COLUMBUS, Ohio — Americans are virtually powerless to correct damaging mistakes in their credit reports due to loopholes and obstacles in the federal law governing credit-reporting agencies, an Ohio newspaper reported Sunday.
The lack of government regulation allows errors that wrongly deny thousands of people the chance to buy homes or cars, take out a college loan, receive medical care or even open a checking account, The Columbus Dispatch wrote. The report is the first of four parts looking at the three largest national credit-reporting agencies and the lack of federal regulation over the reporting system.
The newspaper's yearlong investigation collected and analyzed nearly 30,000 consumer complaints filed with the Federal Trade Commission over 30 months beginning in 2009 and with attorneys general in 24 states in 2009 and 2010. The newspaper said it requested complaints from all 50 attorneys general, but some states don't make the records public, some did not cooperate and others charged fees that were too high.
The complaints alleging violations of the Fair Credit Reporting Act by Equifax, Experian and TransUnion document how consumers across the country have failed to get even obvious mistakes such as wrong birthdates and names corrected.
More than 5 percent of complaints to the FTC and more than 40 percent of those to attorneys general say reports had wrong personal information. An Ohio man born in 1968 complained that his report identified him as having been a police officer since 1923.
Nearly 200 people complained to the FTC that their credit reports listed them as dead, preventing them from accessing credit. Almost a fourth of the complaints to the FTC and more than half of those to attorneys general involved mistakes in consumers' financial accounts for credit cards, mortgages or car loans. Car loans that had been paid off were reported as repossessions, and credit cards that had been paid off showed up as delinquent.
The newspaper also reported that more than 5 percent complained to the FTC about accounts wrongly listed as belonging to them, and more than half of all who filed complaints with the FTC said they could not persuade the credit-reporting agencies to fix problems.
Paul Pierce, 51, of Daytona Beach, Fla., said he began receiving phone calls in 2007 from an agency trying to collect more than $2,000 in cellphone debt belonging to Paul Louis of New York. Pierce kept receiving payment demands and three years later found that the debt on his credit report. He said Experian kept telling him it was his debt. The debt wasn't removed from his report until he complained to the Florida attorney general.
Estimates of those experiencing errors range from less than 1 percent from an industry-funded study to 25 percent by consumer advocates, the newspaper reported
The Washington-based Consumer Data Industry Association speaks for the three credit-reporting agencies. Stuart K. Pratt, the trade group's president and chief executive officer, questioned the validity of conclusions derived from self-reported complaints that he says the FTC makes clear are unverified. He also said the credit-reporting agencies estimate that at least a fifth of complaints are from people trying to have negative but accurate information removed.
Pratt also told the newspaper that credit-card companies and other creditors who send account updates to the agencies share the blame for any inaccurate information.
The Fair Credit Reporting Act enacted in 1971 provides little help to consumers. It does not require error-free credit reports, and credit-reporting agencies do not face penalties for reporting inaccurate information.
The law does require credit-reporting agencies to investigate consumer-reported errors, but does not say how the investigation will be handled. Filing a lawsuit is about the only option consumers have to fight a system in which they are presumed to be at fault, according to the newspaper.
Ohio Attorney General Mike DeWine, a Republican, who said the newspapers findings were "stunning and infuriating," has asked attorneys general in other states to join a multistate investigation into the credit-reporting system. President Barack Obama said in a statement to the Dispatch that his administration will make regulating the credit-reporting agencies a priority.
"We must continue to fight for an economy where everybody plays by the same rules, where consumers are protected," Obama wrote.
Obama in January named former Ohio Attorney General Richard Cordray to head the new Consumer Financial Protection Bureau that now has unprecedented authority to regulate credit-reporting agencies. The bureau is expected to release its regulation plan in July.