Fixing errors on your credit report should get easier now,
following stern new federal guidance issued to the companies that
provide information about you to credit bureaus.
The U.S. Consumer Financial Protection Bureau on Wednesday
that requires companies to review "all relevant information" when
investigating a dispute, including documents you have sent in to
prove your side of the story. Until recently, documentation
provided by consumers on their side of a dispute was reduced to a
code and cast aside.
"Credit reports play a critical role in the lives of consumers,"
CFPB Director Richard Cordray said in a
announcing the bulletin. "Given the importance of these reports,
consumers need to know that their documents are being reviewed when
they dispute what they believe is a mistake on a report."
Credit report errors can have harsh consequences for consumers,
Fair Credit Reporting Act
requires that disputes be investigated. But consumer advocates have
said that the
credit dispute system is broken
, leaving bad data weighing on some consumers for years.
"The overall credit report disputing process is something we
consumer advocates have been complaining about for years," said Chi
Chi Wu, staff attorney with the National Consumer Law Center. "It's
entirely automated and perfunctory -- no one is conducting a real
investigation like the law requires."
Credit furnishers include banks and credit card companies as
well as debt collectors and other companies that report on your
payment history to credit bureaus.
The big three credit bureaus -- Experian, Equifax and TransUnion
-- maintain an electronic system to share information with
furnishers. When they receive a complaint from a consumer about an
error, they relay the dispute to the furnisher of the disputed
Until lately, the system ditched any documents that consumers
submitted to back up their case. Now, however, the "e-Oscar"
portal for credit disputes
has been upgraded so credit bureaus can send furnishers documents
that have been sent in by consumers, according to the CFPB. For
example, if you send letters documenting that a debt has been paid,
that evidence can be relayed to the furnisher of information
showing an unpaid debt.
Nessa Feddis, vice president and senior counsel for the American
Bankers Association, said the ability to share documents will help
ensure accurate information on reports, while she downplayed the
"The requirement was already there," she said, "What's
significant is not the bureau's bulletin, it's the credit bureaus'
new system -- they've been working on this system for years."
In addition, a consumer can always go directly to the
information furnisher to dispute a record, Feddis said, reducing
the impact of the developments. While that's true, it means extra
steps for the consumer.
The bulletin did turn the voluntary improvement made by the
credit bureaus into a regulatory requirement. The consumer
protection bureau told information furnishers they must have a
system capable of receiving dispute information, including
documentation, from credit reporting agencies, and they must review
all the relevant information. Furnishers must also provide the
results of the investigation to the credit reporting agency, and
provide corrected information to all reporting agencies that
received erroneous information. Finally, information furnishers
must fix or delete disputed information, or permanently block
information that is incomplete, inaccurate or cannot be
"Any furnisher not currently maintaining a process that meets
these requirements should take immediate steps to comply with the
requirements of the law," the CFPB bulletin says.
A study by the Federal Trade Commission in February found that
one in five people's credit reports contained an error. Disputes
handled by credit reporting agencies is summarized in a brief code
with a 20-word description and relayed to the source of the
information, even if the consumer sent in letters and documents to
state their case.
The CFPB bulletin and document system will not address all
credit dispute problems, Wu said. For example, so called "mixed
files," where another consumer's credit history becomes confused
with yours, happens at the credit bureau level, not at the level of
the information furnisher. This is the type of error that caused an
Oregon woman to sue Equifax after years of trying to correct her
report, resulting in
an $18 million court award
But the CFPB bulletin is an important step that will help many
people plagued by bad credit they don't deserve, Wu said. "The CFPB
is telling them, 'You need to comply with the law, and we'll be
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