One of the dirty little secrets about the credit-reporting industry is how it profits from consumers' pain - even when its own practices are among the causes. Now Mississippi's attorney general, Jim Hood, has brought that issue to the forefront, with a lawsuit that accuses Experian of "knowingly including error-riddled data in the credit files of millions of Americans," according to this AP report, and then turning around and selling costly "credit monitoring" services to the same people to protect them from harm.
"Experian has turned its failures to maintain accurate credit reports and its refusal to investigate consumer disputes into a business opportunity," Hood said said in a statement. Hood, a Democrat, filed the suit quietly last month in state court - much of it sealed or redacted from the public record as propriietar. It was moved to federal court last week. The AP reports:
Despite the errors added to credit files, the Mississippi lawsuit said, Experian provides no straightforward way for consumers to correct erroneous blemishes affecting them. When consumers file a dispute, Experian reflexively finds in favor of the bank or debt collector that reported the debt, Mississippi said. And when consumers call to complain, the lawsuit said Experian employees attempt to sell consumers credit monitoring products of questionable value.
That's the piece of this story that, as a consumer columnist, I've always found most outrageous. One source of credit-file errors is identity theft, where a bad guy gets instant access to credit in your name, and then - big surprise! - doesn't pay his bills. It only works because the credit reporting agencies are happy to sell reports and scores with as little friction as possible - such as the PIN number required if you institute a security freeze on your credit file.
What do they do to "solve" the problem they help create? They're more than happy to sell you credit-monitoring services, directly or through subsidiaries. Just pay $15 or $20 per month, and you'll be protected - a deal that strikes some as akin to a protection racket. Even when monitoring is sold by third parties, those companies must buy the underlying credit data from Experian and its counterparts.
Some of the errors cited by the lawsuit seem easily correctable, but aren't. The AP's Jeff Horowitz writes:
Mississippi alleges that even simple errors in Experian files -- such as a credit file that wrongly stated that a Mississippi resident described in the complaint as "Consumer 5" was dead -- can prove nearly impossible to fix.
"At first, Consumer 5 and his wife thought it was funny," the complaint said. But months later, his unsuccessful efforts to fix the error cost him the ability to purchase a truck at a favorable interest rate.
In another example cited in the Mississippi complaint, a lieutenant colonel in the Army National Guard was denied credit and forced to buy numerous credit monitoring services due to Experian's failure to distinguish between his credit history and those of other people in his family. Mississippi also alleges that consumers have lost access to the financial system after Experian wrongly confused their credit files with those of people on a U.S. Treasury Department terrorist watch list.
Both of Experian's counterparts among the Big Three, Equifax and TransUnion, have recently acknowledged that they are under investigation by Ohio's attorney general and 31 other states, as well as facing tough new scrutiny from the Consumer Financial Protection Bureau.