Camila Pedrosa Cronkite News
The pandemic has forced Arizona residents to do many things they might not have done before — like get to know their credit reports better than ever.
Arizonans filed complaints with the Consumer Financial Protection Bureau from 6,600 in 2020 to nearly 8,000 over the next year, the most on record. And nearly half of those were complaints about so-called incorrect information on their credit reports and unsatisfactory responses from credit bureaus, according to CFPB data.
Ed Mierzwinski, director of consumer programs at the Arizona Public Interest Research Group, believes the surge was likely due to people being spurred on by the financial challenges of the pandemic.
“People didn’t have enough money because they got laid off or … they didn’t get enough hours,” Mierzwinski said. “So people started saying, ‘Well, what can I do if I have less money? I want to make sure my credit report is accurate so I can at least qualify for credit.’
People also read…
“So they started looking at their credit reports more closely, and they found more errors,” he said.
But a trade group representing the credit bureaus questioned the reliability of the CFPB’s complaint reports. The Consumer Data Industry Association pointed the finger at another possible reason for the surge: “Credit repair companies, many of which are working to remove accurate, albeit negative, information from credit reports, which, to put it bluntly, no one can do.” “
“Some credit repair organizations simply cheat people out of hundreds of dollars a year with unfulfillable promises,” the association said in a statement in response to the CFPB report.
Complaints about credit bureaus have topped CFPB lists every year since the agency’s inception in 2011, but data from the agency showed that complaints about incorrect information increased by 70% and the number of investigative complaints increased from 2019 to 2019 more than doubled in 2020. Mierzwinski said this points to “sloppiness by the credit bureaus” that exposed the pandemic.
Those credit bureaus — Experian, Equifax, and TransUnion — are required by law to investigate all consumer complaints they receive and correct any errors within 30 days of filing, but Mierzwinski said simply that “they don’t.” This could cause credit ratings to drop and subsequently jeopardize the ability to get a job or get a loan, he said.
While Mierzwinski said the credit bureaus don’t investigate errors, the CDIA insisted they do, often before the 30-day deadline.
“National credit bureaus are committed to making it easy for consumers to identify and correct errors in their credit reports,” the association said. “When a consumer spots a potential error, credit bureaus work to fix it before the 30-day period required by law.”
Effects of medical debt on creditworthiness
The other major problem the Arizonans drew attention to was debt collectors misrepresenting debt on their credit report, which Mierzwinski suspects was primarily medical debt. Last month, a CFPB report estimated that $88 billion in medical bills appeared on 43 million credit reports nationwide.
Mierzwinski said much of the reported medical debt is inaccurate, due to what he called a “daisy chain” of hospitals selling their debt to collectors, who then resell the bills to other debt sellers. In the process, important identifying information can be lost, leading collection agencies to “park” debt on credit reports after the deadline for removing them has passed.
“When you literally hit the 10th debt buyer … they never have your full file,” Mierzwinski said. “They may have information that says, ‘John Smith owes $800.’ … It doesn’t say ‘John X Smith’ with his social security number, where he lives, etc.”
Credit agencies consider all debt, including medical debt, when calculating a credit score, which banks rely on to make loans. But CFPB found in 2014 that medical bills are no indication of a person’s likelihood of defaulting on other loans.
“It (medical debt) gets put on credit reports … although it doesn’t mean you’re going to be a manslayer, it just means you got sick or someone else got sick or got fired,” Mierzwinski said. “But it’s not the same as ramping up your credit cards at the mall.”
Shortly after the CFPB reported that medical bills were up to $88 billion in debt.
“Medical collection debt often arises from unforeseen medical circumstances,” said a joint statement from the CEOs of Equifax, Experian and TransUnion. “These changes are another step we’re taking together to help people across the United States focus on their financial and personal well-being.”
Still, Mierzwinski said, the top three credit bureaus account for 60% of all complaints filed.
“They care more about their business — creditors get full information — than their consumers get accurate information,” he said. “Because consumers are not their customers, businesses are their customers.”