Credit bureau Equifax has agreed to pay a $15 million fine to the Consumer Financial Protection Bureau Friday to resolve allegations that it failed to conduct proper investigations of consumer disputes.
On Friday, the CFPB issued a consent order that found Equifax, based in Atlanta, ignored documents and evidence that consumers submitted to dispute information on their credit report, as well as allowing previously deleted inaccuracies to be reinstated in credit reports. The bureau also found that Equifax shared inaccurate credit scores and data about consumers with lenders.
Coding errors in Equifax's internal software caused the company to miscalculate and share inaccurate credit scores for several hundred thousand consumers. The company also reported the same credit accounts multiple times for more than 50,000 consumers.
The CFPB claims Equifax also provided confusing and conflicting letters to consumers about the results of its investigations, and used flawed software code which led to inaccurate consumer credit scores.
"Equifax failed in its basic duty to investigate and resolve consumer disputes about inaccurate information on their credit reports," CFPB Director Rohit Chopra said in a press release.
Equifax said the consent order "turns the page on the CFPB's long-running investigation into our consumer dispute processes."
"We engaged collaboratively and transparently with the CFPB on these matters and worked proactively, even before the investigation began, to address the CFPB's concerns through holistic changes to our technology and processes — all with the goal of improving consumer experiences," an Equifax spokesperson said in a statement.
The company also said it is investing $1.5 billion "in a complete technology transformation," that included major changes to the dispute process and consumer support system.
Still, the CFPB found a significant number of errors.
In 2022, Equifax made a code change that affected the calculations of some consumers' credit scores. Equifax then sold the incorrect credit scores to third parties. Equifax found that more than 600,000 consumers had credit scores that were 10 points or more lower than they should have been, with 139,000 consumers having their scores drop by 25 points or more. As a result, thousands of consumers "may have been offered less favorable credit terms as a result of [the software] errors," the CFPB said in its
Equifax made another coding error in 2022 that involved 46,400 disputed collection tradelines, in which the consumers claimed an account in collection was inaccurate. It took Equifax seven months to remove the duplicate collection tradelines and during that process the company found 10,000 additional instances of system-generated duplicate tradelines.
In addition, Equifax sent letters inaccurately characterizing the status of roughly 50,000 consumers in bankruptcy by stating that their debts had been "discharged" — a positive outcome for the consumer in which their debt is forgiven — when the credit bureau should have characterized the debt as "dismissed" — a negative for the consumer because the debt remains unpaid.
Further, from early 2022 to mid-2023, Equifax sent letters to 250,000 consumers stating that the reinvestigation of their dispute was "still in process" when, in fact, the investigation had ended.
The bureau said that Equifax — which processes 765,000 disputes per month — violated the Fair Credit Reporting Act which mandates that credit reporting agencies investigate disputed information and take steps to ensure consumers' credit reports are accurate.
Credit bureaus are required by the FCRA to provide notice of a consumer dispute to the credit furnisher that reported the disputed information. The CFPB said that Equifax "engaged in unfair conduct by using ineffective systems and flawed processes" and excessively deferred to credit furnishers to address disputes.
Equifax's process for consumers to submit disputes also was limited. In many cases, Equifax failed to consider relevant information submitted by consumers or did not look at the information at all, the CFPB said. After forwarding information about a dispute to a furnisher, Equifax did not meaningfully consider whether the furnisher's response made sense, the CFPB said, and sometimes ignored information it had that contradicted the furnisher's response.
The letters that Equifax sent to consumers also sometimes contained confusing or contradictory statements. In addition, the company allowed previously deleted errors to be put back onto credit reports and failed to block identity-theft related information.
"Equifax did not have systems to detect information that was previously removed and to block that information from again appearing on the consumer's credit report," the bureau said. The company also had no process to identify if a consumer was disputing the same inaccurate information because Equifax failed to correct it the first time. Equifax also reported credit information that it should have blocked due to identity theft.
The $15 million fine will be paid to the CFPB's victims relief fund.
