(5 of 8)
Each of the Big Three also operates a separate unit that compiles credit reports detailing the bill-paying history of nearly every American. The reports are sold to mortgage lenders, credit-card companies and anyone else who can show a "legitimate business interest." The Big Three argue that their service is essential to the workings of credit-card and loan industries that most Americans could not do without. But their critics complain that the reports are frequently riddled with errors and that it is difficult and expensive for consumers to correct or even know about them. Earlier this year Consumers Union reported that nearly half the credit reports it studied from the nation's largest credit bureaus contained some inaccuracies.
Eugene N. Wolfe, a retired speech writer who lives in McLean, Va., knows all about that. In 1986 he was puzzled when a local bank turned down his loan request. To his horror, he discovered that for years an Equifax subsidiary called Credit Bureau, Inc., had merged his credit history with that of another Eugene N. Wolfe, who had a raft of debts. After weeks of conversation and paperwork, Wolfe thought he had cleared up the problem -- until last year, when he was turned down for a credit card and discovered that information pertaining to the other Eugene Wolfe had found its way back into his file.
"At one time I had to pay the highest interest rate on a car loan because the dealer was looking at bum debts that were erroneously listed in my name, but I didn't know it," Wolfe complains. "It makes you angry." Equifax contends that his case was unusual and that the company has recently adopted new software intended to reduce the likelihood of such confusion.
The issue of faulty reporting came to a head in July, when the attorneys general of six states -- Alabama, California, Idaho, Michigan, New York and Texas -- brought suits against TRW's credit-agency operation, accusing it of violating consumer privacy and failing to correct serious reporting errors. The company filed countersuits in federal court arguing that the federal Fair Credit Reporting Act of 1970 supersedes state law. But recently TRW also announced that it would supply consumers on request with free copies of their own credit files, instead of charging up to $20 a copy. Trans Union and Equifax declined to follow suit, arguing that providing free reports would be too expensive. Equifax executives argued that there was no great consumer demand for cheaper reports.
The pressure on the companies seems likely to increase. On Capitol Hill, the House has before it legislation that would require written agreement from consumers before information about them is released by a bank, credit bureau or other institution. Credit agencies oppose the bill, along with another introduced by California Representative Esteban Torres that would update the Fair Credit Reporting Act, which gave consumers the right to see and, if necessary, correct their credit records. That bill would require all credit agencies to send consumers, upon request, one free copy of their report annually, as TRW has voluntarily agreed to do.