credit bureaus are breaking the law due to minimal investigation efforts
Once again, Leonard Bennett, is taking the credit bureaus to task. He contributed to a January 2009 report to the FTC which documents the way credit bureaus investigate consumers disputes (the report was written by Chi Chi Wu). It concludes credit bureaus are breaking the law due to minimal investigation efforts and often merely parroting what a creditor tells them without an independent investigative effort. Currently, most investigations use automated systems at offshore 3rd party companies.
Despite its importance, the FCRA dispute process has become a travesty of justice. The major credit bureaus (Equifax, Experian, and TransUnion) conduct investigations in an automated and perfunctory manner. The bureaus:
- Translate the detailed written disputes submitted by desperate consumers into two or three digit codes.
- Fail to send supporting documentation to creditors and other information providers (furnishers) as required by the FCRA.
- Limit the role of their employees who handle disputes, or of the foreign workers employed by their offshore vendors, to little more than selecting these two or three digit codes. Workers do not examine documents, contact consumers by phone or email, or exercise any form of human discretion in resolving a dispute.
No one can argue these days the importance of credit in the lives of Americans today. Having good credit means access to loans at good interest rates, employment and even insurance.
The information contained in a person’s credit report doesn’t drop down from the sky. It comes directly from credit card companies, mortgage bankers and auto loan providers, who are referred to as “information providers”.
The Fair Credit Reporting Act (FCRA) does not impose strict liability for inaccuracies. Instead, it requires the credit bureaus to “follow reasonable procedures to assure maximum possible accuracy.” Do automated investigations meet these standards? I’ll let you be the judge.
- In a previous study, Leonard Bennett found that an investigator had 4 minutes per dispute to decide which 2 or 3 letter code to assign a dispute.
- In their quest to reduce investigation costs, Equifax has used various automated systems. Before moving investigation efforts offshore, Equifax’s costs were $4.07 per investigation. Currently, Equifax pays only $.57 per consumer dispute letter, regardless of how many items or accounts are at issue.
- Even more despicably, Equifax, in its quest to drive down dispute costs, has recently started to charge information providers for each dispute a consumer submits against the information it provides, then splits this fee with its automated investigation companies.
Want more proof? The FTC report quotes Equifax’s Vice President of Global Consumer Service describing the investigation process. In it, the VP explained that the investigators had no means in which to communicate with either the consumer or the information furnisher:
- Investigators did not have any phones on their desks
- Did not have access to email or fax machines
- There was no way for the investigator to forward consumer documentation to the information furnisher, despite the legal requirements per the FCRA to do so. The deposition quoted the VP as saying, “A mechanism does not exist to forward the actual documents”.
