Equifax accused of misreporting credit scores and keeping it from hundreds of thousands of consumers

Equifax accused of misreporting credit scores and keeping it from hundreds of thousands of consumers

A class action lawsuit claims that the credit reporting agency Equifax provided inaccurate credit scores for hundreds of thousands of consumers seeking loans between March 17 and April 6. The fallout of what Equifax described as a “coding issue” within a “legacy, on-premise server environment” included credit and housing denials that may have otherwise been approved, according to the suit filed on Wednesday on behalf of plaintiff Nydia Jenkins. The issue was first reported by The Wall Street Journal the day before the lawsuit was filed. 

Jenkins, a Jacksonville, Florida, resident, was pre-approved for an automotive loan in January and later denied when Equifax inaccurately reported a drop of 130 points, according to the suit. “In order to secure financing for a vehicle, Plaintiff was forced to apply for another loan from a ‘buy now’ dealership and received a loan with much less favorable rates,” attorneys wrote in the lawsuit. What started as an estimated monthly payment of $350 became a bi-weekly payment of $252, according to the suit.

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Equifax CEO Mark Begor explained at an investor conference in June that Equifax had moved its services to a cloud server and that the coding issue, “a mistake made by our technology team,” was being fixed. “We have been working with our customers over the past five or six weeks to really collaborate with them about what impacts there may be. We think the impact is really going to be quite small, not something that is meaningful to Equifax,” Begor said in the context of its complete financial profile.

The “glitch” was meaningful to the thousands of consumers who saw their credit scores shift 25 points or more in the thick of surging home prices and increasing mortgage rates.

“Initially, it appeared as if the Glitch was limited to individuals who applied for mortgages, and the “company said that less than 9% experienced a change of 10 points or less; less than 3% experienced a change of 11 to 20 points; and less than 1%experienced a change of more than 20 points,” attorneys stated in the lawsuit. “However, further reporting in August revealed that the issue was not limited to individuals who applied for mortgages, and that the inaccurate consumer reports provided by Equifax ‘affected many lenders across multiple consumer loan products, not just mortgages, according to people familiar with the matter.’”

As a result of “inaccurate reporting of their consumer credit information,” plaintiffs and others included in the class action suit allegedly experienced: 

-loss of use of and access to financial accounts and/or credit;

-money and time expended to avail themselves of assets and/or credit frozenor flagged due to inaccuracies;

-impairment of their credit scores, ability to borrow, and/or ability to obtain credit;

-lowered credit scores resulting from credit inquiries following inaccurate reports being provided to lenders;

-money, including fees charged in some states, and time spent placing fraud alerts and security freezes on their credit records;

-costs and lost time obtaining credit reports in order to monitor their credit records to attempt to understand the reasoning behind the denials due to theGlitch;

-lost opportunity costs and loss of productivity from efforts to mitigate and address the adverse effects of the Glitch, including but not limited to efforts to research how to prevent, detect, contest, and recover from the Glitch;

-loss of the opportunity to control how their personal information is used; and 

-continuing risks to their financial health, which remains subject to further harmful inaccurate reporting as long as Equifax fails to undertake appropriate, legally required steps to protect and ensure the maximum possible accuracy when creating consumer reports using the personal information in its possession.

The suit also accused Equifax officials of having knowledge of the coding issue as early as May 27 and failing to notify consumers as the company did with sellers and lenders. “Despite that alleged private acknowledgment, Equifax publicly stated that ‘credit reports’ were not affected,” attorneys stated in the lawsuit. “However, as discussed below, items included on credit reports, including the credit score itself, are vital aspects of a consumer report.”

Equifax acknowledged the issue in a news release on Tuesday and followed up with added clarifications on Thursday. “Equifax understands that consumers have questions about their credit score and the potential effect of the coding issue that took place between March 17 and April 6, 2022,” the company said in the follow-up release. “We take this issue seriously and regret that it occurred. While a number of news outlets have reported on this issue, we want to clarify the conflicting information that has appeared in news reports to ensure accuracy of information.”

The company’s clarification included its assurance that the “coding issue” did not affect the information in consumer credit reports, that the issue is not ongoing, and a “fix was put in place on April 6.”

“Our data shows that less than 300,000 consumers experienced a score shift of 25 points or more,” the company stated. “While the score may have shifted, a score shift does not necessarily mean a consumer’s credit decision was negatively impacted. If you attempted to obtain credit between March 17 and April 6, 2022, and think your decision may have been impacted, Equifax advises that you reach out to the lender for more information.

“Again, we know consumers and businesses depend on our data and we do not take this issue lightly.”

Democrats—Sen. Elizabeth Warren, Sen. Mark Warner, and Rep. Raja Krishnamoorthi—blasted Equifax in a letter calling for the company to answer for its mistakes and failures to alert consumers and regulators. “This is a deeply troubling allegation, raising questions about the impact your opaque practices may have on America’s financial institutions and on individual borrowers, who may be stuck paying higher costs for loans, credit cards, cars, and houses,” they wrote. “Your company owes the public a clear and transparent explanation for why and how it made such grievous errors, the scope of the errors, and why you have failed to notify affected consumers of these errors.”

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