Consumers turn to courts when credit errors go unfixed

For four months, Jeffrey Beaubien wrote letters and made phone calls in a failed effort to remove his son's debts from his own credit report.

Thomas Gulden said he was denied a job and two credit cards because a bank declared him dead and two credit bureaus did not fix the error.

Beaubien and Gulden are two of the 23 Minnesotans who filed federal lawsuits this year to force credit bureaus to correct their records. Records show it is the largest number of these lawsuits filed since 1987.

A representative with a national advocacy group and several attorneys said that in some cases, going to court is the only recourse for consumers suffering from a credit bureau's mistake.

"Nothing is easy with the credit bureaus. You are dealing with machines," said Edmund Mierzwinski, director of the consumer program at U.S. PIRG, the federation of state Public Interest Research Groups. "The people that work for them simply enter data into the machines, unless you have a lawyer send them a letter. Then your complaint goes to the top of the file and your complaint is handled by a human."

As many as 21 percent of consumers have had verified errors in their credit reports, the Federal Trade Commission reported in February. Five percent — 10 million people — had mistakes serious enough to be denied credit or be forced to pay higher interest rates.

In August, the three credit bureaus — Experian, Equifax and TransUnion — took action to reduce these errors by sharing more data with creditors when someone initiates a dispute, said Norm Magnuson, vice president of public affairs at Consumer Data Industry Association, a trade group of the credit bureaus.

In a Star Tribune analysis of federal court records, the number of lawsuits alleging violations of the Fair Credit Reporting Act by the credit bureaus has nearly doubled from the 12 filed last year.

Mark Vavreck, a Minneapolis attorney, said lawyers usually get involved in dispute cases after a consumer has tried multiple times to get the error fixed. Once the suit is filed, Vavreck said, the case is typically settled quickly with the error fixed, and the credit bureaus picking up attorney fees. He said the uptick in lawsuits in Minnesota in recent years is a result of a recovering economy that has given consumers confidence to make big purchases like cars and homes. That triggers credit checks, which uncovers the mistakes.

Beaubien, who lives in Eden Prairie, said he filed a suit to contest the $106,360 debt from his son's student loans, when Beaubien only cosigned for about $30,000. He sent three separate disputes: two to the credit bureaus and one to the lender. That got him nowhere, he said.

Beaubien said he was denied a mortgage and received a car loan with a 17 percent interest rate because the error showed his debt-to-income ratio was extremely high.

"There is a whole portion of my financial life that is totally out of my control. They take no responsibility at all for what they post," Beaubien said. "They won't take nothing off until they are told to."

"I had to go to the Social Security office to get a letter to prove to everyone that I wasn't dead," said Gulden, who said he tried to fix the error at least three times before hiring an attorney.

Mierzwinksi said the system for disputing errors has been broken for years. He said the credit bureaus investigate disputes by verifying that their information is consistent with what was reported by creditors, debt collectors or other data furnishers. What's left out is any information that the consumer attaches to that report, such as letters from creditors saying there is a mistake, he said.

Magnuson, with the trade group, said the bureaus now include all documents when they are investigating disputes about a credit record.

"That was the latest initiative to make sure that everybody — the data furnisher and the credit bureaus — are on the same wavelength," Magnuson said.

In September, the Consumer Financial Protection Bureau issued a warning that it would take corrective action against creditors and other data furnishers who do not fully investigate consumer disputes.

"You should look at it and dispute anything if there is an error and please contact the credit bureaus," he said.