Dive Brief:

• A group of seven Democratic senators urged Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, in a letter Wednesday, to take action to address the high volume of errors that appear on consumers’ credit reports.
• The senators penned the letter shortly after the CFPB released a report last week, which found that consumers in Black and Hispanic neighborhoods, as well as younger consumers, were more likely to have disputes appear on their reports.
• "In an industry that affects all Americans so directly, even a small error rate means tens of millions of people can be denied jobs or housing through no fault of their own," Sens. Brian Schatz of Hawaii, Sherrod Brown of Ohio, Elizabeth Warren of Massachusetts, Ron Wyden of Oregon, Jack Reed of Rhode Island, Chris Van Hollen of Maryland and Ben Ray Lujan of New Mexico wrote in the letter.

Dive Insight:

In Wednesday's letter, the seven senators requested the CFPB evaluate whether credit reporting errors reflect failures by credit bureaus Experian, Equifax and TransUnion for not devoting "sufficient personnel and resources for dispute resolution."  

Consumers' issues with credit bureaus comprised a sizable chunk of complaints submitted to the CFPB's portal. More than 58% of the complaints in 2020 pertained to credit and consumer reporting, the bureau reported in March. 

The senators cited a 2012 Federal Trade Commission study, which found that one in five consumers saw an error appear on at least one of their credit reports, and 5% of consumers had errors that were "economically damaging." A follow-up study in 2015 found that 70% of the consumers impacted three years prior continued to dispute information on their credit reports. Chopra served as an FTC commissioner from 2018 until last month. 

"As a result of simple mistakes, consumers may pay more for credit or be denied loans altogether," the senators wrote. "They might face obstacles applying for a job, getting a mortgage or renting an apartment."

The senators suggested the CFPB enlist an ombudsperson to ensure the accuracy of the dispute resolution process, and that the bureau require nationwide consumer reporting agencies to perform periodic accuracy audits.

The letter outlines restrictions the CFPB could place on the agencies. The senators lauded the regulator’s recent decision to make it illegal for the agencies to find consumer records solely through the matching of names, and urged the CFPB to go one step further in preventing misattribution.

Lawmakers advised the CFPB to require agencies to use all nine digits of a consumer’s Social Security number when matching records, to avoid assigning information to the wrong person. 

"These concerns are not exhaustive, and we look forward to hearing more about your agenda for protecting consumers and working with you to improve this system," the senators wrote. 

A CFPB report released last week found that consumers residing in majority-Black and Hispanic neighborhoods are more likely to file credit disputes. For example, consumers in Black-majority tracts were more than twice as likely to have disputes appear on their credit reports compared to consumers in majority-white census tracts. The study analyzed data on auto loans, student loans and credit card accounts opened between 2012 and 2019.

"Error-ridden credit reports are far too prevalent and may be undermining an equitable recovery," Chopra said in a statement last week.