims that Experian routinely accepts the responses of data furnishers without proper scrutiny. Even when these responses are "improbable or illogical on their face," or when Experian has reason to believe the furnisher might be unreliable, the agency allegedly often fails to dig deeper.
Confusing and inconsistent consumer notifications
After completing an investigation, Experian reportedly sends notices to consumers that fail to clearly communicate the results. Instead, these notices often contain information that is "confusing, ambiguous, incorrect, or internally inconsistent," leaving consumers in the dark about the status of their disputes, the CFPB says.
Improper reinsertion of inaccurate information
Perhaps most alarmingly, the CFPB alleges that Experian has been improperly reinserting previously deleted inaccurate information into consumer reports. This occurs when Experian fails to match newly reported information with records of previously deleted data, causing consumers to see the same errors reappear on their reports under a new furnisher's name.
In response, Experian said in a statement to Fortune: “We take our commitment to meeting the needs of consumers and adhering to all our regulatory obligations seriously. We take great steps to ensure we investigate every consumer dispute thoroughly and go above and beyond the requirements of the law. We take strong exception to the substance and the tone of the CFPB’s accusations.”
The impact on consumers: Why this matters
Credit report errors aren't just minor inconveniences. They can have serious, long-lasting effects on consumers' financial lives. As CFPB Director Rohit Chopra points out in a news release about the lawsuit, "Credit reporting errors can have serious consequences for a family's finances, and it is critical that credit reporting giants follow the law."
Jane Schwalm, a Virginia retiree, has experience in struggling with a lack of precision on Experian’s part.
While on vacation in March 2020, Schwalm received a text message that her phone number had been moved to a different carrier. An identity thief had used her phone number as the entry point to Schwalm’s credit profile, then turned to racking up thousands of dollars in Buy Now Pay Later (BNPL) purchases with Zales Jewelers, Amazon, and Wayfair, among others. The thief also successfully opened up a number of new credit accounts.
When Schwalm returned home she filed a police report for identity theft, then reported the fraud to Experian. She gave Experian a detailed list of the companies involved in the theft, but instead of investigating the claims given, she says Experian went over a decade back into her credit history and investigated long-opened accounts—and even her mortgage—while ignoring the claims Schwalm actually presented.
“Experian investigated the entirely wrong set of problems,” Schwalm says. “What more can I do?”
What consumers can do: Protecting your credit report
While the outcome of this lawsuit remains to be seen, there are steps you can take to protect yourself:
Regularly check your credit reports for errors
You can request a free credit report from each of the three major credit bureaus through annualcreditreport.com. You’re entitled to one report from each bureau every 12 months under federal law, but the bureaus have made reports available weekly since the coronavirus pandemic.
Promptly dispute any inaccuracies you find
Depending on the nature of the error, you’ll want to gather any documents that you’ll need to provide as evidence when filing your dispute. In Schwalm’s case this encompassed not only the fraudulent receipts, but the police report as well.
Schwalm put it succinctly: “Keep copious notes and copies of absolutely everything.”
All three credit bureaus (Equifax, Experian, and TransUnion) allow you to file a dispute online, via phone, or mail. This is your primary source for filing a dispute, although you can also contact the company or issuer who reported the incorrect information to the credit bureau (i.e. the “furnisher”) and dispute the error with them as well while you wait for your dispute to be processed with the credit bureau.
While Schwalm was able to get a fraud alert—which lets lenders know to take extra steps before opening credit accounts in your name—on her Experian report, the only way she was able to get individual fraudulent accounts removed was by contacting the companies themselves.
Escalate your complaint if necessary
Once you’ve submitted your dispute, credit reporting agencies typically have 45 days to investigate your claim and collect additional information from the furnisher. If that time passes without resolution, you may need to get the CFPB involved. Consumers can submit complaints about financial products and services by visiting the CFPB's website or by calling 855-411-CFPB (2372).
The takeaway
The CFPB's lawsuit against Experian underscores the critical importance of accurate credit reporting in our financial system. As consumers, we rely on these reports to access credit, housing, and even sometimes employment opportunities. When errors occur, and especially when those errors aren't properly addressed, the consequences can be severe.
As this case progresses, it will be interesting to see how it impacts not just Experian, but the credit reporting industry as a whole. One thing is clear: the CFPB is sending a strong message that it expects credit reporting agencies to take their responsibilities seriously and to put consumers' interests first.
