The Fair Credit Reporting Act is a federal law that regulates consumer credit reporting agencies, such as Experian, Equifax, and TransUnion. The FCRA also regulates those who provide information to the credit reporting agencies and those who use the information in a consumer credit report.
Studies have shown that nearly 80% of consumer credit reports contain errors of some kind. Examples of the type of errors found include accounts mistakenly listed as delinquent, loans listed twice, and inaccurate personal information. As the credit reporting industry has increased their use of automated procedures, additional problems have arisen. One common such problem is when information for one person is listed on another person’s report (known as a merged or mixed file).
There are a couple of reasons why inaccurate information ends up on a credit report. First, the information provided to the credit reporting agency may itself be inaccurate. Second, the CRA might assigned the reported information to the wrong consumer’s file. Whatever the reason, these mistakes may lead to a person being denied for credit or receiving credit on less favorable terms.And increasingly, many employers are reviewing a job applicant’s credit history when making employment decisions, which creates the possibility of a person being denied a job based on incorrect credit report information.
Unfortunately, the FCRA does not require credit reporting agencies to report accurate information. It merely requires them to use reasonable procedures to ensure the maximum possible accuracy. The Act is a bit toothless in this regard. Where the FCRA does have some teeth, however, is in its investigation requirement. Under the FCRA, if a consumer disputes information in their report to a CRA, the agency must investigate the dispute and, if verified, correct the disputed information. Despite this clear-cut obligation, many consumer disputes do not result in the inaccurate information being removed from their report. One possible reason for this is that the CRA’s customers are lenders, not consumers. For this reason, reporting agencies have an incentive to over-include items at the expense of accuracy.
Fortunately for consumers, the CRA’s failure to conduct a reasonable investigation is a violation of the FCRA and the consumer may bring a lawsuit to hold them liable for their bad conduct. If the consumer proves that the CRA willfully failed to conduct a reasonable investigation of the dispute, the consumer is entitled to $1,000 in statutory damages or the consumer’s actual damages (such as loss of credit or money paid under a higher interest rate). If, however, the credit reporting agency was merely negligent in failing to conduct a reasonable investigation of the dispute, the consumer is only entitled to their actual damages. If no actual damages are suffered, the consumer will lose the suit. In addition, the FCRA requires the credit reporting agency to pay successful consumer litigant’s reasonable attorney fees and costs.
If you learn of a mistake on your credit report, your first step is to dispute it with the credit reporting agency. This post explains how to do it. If the CRA fails to correct the error after receiving your dispute letter, you may consider talking to an attorney who handles FCRA cases. The attorney will be able to recommend next steps to get the mistake fixed and will be able to advise you if a FCRA lawsuit is an option.