Credit Bureaus’ Tardy Rush to Aid Consumer
Suddenly, credit reporting bureaus are serving consumers. They have consumer affairs departments and toll-free numbers. They want consumers to see and understand their own credit reports, even to know and help choose who else sees them.
As consumer service goes, this isn’t exactly radical, but it’s a significant change for credit bureaus, which haven’t always been so consumer-friendly. They wouldn’t be now but for increasing criticism of their activities and proposed legislation to limit those activities--many of which are relatively new enterprises.
Actually, what they call consumer service could itself draw criticism. But it’s something and--more important--something they can bring to upcoming hearings in both the Senate and the House.
Credit bureaus started so local merchants could share information on risky customers. The information came from merchants and was sold to merchants; consumers were only the subject. Soon, thanks to computers, vast amounts of consumer credit data could be stored, searched and transmitted at great speed, with more than a million reports a day delivered to subscribers.
It was a good system, but not perfect. Files inevitably contained errors--not, said the bureaus, their fault. They just stored information, accepting whatever creditors sent, however outdated, incomplete or inaccurate. The industry claimed an error rate of less than 1%. Outside groups, including Consumers Union, have found errors in a third to half of their samplings.
Nor was it easy to correct. Under the Fair Credit Reporting Act, any consumer has the right to a copy of his report (free if he was denied credit) and an investigation of errors. But it could be an uphill battle, involving an average of six months effort, in vain, according to a study of complaints filed with the FTC.
Computerization also gave credit bureaus new business opportunities. Given the masses of material available on everybody--credit data, government records, “lifestyle” information--and the technology that made it “manipulable,” credit bureaus began to manipulate their databases. They “pre-screened” potential credit card customers for banks, matching given criteria (income, demographic description) with their database of consumers to produce nicely “targeted” mailing lists. They created other targeted lists for direct marketing firms.
This work was not popular, partly because concern for personal privacy was growing, and partly because it goes against federal privacy laws, which say that information collected for one use can’t be used for another without the subject’s consent. The result was a backlash just now coming to a head.
Consumers don’t hesitate now to sue bureaus for not correcting mistakes that affect their credit. Furthermore, this summer, 13 state attorneys general, including California’s, sued TRW over its alleged errors, inadequate investigations and sales of credit data to direct marketers.
Congress, moreover, is holding hearings again--as it has for several years--on possible reform of the FCRA. Current proposals would require bureaus to give consumers better access to their files or restrict commercial sales of credit data, or do both. Overall, there’s a feeling that “this is the year” for a vote, says Ed Mierzwinski of the Washington-based U.S. Public Interest Research Group.
It had to impress credit bureaus that the world was changing, and that they should too. Equifax, one of the biggest, even commissioned a Louis Harris survey on consumer feelings, which confirmed concerns about personal privacy and “data security.”
One result was that Equifax is getting out of list-making. It has canceled a joint venture to put 120 million American households, with income and lifestyle data, on a software disk. It’s closing its targeted list division--not a costly move (its $11 million in sales is 1% of Equifax revenue) but a good one.
Last year, Equifax established an office of consumer affairs for the very first time. Now both Equifax and TRW are introducing 800 numbers for consumer inquiries.
There are even some consumer products now--or what purport to be consumer products, although they’re no great cause for optimism. TRW’s 5-year-old Credentials Service, $35 a year, offers consumers unlimited copies (otherwise $8 to $15 each) of their credit report and notification whenever someone else orders a copy. TRW thus answered consumer fears of credit bureaus with a costly “service” that critics believe should be both routine and free.
Equifax went further in the same direction. Its new division, Consumer Direct, offers Your Financial Update for $34.95 a year--copies of one’s credit report plus an “analysis” of how it would look to a credit grantor.
More interesting, its new Buyer’s Market offers consumers their “choice” of junk mail. For $15 a year, they get to check off their interests (clothing, health, high-tech) on a questionnaire. With those responses, freely given, Equifax develops “tailored purchase-preference lists” for direct marketers, doubtless taking in another, even larger fee.
Unfortunately, these new consumer services are “definitely too little, too late to stop legislation,” Mierzwinski says. They’re also pretty elementary, even crude to the point of seeming slippery. Obviously, credit bureaus haven’t quite got a handle on this consumer stuff. But they’re just beginning.
