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Fair Credit Reporting: 4.3.4 Identity Theft

Identity theft poses a unique combination of inaccuracy problems. It is caused by multiple failures of the credit industry to protect the privacy and accuracy of a consumer’s credit file. The 2003 FACTA amendments to the FCRA added a number of protections intended to address identity theft, which are discussed in Chapter 9, infra.

Fair Credit Reporting: 4.3.5.1 How Public Record Information Is Collected

There are many different types of public record information that can appear in a consumer’s file, e.g., bankruptcies, collection judgments, eviction proceedings, criminal records, and tax liens. In contrast to how nationwide CRAs passively receive data from creditors and others, previously they had affirmatively sought out and obtained public record data from their own third-party vendors.432 These vendors may also be “furnishers” governed by the FCRA.433

Fair Credit Reporting: 4.1.2 Congressional Intent to Combat Inaccurate Consumer Reports

The FCRA’s legislative history shows a congressional intent that the Act protect consumers from the transmission of inaccurate information about them.7 The FCRA was drafted to “prevent consumers from being unjustly damaged because of inaccurate or arbitrary information in a credit report.”8 One legislator has described the adverse effect of bad credit histories as: “A poor credit history is the ‘Scarlet Letter’ of 20th century America.”9

Fair Credit Reporting: 4.1.3.1 Studies and Reports Show Consumer Reports Prone to Errors

A number of surveys, studies, and reports have shown that inaccuracies occur with significant frequency in the consumer reports. These studies come from a number of sources, including consumer groups, government agencies, independent pollsters, and even the industry itself. Inaccurate information is troublesome since it can adversely affect whether consumers are granted credit, and with the practice of risk-based pricing, how much they pay for it.18

Fair Credit Reporting: 4.1.3.2 Studies By Consumer Groups

One of the earliest studies on inaccuracies in consumer credit reports was a 1998 survey by U.S. Public Interest Research Group (U.S. PIRG) of 133 consumers who reviewed their own consumer reports.22 This report found that seventy percent of these consumer reports contained an error and twenty-nine percent contained an error serious enough (such as delinquencies or accounts that did not belong to the customer) to cause a denial of credit.23 Six years later, another U.S.

Fair Credit Reporting: 4.1.3.3.1 FACTA’s mandate

The Fair and Accurate Credit Transactions Act of 2003 (FACTA) directed the Federal Trade Commission (FTC) to study and report to Congress on various issues related to the accuracy and completeness of consumer reports. The study occurred over a period of eleven years, with the most significant report to Congress in 2014. Several interim reports were also completed. These interim reports are discussed below.35

In addition to its accuracy study, the FTC was directed to study four specific proposals to improve the operation of the FCRA:

Fair Credit Reporting: 4.1.3.3.3 The FTC’s pilot studies

The first phase of the FTC’s study on accuracy—the first pilot study—was completed by December 2006.45 Thirty-five consumers were recruited. These consumers received assistance from an independent contractor hired by the FTC in obtaining and reviewing their consumer reports for errors.

Fair Credit Reporting: 4.1.3.3.4 The FTC’s large-scale study

In December 2012, the FTC issued its report on the final phase of its studies, a nationwide study of credit report accuracy involving 1001 participants.60 The study participants were selected to have credit scores that matched the national distribution of credit scores as closely as possible.

Fair Credit Reporting: 4.1.3.3.5 The FTC’s follow-up study

In January 2015, the FTC released a follow-up study to its 2012 large-scale study on the accuracy of credit reports.69 The follow-up study focused on 121 consumers who had at least one unresolved dispute from the 2012 study and participated in a follow-up survey.

Fair Credit Reporting: 4.1.3.4.1 Federal Reserve and GAO studies

In addition to the FTC studies pursuant to FACTA, other government researchers have issued findings about inaccuracies in consumer credit reporting. A 2003 study by the Federal Reserve Board (FRB) found that information in credit reporting files is often incomplete and contains duplications and ambiguities.76 The study looked at over 300,000 consumer files from one of the three nationwide CRAs.

Fair Credit Reporting: 4.1.3.4.4 CFPB complaints

The CFPB began accepting credit and consumer reporting complaints in October 2012.94 Credit and consumer reporting has been by far the top category of complaints to the CFPB, which received over 978,000 such complaints in 2022, constituting 75% of the overall complaints received by the Bureau that year.95 Between January 2020 and September 2021, the CFPB received 700,000 complaints specifically against th

Fair Credit Reporting: 4.1.3.6 Internal Accuracy Analyses from Consumer Reporting Agencies

The nationwide consumer reporting agencies maintain vast amounts of consumer credit information. Their business depends not just on data collection, but as well on its analysis and evaluation. Accordingly, the nationwide CRAs conduct their own internal audits or analyses of the accuracy of their data. While generally not publicly available, some practitioners have made an effort in litigation and discovery to obtain these internal audits and analyses.

Fair Credit Reporting: 4.2.1.4 Definition of Accuracy for Furnishers

While the FCRA itself does not define what is “accuracy,” Regulation V includes a definition for purposes of the furnisher accuracy144 and direct dispute requirements.145 This definition defines “accuracy” to mean that information a furnisher provides to a CRA about an account or other relationship with the consumer:146

Fair Credit Reporting: 4.2.2 Accuracy Standard Applies to Report Actually Supplied to User

It is important to determine the specific information that was actually reported to a user and the accuracy of that information in the form it was reported to the user. The plain language, paper version of a consumer report usually produced in litigation, with easily-read narratives, is not the manner in which the “Big Three” nationwide CRAs typically supply a consumer report to users.150

Fair Credit Reporting: 4.2.3 Accuracy Requires Common Understanding of Information

Ambiguity in information supplied to users can create inaccuracies in consumer reports that are actionable under the FCRA. For example, in Cassara v. DAC Services, a truck driver history database used an overly broad definition of what constituted an “accident,” leading employers to use different standards to report accidents. The Tenth Circuit held that these discrepancies raised a genuine issue as to the accuracy of such reports, stating:

Fair Credit Reporting: 4.2.4.1.1 Majority of circuits have adopted a “maximum possible accuracy” approach

The FCRA requires more than technical or literal accuracy; it requires “maximum possible accuracy of the information concerning the individual about whom the report relates.”162 As the Third Circuit has noted, “the distinction between ‘accuracy’ and ‘maximum possible accuracy’ is not nearly as subtle as may at first appear, it is in fact quite dramatic.”163 And as the Eleventh Circuit observed “[t]he words ‘maximum’ and ‘possible’ mean ‘greatest in quantity or highest in degree attainable’ and ‘