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Increase in Credit Report Dispute Lawsuits

Posted by Sami Thalji | Jun 27, 2024

Consumers are filing numerous lawsuits disputing information on their credit reports, encouraged by credit repair firms using social media platforms like TikTok and Instagram.

Surge in Complaints and Lawsuits

Banks, auto loan servicers, credit card issuers, and debt collectors are frequently targeted by disputes about inaccuracies on credit reports. The three major credit bureaus—Equifax, Experian, and TransUnion—handle most of these complaints and lawsuits. Recently, more financial institutions are facing disputes alleging violations of the Fair Credit Reporting Act (FCRA).

Growth in FCRA Lawsuits

Litigation in this area has grown significantly in the past few years. The Consumer Financial Protection Bureau (CFPB) has been actively addressing issues with credit bureaus and data furnishers failing to investigate disputes properly. This scrutiny has led to an increase in lawsuits.

Role of Credit Repair Companies

Credit repair companies and the use of credit score apps like Credit Karma have contributed to the rise in disputes. Social media is filled with content from these companies, driving more people to check and challenge their credit reports.

Increasing Pro Se Litigants

There has been a notable increase in individuals representing themselves in court, often guided by online advice. This has led to more cases of unverified claims of identity theft and harm to credit.

Regulatory Oversight and Industry Challenges

The CFPB has been questioning the accuracy of credit reports and considering rules to ban medical debts from credit reports. The complexity of credit reporting systems and the high volume of disputes create room for errors. Credit reporting agencies and data furnishers have only 30 days to respond to complaints, which can be challenging given the massive amounts of data involved.

Outsourcing and Investigation Concerns

Many data furnishers outsource the dispute process, raising questions about the thoroughness of investigations. The credit industry needs to improve its procedures to prevent inaccuracies and properly investigate disputes.

Litigation Trends and Costs

Lawyers representing consumers are demanding higher settlements in FCRA cases, with some cases settling for up to $50,000. The CFPB's focus on credit reporting has increased regulatory oversight and may lead to more litigation.

Legal Actions and Industry Impact

Experian recently sued a law firm for allegedly operating a racketeering enterprise aimed at extorting settlements through fabricated FCRA lawsuits. Despite some questionable claims, legitimate lawsuits are increasing in value as more lawyers challenge the industry's investigation practices.

Future of Credit Reporting and Litigation

The CFPB is proposing changes that could expand the definition of credit reporting agencies, potentially leading to more litigation. As the CFPB emphasizes the need for accurate credit reports, the industry faces higher demands and increased costs for settling disputes.

By staying informed and proactive, consumers can protect their financial health and ensure their credit reports are accurate. Regularly checking credit reports and addressing any errors promptly is crucial for maintaining good credit standing.

About the Author

Sami Thalji

Sami Thalji is a native Floridian, born in Clearwater and raised in St. Petersburg, Florida. Sami graduated from Osceola High School in Seminole, Florida before attending and receiving both his Bachelor of Science and Juris Doctor from the University of Florida in Ga...


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