by Jeff Sovern
A couple of weeks ago, Ira Rheingold and I had an op-ed in the Times about issues with credit reports. Almost on cue, the Associated Press reports Jury awards Oregon woman $18.6M over credit report. It seems she had been trying to get Equifax to correct errors for two years.
In the op-ed, we mentioned some of the changes we would like to see, including that Congress should require "greater accuracy from credit bureaus. . . ." At present, under 15 U.S.C. § 1681e(b), credit reporting agencies are required "to follow reasonable procedures to assure maximum possible accuracy . . . ." I would like to see Congress raise that to “best procedures to assure maximum possible accuracy.” Courts have been too willing to excuse errors in credit reports by finding the credit bureau procedures that caused them or failed to prevent them reasonable. For example, in Sarver v. Experian Information Solutions, 390 F.3d 969 (7th Cir, 2004), a credit bureau erroneously reported that some of the consumer's accounts had been involved in bankruptcy even though the consumer's other accounts did not carry that notation. The court found that it was reasonable for the credit bureau not to have picked up the discrepancy between the different accounts. The court also found it reasonable for the bureau not to know what's in its files or that its files contained inconsistencies, given that the credit bureau receives over 50 million updates a day. I am told that credit bureaus have software that flags some anomalies, such as apparent attempts by children to take out car loans; surely it would be possible to create similar software to pick up anomolies of the sort in Sarver. I think credit bureaus should be obliged to use such software, but I fear that decisions like Sarver, based on the old standard, reduces their incentive to incur the cost of the software. By contrast, a standard that obliged credit bureaus to use best efforts would cure that problem, and by increasing report accuracy, help both consumers and lenders.