Mississippi Attorney General Jim Hood's office sued credit reporting giant Experian Information Solutions, alleging errors in the company's data and regular violations of consumer protection laws.
The lawsuit accuses Experian of knowingly including mistake-riddled data in the credit files of millions of Americans, jeopardizing their ability to obtain loans, employment-related background checks and sensitive government security clearances. The complaint states that Experian has even wrongly reported that consumers are on a federal terrorism watch list.
The lawsuit was filed in a Biloxi, Miss. state courthouse and transferred to Mississippi federal court late last week.
The case stands out as the first major legal action by a state against a credit bureau in recent years, however, and its litigation may pressure other states and federal agencies to take public action. Much of Mississippi's case appears to be rooted in documents obtained directly from Experian.
Experian officials have stated to investors that, to the best of its knowledge, it complies with data protection requirements. However, the company warned that, "We might fail to comply with international, federal, regional, provincial, state or other jurisdictional regulations, due to their complexity, frequent changes or inconsistent application and interpretation."
Earlier this year, Experian warned investors that the Consumer Financial Protection Bureau and its British counterpart are regulatory agencies responsible for protecting consumers and said, "It remains uncertain how these bodies may affect our credit and consumer business processes and business models in the future."
"Experian has turned its failures to maintain accurate credit reports and its refusal to investigate consumer disputes into a business opportunity," Hood, a Democrat, said in a statement.
The lawsuit states that Experian provides no logical way for consumers to correct erroneous blemishes affecting their credit. When consumers file a dispute, Experian reflexively finds in favor of the bank or debt collector that reported the debt, Mississippi officials said. When consumers call to complain, the lawsuit said Experian employees attempt to sell consumers "credit monitoring products of questionable value."
Experian's alleged misconduct has hurt Mississippi consumers, the lawsuit said, because of the company's alleged failure to maintain reasonable procedures to verify credit information and correct mistakes - a violation of the federal Fair Credit Reporting Act.
At Experian's request, examples of allegedly inappropriate business practices were censored in the public court filing because Experian considers them a trade secret.