Credit rating bureaus have double standard for handling disputes

Tuesday, May 17th, 2011 By

Consumer hand squeezes credit card

The credit squeeze: a double standard. Flickr / alancleaver_2000 / CC-BY

Credit Rating Bureaus issue reports that affect the financial life of everyone who has ever used or will ever use credit. All consumers are judged by their credit rating when it comes to credit cards, mortgages and even job offers.  It may be disturbing to some, however, to learn that the bureaus have a two-tiered system when it comes to resolving errors: one standard for the well-known, well-connected and powerful people — and one for everyone else.

VIPs receive immediate help

According to the New York Times, the three major agencies, Equifax, Experian and TransUnion, keep a VIP list including celebrities, politicians and other influential people. Those on the list receive special attention and most errors are corrected immediately.

Average consumer routed into automated system

For the average credit user, however, disputes are routed into a largely automated system. Complaints are routinely transferred to overseas subcontractors who make quick decisions based on a cursory glance at records. Consumers then can only challenge disputes through the expensive court system.

Influence overshadows accountability

“The legal responsibility of the credit reporting agencies and of the creditors is well established,” said Leonard Bennett, a consumer lawyer in Newport News, Va. “There is a requirement that they do meaningful research and analysis, and it is almost never done.”

As credit has become more and more essential to survival in the modern financial world, the credit rating bureaus have become increasingly powerful.  Their reports determine the all-important credit score that lenders use to determine creditworthiness.  However, consumer advocacy groups claim their accountability has not kept pace with their influence.

Bureaus work for lenders, not consumers

“There is no neutrality in the credit reporting agencies,” said John Ulzheimer, president of consumer education at SmartCredit.com. “They work for the lenders who buy credit reports from them, and anyone who suggests otherwise is not being intellectually honest.”

Reaction of credit rating bureaus

When questioned about the VIP category, TransUnion said all consumers “have the ability to speak to a live representative.” Equifax claimed all consumers who came to the bureau were provided with a number for customer service.  Experian denied that it had a VIP list.

FTC to report on bureau accuracy

Next year the Federal Trade Commission is expected to release a study on the accuracy of credit reports.  The report may or may not contain recommendations for legislative action.

Sources

New York Times

MSN

Telegraph

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