I have breaking news! Congress just dropped a Credit Bureau bombshell!
The Chairman of the Select Subcommittee on the Coronavirus Crisis called on the CFPB to investigate Experian, Equifax, and TransUnion for allegedly failing to address consumer disputes, as well as discarding disputes without investigation and potentially violating the Fair Credit Reporting Act!
So, on this week's Podcast, I cover the allegations made against the Bureaus, their response to the allegations, and what this means for our industry!
Ok, let's get into this…
A few days ago, Representative Jim Clyburn, Chairman of the Select Subcommittee on the Coronavirus Crisis, sent a LETTER to Rohit Chopra, the Director of the Consumer Financial Protection Bureau, requesting the CFPB review the three bureaus Equifax, Experian, and TransUnion for possible violations of the Fair Credit Reporting Act.
This call for an investigation followed Chairman Clyburn's three letters to the CEOs of Equifax, Experian, and TransUnion asking for information on the companies' failures to respond to and resolve credit reporting inaccuracies raised by consumers during the pandemic.
Now I know you credit heroes have noticed the increase in all those stall letters you get from the bureaus, right? Or just no response at all? Well, that's a big part of what this is about. And it looks like the bureaus are getting called out, which is awesome!
The Select Subcommittee began reviewing the three Credit Bureau's dispute processes after the CFPB found that the Credit Bureau's rate of correcting or removing errors on consumer Credit Reports had dropped dramatically during the pandemic.
How this relates to us? Well…
Chairman Clyburn's letter alleges, "Information obtained by the Select Subcommittee indicates that there are longstanding problems with the Nationwide Consumer Reporting Agencies' practices for responding to consumers who challenge credit reporting errors."
Ha. We could've told him that. Check out our episode on Credit Bureau Stall Tactics to learn more about how they like to do business and how terrible they are.
The Subcommittee raised concerns about whether the Bureaus fulfill their obligations to consumers and the CFPB under the Fair Credit Reporting Act.
Chairman Clyburn also added, "The prevalence of credit reporting errors has been particularly concerning at a time when Americans have needed access to credit in order to weather difficult economic circumstances brought on by the pandemic. Errors in credit reports can reduce consumers' credit scores, potentially blocking access to loans, housing, and employment, among other serious consequences."
Chairman Clyburn followed that up with the Subcommittee's findings and requested that the CFPB use its supervisory authority to investigate and address these serious issues.
Here's the thing to remember…
This is a developing story, and we still don't have all the information yet. It's also unclear if or when this investigation will begin or how it will change the industry. But…
ANY industry change that benefits a consumer's ability to dispute errors on reports and to repair their credit is a WIN for everyone!
That said, let's take a look at what the Subcommittee found…
I've included a link to Chairman Clyburn's LETTER, so you can read it or follow along…
Okay, according to the Select Subcommittee on the Coronavirus Crisis…
Consumers Dispute Errors and File Complaints Far More Often Than Previously Thought
Consumers have been disputing information in their credit reports on a scale much greater than previously thought. The CFPB believes the total number of disputes is more than DOUBLE their previous estimates.
For example, the CFPB estimated that all three Credit Bureaus would receive 8 million dispute submissions COMBINED in 2021. But JUST Equifax received nearly 14 million in 2021!
Between 2019 and 2021, consumers disputed nearly 336 million items—on their credit reports across the three Bureaus.
And during 2020 and 2021, the CFPB received a record-breaking number of complaints about the Bureaus, more than 619,000 in 2021 alone.
And I'm not surprised about all these complaints. We can see for ourselves the number of stall letters we're suddenly receiving from the bureaus. Or no response at all!
Here's what I believe…
We know that 8 out of 10 credit reports contain errors, so it's our right to dispute them.
The more people realize good credit is an essential part of modern life. The more people are going to demand Credit Bureau accuracy and accountability.
I don't know why they have the power they have; we didn't vote for them. They aren't a part of the government. And it's messed up that they have so much control over our lives.
It's unfortunate that financial literacy isn't taught in schools and unfortunate that we as adults have to learn this all the hard and expensive way. In my case, I didn't start learning how to be financially literate until a bank error happened, and the system attacked me. That changed the course of my life, and that's now why I want to help others.
Greater financial literacy will inspire greater financial recovery efforts. The Bureaus really should be the ones leading this charge, not fighting the very people who need help the most.
And why do they do this? Because it makes them and the banks trillions of dollars. So they have all the money in the world to hire lobbyists and pressure politicians into keeping the laws working in their favor.
Ok, enough of my rant.
Back to the Subcommittee findings. They allege that…
The Bureaus are Disregarding Millions of Disputes Based on Speculative or Overly Broad Criteria
The Select Subcommittee obtained evidence indicating that the Bureaus discard millions of disputes every year WITHOUT INVESTIGATION.
At least 13.8 million dispute submissions were discarded without investigation between 2019 and 2021 alone!
Yup. Credit Heroes see this happening every day. We've been discussing it daily in our community through the entire pandemic. That's when they really accelerated this bad behavior.
All three Bureaus claim that they discard disputes without investigation when they suspect unauthorized 3rd-party involvement. The Subcommittee determined, however, that each of the Bureaus uses vague and speculative criteria to determine that a dispute was submitted by an unauthorized 3rd-party, such as multiple disputes with similar language or arriving in similar envelopes.
For example, Equifax disregards mail that "tends to use identical language and format [and] come from the same zip code."
Experian discards disputes based on "envelope characteristics" and "letter characteristics," including factors such like "same or similar ink color," "same or similar font," and "same or similar verbiage."
TransUnion has a reference guide for disregarding disputes based on envelope-related criteria.
First, THIS IS REALLY STUPID!!! It's an obvious stall tactic and a direct attack on consumers' ability to repair their credit, but I'll save the rest of my thoughts until the end of this section of findings.
The Select Subcommittee stated that while the Bureaus are not required to investigate illegitimate disputes, discarding these disputes runs contrary to the Fair Credit Reporting Act if any of them have been submitted directly by consumers or their authorized representatives. (That's you, Credit Hero).
The findings suggest that the Bureaus could be improperly discarding millions of disputes every year, unfairly punishing consumers who take advantage of government-furnished or publicly available support services.
Consumers are often not experts on credit reporting and may use online resources when disputing information with the Bureaus, such as sample template letters with similar language, some of which are provided by the CFPB itself!
BOOM! Mic DROP.
Thank you, Select Subcommittee, for saying what we're all thinking.
My takeaway from this section of findings…
Throwing away consumer financial disputes because envelopes look similar is really, really stupid. How many types of envelopes even exist? Like 2 or 3?
The Subcommittee already made the best point, people use what they have access to, and most often, that's a free resource or template they find online. Discarding any financial dispute without really investigating it is lazy! And not only that, it's unethical and immoral.
Even if 99% of those discarded disputes were improperly filed or frivolous, that means 1% of those disputes were legitimate.
But that 1% isn't a number. It's a person. It's thousands of people, and their financial future was thrown in the trash because they used the wrong envelope. The Bureaus should be embarrassed that this is even being used as their argument.
Back to the Subcommittee findings…
The Bureaus Overly Rely on Data Furnishers to Investigate Disputes
The Subcommittee obtained evidence showing that all three Bureaus referred more than half of their disputes to Furnishers for investigation.
Specifically, between 2019 and 2021, Equifax referred between 61-62% of disputes to Furnishers each year, Experian referred between 54-56%, and TransUnion referred between 80-82%.
This reliance is concerning because CFPB and other stakeholders have previously cited Furnishers for often conducting insufficient investigations and the Bureaus for often accepting the Furnisher's response without independent investigation.
And the last major finding from the Subcommittee…
The Majority of Disputes Do Not Result in Relief for Consumers
The Select Subcommittee obtained evidence to suggest that the Bureaus may not be allocating enough staff to adequately investigate disputes.
Despite each Bureau reporting a similar number of disputed items in 2021, the number of staff and staff time that each Bureau allocated to responding to disputes and CFPB complaints varied greatly.
Ultimately, the majority of credit report disputes have not resulted in relief—in other words, correction or removal of reported errors—for consumers.
From 2019 to 2021, Equifax made no changes to 53-57% of disputed items each year, Experian made no changes to around 48% each year, and TransUnion made no changes to 47-51% of disputed items in the three years that they reviewed.
While some portion of the disputes may be meritless, some are not.
The CFPB and others have documented cases of consumers experiencing stress, frustration, and financial hardship as a result of the Bureau's failure to correct legitimate errors on their credit reports. Unresolved errors in credit reports can, in some cases, cause consumers to lose access to loans, housing, and employment.
No shit!
Well, all I can say again is "thank you," Subcommittee…
My takeaway from all of these findings…
Number 1: The bureaus are a**holes. And they're finally under a microscope!
Number 2: Don't be discouraged! The first step to change is recognizing the problem.
These Congressional findings confirm what all of us in the Credit Industry have long suspected…
The Bureaus are not our friends. The Bureaus are businesses. They don't see you as a person. Your financial data is their product. Your personal information makes them and the banks trillions of dollars. It's about time we stood up to them and demanded change.
And we just got a massive vote of confidence from Congress that reform is on its way!
So that is awesome!
And don't forget, Credit Repair might be an uphill battle, but we're fighting the good fight! Like the late, great John Lewis said: "Get in good trouble." And standing up to Credit Bureaus and banks is definitely good trouble, and it changes lives.
I'll keep you updated as the story unfolds.
I’ll end by saying…
If you don’t already have a Credit Repair Cloud account, check it out. It’s the software that most Credit Repair businesses in America run on. Just sign up for a 30-Day Free Trial at CreditRepairCloud.com/freetrial
And If you’d like me to hold you by the hand as you launch your own credit repair business, check out our Credit Hero Challenge!
It’s an amazing program where you’ll learn the processes that have made millionaires, and it costs less than you'll spend taking your family to McDonald’s for dinner.
We’ve got another challenge starting in a few days, so grab your spot right now at CreditHeroChallenge.com!
Until then, remember, keep the facts on your side…
And keep changing lives!