A 2002 Federal Reserve report created by the executives of TransUnion, one of the largest credit reporting businesses, justified its privacy invasion by saying, “Credit reporting companies give businesses insights into a consumer’s past behavior, similar to the ways in which an insurance company might use a driving record.” They fail to mention the difference. A driving record is created by a court system, where the driver can challenge the ticket and win the court case.
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Credit reporting businesses do not limit the information they collect and sell to information proven in a court system. Instead, the companies enter into an agreement with other companies. Transunion discloses, “Upon request for a business to begin obtaining consumer credit data, the credit reporting company will perform various investigations and checks to ensure the legitimacy of the business’s purpose. Once the business has established itself as having a permissible purpose, it can begin reporting and requesting data from credit reporting companies.”
Credit reporting businesses only make money if they find the business that wants to buy its reports is “legitimate.” Deciding if a business is legitimate, like a company that sells “timeshares,” has little to do with the value of the business and much to do with the bottom line of the credit reporters.
Credit reports were once used solely to decide to whom to offer credit. The businesses have found new ways to use the information. Your insurance premiums are probably based on the credit report the company sells.
Your future employer is probably buying a credit report. Even landlords are sold a credit report that doesn’t consider rental payments.
The complaints about credit reports are in the millions. The Consumer Financial Protection Bureau (CFPB) alone, “From October 2021 to September 2022, received nearly one million complaints. How many how many resolved to the consumer’s satisfaction? Very few.
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From the CFPPB’s annual report:
“Consumer reporting issues are complicated, in part, because of the structure of the system:
consumers do not choose to participate; they cannot vote with their feet if service is poor;
market participants do not have ordinary competitive pressures; and actions by those
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It is true that if you are denied credit, you have the right to see the credit report used. Aside from the fact that by that time it is too late, removing mistakes in a timely fashion is almost impossible. You can write the credit reporter challenging something on the report. But there is no independent investigation. The credit reporter decides who to help: the business paying for the service or the consumer complaining. After the credit reporter has ruled in favor of the corporation paying its fees, the consumer can, of course, “put a letter” in the file. Except no one reads the file anymore, the file gets turned into a “FICO” score, which uses a proprietary formula to rate consumers.
The credit reporting companies have such a hold over us that the United States Justice Department is investigating the companies for anti-trust violations. Credit unions and others are suing the company that turns credit reports into numbers, Fair Isaac Corp, for violating other anti-trust provisions.
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It may seem strange in 2023 to say we have the right to privacy. Multi-national corporations should not be able to secretly collect private information about us and sell it to others without our permission. And no for-profit company should replace a court system and decide who owes money on a contract dispute, as the credit reporting agencies do.
It’s not such a crazy idea to shut down the credit reporting businesses. As the Federal Government itself writes: “There are alternatives to the current system. Some economies, for example, are moving towards open banking rules that put consumers in control of their data. Consumer finance experts in the U.S. are encouraging the exploration of different models.