WASHINGTON – Lawmakers yesterday pressed a Consumer Financial Protection Bureau official regarding problems with the credit reporting system raised in a major study released by the agency last week.

The CFPB found that consumers disputed up to 38 million items on their credit reports last year, as part of its report examining the practices of the big three credit reporting companies, Equifax, Experian and TransUnion (CU Journal, Dec. 17).

Sen. Sherrod Brown (D-OH) expressed concern about credit report inaccuracies during a hearing on the issue, warning that the industry often is profitable for lenders and the credit reporting agencies, but difficult for consumers to navigate.

“Under the law, credit bureaus and creditors have some general commands but few concrete obligations,” said Brown, who chairs the Senate Banking Subcommittee on Financial Institutions. “Too often the burden is on the consumers, who don’t know enough about their credit reports, or who don’t have time to navigate the arcane and confusing system.”

The Ohio Democrat questioned Corey Stone, assistant director for deposits, cash, collections and reporting markets at the CFPB, about how those complaints are addressed.

The report found that while the majority of complaints are referred from the credit bureaus back to the companies that provided the information, some supporting documentation mailed in by consumers may not get passed along with the complaint. Automated complaint forms sent back to the data suppliers contain dispute codes and up to 255 characters of supplemental text from the consumer complaint.

“Is it a fair statement to say that consumers must provide evidence when they challenge a credit score, but that creditors are taken at their word?” Brown asked Stone during the hearing.

Stone said he thought that description was “accurate.”

“You’re saying that the consumer can provide information that’s not going to get to the furnisher in necessarily the form they provided,” he said. “It does get converted into codes, it can be put into this limited text field …or may not be passed on.”

But Stone declined to comment on whether such actions violate the law, noting the report was intended to be “descriptive, rather than prescriptive.”

He said the agency is still investigating what to do next.

Sen. Jeff Merkley also asked Stone about the role of medical debt collection in credit scoring, an issue the Oregon Democrat has worked on previously. He reintroduced legislation in March that would prohibit companies from using paid off or settled medical debt in assessing consumer credit scores.

“I’m only arguing that when people have settled this, and gone through the complex process of determining which insurance company should have paid what – but by that time it’s already been reported and it’s on their credit report for seven years,” Merkley said. “Between the fact that one, the industry doesn’t consider it predictive, and the fact that there’s so much damage, it seems that ought to come out.”

 

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