The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Experian, one of the largest credit reporting agencies in the U.S., for allegedly conducting "sham investigations" into consumer disputes about their credit reports.
Why It Matters
The CFPB claims that Experian's inadequate handling of disputes has led to incorrect information being included on consumers' credit reports, which can "threaten consumers' access to credit, employment, and housing."
Millions of Americans rely on accurate credit reporting to manage their financial lives. Experian, as one of the three main credit bureaus, holds significant power over consumers' financial health.
Errors on credit reports can cause lower credit scores and higher interest rates on loans. This can make it more expensive for consumers to borrow money for cars, homes and other needs.
Inaccurate data on credit reports can also create challenges when trying to get approved for housing since landlords often check credit reports before approving rental applications. Moreover, employers may review credit reports as part of their hiring process, meaning incorrect information can impact job opportunities and career prospects.
What To Know
The U.S. consumer watchdog's complaint against Experian alleges several failures in the company's handling of consumer disputes. According to the CFPB, Experian sent "misleading, confusing, or inaccurate" dispute codes to furnishers of credit reporting data, failing to provide them with all relevant information about disputes. This practice compromised the accuracy of the information that furnishers relied on when responding to disputes.
The CFPB also claims that Experian allowed inaccurate information to remain on credit reports by over-relying on furnishers' responses, even when it had information from consumers suggesting that the furnishers might be providing unreliable information. For example, Experian allegedly received "responses with inconsistent information, such as indicating a consumer's overdue balance is greater than the total amount due." The CFPB believes this overreliance on potentially unreliable furnishers led to ongoing inaccuracies in consumers' credit reports.
The complaint also alleges that Experian failed to inform consumers of the results of reinvestigations, leaving them unaware of the status and outcomes of their disputes. The CFPB also claims that Experian allowed mistakes to reappear on credit reports by "not prevent[ing] new furnishers from reinserting tradelines that Experian had deleted in response to a consumer dispute."
Overall, the CFPB alleges that Experian's practices violated the Fair Credit Reporting Act (FCRA) and the Consumer Financial Protection Act (CFPA), both of which are designed to protect consumers' rights and ensure the accuracy of credit reporting.
Experian told Newsweek that the company has been discussing industry-wide issues with the CFPB and has been operating "in good faith." Experian criticized the CFPB for filing the lawsuit with "no communication and no response to our outstanding communications with them."
"The lawsuit is completely without merit. It is contrary to longstanding regulatory and judicial precedent and is another example of irresponsible overreach by the CFPB. Our legal position is strong, we will defend it vigorously and are confident we will prevail. We do not expect this to have any material impact on our business," Experian said.
Experian added that the company is committed to adhering to regulatory obligations and that they take "great steps" to investigate consumer disputes.
"We take strong exception to the substance and the tone of the CFPB's accusations," Experian said.
What Experts Are Saying
Rohit Chopra, director of the CFPB, said in a statement: "When consumers disputed errors on their credit reports, Experian conducted sham investigations rather than properly reviewing the disputes as required by federal law. Credit reporting errors can have serious consequences for a family's finances, and it is critical that credit reporting giants follow the law."
Jordan Takeyama, senior public relations manager for Experian, told Newsweek: "This lawsuit relates to matters that as an industry we have been collectively discussing with the CFPB. We have operated in good faith with the CFPB throughout. Despite our constructive engagement and long track record of working alongside the CFPB to ensure consumers can easily dispute potentially inaccurate information, the CFPB chose to file a lawsuit with no communication, and no response to our outstanding communications with them.
The lawsuit is completely without merit. It is contrary to longstanding regulatory and judicial precedent and is another example of irresponsible overreach by the CFPB. Our legal position is strong, we will defend it vigorously and are confident we will prevail. We do not expect this to have any material impact on our business.
We take our commitment to meeting the needs of consumers and adhering to all our regulatory obligations seriously. We take great steps to ensure we investigate every consumer dispute thoroughly and go above and beyond the requirements of the law. We take strong exception to the substance and the tone of the CFPB's accusations."
What Happens Next
The CFPB is seeking a court order to stop what it believes are Experian's unlawful practices and financial compensation to consumers who have been harmed by the credit bureau's alleged practices. This could include "restitution, damages, refunds, or other monetary relief" to cover financial losses due to inaccurate credit reports.
The CFPB is also seeking forfeiture of any ill-gotten gains that Experian may have obtained through its alleged unlawful practices. This would seek to prevent Experian from benefiting financially from acts that harmed consumers and violated federal laws.
The CFPB is also pushing for a civil money penalty on Experian, which would serve as a deterrent against future violations and reinforce the importance of compliance with consumer protection laws.
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