A report published in May seems to indicate that there are not as many errors on credit reports as previous studies have shown. The credit reporting industry has been trumpeting the results – the study concluded that less than one percent of credit reports have errors that could adversely impact consumers. (Prior estimates have indicated errors in the range of three percent to 25 percent). But let’s take a closer look.
The credit reporting agencies have proudly proclaimed that the report, and the study it was based on, was done by an independent third party, the Policy and Economic Research Council (“PERC”). But let’s be clear – the study was commissioned and paid for by the Consumer Data Industry Association, the trade group for the credit bureaus, such as Experion, TransUnion and Equifax, that assemble and sell credit reports.
The Federal Trade Commission, one of the federal government agencies tasked with oversight of the credit and collections industry, is in the process of conducting its own nationwide study, expected to be ready next year. It will be interesting to see how a truly independent study compares with a study funded by the credit reporting industry.
And even if the one percent error rate is correct, according to a recent article in the New York Times, the big three credit bureaus reportedly have at least 200 million credit files – each. So even a one per cent error rate translates into two million consumers harmed at each bureau. That’s nothing for the credit reporting agencies to be proud of, that’s for sure.
And make no mistake, the harm to consumers can be significant, especially in the current economic climate. USA Today reports that 60% of businesses now check the credit histories of potential employees before hiring. The negligence of a credit reporting bureau may now mean the difference between consumers getting a job or ending up on food stamps and unemployment.
The PERC report can be found on the publications page of the PERC website.
-- Sheril Stanford