Almost four years after federal law was updated to let you get free copies of your credit reports and more easily fix mistakes found in them, you can indeed get your reports for free. But correcting erroneous or nefarious information still can be nearly impossible.
"Credit reports are plagued with errors," Chi Chi Wu, staff attorney at the National Consumer Law Center, testified Tuesday before the House Financial Services Committee. And credit reporting companies continue to respond to disputes with "perfunctory" automated systems that tend to repeat errors rather than repair them, she told the panel.
Stuart Pratt, president of the Consumer Data Industry Assn., which represents credit reporting companies, said reports of widespread inaccuracies were overblown. About 11% of the 52 million free credit reports issued in the last two years were disputed, he said. In some of those disputes, he added, consumers were merely attempting to update information that had been accurate but was out of date.
All sides agreed, however, that key portions of the 2003 Fair and Accurate Credit Transactions Act had not been put into practice, including a provision that would warn consumers if they appeared to be victims of identity theft.
In addition, regulators haven't come out with rules governing how and when banks, retailers and others who provide credit information must respond to consumer disputes. Nor have they issued rules that would help consumers dispute information with the credit grantor, rather than the credit reporting company -- a move that the credit reporting companies say they welcome.
Part of the blame rests with federal agencies that were asked to work together to establish rules and regulations, said Rep. Spencer Bachus (R-Ala.).
Credit issuers, which include retailers as well as banks and other financial companies, are regulated by a patchwork of state and federal agencies, including the Federal Trade Commission and the Federal Reserve. The law required the federal agencies to create standard rules for all issuers of credit to follow when reporting consumer payments to credit bureaus. But, the agencies haven't produced the rules.
"I am very disappointed in the agencies and their inaction in fashioning regulations," Bachus said.
"So many years to accomplish a congressional task is really ridiculous and unacceptable," said Rep. Carolyn B. Maloney (D-N.Y.).
Officials of the FTC and the Fed testified that they'd accomplished many tasks demanded by the law but said that "interagency rulemaking" was not "efficient."
Wu said that some of the work the agencies had already done was inadequate to protect consumers from having erroneous information added -- sometimes repeatedly -- to their credit files.
Credit reporting software is tolerant of mistakes, Wu said, so consumers with similar names or Social Security numbers continue to have their files merged. The process also fuels identity theft because, with only a portion of accurate information, a thief can get credit and have the account issued to the thief's address, rather than the address that the victimized consumer has on file. Regulators have noted this problem in reports since the 2003 law was passed, but they have been hesitant to require better data matching because creditors contend that minor errors could cause them to toss out relevant data.
Moreover, companies that buy delinquent debt from creditors sometimes add data to consumer files by reviving long-dormant information, Wu said. The 2003 act was supposed to curb that practice.
Pratt countered that the law had helped consumers but needed to be given more time to work as intended.
Rep. Barney Frank (D-Mass.) said that if the federal agencies were unable to forge an agreement on the remaining regulations demanded by the act within three months, he would sponsor legislation to give jurisdiction to the FTC. The FTC would have to consult only with the other agencies, he said. He said he also planned to introduce legislation to reinstate the consumer's right to sue over inaccurate credit reporting.