This article is the first installment in a two-part series. Here, we focus on what consumers can do to correct errors in their credit reports. In Part 2, Credit Reporting and Your Business: Obligations of Information Furnishers, we review this subject matter from the perspective of businesses providing information to credit reporting agencies.
Have you ever discovered that your credit background contains inaccurate information about you? This can be an incredibly frustrating situation, and it may also be an increasingly common one.[1]
Depending on the nature of these errors and their impacts on credit scores, they can prevent consumers from obtaining lines of credit or even from getting job offers. However, consumers may be protected by laws such as the Fair Credit Reporting Act (“FCRA”).[2] The FCRA was enacted in 1970 to regulate the accuracy, fairness, and privacy of consumer credit histories; it is administered by the Federal Trade Commission (“FTC”) and the Consumer Financial Protection Bureau (“CFPB”).
In this article, we discuss what steps you may consider taking in the event that you discover that consumer credit bureaus have been reporting inaccurate or outdated information in your credit history. But first, some additional background.
What is a consumer credit reporting agency?
Credit reporting agencies are sometimes also referred to as “credit bureaus” or “consumer reporting agencies.” These entities collect, process, and house data relevant to consumers’ financial histories. Credit bureaus collate and analyze the data they collect and generate reports that “help[] potential lenders or employers rate your reliability.”[3]
The three major credit bureaus are Experian, TransUnion, and Equifax (collectively, the “Credit Bureaus”). The Credit Bureaus receive data about consumers from lenders, including banks, car dealerships, mortgage companies, and other creditors. Businesses that send data to the Credit Bureaus are known as “furnishers.”
(Furnishers, like the Credit Bureaus, have their own sets of duties and responsibilities under the FCRA.[4] Please stay tuned for a future article on this subject.)
How to correct errors in your report
Like it or not, the Credit Bureaus are clearly an integral part of society and, unfortunately, future goals and plans can be jeopardized when they make mistakes. So, what can you do if you discover that your credit reports contain a mistake?
Obtain copies of your credit reports. In order to fully understand the origin of the error in your credit history, you’ll need to obtain and review a copy of your credit report from each Credit Bureau. Not all furnishers send data to each Credit Bureau, so information can vary across each Credit Bureau’s report on a particular consumer. A 2003 amendment to the FCRA—the Fair and Accurate Credit Transactions Act of 2003 (“FACTA”)[5]—allows consumers to receive a free credit report once per year from each Credit Bureau. Reports can either be requested directly from the Credit Bureaus or through a website that the Credit Bureaus jointly operate in order to comply with their obligations under FCRA and FACTA.[6]
Determine if the problematic information is something that can be removed. The Credit Bureaus will report all data that they collect, including information that reflects poorly on consumers’ credit histories, so long as it is believed to be accurate and current. What information can be removed? Answer: (1) incorrect information; (2) duplicative information (in some circumstances); and (3) old, negative information (depending on how old it is).
- Incorrect Information. Incorrect information can and should be removed and permanently disassociated from a consumer’s credit history as soon as practicable. For example, if a credit report contains information that is clearly wrong, such as incorrect names, dates of birth, addresses, or bank accounts or credit cards that the consumer never opened or applied for, such information can and should be stricken and removed.
- Duplicative Information. Consumers may also want to consider having information that is duplicative removed from their credit reports. Sometimes, for example, accounts or credit cards can appear multiple times in the same report and, while the information may not necessarily be incorrect, the appearance of multiple instances of the same item (apart from being unnecessary) may prompt a prospective lender or employer to believe that the consumer’s credit history is more problematic than it actually is.
- Negative, out-of-date Information. Of course, credit reports can contain negative information such as, among other things, records of foreclosures, late payments, judgments, lawsuits, liens, and bankruptcies. But, in general, accurate but negative information shouldn’t be left hanging over a consumer’s head forever. Most of it can and should be removed after seven (7) years, although there are exceptions. For example, while items discharged in bankruptcy may only be reported for seven (7) years, the fact that a bankruptcy was filed can be reported for up to ten (10) years from the date of filing.[7]
Notify the Credit Bureaus of the disputed information. If you find inaccurate or outdated information in your credit reports, take action immediately by notifying the Credit Bureaus that you dispute the information. Disputes can be initiated with each Credit Bureau through its website.[8]
The Credit Bureaus have thirty (30) days to review and respond to a complaint. They will investigate the complaint by contacting the furnisher(s) of the disputed information; if the furnisher(s) cannot prove that the disputed information is in fact accurate, then the Credit Bureaus must delete or correct it and provide the consumer with an updated report. Consumers may also consider contacting the furnisher(s) of the information directly.
Wherever a complaint results in a changed or updated report, the consumer has the right to instruct the Credit Bureaus to provide updated copies of the report to any prospective employers who received the old erroneous report within the past two (2) years, as well as to any other persons who received the old erroneous report for any purpose during the prior six (6) months.[9]
The above steps can be successful in resolving a dispute. But if they are not, there are other options to consider, including bringing the dispute to the attention of regulators and, if necessary, litigation.
File a CFPB Complaint. If the Credit Bureaus fail to remove information that a consumer identifies as incorrect or outdated, then the consumer may choose to involve regulators by filing a complaint with the CFPB. This can easily be done through the Bureau’s website.[10]
Litigation. If the dispute cannot be resolved through any of the above avenues, then consumers may consider escalating it to litigation. Inaccurate reporting of information is actionable under the FCRA. Consumers can recover actual or statutory damages and—if the violation was willful—punitive damages.[11] Consumers have two (2) years after discovering an error in which to file suit.[12] As with many kinds of disputes, litigation should always be a last resort.
Should I contact an attorney?
If you have questions about whether information contained in your credit report can be removed, you should contact an attorney. If properly handled, disputes with Credit Bureaus and/or information furnishers may be an effective means for resolving discrepancies in credit histories. You should contact an attorney for additional information about this area of the law.
Max Julian is a partner at Gertsburg Licata in the litigation practice group. He may be reached at (216) 573-6000 or at [email protected].
Gertsburg Licata is a full-service, strategic growth advisory firm focusing on business transactions and litigation, M&A and executive talent solutions for start-up and middle-market enterprises. It is also the home of CoverMySix®, a unique, anti-litigation audit developed specifically for growing and middle-market companies.
This article is for informational purposes only. It is merely intended to provide a very general overview of a certain area of the law. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney licensed to practice in your jurisdiction. If you have specific questions about your matter, please contact an attorney licensed to practice in your jurisdiction.
Footnotes:
[1] See Fed. Trade Comm’n, Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003 39 (Dec. 2012) (finding that 13.4% of consumer credit reports from a sample of 2,968 reports “contained at least one material error”), available at https://www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-accurate-credit-transactions-act-2003-fifth-interim-federal-trade-commission/130211factareport.pdf.
[2] Codified at 15 U.S.C. § 1681, et seq.
[3] TransUnion, What is a credit reporting agency?, https://www.transunion.com/credit-reporting-agencies (last visited Mar. 12, 2018).
[4] See 15 U.S.C. § 1681s-2.
[5] Codified at 15 U.S.C. §§ 1601, 1681, et seq.
[6] See generally Annual Credit Report.com, https://www.annualcreditreport.com/index.action (last visited Mar. 12, 2019).
[7] See 16 C.F.R. § 605.
[8] See generally Experian, Dispute online, https://www.experian.com/disputes/main.html#newDispute (last visited Mar. 12, 2019); TransUnion, Credit Dispute, https://www.transunion.com/credit-disputes/dispute-your-credit (last visited Mar. 12, 2019); Equifax, How to dispute information on your Equifax credit report, https://www.equifax.com/personal/disputes/ (last visited Mar. 12, 2019).
[9] See 15 U.S.C. § 1681i(d).
[10] See CFPB, Submit a complaint, https://www.consumerfinance.gov/complaint/getting-started/ (last visited Mar. 12, 2019).
[11] See 15 U.S.C. § 1681n; see also, e.g., Brim v. Midland Credit Mgmt., Inc., 795 F. Supp. 2d 1255 (N.D. Ala. 2011).
[12] See 15 U.S.C. § 1681p.
