At Sherman & Ticchio, we work in a peculiar field. We are attorneys who assist clients that are the victims of inaccurate credit reports or background check reports. We bring lawsuits against credit bureaus such as Equifax, Experian, Innovis, and TransUnion, as well as the companies that report to these credit bureaus (examples include banks of all sizes, credit card companies, car lenders, mortgage companies, etc.). Our lawsuits are brought primarily under a statute called the Fair Credit Reporting Act (FCRA). So that is our day job (and sometimes our night and weekend job as well). You (and us when we are not wearing suits and carrying briefcases) are, according to the Fair Credit Reporting Act, a consumer.
While the Fair Credit Reporting Act (FCRA) defines you as a “consumer,” a credit bureau (or, in the terminology of the FCRA, a “consumer reporting agency” or “CRA”) defines you quite differently. To a consumer reporting agency, you are one thing: a product. You are a repository of personal and financial information that credit bureaus reduce to documents called consumer reports, which they then sell over and over again.
Why are companies buying consumer reports about you even when you do not apply for credit?
Credit bureaus like Equifax, Experian, Innovis, and TransUnion gather all kinds of information about you. They get their information from a number of sources, including credit card issuers, public records, and even from other credit bureaus. After gathering your information, credit bureaus package it into a convenient consumer report which is then sold to your current and potential creditors. Why do these lenders want to buy your information?
Some companies want to buy your information so that they can decide if they are going to market a credit-based product (credit card, auto loan, home mortgage, etc.) to you. You likely have received an offer (or perhaps a few hundred offers) for a new credit card in the mail recently. Some credit card companies only want to offer their best rates to potential customers who are at low risk of defaulting. In order to determine who to pre-approve for their “prime” cards, they may purchase the credit reports of all consumers in a city, county, or state who have a credit score of 700 or higher. Other potential creditors may target higher risk consumers so they can offer credit at high interest rates. Those companies may buy consumer reports about people who live in less affluent zip codes.
In addition, your current creditors buy consumer reports about you. Why? So they can see whether your creditworthiness has changed. Perhaps you’ve recently missed a mortgage payment. Capital One may decide that this makes you a higher risk borrower and so it may cancel your credit card, lower your credit limit, or increase your interest rate.
Who is reporting your information, and why?
As we said earlier, credit bureaus get their information from a number of sources, including companies, like creditors, that the Fair Credit Reporting Act refers to as “furnishers.” Furnishers are called that because those companies furnish information about you to credit bureaus, such as your payment history, any amount of money you still owe, the dates you opened your credit accounts, etc.
One of the main reasons furnishers provide your information to the credit bureaus is because it can be a powerful tool to threaten you. If you fail to make a payment on time, your credit card company can report that fact to a consumer reporting agency, who will sell that information to almost anyone else who would think about extending credit to you. Even if you only missed your payment by a dollar, or they were supposed to withdraw money from your account pursuant to an autopay agreement that failed due to no fault of your own, you may find that credit bureaus have broadcast on consumer reports that you were 30 days late on a payment (i.e., that you missed a payment).
When “consumers” become victims
Sherman & Ticchio helps people (we think of you as more than consumers) who have found inaccurate information on their credit reports or background check reports. That information could have appeared because you were the victim of identity theft, or because a credit bureau mixed your credit file with the credit files of other “consumers.” Inaccurate information can even be reported because a “furnisher” mistakenly provided inaccurate information to a credit bureau. Whatever the reason for misinformation is, the results of inaccurate credit reporting can be devastating.
Once inaccurate information appears on a consumer’s report, it can be sold to several, or even dozens of potential creditors. Equifax may mistakenly list that you filed for bankruptcy, and then report that fact to every major credit card issuer in America, all without your knowledge. After an identity thief opens a credit card in your name, Experian may tell your mortgage company that you run high balances on your credit accounts, and you may find yourself faced with higher interest rates or less favorable terms.
Even if there is nothing inaccurate on your credit reports, the credit-reporting system could set you up for failure. When a credit bureau sells your information, they put your information at risk. Not only can credit bureaus be hacked, but every company they sell your information to can also be hacked. A data breach at any number of companies could result in your name, address, phone number, employment information, account numbers, and/or social security number getting into the wrong hands.
This is about more than credit
Most of this article has focused on “credit.” However, this same reporting system exists in the job market and the housing market as well. “Consumers” may find that it is impossible to rent an apartment because of a false eviction record on their tenant-screening report, or they may lose a job because a background check company falsely reported a criminal history on their background check report. Companies that sell background check reports are almost always considered consumer reporting agencies under the Fair Credit Reporting Act. And background check reports are one of the many kinds of documents that qualify as consumer reports.
When did you sign up for this?
As you can see, you are the part of a complex economic system that is very profitable for companies like Equifax, Experian, Innovis, and TransUnion. It is also a system that frequently leaves you with the short end of the stick. Your data is sold without your permission to companies you may have never even heard of. If you’re lucky, those companies won’t be hacked, and the information that is sold to them will be accurate.
It may not be entirely inaccurate to refer to you as a “consumer.” After all, we do consume a number of credit-related products. We pay for credit monitoring services, identity theft protection, and we pay for our credit reports in an effort to assure that information reported about us is accurate. It’s a great system — from the perspective of banks and credit bureaus. Not only do these companies make enormous sums of money off of you (and us, too), but — via their many credit monitoring products — the credit bureaus have quite ingeniously found a way to make you pay them even more money so that you might be alerted to their mistaken reporting. Nobody paid you for your information. Even worse, you pay them. So ask yourself, are you a “consumer,” or a “product”?