A follow-up report on credit report accuracy issued this week by the Federal Trade Commission is likely to be cited by the CFPB as additional support for the CFPB’s concerns about inaccurate credit reporting. In December 2014, that concern resulted in the CFPB’s imposition of a new requirement on major consumer reporting agencies to provide regular “accuracy reports” that identify furnishers with the largest number of consumer disputes.
The FTC’s report is a follow-up to its 2012 study in which approximately 1,000 consumers reviewed for accuracy their three credits reports from the three major nationwide CRAs. Study participants who initiated a dispute with a CRA were provided with new credit reports and credit scores after completion of the FCRA dispute process. The new credit reports were then compared to the old reports to assess whether the CRAs had modified the reports in response to the disputes. In the follow-up study, the FTC looked at the “reinsertion rate,” meaning the frequency with which previously removed negative information reappeared on a credit report. It also looked at whether consumers continued to allege inaccuracies after the CRA verified the disputed information as accurate, whether consumers recalled receiving notifications from the CRA when information was not modified, and whether consumers planned to continue their disputes. (The FTC uses the term “unresolved dispute” to refer to a dispute in which the CRA disagreed with the consumer’s alleged inaccuracy. While the FTC acknowledges that it “recognize[s] these disputes are only potentially unresolved from the consumer perspective,” use of the term “unresolved” creates an implication that the CRA can be faulted for not completing the dispute process.)
The FTC study indicates that its contractor interviewed 121 (or 68%) of the 179 participants in the main study with unresolved disputes. The FTC states that it “performed some basic statistical analyses to show that the follow-up interview sample of consumers is generally representative of the type of disputes filed by the population of participants in the main study.” Based on the follow-up interviews, the FTC made the following findings:
- Of the 121 consumers who had at least one unresolved dispute, 37 consumers (31%) stated that they now accepted the original information as correct, thus accepting the decision of the CRA.
- 84 consumers (almost 70%) still believed that at least one piece of previously disputed information was inaccurate. Of those 84 consumers, 38 consumers (45%) planned to continue their dispute(s), 42 consumers (50%) planned to abandon their dispute(s), and 4 consumers (5%) were undecided.
- The most common reason given for abandoning the dispute process was that consumers felt that the inaccurate information was not important or the consumer was not interested in pursuing the matter (40%). For another 23% of the unresolved and abandoned disputes, the consumers indicated that they did not have enough time to continue the dispute.
- Of the 121 consumers who had at least one unresolved dispute, 49 consumers (40%) stated that they did not receive a notification from the CRA that the item was not changed. Of the 56 consumers who stated they received a notification, over half (29 consumers) stated that no explanation was provided by the CRA for the lack of modification. (The FTC acknowledges “the possibility” that some portion of the consumers who claimed they were not notified “in actuality may not remember receiving the notice or may have thrown away the notice as ‘junk mail’.” It also acknowledges that the notification received by some of the consumers claiming they did not receive an explanation “may have officially included an explanation.”)
- Of the 202 consumers who received modifications during the original dispute process and whose reports were redrawn a year later, 2 consumers (1%) each had one previously removed negative information item reappear on their credit report. While acknowledging that it found reinsertion to be “relatively rare,” the FTC nevertheless comments that the “continued presence of the reinsertion issue suggests that consumers, the CRAs, and policymakers must remain vigilant regarding the reappearance of negative information.”
The FTC states that although its follow-up findings are “interesting,” it is not currently recommending any specific legislative action on credit report accuracy “due to the relatively small number of consumers who participated in the follow-up interview.” However, the FTC still concludes that the study’s findings justify the following recommendations:
- CRAs should review and improve the dispute results notification process to ensure that notices and explanation of investigation results are provided to consumers.
- CRAs should continue to explore efforts to educate consumers regarding their rights to review their credit reports and dispute inaccurate information.
- Consumers should continue to examine their credit reports annually and follow the FCRA dispute process when inaccuracies are identified