If you’re not careful, you could unknowingly undermine your consumer rights — as well as the ability to successfully challenge your case — when disputing credit report errors.
Under the Fair Credit Reporting Act, credit reporting agencies such as Experian, Equifax and TransUnion are required to thoroughly investigate your credit report dispute. So are the furnishers that supply your financial information to the credit bureaus. But companies’ investigations are often quick, say experts, and rarely involve a substantial review of your case, causing some errors to get repeatedly verified as accurate.
If this happens to you, you have a legal right to sue. But you may not get very far if you don’t take extra steps beforehand to prepare your case, according to numerous court documents reviewed by CreditCards.com and interviews with consumer lawyers experienced in handling Fair Credit Reporting Act cases.
Many people get tripped up by a confusing number of pitfalls that sometimes begin before they even submit their first dispute. Here are five of the most common mistakes made when disputing credit report errors.
1. Dispute only with the furnisher If you know a lender is misreporting your information to a credit bureau, it may seem faster to bypass the credit reporting agency completely and deal only with the lender. “The law allows you to go directly to the furnisher and state your case,” says Norm Magnuson, vice president of public affairs at the Consumer Data Industry Association, a group representing consumer data reporting companies.
Don’t. If you skip the credit bureaus’ dispute system, you risk not being able to fight back if the lender fails to correct the mistake, say experts. “In order to trigger the investigation process under the Fair Credit Reporting Act, the dispute has to be sent to the credit bureau,” says DeVonna Joy, an attorney with the Consumer Justice Law Center in Big Bend, Wis.
That means if a lender or other type of data furnisher, such as a debt collection agency, insists their records are correct, you can’t sue them for failing to investigate the mistake unless you’ve disputed with a credit reporting agency first. “You don’t have a claim until you’ve disputed at least once,” says Joy.
You also can’t sue a creditor or credit bureau based solely on the inaccuracies in your report, she says. “Most people do not realize that it is not illegal for a credit bureau to report inaccurate information,” says Joy. “A claim arises only if the credit bureau or furnisher fails to properly investigate a dispute.”
2. Skip over the terms of an agreement with the credit bureau If you recently bought a credit report online from one of the big three credit bureaus, you probably ignored the terms buried at the bottom of the credit bureau’s Web page. Many people do.
However, unless you mail an opt-out letter to the credit bureau within 30 to 60 days of receiving the report, you automatically agree to a binding arbitration clause that bars you from airing your dispute in front of a jury and from joining in a class-action lawsuit against the bureau.
All three major credit bureaus have arbitration agreements in their terms of use, according to a review by CreditCards.com. That means if you buy your credit report online and find an error on it, you can still dispute the error. However, if you disagree with how the credit bureau managed the dispute and want to take the bureau to court, the credit bureau can legally press the arbitration clause and force you to give up your right to argue your case before a jury.
That can make it much more difficult to prove your case and win substantial damages if you’ve been financially wronged, say consumer lawyers.
In arbitration, your complaint will be handled by an individual arbitrator, appointed from an arbitration association chosen by the credit bureau, and it will be solely up to the arbitrator to decide your case. If you disagree with the arbitrator’s decision, you are not allowed to appeal.
“Forced arbitration clauses never help the consumer,” says Cary Flitter, a consumer lawyer and law professor in Philadelphia. “They only help the business that does something wrong.”
3. Lose evidence If you send dispute after dispute to the credit reporting agencies and continue to get nowhere, your next best step may be to sue the credit bureau, say experts. (You can also file a complaint with the Consumer Financial Protection Bureau.)
You won’t get far with your case, however, if you didn’t save evidence proving the mistake is real — and that you’ve been substantially harmed, say consumer lawyers. “The strongest cases are where the consumer has tried on their own, made multiple disputes and can show that they’ve been harmed,” says Joy.
In numerous court cases reviewed by CreditCards.com, many people lost their chance to argue their case before a jury because they did not save enough evidence that could be used in court to prove they had been wronged. Instead, their case was moved to summary judgment at the request of the credit bureau or the furnisher of the information, causing it to be decided by a judge rather than at a trial by jury.
In order to get a case past summary judgment and get a jury to hear your complaint — which gives you the best possible chance of winning your case — you will have to produce evidence showing there’s factual disagreement about what happened to your dispute and how you suffered as a result.
That includes saving documents, such as a certified mail receipt, that shows the credit bureau received your dispute. “The big three consistently lose or claim to lose consumer correspondence,” says Leonard Bennett, a consumer lawyer based in Newport News, Va.
It also includes saving all of your financial paperwork, including any denials of credit that you have received. “Those denial of credit letters are proof a consumer may have been harmed by credit report errors,” says Joy.
4. File disputes online instead of in writing When disputing credit report errors, most people opt for convenience and dispute online or by phone, says the CDIA’s Norm Magnuson. “About 54 percent of disputes are done on the telephone or Web,” he says. When people do mail a dispute, they rarely include a robust explanation of their complaint, he says. “Only 2 or 3 percent involve a free-form letter [that’s] a page or more,” says Magnuson.
The credit reporting agencies actively encourage this brevity by marketing on their websites how easy it is to use their online dispute systems. However, consumer lawyers say that using a form supplied by the credit bureau could cost you your case if you later need to take the credit bureau to court. “Never do credit report disputes online or on the small space on the credit report itself,” says Joy. Often, “there isn’t enough room to make full explanations,” she says.
That could hurt you later on if you have to sue the credit bureau for failing to properly investigate your dispute. You’ll need to be able to prove in court that you gave the credit bureau enough information to examine your case and conclude that the error is legitimate, say experts. Otherwise, “the credit reporting agency will uniformly respond with, ‘Not our fault, we didn’t have enough information,'” says consumer lawyer Bennett.
Experts recommend you mail a detailed letter to the credit bureaus that:
- details why the information in the report is wrong and,
- contains evidence proving the mistake.
The credit bureau is unlikely to use the evidence to investigate your complaint. However, by including it with your letter (and making copies for your files), you are making it much harder for the credit bureau to later claim that the error is your fault because you didn’t send enough information, say consumer lawyers.
Similarly, experts recommend you send the lender connected to the error identical copies for the same reason. Credit bureaus rarely forward evidence to the furnishers of the information and instead shrink your dispute into a two- to three-digit code and a 100-character summary of the dispute. Many lenders have complained in congressional testimony that the condensed information makes it hard for them to know what the dispute is about and to properly investigate the complaint.
“The reason why you want to send a copy of the letter is not because [the furnishers] are going to do a substantive investigation. They typically don’t,” says Bennett. You want to send it so the furnishers can’t argue in court that the dispute they received was inadequate, he says.
5. Listen to a debt collector You can’t dispute accurate information on your credit reports and expect the credit bureaus to remove it. However, you can hold the credit bureaus liable under the Fair Credit Reporting Act if they fail to observe the time limit on your debt.
By law, negative information should drop off your report after seven years. A bankruptcy may remain on your report for up to 10 years.
If you see a debt that’s real on your report, but is older than seven years, you can dispute the debt to the credit bureaus and demand that it’s removed. You can also fight back against a debt collector that is threatening to sue you for the debt if it’s past its statute of limitations.
The legal expiration date on the debt should give you a bulletproof defense of any lawsuit that’s filed after the statute ends. That strategy only works, however, if you didn’t accidentally re-age the debt after talking with a debt collector, says Paul Stephens, director of privacy and advocacy at Privacy Rights Clearinghouse.
“There is a big problem with this particular issue,” says Stephens. Debt collectors often sell accounts to one another and sometimes the debt collectors will report inaccurate timelines, causing the debt to be reported longer than it should. “That’s what’s called re-aging of debt,” he says. Under the Fair Credit Reporting Act, this shouldn’t happen and you have the right to fight it.
However, if you receive a call from a debt collector and agree to pay part of an expired debt, you could potentially restart the clock on the debt’s statute of limitations and undermine your ability to successfully fight back.
“Debt collectors can keep calling you and hounding you,” says Stephens. “They may get you at a weak or vulnerable moment and at that point in desperation you may make a promise to get into a payment plan or potentially acknowledge the debt.” At that point, the debt collector can sue you — and potentially win a judgment against you — for a debt that you should have been able to scrub from your credit history for good.
