Jeff Gelles: Republicans attempt to thwart consumer protection from credit bureaus

Press 1 if you're disturbed to discover that more than one in four consumers found a "potentially material error" on a credit report from Experian, Equifax or TransUnion, according to a new study of credit reporting commissioned by the Federal Trade Commission.

Press 2 if you're dismayed to learn that 21 percent of the study's participants won corrections to at least one of their credit reports. Press 3 if you're angry to hear that a quarter of those found an error big enough to cut their credit score more than 20 points - enough, say, to raise their rate on a car loan.

Press 4 if you'd like to know why this infuriating system, which treats consumers' personal and financial data as a commodity and leaves us largely powerless to control or correct it, is still being studied rather than fixed.

Tired of pressing buttons, and want to talk to a human being who can help fix the problem? You might want to start by calling just about any Republican senator - one of the 43, including Pennsylvania's Pat Toomey, who are again trying to block the Consumer Financial Protection Bureau from doing its job, by blocking confirmation of a permanent director, unless Senate Democrats and President Obama agree to weaken the new agency before it gets fully under way.

Supervising the credit-reporting system is just one of the tasks the CFPB has taken on since it opened in July 2011. If it's not undermined by Republicans' strangely tone-deaf threats - do they really think consumer protection is unpopular among voters? - the CFPB also may help rein in the excesses of debt collectors, payday lenders, and other supporting players in the financial system.

Unlike some of those, credit reporting affects virtually every consumer. And as the study the FTC released Monday illustrates, this isn't the first time that federal regulators have tried to get a handle on a $4 billion-a-year business that provides crucial data to the rest of the financial industry but that often seems to handle that task cavalierly.

Equifax, Experian and TransUnion are the best known of the so-called consumer reporting agencies, but there are hundreds of other specialty agencies. Since Congress passed the Fair and Accurate Credit Transactions Act of 2003, consumers have been entitled to a free annual report from the Big Three, and also from companies that collect data on things such as your employment history, insurance claims, and medical-payment records.

You can request your free reports from the Big Three online, from www.annualcreditreport.com, or by calling 1-877-322-8228. Thanks to the CFPB, you can find a list of lesser-known consumer reporting agencies at http://1.usa.gov/XTVyjO - you have to contact each directly to request a copy of your report. The CFPB is also taking credit-reporting complaints at www.consumerfinance.gov.

Why does the credit-reporting industry demand regulatory attention? Because its basic business model - selling data about consumers to third parties - leaves the market largely powerless to restrain its excesses.

Don't get me wrong - the Big Three are eager to sell us stuff, including credit scores and services such as credit monitoring and ID-theft protection. But they mainly serve financial institutions and other data-hungry businesses that use consumer data to limit their risks. Our business is just gravy.

Outside of regulators, in fact, the only restraint on the credit bureaus comes from lawyers such as Jim Francis, whose Philadelphia firm, Francis & Mailman, has turned suing the Big Three into a cottage industry.

Consumers turn to lawyers like Francis when they can't get errors fixed. Many are shocked to learn that all the documents they dutifully mailed in to prove their case are never forwarded to the business whose report they're disputing. Instead, the bureaus reduce the evidence to a two-digit code that means something like "not mine" or "never late," and at most a short explanation.

Francis has won large settlements for clients whose lives have been harmed, but says the bureaus have no systemic incentive to fix things. When they make hundreds of millions of dollars each year in profit, legal losses are small change - "just a cost of doing business," he says.

Press 5 - or call your senator - if you think it's time to quit studying and get this mess fixed.