Quick, name the three big credit bureaus. Hint: two begin with an "E," and all three have veto power over your financial decisions.
It's hard to tell the faceless companies apart -- but the way they handle consumer complaints looks very different.
According to a CreditCards.com analysis of the first year of complaints on record at the U.S. Consumer Financial Protection Bureau, there are big gaps in how the big three bureaus -- Equifax, Experian and TransUnion -- handle gripes.
Equifax says it resolves CFPB complaints in the consumer's favor 62 percent of the time. That compares with a 23 percent pro-consumer rate at TransUnion and just 12 percent at Experian.
But there are some inconsistencies in the numbers, and consumer advocates doubt that the limited federal figures point to differences in how mainstream disputes are handled. In the larger world, "we're just not seeing differences in outcomes," said Randy Padawer, vice president of credit repair services at Lexington Law, which works on fixing credit report errors on behalf of consumers.
Errors on your credit report can cost you a loan, an apartment or even a job, so accuracy is important. Under the Fair Credit Reporting Act, credit bureaus are required to investigate disputed entries if you think your report contains a mistake. But the automated system for checking credit information has been criticized as a broken process that leaves too many consumers besmirched with bad data.
"People just have terrible experiences with these agencies," said David Jones, executive director of the Association of Independent Consumer Credit Counseling Agencies. "Some people take four or five years, and they still can't get everything straightened out."
A fresh look
The CFPB has logged about 12,100 complaints concerning credit reports since it started tracking the issue in October 2012, and wrong information was by far the No. 1 gripe. After relaying a complaint to the relevant company, the agency follows up to see how the issue was resolved and whether the consumer agrees with the company's solution.
One goal of tracking the complaints and publishing the data is to provide more insight into the sources of problems that plague consumers. Another goal is to prod laggards to improve. On the surface, it looks like there is room for improvement.
Most complaints are marked "closed with an explanation," meaning the credit bureau is standing by its guns. But some companies seem more flexible than others.The differences in how bureaus resolve complaints mean you are five times more likely to get nonmonetary "relief" from Equifax than from Experian, and about three times more likely than TransUnion. Nonmonetary relief means"objective, verifiable" steps taken by the company to resolve the substance of the complaint, according to the CFPB's definition.
None of the big three bureaus is big on paying "monetary relief," commonly known as "money," to kvetchers. Fewer than 1 percent of complaints resulted in a payout. But nonmonetary relief might be just as welcome, as that would include correcting information on a credit report.
A closer look at "relief," however, turns up a glaring inconsistency. Of the consumers who supposedly won their disputes with Equifax, nearly half told the CFPB they were unhappy with the company's resolution, the complaint data show, indicating that the consumers' problems were not fixed to their satisfaction.
Overall, consumers dispute the solutions offered by credit bureaus more often than other industries, the CFPB data shows.The dispute rate for the big three overall is 26 percent, compared to 16 percent for bank accounts and just 13 percent for credit cards.
Experts said that the differences in resolution rates for complaints filed with the regulator probably don't mirror most people's experience. For an everyday dispute filed directly with the credit bureau, "exactly the same thing happens at all three," said Leonard Bennett, an attorney at Consumer Litigation Associates in Newport News, Va., who specializes in credit reporting litigation.
In a typical dispute, offshore contractors reduce the gripe to a code number and transmit it to the lender or other source of the data. The lender checks its records -- usually the same ones that gave rise to the dispute -- to see that the data being checked match with the original records and responds with an "all clear" to the credit bureau, Bennett said. "Of course it's the same," Bennett said.
The gap in companies' complaint resolutions could be a labeling difference, where it only looks like a change is being made, Bennett said. Companies might be putting the "relief" label on different actions, although the CFPB has provided a lengthy definition for all companies to follow.
Bennett said that creditors often respond with "modified" data in a dispute. However, most of the modifications are updates of the disputed data, not corrections. A similar semantic blurring could construe a change in the credit report as "relief" when the change doesn't address the substance of the complaint.
What's more, at least some complaints that arrive via the federal regulator might be getting special treatment. Credit bureaus have a fast track for disputes filed by lawyers, celebrities and other VIPs, which get hands-on treatment in the U.S., Bennett said. If some regulatory complaints are being expedited, that would skew the outcomes.
The role of 'furnishers'
The credit reporting industry says improving the accuracy of credit reports depends only partly on the credit bureaus. The ball is largely in the court of the data "furnishers" -- banks, debt collectors and others who report what bills you did or didn't pay.
"We are working with lenders trying to pull apart the complaints and see where the issue lies," said Norm Magnuson, vice president of public affairs for the Consumer Data Industry Association, in an email response to questions. Representatives of TransUnion, Equifax and Experian did not respond to questions.
If lenders "don't provide the credit bureaus with the correct information, it will be wrong in the credit report," Magnuson said. "If we don't post information to the right credit file, the credit report will be wrong."
In September 2013, the CFPB issued an order requiring credit bureaus to pass along supporting documents, such as receipts for paid bills, to the source of the negative information for review. The CFPB order also requires the source to weigh these materials when checking its records. Consumer advocates hope this will clear up more complaints, but the September order is too recent to have an impact on the first year's complaint data.
"This should help lenders put the consumer dispute in context and better respond to the issue at hand," Magnuson said.
Complaints: where, what and why
The unhappiest states in the CFPB complaint data were Florida, Maryland, Nevada and Virginia, each with more than five complaints per 100,000 people since October 2012. Bringing up the rear were Wisconsin, West Virginia, South Dakota and Nebraska, each with fewer than two complaints per 100,000.
People lodged gripes about not getting their free annual credit reports -- a right under federal law -- problems with services that are supposed to guard against ID theft, and fears that their credit report was used improperly by others. But by far the most grumbles involved disputed information. Errors and error investigations were the cause of 80 percent of complaints.
The vast majority of gripes were aimed at the big three credit bureaus. Experian was the subject of 4,497 complaints, compared to 4,013 for Equifax and 2,959 for TransUnion. Other companies, including lenders, debt collectors and alternative credit bureaus, also received a smattering of complaints.
Each of the big three keeps files on roughly 200 million Americans, according to the industry association. So why should the most complained-about company get 52 percent more gripes than the least? The CDIA said it did not have enough insight into the regulatory complaint files to have an answer.
Making more errors would generate more complaints for a company, but independent studies of the credit files say that's not the case. In February 2013, the Federal Trade Commission released a widely cited study of the big three credit bureaus' record for accuracy and mistakes. It found that 5 percent of reports contained errors serious enough to cause a higher interest rate, or rejection of a loan application. What it didn't find was a difference in the frequency of mistakes from one company to another.
"It's important to remember that the FTC study did not find differentiation between the bureaus in terms of the quality of the files," Padawer said.
Padawer said he has seen differences between the bureaus that could help explain the complaint gap. Experian goes through extra steps to check your identity when you submit a dispute to guard against ID theft, he said. Those steps add time to the complaint response, and that could mean more complaints from impatient consumers.
"Perhaps some consumers don't want to go through an extra round of communication," Padawer said. "Instead, they're going to fly over to the CFPB site and file a complaint."
See related: Free credit reports: How to get the actual free one