|By TARA SIEGEL BERNARD|
Even after sending more than 13 letters to
That indifference should surprise no one who has ever tried to deal with the any of the three big credit reporting agencies,
So she tried suing. That worked. A jury in
If you think this has taught
The credit bureaus are willing to tolerate these errors — and settle with consumers out of court — as a cost of doing business, according to credit experts and lawyers who work on these cases.
“Their business model is to keep doing the same thing over and over again,” said
Ms. Miller made every effort to fix her report, exactly as consumers are advised to do. She initiated the company’s dispute process about seven times, and in most instances,
But nothing ever changed: Ms. Miller, a model financial citizen who once had the credit score to prove it, had become mixed up with another, much less creditworthy
Mixed files, as they are known in the credit industry, most frequently involve people who share common names with individuals who have similar
The bureaus often outsource thousands of disputes daily to workers overseas. Those workers, often overwhelmed by the sheer volume of cases, are largely told to translate the problem into a two- or three-digit code that defines the gist of the problem (account not his/hers, for instance) and feed it into a computer.
But that process won’t untangle a mixed credit report. The reason files become mixed to begin with can be traced back to the computer formula the bureaus use to match credit data to a specific person’s credit report. It allows credit data, say a late payment on a credit card, to be inserted into a person’s file even if the identifying information isn’t an exact match. In other words, the system might add a late payment to the credit report of someone like
Partial matches aren’t always wrong, of course. Solid estimates on the number of mixed files are hard to find, though a 2004 study from the
Other estimates put the number of actual mixed files at less than 0.2 percent to nearly 5 percent. The F.T.C.'s report said that mixed files were not always harmful to consumers because most credit account information was positive.
To that I say: Consumers with mixed files are supposed to take comfort in the fact that their credit report doppelgangers, on the whole, are likely to pay their bills?
There is a reason the bureaus operate this way. They would rather err on the side of including too much information in your credit report than leave information out, according to consumer lawyers and advocates. They also need to account for typos and small errors that can cause the credit agencies to leave out information — both good and bad credit behavior. Financial services firms are paying the bureaus to receive the most complete financial profile possible, even that means sacrificing a bit of accuracy. (The F.T.C.'s report said that lenders might actually prefer to see all potentially derogatory information about a potential borrower, even if it can’t all be matched with certainty.)
“The bureaus would rather accept the possibility of some mixed-file risk rather than the possibility that a debtor who owes a debt gets away with it,” said
The dispute process is supposed to catch the people who fall through the cracks. But as people like Ms. Miller can attest, it doesn’t always work. The Fair Credit Reporting Act, the law that governs the big bureaus, requires the agencies to provide a reasonable investigation. Ms. Miller’s lawyer said their litigation revealed that there was no investigation at all. (It’s worth noting that Ms. Miller had problematic credit reports at the other two bureaus, but those agencies resolved the matter.)
“They testified that they get something like 10,000 disputes a day, so they don’t have the time to look at each one,”
What else could she have possibly done? I asked the credit bureaus for advice.
Ms. Miller, however, had to endure repeated phone calls from debt collectors, who threatened to sue. She couldn’t co-sign a credit line for her son who was in his freshman year of college, and she said she put off refinancing her mortgage. It also meant that she couldn’t co-sign a car loan for her disabled brother. And plans to build a workshop on their property, which required a loan, would have to wait.
The jury’s giant award to Ms. Miller is generous and goes a long way toward compensating her for those lost opportunities. But lawyers say the initial awards are often reduced after being reviewed by the trial judge. An out-of-court settlement for the typical mixed-file case might be
Will Ms. Miller’s award have any lasting impact on the industry?
It’s more likely, though, that the
“Big punitive penalties may help force the bureaus to upgrade their 20th-century algorithms and incompetent dispute reinvestigation processes,” said
Nearly every expert I spoke with conceded that Ms. Miller had few options. “She had two choices, and they both stunk,” said
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