Hundreds of thousands could have had their scores erroneously shifted by 25 points
Atlanta-based Equifax this month acknowledged it misreported consumers’ credit scores, potentially affecting applications for mortgages, credit card applications and auto loans. Mortgage Professional America interviewed an attorney investigating the matter to determine what recourse affected consumers might take to protect themselves.
After disclosing the error, Equifax has said less than 300,000 consumers had their credit scores changed by 25 points or more in any direction – swinging borrowers’ credit scores from good to fair or vice versa. The incorrect scores were sent out during a three-week period between March 17 and April 6, according to the credit bureau.
“Obviously, Equifax is a credit reporting agency and they’re permitted by federal law under the Fair Credit Reporting Act to provide credit scores to lenders who are seeking to extend credit to consumers,” Jason Doss (pictured) of Doss Firm LLC – which, as it happens, is also based in Atlanta – told MPA during a telephone interview. “They’re allowed to do that, so long as they follow the regulations that are set forth by the Fair Credit Reporting Act. One of those – which seems obvious – is to accurately report what the credit report is.”
Doss’s law firm is devoted to representing consumers across the country in a variety of areas including investment disputes and consumer class action litigation. To that end, he has helped recover millions in damages from well-known financial services companies on behalf of individual investors who lost their life savings due to bad investment advice and, in some cases, financial fraud.
Repercussions of the glitch continue to unfold, and it’s unknown how it may have adversely affected people who may have been applying for mortgages, Doss said. It’s also unclear if any specific demographic was hit hardest by the erroneous credit reports.
Doss provided a primer on how consumers are vetted for creditworthiness, based on scores provided by Equifax and the two other credit agencies, Experian and TransUnion. The practice isn’t unlike an insurer’s requiring three estimates to a car damage claim, from which the middle estimate is chosen for the payout.
“For a period of time – and I don’t know if the time has been actually defined specifically or not but I’ve read between March 17 of this year and April 6 – there was a computer glitch that affected a certain number of consumers’ credit scores in a negative way,” Doss said. “I don’t know how many people were 25 points or less. But if those consumers sought a mortgage during that time period, I’m aware that a lot of mortgage brokers who get these applications for mortgages cull all three scores but use the middle score as the score they base the interest rates and the lenders and all that stuff on.”
And there’s the rub: “If Equifax was that middle score and it was 25 points less than it should’ve been, it’s possible that consumer is going to be locked into a 30-year mortgage with an interest rate that is higher than it should’ve been,” Doss said. “Paying over the course of that 30-year term, that’s a lot of money,” alluding to the extra – and unnecessary – expense of a consumer approved at an erroneous, lower creditor score.
MPA last week reached out to an Equifax spokesman for comment but did not receive a response. In a prepared statement issued widely, the company sought to assuage consumers’ concerns: “We know that businesses and consumers depend on our data and Equifax takes this technology coding issue very seriously,” the statement read in part. “As part of our commitment to resolving this issue, Equifax has conducted extensive analysis of credit scores used for consumers seeking credit during the time period of the issue. Our analysis indicates that for those consumers there was no shift in the majority of scores during the three-week timeframe of the issue. Our data shows that less than 300,000 consumers experienced a score shift of 25 points or more. While the score may have shifted, a score shift does not necessarily mean that a consumer’s credit decision was negatively impacted. We take it very seriously, and it’s one we are going to make sure we are going to fix."
A couple of paragraphs down in the statement, the credit rating agency makes this statement: “Again, we do not take this issue lightly. The issue has been fixed, we are working closely with lenders, and we are accelerating the migration of this environment to the Equifax Cloud, which will provide additional controls and monitoring that will help to detect and prevent similar issues in the future.”
Despite such assurances, litigation against the agency has already begun in the glitch’s wake. According to NBC News, a class-action lawsuit was filed in US District Court in North Georgia by the Florida-based law firm Morgan and Morgan. Attorneys seek a trial by jury for damages suffered by anyone whose score changed during the time of the system glitch, the news outlet reported this week.
Doss said several other similar lawsuits have been filed across the US so far: “Consumers are gathering information, and lawyers are gathering information as well,” he said. “There have been a few class action lawsuits filed so far. There will be more. They will likely be filed at various jurisdictions around the country, and the same consolidation process will likely happen – it will be consolidated in a certain place in a certain federal court. All that stuff takes time, and we’re right at the very beginning of this.”
The attorney urged consumers who suspect they may have been affected to take action – a step toward empowerment that resonates personally given his founding of The PHABA Foundation, a charitable organization devoted to promoting investor education for which he serves as president and CEO.
“Consumers are really beginning to understand how this could affect them,” he said, noting that most people rely on others to perform their due diligence. “If they find out they’re paying a percentage point more than they should be on their 30-year mortgage, they’ll start to look into this a little bit deeper. There’s various documents they can look at. But at the end of the day, some of this is pretty complicated. Just the mortgage application, for example – knowing that the mortgage application takes the middle score, most people don’t know that and whether that impacted them or not. I’m encouraging folks to gather their documents. If they’ve applied for any credit or loan between March and April of this year, start looking into whether or not they were affected.”