The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Experian, one of the largest nationwide consumer reporting agencies, for failing to adequately investigate consumer disputes. According to the CFPB, Experian’s practices result in the inclusion of incorrect information on consumer credit reports, posing risks to consumers’ access to credit, employment, and housing.

“When consumers disputed errors on their credit reports, Experian conducted sham investigations rather than properly reviewing the disputes as required by federal law,” said CFPB Director Rohit Chopra. “Credit reporting errors can have serious consequences for a family’s finances, and it is critical that credit reporting giants follow the law.”

About Experian

Based in Costa Mesa, California, Experian is a subsidiary of Experian plc, a global data broker and analytics company headquartered in Ireland. As one of the nation’s three largest credit reporting conglomerates, Experian maintains data on most families in the United States. The company provides credit scores, credit reports, credit monitoring, and other related products to consumers and businesses. Experian collects information from data furnishers, such as banks, credit card companies, and debt collectors, and sells consumer reports to creditors and businesses to evaluate credit, employment, and housing opportunities.

Allegations Against Experian

The CFPB alleges that Experian has violated the Fair Credit Reporting Act (FCRA) by:

1. Conducting Sham Investigations: Experian uses flawed intake procedures that fail to convey all relevant information about consumer disputes to original furnishers. The agency allegedly accepts furnishers’ responses uncritically, even when they are illogical or unsupported. Consumers receive notices with investigation results that are often confusing, incorrect, or inconsistent.
2. Improperly Reinserting Inaccurate Information: Experian reportedly fails to implement tools to prevent the reinsertion of inaccurate information into consumer reports. This leads to consumers seeing previously disputed and corrected information reappear on their credit reports under the name of a new furnisher.
3. Violating Consumer Protection Laws: Beyond FCRA violations, the CFPB claims Experian’s faulty dispute procedures and uncritical deference to furnishers’ responses constitute unfair practices under the Consumer Financial Protection Act. 

The Importance of the FCRA

The FCRA mandates that consumer reporting agencies ensure the accuracy of consumer reports and conduct thorough investigations into disputed information. It also requires agencies to follow specific procedures before reinserting information previously removed due to disputes.

Impact on Consumers

Inaccurate credit reporting can significantly harm consumers by:

• Limiting access to loans, credit cards, and mortgages.
• Affecting employment opportunities where credit checks are required.
• Threatening access to rental housing or other critical services.

If you have experienced issues with credit reporting, it’s essential to know your rights and take proactive steps to dispute errors. Learn how to dispute inaccurate credit information.

Enforcement Action

Under the Consumer Financial Protection Act, the CFPB has the authority to take legal action against institutions that violate consumer financial protection laws. The CFPB’s lawsuit against Experian seeks to:

• Halt the company’s unlawful practices.
• Provide redress for harmed consumers.
• Impose civil monetary penalties, with funds directed to the CFPB’s victims relief fund.

FAQ

What are my rights under the FCRA? You have the right to dispute inaccurate information on your credit report and expect a proper investigation by the reporting agency.

How can I dispute errors on my credit report? You can file a dispute directly with the credit reporting agency. Learn more about the process here.

Source: Consumerfinance.gov

CFPB Finalizes Rule to Remove Medical Bills from Credit Reports

The Consumer Financial Protection Bureau (CFPB) has taken a monumental step by finalizing a rule to eliminate medical bills from credit reports. This action is expected to transform the financial landscape for millions of Americans by removing unfair barriers to credit access caused by medical debt.

What the Rule Does:

1. Removes Medical Debt from Credit Reports:
   • Medical bills will no longer appear on consumer credit reports, ensuring that past-due medical expenses do not impact credit scores.
   • This change will empower consumers to qualify for financial products like mortgages, car loans, and credit cards without the shadow of medical debt.
2. Ensures Fair Lending Practices:
   • Lenders can no longer use medical debt as a factor in determining creditworthiness.
   • The CFPB emphasizes that medical debt is often an unreliable indicator of financial responsibility, as it frequently arises from emergencies or billing errors.
3. Aligns with Consumer Protections:
   • This rule builds on previous actions by the CFPB, including efforts to address inaccuracies in credit reporting and ensure fair treatment of consumers.
   • Medical debt collections often stem from disputes over insurance coverage or billing errors, making their inclusion on credit reports particularly problematic.

Why This Matters:

Medical debt has been a significant hurdle for millions, disproportionately affecting those facing unexpected health crises or billing inaccuracies. The CFPB’s research has shown that the presence of medical debt on credit reports can unfairly penalize consumers, even when the debt is small or being disputed. By eliminating medical bills from credit reports, the CFPB aims to provide relief to consumers and promote fairer credit evaluations.

Implementation Details:

The rule, which amends Regulation V under the Fair Credit Reporting Act (FCRA), will take effect starting March 17, 2025. This timeline allows for a smooth transition while ensuring compliance across financial institutions. It also aligns with broader federal efforts to alleviate the burden of medical debt on American households.

A Broader Perspective:

This initiative is part of the CFPB’s ongoing commitment to protect consumers from financial harm and ensure equitable access to credit. By addressing the systemic issues associated with medical debt, the agency is helping millions of Americans achieve financial stability. Additionally, the CFPB’s efforts highlight the need for transparency and accuracy in credit reporting practices.

For more details, read the official CFPB announcement here.

CFPB Sues JPMorgan Chase, Bank of America, and Wells Fargo

On December 20, 2024, the Consumer Financial Protection Bureau (“CFPB”) announced that it has sued the operator of Zelle and three of the nation’s largest banks for failing to protect consumers from widespread fraud on America’s most widely available peer-to-peer payment network.

Early Warning Services, which operates Zelle, along with three of its owner banks—Bank of America, JPMorgan Chase, and Wells Fargo—rushed the network to market to compete against growing payment apps such as Venmo and CashApp, without implementing effective consumer safeguards.

Customers of the three banks named in the lawsuit have lost more than $870 million over the network’s seven-year existence due to these failures. The CFPB’s lawsuit describes how hundreds of thousands of consumers filed fraud complaints and were largely denied assistance, with some being told to contact the fraudsters directly to recover their money.

According to the CFPB, Bank of America, JPMorgan Chase, and Wells Fargo also allegedly failed to properly investigate complaints or provide consumers with legally required reimbursement for fraud and errors.

The CFPB is seeking to stop the alleged unlawful practices, secure redress and penalties, and obtain other relief.

For additional details, please CLICK HERE. 

Source: Consumerfinance.gov

CFPB Takes Action on Bait-and-Switch Credit Card Rewards Tactics

CFPB Finds Lenders Cramming Markup Fees and Confusing Terms into Solar Energy Loans

On August 7, 2024, the Consumer Financial Protection Bureau (“CFPB”) published an issue spotlight finding that some residential solar lenders are misleading homeowners about the terms and costs of their loans, misrepresenting the energy savings they will deliver, and cramming markup fees into borrowers’ loan balances. The report describes how fees often increase loan costs by 30% or more above the cash price, and that lenders often misrepresent the impact of the federal tax credit for solar installations. These loans are generally facilitated by lenders in partnership with solar installers and door-to-door sales companies.

Fifty-eight percent of solar projects were paid through loans in 2023, and the number of lenders is increasing accordingly. These lenders often partner with solar installers and employ a variety of marketing and door-to-door sales tactics to convince homeowners to enter into financing agreements.

The CFPB found that the rapid rise of nonbank lenders partnered with solar salespeople into the solar market is also raising the potential for illegal behavior and consumer harm. In contrast to auto loans or mortgages where consumers know they want a car or house and then seek out financing options, door-to-door salespeople are going directly to homeowners in attempts to convince them both to purchase a solar energy system and to do so via a loan through their company. Within this sales and lending scheme, many homeowners are discovering they are being duped and misled into contracts with inflated principals, ballooning monthly payments, and electricity savings lower than promised.

The CFPB has identified four areas of significant risks:

• Hidden markup fees: Lenders build hidden fees into their loans by marking up the principals of the loans. These “dealer fees” often increase the loan cost by 30% or more above the cash price of a solar project. Lenders frequently bake these fees into a loan’s principal without including them in the stated annual percentage rate (APR). Lenders also rarely and clearly separate these markups from the total cash price that consumers would otherwise pay for a system’s installation.
• Misleading claims about what consumers will pay: While receiving a tax credit is not guaranteed and based on a number of factors, many solar loan sales pitches promote the 30% federal “Investment Tax Credit” for residential solar installations. In fact, lenders will present loan principals as a “net cost” that assume the tax credit will be received. Consumers may end up believing either the tax credit will subtract from the “net cost” or that the “net cost” is what will be paid regardless of whether they end up qualifying for and receiving the tax credit.
• Ballooning monthly payments: Loan terms may require a substantial prepayment by a certain date that is equal to the expected tax credit. If a homeowner does not qualify for the tax credit, they will end up on the hook for the prepayment or face substantially higher monthly payments.
• Exaggerated savings claims: Homeowners report being told that solar panels will cover financing costs as well as eliminate future energy bills. While this promise may be true for some homeowners, the financial benefits of solar projects are uncertain and can vary significantly by geographic location and season.

In conjunction with the report, the CFPB released a consumer advisory warning homeowners of the risky practices in the solar lending market and sharing advice for borrowers who encounter illegal activity.

Source: Consumer Financial Protection Bureau