How do the credit bureaus manage your personal data anyway? Part 2

Report released by Consumer Financial Protection Bureau examines how credit reporting agencies handle disputes

As detailed in part one, the accuracy of our credit report and our credit score is very important to an individual’s and families’ financial health. The recently created Consumer Financial Protection Bureau (CFPB) continues to examine the processes being used to furnish consumer credit information to the major credit reporting agencies.

The CFPB released a report in December intended as a public service to provide basic descriptions of, and statistics regarding, the underlying processes about how individual consumer data is reported, matched to consumer files, and reviewed when consumers dispute an inaccuracy.

Additional key findings of the report include:

  • Consumers’ right to dispute information contained in their credit reports under the Fair Credit Reporting Act (FCRA) provide important checks on inaccurate credit reports.  As consumers, we have the right to obtain a free copy of our credit reportMichigan State University Extension suggests requesting a copy of your credit report ever four months – once from each of the three major credit reporting bureaus: Transunion, Equifax and Experian. The CFPB estimates that at least 40 million consumers obtain a copy of their credit file from one or more of the three major reporting agencies annually.
  • The reporting agencies received approximately 8 million contacts from consumers in 2011 to initiate disputes about the accuracy of one or more items in their credit files.  In total, these contacts resulted between 32-38 million disputed items on consumers’ credit reports. MSU Extension suggests that the Federal Trade Commission’s publication – How to Dispute Credit Report Errors – is a helpful, free resource to consumers.
  • Collections items are a major source of disputes.  Almost 40 percent of disputes handled by the reporting agencies on average can be linked to collections items. 
  • Through an automated system – called eOSCAR – the reporting agencies provide entities that report consumers’ credit data with one or two numeric codes that indicate the nature of the consumer’s dispute and in very few cases is an explanation provided. Currently, the reporting agencies generally do not forward documentation that consumers submit with mailed disputes or provide a mechanism for consumers to forward supporting documents when filing disputes online or over the phone. 
  • The credit reporting agencies, in seeking to maximize accuracy in resolving disputes, report they rely on furnishers meeting their obligations under the FCRA to report information accurately and to respond to disputes appropriately.  Consumer advocates have argued that the reporting agencies have an obligation to monitor and manage furnisher practices as part of their broader obligation to achieve credit report accuracy.
  • While the measurement of credit report accuracy and the causes of inaccuracies present challenges, periodic measurement of credit report accuracy seems to indicate that the system will continue to get better.

For more detailed information, visit the CFPB’s report at: http://files.consumerfinance.gov/f/201212_cfpb_credit-reporting-white-paper.pdf

 

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