CFPB Orders Equifax to Pay $15M Penalty for Inadequate Credit Report Dispute Investigations

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The Consumer Financial Protection Bureau (CFPB) earlier this month announced that it has ordered Equifax to revise certain policies and pay a $15 million civil penalty after finding that the credit reporting agency had for years failed to properly investigate consumer disputes.

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According to the CFPB’s 75-page order, flawed dispute practices and software coding, among other failures, caused false or incomplete information to remain on thousands of consumer reports that Equifax furnished to third parties. The CFPB found that Equifax and subsidiary Equifax Information Services violated the federal Fair Credit Reporting Act by failing to conduct sufficient dispute investigations and ensure the maximum possible accuracy of the reported data.

Equifax’s processes for submitting disputes served to curb a consumer’s ability to fully and accurately describe the nature of a particular issue, the CFPB said in a January 17 press release, noting that the credit reporting agency processes roughly 765,000 disputes each month.

For example, a consumer who submits a dispute online is given only a limited set of pre-populated descriptions to characterize their concerns, which correspond to a small number of internal codes available in Equifax’s system, the order explains. The dispute code is then passed on to the entity that furnished the information in order to obtain its response, but given the restricted code options, the forwarded data often fails to adequately communicate the full scope of the problem, the document asserts.

Furthermore, after the furnisher responds to the dispute, Equifax accepts the reply without meaningful review, even when the credit reporting agency possesses information that contradicts the response, the CFPB said.

“This process is almost entirely automated,” the order states. “[Equifax] conducts little to no review of the Furnisher’s response to flag any logical inconsistencies, and there is no way for the Furnisher to provide information about the substance of the Dispute or its investigation beyond the two-digit code.”

The CFPB also determined that Equifax has ignored documents and evidence consumers have submitted with their disputes and provided them with confusing letters about the outcome of its investigations. The automatically generated letters often contain contradictory statements—such as both “this has been verified as accurate” and “this item has been deleted”—and regularly fail to inform the consumer about the results of their dispute, the order contends.

In addition, the CFPB accused the “Big Three” credit reporting agency of allowing previously deleted errors to be put back on consumer files.

“Equifax did not have systems to detect information that was previously removed and block that information from again appearing on the consumer’s credit report,” the press release shares.

Moreover, a flawed internal software code adopted in March 2022 resulted in the miscalculation and subsequent disclosure of inaccurate credit scores for hundreds of thousands of consumers, the CFPB’s order adds. A similar coding error also led Equifax to report the same credit accounts multiple times for more than 50,000 people, the document relays.

The CFPB has ordered Equifax to bring its dispute resolution practices in line with federal law, including by establishing a reasonable online dispute submission portal and enhancing its processes for consumers to initiate a dispute over the phone or by mail.

On top of changing its business practices, the credit reporting agency must pay a $15 million penalty to the CFPB’s victims relief fund, which is used to compensate consumers harmed by companies that violate federal consumer financial protection laws.

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