On Wednesday, the heads of Equifax, Experian and TransUnion will testify before the House Financial Services Committee for the increase in consumer complaints to the CFPB.
Washington, DC — Late last month, The American Banker covered a massive and unprecedented “2020 spike” in complaints from consumers to the Consumer Financial Protection Bureau (CFPB) regarding errors and other problems on their credit reports and other issues involving the credit reporting agencies (CRAs).
A staggering 58% of all consumer complaints submitted to CFPB in 2020 were about credit reporting and the number of consumer complaints regarding the three main CRAs—Equifax, Experian, and TransUnion—more than doubled from 2019 to 246,000.
In the midst of a global pandemic that left millions without a job and in need of help, Americans are understandably frustrated with the credit reporting industry, which is notorious for being unresponsive and unaccountable to consumers. According to FTC studies, an estimated one in five Americans has an error on one of their credit reports, denying them access to things like more affordable mortgages and car loans. Worse yet, consumer surveys conducted by the FTC indicate that Americans overwhelmingly find the process to correct errors and other problems with their credit report confusing, difficult, and extremely time-consuming.
Unfortunately, American consumers have no choice about whether to participate in the credit reporting system, which generates credit reports and scores that are used to evaluate applications for mortgages, car loans, credit cards, and even employment.
Incredibly, rather than take responsibility, the credit reporting industry has sought to blame the surge in complaints on AACCP members and other organizations offering credit repair services, which help American consumers navigate the complicated system.
When asked about these allegations, however, a CFPB spokesman told The American Banker that the CRAs:
“have provided no credible evidence that the increase is the result of unauthorized submissions by credit repair organizations.”
Chi Chi Wu, a staff attorney at the National Consumer Law Center, summed up the flaw in the talking points being pushed by the credit reporting industry:
“[T]he position that nearly 300,000 consumers are lying to the CFPB is not true.”
In fact, as discussed in the American Banker article, the pandemic appears to have driven the spike in complaints:
A lawyer representing the largest credit repair firm denied the industry’s allegations, saying consumers filed more complaints with the CFPB because of financial stress stemming from the coronavirus pandemic.
“With respect to the complaint numbers, if you plot the CFPB numbers by month, you will see a striking similarity to COVID,” said Eric Kamerath, an attorney who represents Lexington Law, the largest credit repair firm, and Progrexion Marketing, an advertising firm that owns the second-largest firm, CreditRepair.com. “People had more interest in their credit reports and more opportunity to try and deal with questions on their own.”
By deflecting blame to consumer credit advocates, the CRAs ignore the mountain of consumer complaints collected by the CFPB about their industry each year. In fact, while the 2020 complaint figures are significantly higher than 2019, credit reporting has been the top CFPB complaint category for the past three years. Indeed, since 2013, credit and consumer reporting has been amongst the top three complaint categories every year.
- In 2019, 44% of consumer complaints to CFPB were about credit or consumer reporting, followed by debt collection at 21%.
- In 2018, 38% of consumer complaints to CFPB were about credit or consumer reporting, followed by debt collection at 25%.
- In 2017, 31% of consumer complaints to CFPB were about credit or consumer reporting, followed by debt collection at 26%.
- In 2016 and 2015, credit and consumer reporting accounted for the second most CFPB complaints (after debt collection) at 20% and 19%, respectively.
- In 2014 and 2013, credit and consumer reporting accounted for the second most CFPB complaints (after debt collection and mortgage-related complaints) at 18% and 15%, respectively.
In contrast, complaints about credit repair services represent a miniscule fraction of the complaints received by CFPB each year—ranging between 0.1 and 0.3% each year since 2015.
In response to questions from The American Banker, Liz Shrum, a senior advisor to the AACCP, sets the record straight:
“‘A consumer comes to us and says there’s all this stuff on [their credit report] that is not [theirs], it’s wrong or fraudulent and they are looking for other resources for how to survive,’ said Liz Shrum, a senior adviser and spokesperson for the group, which has two other members, Progrexion and CreditRepair.com.”
“‘If there’s been a mistake or someone stole their identity, we send letters to ask the debt collectors to investigate that on behalf of consumers,’ Shrum said, adding: ‘We ask for there to be investigations of inaccurate, unfair or unsubstantiated items on credit reports.’”
Later this week, the heads of Equifax, Experian and TransUnion will testify before the House Financial Services Committee in an oversight hearing focused on accuracy and compliance issues in the consumer credit reporting industry. Rather than blame credit repair organizations, we would urge these executives to commit to taking real action to address longstanding and legitimate concerns about the high-rate of errors in the credit reporting system and the CRAs’ lack of responsiveness to consumer complaints.