The number of consumers in Massachusetts who complained to a federal regulatory agency that there were errors in their credit reports more than doubled during the pandemic.
The surge in complaints — which is national in scope — is a likely byproduct of the economic upheaval of the pandemic, said Chi Chi Wu, a staff attorney at the Boston-based National Consumer Law Center who has coauthored previous analyses of the credit report industry.
“I think more people have become aware of how important credit reports are” in a time of financial uncertainty, she said. “People realize that your credit report is your financial report card and that errors in it can drag down your score.”
Massachusetts residents filed more than 3,500 complaints with the Consumer Financial Protection Bureau last year, compared with fewer than 1,300 in 2019, according to CFPB data on its website. Nationally, more than 300,000 complaints were filed last year, more than double the amount in 2019, the data show.
The people who filed complaints with CFPB did so only after first complaining directly to the companies that compiled their credit reports and not getting them corrected.
But even with the help of the CFPB, the vast majority of consumers who complained about errors in their credit reports failed to get corrections, according to a CFPB report released last week.
The companies — known as credit bureaus — are legally mandated to investigate complaints referred to them by the CFPB. But the credit bureaus corrected mistakes in only about 2 percent of those referrals, a much lower rate than before the pandemic, according to the CFPB report.
In 2021, the credit bureaus reported fixing errors “in less than 2 percent of complaints, down from nearly 25 percent of complaints in 2019,” the report says.
One big factor in fewer fixes is a change in how the three big national credit bureaus approach a big chunk of the complaints referred to them by CFPB.
Beginning in April 2020, the three national credit bureaus — Equifax, Experian, and TransUnion — began refusing to respond to complaints they said were filed by representatives of consumers, instead of by consumers themselves, the new CFPB reports says.
In recent years, so-called credit repair companies have played an increasingly large role in the industry by charging consumers fees to improve their credit reports.
But many are of questionable legality, the CFPB report says.
“Many charge illegal fees, operate in bad faith, mislead consumers, or are outright fraudulent,” the CFPB report says.
Still, the CFPB report says the credit bureaus are too quick to assume many complaints are the illegitimate product of credit repair companies.
The credit bureaus, the report says, dismiss many complaints “based on unsubstantiated conclusions of suspected third-party involvement and on a flawed guidance that does not apply to CFPB complaints.”
The way credit bureaus are dismissing these complaints “raises serious questions about whether they are unable — or unwilling — to comply with the law,” the report says.
Credit repair companies do not identify themselves as such in complaints submitted to the credit bureaus, according to the CFPB report.
A spokesman for the Consumer Data Industry Association, which represents credit bureaus and other data companies, released a statement in response to a request for an interview.
“We are reviewing the CFPB report in detail,” the statement said. “We agree that responding to legitimate consumer complaints and getting credit reports right are paramount. As the CFPB notes, credit reporting plays a critical role in consumers’ lives. That’s why we are committed to expanding credit access to all consumers.
“The CFPB report highlights trends including increased activity by certain credit repair companies, which can inflate complaint numbers and undermine the process of addressing legitimate requests. We are committed to continuing to work with the FTC and CFPB to protect consumers against these harmful and abusive tactics.”
Credit reports compile detailed data from mortgage lenders, credit card companies, and other creditors on whether consumers paid their bills on time, and whether they defaulted on any accounts. Credit reports produce a credit score — ranging from 300 to 850 — that helps determine whether consumers can obtain credit and what interest rate they must pay.
During the pandemic, the credit bureaus are offering free weekly online credit reports. Before the pandemic, consumers could access free reports once a year.
While credit reports are widely used by lenders, they are also used by many landlords and employers conducting background checks.
“It’s absolutely crucial that credit reports be accurate,” Wu said. “Or it will cost you.”
Common reasons for mistakes in credit reports include the mixing of information belonging to one consumer into the file of another, incorrect or incomplete information furnished to the credit bureaus by creditors, and the fallout from identity theft.
In a 2019 report she wrote for the National Consumer Law Center, Wu cited a 2012 study by the Federal Trade Commission that found that “one in five consumers have verified errors in their credit reports, and one in 20 consumers have errors so serious they would be denied credit or need to pay more for it.”
Wu, in an interview, said she has no reason to believe the accuracy of credit reports has substantially improved since then. “There’s no solid data to show that,” she said.
In a statement, the CFPB said “credit reporting has and continues to be a focus of the bureau’s supervisory work. … We have a range of authorities and will continue to work to get improved [credit bureau] compliance.”
“The big question now is what will CFPB do,” Wu said.