Millions of consumers have an error on their credit report. In response, Democratic Senator Claire McCaskill of Missouri held a hearing Tuesday on the consumer report industry.
One out of every five consumers has an error on at least one of their major credit reports, according to a study released a few months ago by the Federal Trade Commission. Those errors can cause consumers to pay more or be denied credit or housing.
McCaskill, who recently became chairman of the Senate subcommittee on consumer protection, called the system “kafkaesque.”
“What happened in many of these instances is the consumer comes forward and says, ‘You’ve got an error,’ and all you do is put it into a two digit code," McCaskill said. "I can’t believe you’re so clogged up because all you do is put it into a two or three digit code and send it to the lender, the lender says ‘No’ and you say ‘Okay.’”
The credit report industry isn’t something consumers can opt out of. And McCaskill says credit report agencies have little incentive to rectify mistakes.
“Seriously, you aren’t going to fix it unless you’re going to be monetarily punished,” McCaskill told an industry representative.
What’s more, many consumers pay for a service that is free. You can receive a free credit report at a site required by federal law. But many don’t know about this service, and turn to more marketed sites that cost money.
An industry representative defended the system, saying many consumers are happy with their credit reporting agencies.
But McCaskill pointed out several cases where a consumer has had an error on their report for years, and are still experiencing problems today.
Follow Chris McDaniel on Twitter: @csmcdaniel