The three major credit bureaus agreed Wednesday to pay more than $6 million to 31 states to cover the cost of a three-year investigation into credit reporting errors.
Equifax, Experian and TransUnion also agreed to keep better track of companies that routinely make mistakes when reporting consumer credit information and to actively investigate disputes that furnishers of payment information cant resolve. The bureaus also will review disputes involving identity theft and co-mingled files, which can occur when the bureaus add information about the wrong person on a credit report.
The bureaus collect and provide credit information on more than 200 million consumers in the U.S.
Wednesday's multi-state agreement is separate but similar to a March plan reached between the bureaus and New York state that requires them to create a plan to monitor furnishers. Furnishers include financial companies that report consumers payments on credit cards and loans to the bureaus and collectors.
Some specifics from Wednesdays agreement include:
- Collection agencies that report information to the bureaus must provide the name of the original creditor and information about the debt before the information can be added to a consumer's credit report.
- Bureaus must provide the states with lists of furnishers that most often report information that consumers dispute as inaccurate.
- Bureaus are prohibited from reporting information about fines and tickets on consumers' credit reports.
- Bureaus cannot attempt to sell products to people who call them with disputes.
The Consumer Data Industry Association, a trade group that represents the bureaus, issued a statement about the agreement.
"With the exception of the financial payments the credit reporting agencies are making to the attorneys general to cover the costs of their investigations, consumer education and other purposes, the settlement essentially adopts the plan announced with the New York attorney general," CDIA President Stuart Pratt said in a statement.
New York and the 31 other states started the investigation together, but New York split off in 2013. The New York settlement led a push for the credit bureaus to take a more active role in resolving complaints. The New York plan requires the bureaus to institute several reforms in the next three years, including giving consumers the right to challenge inaccurate information by initiating a dispute. In disputed cases, the bureaus must use trained employees to review all supporting documents submitted by consumers who see an error in their files, even if the creditor reports the information is accurate.
Forty percent of consumers who disputed an item on their credit reports said they don't recall ever having heard back from the credit bureau, according to the Federal Trade Commission. Also, 40% who apparently lost disputes said they never got an explanation for the credit bureau's decision.
More than 25% of credit reports contain at least minor errors, according to the FTC, and about 5% of all consumers - roughly 10 million people - have reports that contain an error serious enough to impact their ability to get credit.
The states taking part in Wednesday's settlement are: Alabama, Alaska, Arizona, Arkansas, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont and Wisconsin.