A national survey released today by the U.S. Public Interest Research Group (PIRG) found that, despite passage of a 1996 federal law, nearly one-third of credit reports still contain serious errors that could cause consumers to be denied credit. The report also found that many consumers still can't get through to bureaus to request their reports. The report makes recommendations to Congress and state legislatures on ways to improve credit report access and accuracy, since reports are now being used not only for credit, job, and insurance applications but also when consumers try to write checks, open bank accounts or even use ATM debit cards.
"Many credit reports are a ticking data time bomb of inaccurate information that could devastate a consumer's financial health at any moment," said Ed Mierzwinski, PIRG Consumer Program Director. "The data dealers are selling credit reports that are full of mistakes to businesses, and innocent consumers pay the price."
Among the principal findings of the report were the following:
Twenty-nine percent (29%) of the credit reports contained serious errors that could result in the denial of credit. "Serious" errors included false delinquencies, public records or judgements that belonged to a stranger, or credit accounts that did not belong to the consumer;
Seventy percent (70%) of the credit reports contained mistakes or errors of some kind, also including the following;
Forty-one percent (41%) of the credit reports contained incorrect personal demographic identifying information;
Twenty percent (20%) of the credit reports were missing major credit cards, loans, mortgages, or other accounts that are critical to demonstrating consumer credit worthiness;
In addition, the report found that it was difficult to obtain credit reports.
An additional 22 requested reports, or 14% of total requests, were never received by the consumers, despite repeated calls and/or letters.
Of the consumers who did obtain their credit reports, at least 14% of them were forced to call back 3 or more times.
Twelve percent (12%) of consumers waited two weeks or longer to receive their report once they finished requesting it. It took more than a month for one California man to receive his report.
"We demand that Congress, the Federal Trade Commission and state legislatures require the credit bureaus to comply with the law by fixing the mistakes and answering the phones," added Mierzwinski. "And we demand improvements to the law to make it easier for consumers to avoid mistakes by credit bureaus, banks, department stores and other data dealers," he said.
Investigations and reports in the 1980s and early 1990s by Congress, the PIRGs, state attorneys general and the Federal Trade Commission had found that credit bureau errors were a leading national problem. From 1992-94, the Federal Trade Commission and several state attorneys general signed court-approved consent decrees with several credit bureaus, including the three national data repositories, Equifax, Trans Union and TRW (now Experian). Following a seven year PIRG campaign, Congress finally enacted modest 1996 amendments to the Federal Fair Credit Reporting Act, to improve accuracy and protect consumer privacy.
The new federal law, which took effect on 30 September 1997, requires increased accuracy standards to prevent errors and requires certification by banks and other creditors that furnish information to the bureaus that any disputed information is accurate before it is re-inserted following a reinvestigation. The new law also requires bureaus to have adequate personnel, to maintain toll-free telephone numbers and to make their reports easier to understand.
Unfortunately, the new law also preempts the states from enacting new laws in many areas, including regulating the duties of banks and other creditors to maintain accuracy, until the year 2004. One area not preempted is the right of states to enact free credit laws. Since 1996, Georgia, Colorado and New Jersey have joined Maryland, Massachusetts and Vermont to provide free reports annually on request.
The PIRG report also made the following recommendations for Congress, state legislators, and the credit industry to help protect consumers from credit report errors:
Improve consumer access to credit reports by providing that an automatic free credit report be mailed to every consumer annually by each national bureau.
Strengthen duties of banks, department stores and other furnishers of information to avoid errors and give consumers greater rights to sue these data dealers, as only Massachusetts and California now provide.
Toughen enforcement of credit accuracy laws. Increase civil penalties for violations and provide for $1000 mandatory minimum statutory damages to consumers for violations of credit reporting laws by credit bureaus or furnishers.
"Although credit reports contain vitally important information about most consumers, the accuracy of those reports is far from guaranteed," U.S. PIRG's Mierzwinski said. "If credit bureaus can't always be trusted to get the facts straight, then consumers should be given the tools to protect themselves."
The report offered the following recommendations for consumers to protect themselves from credit report mistakes:
Inspect your credit report annually. Just like your body needs an annual physical, your financial health needs an annual fiscal; Dispute inaccurate information immediately. The bureau is required to send you a copy of your rights when it mails your report.
Take advantage of your right to restrict access to your credit report by removing your name from credit bureau lists that are sold to creditors and insurers for junk marketing mailings.
The report, "Mistakes Do Happen," looked at a representative sample of credit reports from across the country to find out how common mistakes in credit reports are and what types of errors most often occur. In January, 1998, 88 consumers obtained 133 credit reports from the three major credit bureaus - Experian (formerly TRW), Equifax, and Trans Union. An additional 22 consumers failed to receive their reports.
"Your credit report, while not always accurate, will always affect your financial future," concluded PIRG's Mierzwinski. "Consumers, credit bureaus, and legislators should do everything possible to see that credit reports tell the truth, the whole truth, and nothing but the truth."