Business Practices & Corporate Accountability News

BOSTON—One in four credit reports contains errors serious enough to cause consumers to be denied credit, a loan, an apartment, mortgage or even a job, according to a new survey released today by MASSPIRG. Download the report.

"Most people don't even find out that their credit reports contain errors until it is too late-when they have lost the loan, been denied the mortgage, or been turned down for an apartment," said Deirdre Cummings, MASSPIRG's Consumer Program Director.

Three national credit bureaus, Equifax, Experian, and Trans Union, collect and compile information about consumer creditworthiness from banks, creditors and from public records such as lawsuits, tax liens and bankruptcy filings. The so-called "Big Three" each maintain a file on nearly every adult American. The resulting credit report amounts to a consumer's financial résumé. The credit score calculated from this report is a consumer's financial SAT.

Over the last decade, the state PIRGs and other consumer organizations have issued numerous reports showing that sloppy credit bureau practices are at fault for errors in consumer credit reports.

"These Big Three credit bureaus make billions of dollars selling a faulty product that jeopardizes the good names of one in four consumers," said Cummings. "Their reports could mix you up with a total stranger or fail to report that you've paid off a loan or debt. When that happens, you either pay too much for credit, or get denied credit, insurance, a home or a job."

MASSPIRG collected 200 surveys from adults in 30 states who reviewed their credit reports for accuracy. Key findings include:

- Twenty-five percent (25%) of the credit reports contained errors serious enough to result in the denial of credit;

- Seventy-nine (79%) of the credit reports contained mistakes of some kind;

- Fifty-four percent (54%) of the credit reports contained personal demographic identifying information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect;

- Thirty percent (30%) of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open.

In December 2003, Congress passed the Fair and Accurate Credit Transactions Act (FACT Act), which included a number of provisions designed to improve the accuracy of credit reports, and a right to free annual credit report on request (a right we have had here in Massachusetts since 1996).

"Consumers are well-advised to be vigilant here. As the report indicates, the best prevention from future problems is ordering your report annually and correcting any inaccuracies," said Beth Lindstrom, Director of the State Office of Consumer Affairs.

MASSPIRG also called on legislators and regulators to go beyond the FACT Act to protect consumers' financial privacy and ensure the accuracy of credit reports. Specifically, MASSPIRG called for the quick passage of a number of reforms that would protect consumers from credit reporting errors and help reduce Identity Theft, a major cause of credit bureau errors and consumer frustration. Those reforms include:

Replacing Social Security Numbers on Drivers' Licenses - The most common source of identity theft is unprotected Social Security numbers. Unfortunately, these numbers are widely used as identifying sources in every day life. We must replace all Social Security numbers on drivers' licenses with scrambled numbers, and prohibit or limit its use by others.

Closing the Credit Header Loophole (HB 4556) - Defines all personal information obtained on a credit report, such as name, social security number, date of birth and address, as part of the credit report, requiring it to fall under the same regulation and protection as the financial information in the credit report.

Police Reports (HB 2507) - Allows consumers to file police reports in their city or town if they find themselves victim of identity theft. It also requires all police departments to have a system in place to take reports. This is important, as the federal FACT Act requires consumers to have a police report in order to "block" access to their credit report.

In addition, MASSPIRG recommended strengthening consumers' private right of action to seek redress from the courts when a credit bureau or a creditor fails to protect personal information or to comply with an investigation.

"The most common reflection of our reputation as a trustworthy consumer is our credit report, but one in four reports is seriously flawed," said Cummings. "Consumers have to check up on the credit bureaus to make sure they are telling the truth about us. Our law makers and regulators should do everything in its power to make sure these credit reports tell a true story," concluded Cummings.

MASSPIRG is a statewide public interest advocacy organization.