WASHINGTON — The pandemic has forced Arizonans to do a lot of things they might not have done before — like knowing their credit reports better than ever.
Arizonans went from filing 6,600 complaints with the Consumer Financial Protection Bureau in 2020 to nearly 8,000 the following year, the most record. And nearly half of those complaints were about what consumers called incorrect information on their credit reports and unsatisfactory responses from credit reporting companies, according to CFPB data.
Ed Mierzwinski, consumer program director for the Arizona Public Interest Research Group, thinks the spike was likely the result of people being spurred by the financial challenges created by the pandemic.
“People didn’t have enough money because they got laid off or…they didn’t have enough hours,” Mierzwinski said. “So people started saying, ‘Well, what can I do if I have less money? I want to make sure my credit report is accurate so I can at least qualify for loans.
“So they started looking at their credit report more and they found more errors.”
But a trade group that represents credit reporting companies has questioned the reliability of the CFPB’s complaint reports. The Consumer Data Industry Association pointed to another possible reason for the increase: “Credit repair companies, many of which operate to remove accurate, albeit negative, information from credit reports, which, to be clear , no one can do.”
“Some credit repair organizations are simply scamming hundreds of dollars a year on unrealizable promises,” said a message from the association, in response to the CFPB report.
Complaints about credit reporting companies have topped the CFPB’s lists every year since the agency was established in 2011, but data from the agency showed that complaints about incorrect information rose by 70% and investigation complaints more than doubled from 2019 to 2020. by credit bureaus” the pandemic revealed.
These credit bureaus – Experian, Equifax and TransUnion – are required by law to investigate all consumer complaints they receive and correct any errors within 30 days of filing, but Mierzwinski simply stated that ” they don’t.” This could lead to lower credit scores and subsequently jeopardize the ability to get a job or a loan, he said.
While Mierzwinski said credit bureaus don’t investigate errors, the CDIA insisted they do, often before the 30-day deadline.
“National credit reporting agencies prioritize making it easy for consumers to identify and correct any errors in their credit reports,” the association said. “If a consumer discovers a potential error, credit reporting agencies work to resolve it within the legally required 30-day time frame.”
The other main issue reported by Arizona residents was that debt collectors incorrectly flag debt on their credit reports, which Mierzwinski suspects is primarily medical debt. Last month, a CFPB report estimated that $88 billion in medical bills appear on 43 million credit reports nationwide.
Mierzwinski said much of the reported medical debt is inaccurate, due to what he called a “daisy chain” of hospitals that sell their debt to collectors, who then resell the bills to other other debt sellers. In the process, vital identifying information can be lost, requiring debt collectors to “park” the debt on credit reports after the deletion time expires.
“By the time you literally get to the 10th debt buyer…they never have your complete case,” Mierzwinski said. “They might have information that says ‘John Smith owes $800’…It doesn’t say ‘John X Smith’, with his social security number, where he lives, etc.”
Credit agencies include all debt, including medical debt, when calculating a credit score that banks use to make loans. But the CFPB found in 2014 that medical bills were not indicative of a person’s likelihood of defaulting on other loans.
“This (medical debt) is listed on credit reports…even though it doesn’t mean you’re going to be a deadbeat, it just means you got sick or someone else got sick or laid off” , said Mierzwinski. “But that’s not the same as raising your credit cards at the mall.”
Shortly after the CFPB reported that medical bills accounted for up to $88 billion in debt on credit reports, the three credit reporting agencies announced they would remove nearly 70% of that debt from credit reports. consumer credit this summer.
“Medical collection debt often arises from unforeseen medical circumstances,” said a joint statement from the CEOs of Equifax, Experian and TransUnion. “These changes are another step we are taking together to help people across the United States focus on their financial and personal well-being.”
Still, Mierzwinski said, the three major credit bureaus account for 60% of all complaints filed.
“They care more about their business – creditors get complete information – rather than their consumers getting accurate information,” he said. “Because consumers are not their customers, businesses are their customers.”