Transcript
Case 1:14-cv-00243-LG-JMR Document 1-2 Filed 06/12/14 Page 1 of 102
Case: 24CH1:14-cv-01212 Document #: 2 Filed: 05116/2014 Page 1 of 85
IN THE CHANCERY COURT OF THE FIRST JUDICIAL DISTRICT OF
HARRISON COUNTY, MISSISSIPPI
STATE OF MISSISSIPPI ex TeL
JIM HOOD, ATTORNEY .GENERAL OF
THE STATE OF MISSISSIPPI,
Plaintiff,
v.
EXPERIAN INFORMATION
SOLUTIONS, INC.,
Defendant.
COMPLAlNT
JOHN McADAMS, CHANCERY CLERK
D.C.
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TABLE OKCONTENTS
INTRODUCTION .. ,CO'., •. : .. ". ......... ,.,., ... , .... , ... " ..... , ......................................................... ,., .•••.. ,. "'''' .•.• , ........... ,.1
PARTIES ....... , •.. '".: • .0,.;., .. ; ... , ••• :.:0';;:, .... ;.;; ;.; ..... ; ..... i. ';"'",;,';".;"' .. ;;;,.>: .. ,;;.;. "" .;, ...... , .............. , ......................... : .............. 8
JURISDICTION AND VENUE ... ; .. ;.; ................ ,,, .. ,,;.; .... ;.,,,, ....•..• , ...... , .•• ; •. ,.,;.;;.,., •• ;.: .. ,;.;-..... ;;;·', .... i ..•• J. ••• j,.:.; .• 9
FACTUAL ALLEGATIONS ........................................ , .............................................................................. ,;; ... 9
1. EXPERIAN HAS FAILED TO IMPLEMENT REASONABLE PROCEDURES TO
ENSURE THE MAXIMUM POSSIDLE ACCURACY OF CONSUMER CREDIT
REPORTS IN VIOLATION OF THE FAIR CREDIT REPORTING ACT . ................. i ......... <}
A. Experian Fails to Take Reasonable Steps to Improve the Accuracy of
Consumer Reports .................................................... ; ... ; ... "'.;.· .. i., ... " ...... ; .•• "",·;";;,,,, .......... 11
I. Experian's procedures pennit and do not prevent "mixed files." ................... 13
2. Experian permits inaccurate public record information to be included
' ..
in consumers' credit reports .............. · ... · .. ; .. , .... ;., ........ ; .... · .... "i." .... ;" .... ; ........... 19
3. Experian does not prevent inaccurate data from re-appearing on
consmners' credit reports after deletion or correction .......................... n .. " •• ;.; 22
4. Experian fails to ensure that OFAC alerts are accurate .................................. 22
5. Experian fails to ensure that accounts extinguished in bankruptcy are
reported accurate1y ... , .................................................. i ...... ;; ••• ,.i •. ·; .. ;.· .. ; .. ,; ..... ,,;. 24
B. Experian Fails to Address Errors that Come to its Attention .................................... " 26
C. Experian Does Not IdentifY, Address, or Prevent Errors in Data from
Unreliable Sources ............................ , ..................... , ............. , ........................................... 28
D. Experian's Representations that it Provides Accurate Credit Reports and its
Failure to Employ Reasonable Procedures to Ensure the Maximum Possible
Accuracy of Credit Reports are Also Unfair and Deceptive Practices .................. , .... 32
n. EXPERIAN DOES NOT CONDUCT REASONABLE REINVESTIGATIONS
OF CONSUMER DISPUTES .................................................................. ; .................................... 33
A. Experian Does Not Itself Reinvestigate Consumer Disputes ..................................... 35
B. Experian Creates Impermissible Obstacles to Reinvestigating Disputes ........ ; ......... ' 39
C. Experian's Staffing and Compensation Makes it Difficult for Consumers to
Initiate Disputes and Impossible for Employees to Adequately Record and
Investigate Them .......................... , ................ , ................. i ................ ;· ................... , .......... ·.41
D. Experian's Reliance on Furnishers to Conduct an Investigation is
Unreasonable ............................ · ..... i ............... · .................... ,.;'''; ... ; ......... ;;;;,; •••• " ..... , ....... 43
E. Experian Refuses to Investigate Legitimate Consumer Disputes ............................... 48
F. Experian Does Not Provide Consumers with the Same Information it Gives
Creditors, Undermining Consmners' Ability to Dispute Inaccuracies ....................... 49
G. Experian's Failure to Reinvestigate Consmner Disputes is Also Unfair and
Deceptive . . · ... ,.· .. ; ... · ...• ~ ............................ i .... ' •• ' .... ,; .•. ·.'.i' ........ , ......... , .• · ... · ..... , ... , ........... · ... 49
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III. EXPERIANFAILS TO PROVIDE ALL RELEVANT INFORMATION
REGARDING CONSUMER DISPUTES TO THE FURNISHER OF THE
INFORMATION ........ , ................. " ...... , .... ,., .. , .. ,., .. ,., .. ".c ....... , .. ,', .. , •. , ..... , •..• , ..• , .. ·······",··.··· .. ·• ... , •••.•. 50
N.. EXPERIAN FAILS TO EXCLUDE NEGATIVE OBSOLETE ACCOUNTS
APPEARING ON CONSUMERS' CREDIT REPORTS ................................... , .•• ; .. ;,; .... 53
V. EXPERIAN FAILS TO PREVENT INFORMATION THAT WAS DELETED
OR CORRECTED FROM BEING REINSERTED ON CONSUMER CREDIT
REPORTS .................................................................................................................... ;.,.;.; ... 55
VI. EXPERIAN DOES NOT PROVIDE CONSUMERS WITH THEIR FULL
CREDIT FILES ..... , ...... , •. , ............... , ................ , .................................................... " .................. , .. 57
VII; EXPERIAN DECEPTIVELY MARKETS CREDIT MONITORING
SERVICES AND CREDIT SCORES .................................................................... : .. ;., ....... 60
VIII. EXPERIAN ACTED WILLFULLY IN FAILING TO COMPLY WITH ITS
STATUTORY DUTIES ......................................................................................... ;· .. , ... ,; ....... 67
REQUEST FOR RELIEF ........ :: ............ ; ........... ;;.;c.: .. , ....... ;.; ... : ....... ; ....... ;; .... " ................. ; ....... ;.;; ....... , ... ; 81
II
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COMES NOW, the State of Mississippi, by the Honorable Jim Hood, Attorney General
of the State of Mississippi, and files this Complaint against Defendant Experian
Infonnation Solutions, Inc. ("Experian") for injunctive relief, statutory and punitive
damages, civil penalties, restitution, rescission, disgorgement, and costs and attorneys'
fees pursuant to the Mississippi Consumer Protection Act, the Fair Credit Reporting Act,
and the Dodd-Frank Wall Street RefoTIll and Consumer Protection Act. In support
thereof, the State would show unto the Court as follows:
INTRODUCTION
1. Experian, known as a national credit reporting agencyl (''NCRA'' or "credit
bureau"), gathers, produces, and discloses credit reports
Z
on virtually every
Mississippi consumer. These credit reports include, among other important
details, the credit extended to consumers, their history of payments, defaults, or
bankruptcy, and judgments or Jiens entered against them, and are used to
determine whether and on what terms a consumer will be offered credit cards,
student, car, and small business loans, mortgages, rental housing, and insurance.
Prospective employers may check the credit reports of applicants to determine
whether to hire them. Unpaid debt and delinquencies can prevent members of the
military or defense contractors from obtaining security clearances or jeopardize
existing clearances; credit reports from the NCRAs demonstrate their current
financial status and credit history. There are few documents more important to
I "big three" national credit reporting agencies, along with
Equifax and TransUnion.
2 Credit reports as used herein refers both to credit reports provided to consumers,
sometimes referred to as consumer disclosures, and consumer credit reports provided to
creditors.
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students, homrowners, tenants, job candidates, or service-members than their
credit reports.
2. Congress has recognized the "vital role" and "grave responsibilities" of credit
reporting agencies and the importance of "fair and accurate" credit reporting. 15
U.S.C: § 1681a(I). Because oHhis, the federal Fair Credit Reporting Act
("FCRA") imposes a rigorous set of duties on credit reporting agencies to "follow
reasonable procedures to assure maximum possible accuracy" of consumer credit
information and to allow consumers to check and to dispute any errors. 15 U.S.C.
§§ 1681e(b), 168li(a). The law also requires credit reporting agencies to both
reinvestigate consumers' disputes and to share "all relevant information" sent by
consumers with the creditors and debt collectors that furnished the disputed
information ("furnishers") so that errors can be fixed. 15 U.S.C. § 1681 i(a). In
addition, the Mississippi Consumer Protection Act, Miss. Code Ann. § § 75-24-
5(1),75-24-5(2) ("MCPA"), and the Dodd-Frank: Wall Street Reform and
Consumer Protection Act, 12 U.S.C. § 5536(a)(1)(B) ("Dodd Frank: Act") apply
to bar credit reporting agencies from engaging in unfair and deceptive practices.
3. Over the last year, pursuant to its authority under the MCPA, the Mississippi
Attorney General's Office has obtained and reviewed documents from Experian,
its trade association, furnishers that report information to Experian, and the
vendor used by Experian to obtsin public record information. The Attorney
General's Office reviewed dozens of Jaw suits against Experian and the testimony
provided in those cases, interviewed former employees, and reviewed hundreds of
complaints from Mississippi consumers. Among them, for example, is a
2
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Lieutenant Colonel in the Army National Guard, who has spent hundreds of hours
clearing up errors in his credit report, which routinely is merged with members of
his family. The Lieutenant Colonel also has assisted nwnerous soldiers whose
security clearances were threatened due to errors on their credit reports, including
one childless soldier whose credit report;showed he was delinquent on his child
support payments.
4.. Experian refuses to take reasonable steps to ensure the accuracy of its consumer
credit reports, as the law requires. While no data systems art) perfect, Experian
fails to take basic steps - certainly inherent in the obligation of "maximwn
possible accumcy" - to eliminate known, common, and reasonably remediable
sources of error, Experian uses an insufficiently rigorous formula to pull together
the credit history belonging to a particular consumer, knowing that it produces
significant nwnbers of false matches.
5. Moreover, Experian has failed to meaningfully engage the safety valve required
by law to identify and address mistakes that are inevitable with even the strictest
procedures - the consumer dispute process. Instead of conducting reasonable
reinvestigations of consumer complaints, Experian merely reviews consumer
disputes to assign a code to classify the complaints (e.g., "not hislhers" or
3
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i
"account closed") and forwards those codes to the creditors that reported the
infonnation. Despite its independent obligation under the FCRA, Expenan
conducts no investigation and, did not,
-even forward the
explanations and evidence submitted by consumers to creditors for them to
review, so that furnishers often lacked important infonnation necessary to fully
investigate consumer disputes. Experian adopts whatever "finding" the creditor
reports back, even when contradicted by information and documentation provided
by consumers.
3
6. In short, Expenan has, over more than two decades, engaged in an unyielding
pattern and practice of violating federal and state law. Experian's failure to adopt
reasonable procedures to assure maximum possible accuracy and failure to
conduct reasonable reinvestigations has caused significant inaccuracies in the
credit reports of Mississippi consumers. Experian has mixed up the identities of
consumers. It has reported as late or still owing accounts that were paid on time
or settled in full, as well as accounts that were aged and should no longer appear
on the credit report Of accounts that were extinguished in bankruptcy. It has
disclosed liens and judgments, but then failed to update its records when those
liens or judgments were removed or resolved.
7. Frustrated Mississippi consumers sent almost _.to Experian
between March 1,2010, and April 18, 2013. They have gathered and provided
cancelled checks, account statements, court documents, and birth certificates, and
talked on the telephone with call center representatives who often are unwilling or
3 Disputes related to
I Expenan.
4
often are handled _
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unable to help them. In the event they are able to get an error corrected, they find
that the mistake may reappear months or years later.,
Experian has paid tens of
millions of dollars in judgments and settlements to consumers in Mississippi and
across the country over a dozen years, but has refused to take the steps necessary
to confonn its conduct to the law.
8. Mississippi consumers described to the Attorney General's Office serious
financial hanns that resulted from errors in their credit reports: they were denied
credit or paid higher interest rates; they could not open bank accounts, rent
apartments, finance their homes, or buy cars; they lost opportunities for
employment; and jeopardized their security clearances. They expressed enormous
anxiety and anger at the impact on their reputations from false derogatory
information, often maintained over months or years and many sleepless nights.
They described spending months and years trying to resolve errors themselves.
Many still have not obtained relief and others were helped only after they
complained to regulators. Finally, many of these consumers - those
knowledgeable and determined enough to reach out to law enforcement-
expressed their concern for consumers who did not know or could not protect
their rights.
9. The experiences of Mississippi consumers are consistent with, and confinned by,
the experiences of consumers nationally. The Federal Trade Commission
C"FfC") recently reported that nearly 20% of consumers in a recent study-
5
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which, extrapolated, would amount to 40 million individuals - had confirmed
errors in their credit reports from at least one of the NCRAs; for 13% of
consumers, the error was significant enough to change their credit score.
4
Thirty
percent of the time, when consumers disputed an item with all three NCRAs, the
agencies reached different resolutions.
5
10. A 2012 study by the Columbus Dispatch found that 6% of nearly 21,500
consumers who complained to the FTC during a 3D-month period beginning in
2009 and nearly 8% of 1,842 who complained to state attorneys general in 2009
and 2010 indicated that their files included someone else's information; nearly
one-third of those consumers were unable to get the credit bureau to correct the
error.
6
Almost 200 consumers said their reports showed them as deceased, and at
least one of those consumers was told by the NCRA that it had investigated and
verified the report of his death.
7
4 FTC, Report to Congress Under Section 319 of the Fair and Accurate Credit
Transactions Act of 2003, at v (Dec. 20J 2), available at
11 Itp://www.ftc.gov/sites/default!files/documcnts/reportslscction-319-fair- and -accurate-
commission/130211 factarePOrt.pdf. The study only assessed the change in the credit
score if the NCRA made the change requested by the consumer. Because the 13% does
not include consumers for whom the NCRAs did not change the clalmed errors, the
actual number of consumers who have a lower credit score because of errors in their
credit report likely is higher. Indeed, the study found that of the 21 % of study
participants who identified at least one potentially material error, the dispute process
resulted in no change, and for another 4 I %, errors were only partially remedied.
:l ld. at 54.
6 Mike Wagner and Jill Riepenhoff, Credit Scars: Mixed and Marred, Columbus
Dispatch, May 7,2012, available at
http:l(www.dispatch.com/eontent/stories/local!2012/05/07/mixed-and-maned.html.
7 Mike Wagner and Jill Riepenhoff, Credit Scars: Credit-Reporting Agencies'
Failure to Address Damaging Errors Plaguing Thousands of Americans Prompts Call for
6
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11. Experian's business model not only tolerates, but rewards errors. _
--.. a company owned in part by Experian, receives fees •
8 Experian also eams revenue by
deceptively selling credit monitoring services and educational credit scores to
consumers who cannot trust the accuracy of its credit reports. In 2013, Mississippi
consumers paid Experian more than·_ for credit monitoring products
alone.
9
12. Most courts have held that private litigants cannot obtain injunctive relief under
the FCRA against Experian. Private settlements and judgments against the
company have failed to incentivize compliance with the law. As consumer
groups have noted, the power of the marketplace cannot operate to force Experian
to correct the pattern or prevalence of errors in its credit reports:
It is essential to keep in mind that the paying clients of the
credit reporting industry are not consumers, but the
creditors who furnish or use the information contained in
the CRAs,10 databases .... Thus, unlike almost all other
business relationships, consumers who are unhappy with
the actions of a CRA cannot vote with their feet - they
cannot remove the information or take their business
elsewhere. Creditors, in contrast, do have the ability to
switch between CRAs if they wish. And vigorous
investigation of consumer disputes is likely to drive
creditors away. Traditional competitive market forces
therefore provide little incentive for CRAs to incur the
Swift Action, Columbus Dispatch, May 6, 2012, available at
http://www .dispatch. cmn! lcontentlstorieslloca1!20 12105/061 credi t-scars.h tIDl.
10 NCRA and CRAs are used interchangeably to refer to the national credit
reporting agencies.
7
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costs to institute new procedures that ensure information is
accurate or to undertake investigations to correct errors,
since these activities primarily benefit consumers. Only the
FCRA itself compels such behavior.
1 1
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13. In an effort to redress, deter, and punish Experian's widespread violations of the
law, the Attorney General seeks injunctivc relief and also requests that Experian
be ordered to pay restitution, civil penalties, disgorgement, and statutory and
punitive damages appropriate to its long and knowing history of violating federal
and state law.
PARTIES
14. Plaintiff, the State of Mississippi, acting through its Attorney General Jim Hood,
brings this action in the public interest pursuant to the Attorney General's
statutory and parens patriae authority to enforce the MCP A, the FCRA, and the
Dodd-Frank: Act.
15. Defendant Experian Information Solutions, Inc. is a "consumer reporting agency,»
(eRA) as defined in the Fair Credit RepcrtingAct, 15 U.S.C. § 1681(f), and is
regularly engaged in the business of assembling, evaluating, and disseminating
information concerning consumers to furnish consumer reports to consumers and
third parties. Experian falls within the subset of CRAS known as a "nationwide
consumer reporting agency," defined as a eRA that "regularly engages in
assembling, evaluating, and maintaining credit account and public record
information, for the purpose of furnishing consumer reports to third parties
II Credit Reports: Consumers' Ability to Dispute and Change Inaccurate Information:
Hearing Before the R Comm. on Fin. Servs., 110th Congo 3 (2007)(statement of Chi Chi
Wu, Nat'! Consumer Law Ctr.).
8
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bearing on a consumer's credit worthiness, credit standing, or credit capacity." 15
U.S.C. § 168Ia(p). Experian's North American headquarters are located in Costa
Mesa, California, and Experian is authorized to do business within Mississippi.
Experian is, by far, the largest of the three national credit reporting agencies, with
global revenue of$4.713 billion in the year ending March 2013. At all relevant
times, Experian has been doing business, and continues to do business, regularly
in the State of Mississippi, including by compiling and disclosing the credit
reports of Mississippi consumers and by selling credit products and services to
Mississippi consumers.
JURISDICTION AND VENUE
16. Jurisdiction and venue are proper under Miss. Code Ann. §§ 75-24-9,75-24-19,
and 11-5-1, as well asunder 15 U.S.C. § 168Is(c); 12 U.S.C. §§ 5564(f) and
5565. Experian is subject to personal jurisdiction under Miss. Code Ann. § 13-3-
57 because at all relevant times Experian did business in Mississippi.
FACTUAL ALLEGATIONS
I. EXPERIAN HAS FAILED TO IMPLEMENT REASONABLE
PROCEDURES TO ENSURE THE MAXIMUM POSSmLE ACCURACY
OF CONSUMER CREDIT REPORTS IN VIOLATION OF THE FAIR
CREDIT REPORTING ACT.
17. The FCRA demands that "[ w )henever a consumer reporting agency prepares a
consumer report it shall follow reasonable procedures to assure maximum
possible accuracy of the infonnation concerning the individual about whom the
report relates." 15 U.S.C. § 1681e{b). "Maximum possible accuracy" requires
9
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more than technical or literal accuracy. A consumer report is inaccurate not just
for an error, but also if it is potentially misleading or incomplete.
12
18. Expeoan has failed to employ reasonable procedures to ensure the accuracy of its
credit reports, and, as a result, has caused and permitted errors in the credit reports
of Mississippi consumers. Mississippi consumers have complained about these
errors in
and
lawsuits against Experian. The Attorney General's Office also has confirmed
likely errors in its review of
These
consumer complaints, lawsuits, and _ result from and reflect systemic
problems in (1) mixing the records of Mississippi consumers, (2) failing to update
public record information in a timely manner, (3) allowing inaccurate or aged
information to reappear on their credit reports, (4) allowing inaccurate
information to reappear on credit reports after the information had been removed,
and (5) failing to accurately report tradelines and debts that were extinguished in
bankruptcy, and (6) accepting and reporting inaccurate or incomplete information
from furnishers, among other errors.
19.
_ Upon information and belief, even this _rate of disputes fails to
12 Sepulvado v. esc Credit Servs., Inc., 158 F.3d 890, 895 (5th Cir. 1998); Pinner
v. Schmidt, 805 F.2d 1258,1262 (5th Cir. 1986).
10
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reflect the number of consumers affected by errors in their credit reports who
either do not detect them or do not file disputes.·
20. The FTC provides guidance on what constitutes reasonable procedures to ensure
maximum possible accuracy:
If the CRA's review of its procedures reveals, or the CRA
should reasonably be aware of, steps it can take to improve
the accuracy of its reports at a reasonable cost, it must take
any such step. It should correct inaccuracies that come to
its attention. A CRA must also adopt reasonable
procedures to eliminate systematic errors that it knows
about or should reasonably be aware of, resulting from
procedures followed by its sources of information. For
example, if a particular credit grantor has often furnished
erroneous consumer information, the CRA must require the
creditor to revise its procedures to correct whatever
problems cause the errors or stop reporting information
from that creditor.
13
21. Further, if the NCRA:
learns or should reasonably be aware of errors in its reports
that may indicate systemic problems (by virtue of
information from consumers, report users, from periodic
review of its reporting system or otherwise), it must review
its procedures for assuring accuracy and take any necessary
steps to avoid future problems.
14
A. Experian Fails to Take Reasonable Steps to Improve the Accuracy of
Consumer Reports.
22. Upon information and belief, despite its enormous data, resources, and analytic
capacity, Experian does not employ an internal system or review mechanism
13 FTC, Report - Forty Years of Experience with the Fair Credit Reporting Act:
An FTC Stqff Report with Summary of Interpretations 2011 at 67 (hereinafter "Forty
Years ofExpeJience"); ,see also http://www.gpo.gov/fdsys/pkg/CFR-2011 titlel6-
voll/pdflCFR-2011-titleI6-volJ-part600-app-idI024.pd£
14 I d. at 68.
1 J
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sufficient to maintain the accuracy of conswners' credit histories,. IIIIIIIIIII·
Indeed, the CFPB recently found:
While the NCRAs' data screens do find errors by
identifYing anomalies and incnnsistencies, these checks
rely on underlying furnisher data to be valid. The NCRAs
do not conduct independent checks or audits to determine if
the data is accurate, such as contacting a consumer to ask if
she is properly associated with an account or if the balance
reported on an account is true, or checking the recnrd-
keeping practices of a furnisher. The NCRAs generally rely
on furnishers to report information on consumers that is
complete and accurate. IS
23. Instead of conducting its own review, Experian claims that its records are _
.. effect, Experian shifts its burden to employ
reasonable procedures to ensure the maximum possible accuracy of credit reports
to consumers, relying on them to obtain, understand, and dispute their credit
reports. This is a poor "audit" mechanism by any measure, but even more so here
15 CFPB, Key Dimensions and Processes in the u.s. Credit Reporting System: A
review of how the nation's largest credit bureaus manage consumer data at 19, (Dec.
2012), available athttp://files.consumerfinance.gov/f/201212 cfpb credit-reporting-
white-paper.pdf (heremafter "Key Dimensions"): . .
12
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given the limitations Experian imposes on consumers' access to their credit
reports and ability to dispute infonnation (see, Section VI) and its unwillingness
to address errors reported by consumers (see, Section I(B».
1. Experian's procedures permit and do not prevent "mixed
mes."·
24. Upon this shaky foundation, Experian adds more teetering blocks. Upon
infonnation and belief, Experian knows that its procedures to create consumer
credit reports are over-inclusive and fail to reliably match credit infonnation with
the correct consumer, resulting in credit reports that merge the credit histories of
distinct consumers. These errors are so frequent that they have been given a name
- "mixed files."
25. Experian relies on to
aggregate all of its infonnation associated with a particular consumer. A • is
meant to be unique to a consumer, but often consumers are
While Experian did not, in response to the Attorney General's subpoenas, provide
the algorithm it applies to associate data with a specific consumer, litigation and
other public infonnation indicate that Experian relies on partial matches in
consumer identifying infonnation to determine whether data records belong to the
same person. Thus, in deciding whether a mortgage in the name of Jolm Smith
belongs with a tax lien owed by J. Smith, a student loan paid offby Jolm c.
Smith, and a car repossessed from John Smith, Jr., Experian looks_
. and other more specific information - such as
-but
13
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only to the extent it has this information. Even when it has more specific
infonnation, Experian
Presumably, the
algorithm assigns weight to each of these, factors in assessing a match.
26. The screen used by Experian is not rigorous enough to prevent false matches and
yields an expected - and unacceptable - number of errors. Upon infonnation and
belief, Experi!lll knows that its matching criteria produce false positives - that
there is a reasonable possibility that different consumers will be merged into a
'and, ultimately, a single credit report. 16
27,.
16 The matching criteria used to create and merge _ also increases the number
6fJiiEIJ,ulmte:d files are ,
14
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28 ..
-
29. This overly aggressive matching may lead to consumers being erroneously
"matched" with credit information belonging to other consumers with different
names and addresses. Upon infonnation and belief, these loose matching
procedures also contribute to the mixing of consumers' files with identity thieves.
If an identity thief adopts some of a victim's personal identifYing information,
upon infurmation and belief, Experian's
merges the victim's
information with the identity thiers infonnation, even though many of the
identifiers do not match.
17
30. Mixed files often arise because Experian provides credit reports to creditors
without requiring that they provide
18 For example, a creditor
17 National Consumer Law Center, Report - Automated Injustice: How a
mechanized dispute system/rustrates consumers seeking to fIX errors in their credit
reports at 9 (Jan 2009).
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3L
can ask for the report for Kathy Herman, 123 Main Street, Jackson, MS 01234,
without providing . Upon infonnation and belief,
Experian knows that this lack of detail call cause it to respond with the credit
infonnation of more than one consumer that, in part, matches the identifying
information. Requiring creditors to provide
or __
• would allow Experian to more reliably exclude credit infonnation that
belongs to someone else.
-
32. Reasonable procedures to ensure maximum possible accuracy demand better
procedures to prevent mixed files. Requiring a more reliable match of the data
Experian has would be a reasonable step to ensure maximum possible accuracy of
credit reports and to reduce this known source of errors, especially given the
significant harm to consumers who are victims of mixed files.
Despite recognition of
16
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the importance of addressing mixed files and the high risk presented by the
problem, upon information and belief, fupenan has not fixed it.
33, Every year, Experian receives a significant number of_ and
including lawsuits and _ filed by Mississippi consumers, regarding
mixed files.
34. For example, Consumer 1, a Lieutenant Colonel in the Army National Guard who
lives in Madison, Mississippi, has had his credit report repeatedly mixed with his
father and grandfather, who have the same first and last name, but different
suffixes. (They are "Sr." and "Jr.;" he is the "ill"). His grandfather's credit card,
opened when Consumer I was a few years old, and his father's mortgage both
appeared on his credit report. He disputed all of these mistakes through online
forms and by mail and telephone, but not once has a dispute initially been
resolved in his favor; in all, he has spent hundreds of hours trying to correct his
credit report. He has bought the various monitoring services and credit report
products to try to stay on top of errors in his credit report because derogatory
credit information would jeopardize his Top Secret security clearance and has
stopped him from getting a loan before. He has helped many of the soldiers he
commands avoid losing their security clearances due to errors on their credit
reports, including one soldier who had no children but whose credit report showed
arrearages on child support.
35. Consumer 2 of Tupelo, Mississippi, also has been the victim of a file mix-up.
Apparently, someone with the same Jast name used to live at her address and that
person's new address and at least one of her accounts appears on Consumer 2's
17
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credit report. She complained to Experian, but equId not get the erroneous
information removed. Because of her mixed file, she received collection calls for
the other individual and has seen her own bills routed to the wrong address,
causing problems when she did not pay. When she goes online to access her
credit report and must confirm her identity, she has to confirm the other person's
new address or cannot access the system.
36. The experience of these consumers is reinforced by the complaints of many other
Mississippi consumers and by consumers from across the country. The news
show 60 Mil/utes featured the story of a consumer, Judy Thomas, of Ohio, whose
file was mixed with Judith Kendall, of Utah. After 6 years, daily calls to the
NCRAs, and hundreds ofletters (including letters from creditors confinning that
the debt was not hers), Ms. Thomas could not get the credit bureaus, including
Experian, to fix her report. J9 It took a year of litigation to resolve the error. In the
meantime, Ms. Thomas was prevented from co-signing student loans, obtaining
credit, or taking advantage of favorable interest rates to refinance her mortgage.
37. Upon information and belief, despite evidence of systemic problems in its
matching criteria, Experian continues as before, failing to employ reasonable
procedures to avoid mixed file errors and subjecting Mississippi consumers to
continued errors in their credit reports. Despite being on notice of this significant
source of error, the Mississippi Attorney General's Office found no evidence.
19 60 Minutes: 40 Million Mistakes: Is your credit report accurate? (CBS
television broadcast Feb. 10,2013), available at
http://www.cbsnews.com!video!watchJ7id=50140748n.
18
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38. The FTC has suggested that the NCRAs may choose to accept, and impose on
consumers, these mixed file errors because creditors (its tIUe customers) prefer to
see all potentially negative credit information, even ifthere is doubt about the
match, rather than miss negative information that they would want to weigh in
credit or pricing decisions. "This preference could give the credit bureaus an
incentive to design algorithms that are tolerant of mixed files.',20 The FCRA
prohibits precisely this trade-off.
2. &perinn permits inaccurate public record information to be
included in consumers' credit reports.
39. Accuracy of public record information, including information about bankruptcy,
tax liens, and civil judgments, is especially important as derogatory public record
information may have a greater effect on consumers' credit profiles and credit
scores than other information on their credit reports.
40. As of2007, Experian processed approximately _ consumer disputes
annually related to public record information.
21
41. Mississippi consumers have complained about inaccurate public record
infonnation on their Experian credit reports. Consumer 3 was unablc to get
20 FTC, Report to Congress Under Sections 318 and 319 of the Fair and
Accurate Credit Transactions Act of2003 (Dec. 2004), available at
http://www.ftc.gov/reportslunder-section-318-319-fair-accurate-credit-transaction-act-
2003.
21 Upon information and belief, the current number of disputes related to public
records information is . since the number of disputes likely does not
reflect _ and the consumer disputes related to
information collection by
19
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42.
Experian to correct errors on her credit report until the Mississippi Attorney
General's Office intervened on her behalf. An elderly woman who had been
caring for her ailing husband suffering with a heart condition, Consumer 3 risked
losing her deposit and contract on her lease-to-own home due to an error on her
Experian credit report: a second mortgage that was discharged in bankruptcy was
being reported as past due on her credit report. After Consumer 3 was threatened
with a lawsuit by her landlord if she did not close on her home, the Attorney
General's Office contacted Experian and only then was the error removed from
her credit report.
Experian contracts with
for retrieval of public record
infonnation.
In all, _ provides _.public records to Experian
each year.
43. Experian has little financial incentive to ensure the collection and reporting of
public record information in a timely fashion or to investigate consumer disputes
regarding public record information. Experian pays ___ annually for
the collection of public records in Mississippi. Presumably, the more frequently
public records are updated, the more Experian pays for the service. Upon
infonnation and belief, Experian requires _ to collect Mississippi consumer
public records from Mississippi courthouses at certain intervals, often very
20
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Upon information and
the credit report of
every consumer with a new or updated public record would be inaccurate.
44. Further, when a consumer disputes public record information, Experian pays
_afee
provides a disincentive for Experian to obtain the infonnation needed to
investigate consumer disputes about public record information.
45. Further, Experian failed to require
This
belief, this failure to
information and
to reflect bankruptcy filings,
dismissal or satisfaction of judgments or liens, and other public records
information
causes Experian to maintain and disclose
credit reports that are outdated or incomplete.
21
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3. Experian does not prevent inaccurate data from re-appearing
on consumers' credit reports after deletion or correction. .
46; Sinularly, Experian fails to comply with the FCRA's directive to prevent the
reinsertion of deleted or corrected information, which is, by definition, inaccurate
or unverified. 15 U.S.C. § 1681 i(a)(5) (when inaccllTllte infOImation is "deleted
from a consumer's file ... the information may not be reinserted in the file by the
consumer reporting agency unless the person who furnishes the infurrnation
certifies that the information is complete and accurate"). The law also requires
that the NCRAs notify consumers within five business days after it has reinserted
information. 15 U.S.C. § 168Ii(a)(5)(B)(ii). Accordingly, by permitting,
allowing, or failing to maintain reasonable procedures to prevent the reinsertion of
inaccurate information deleted from a Mississippi consumer's file and, upon
information and belief, by failing to obtain certifications of the accumcy of such
changes or notify conSumers oftbe reinsertions, Experian has violated and
continues to violate 15 U.S.C. § 1681i(a)(5). Experian's violation of the FCRA's
reinsertion provisions, as described in Section V, also constitutes a failure of its
procedures to ensure maximum possible accuracy of credit reports.
4. Experianfails to ensure that OFAC alerts are accurate.
47, Experian offers to provide alerts on credit reports to inform creditors when
consumers' names appear on the list of Specially Designated Nationals suspected
of terrorism or narcotics trafficking compiled and published by the Office of
Foreign Assets Control ("OFAC"). This
_ which generated over iii revenue in I
I aims to assist creditors in complying with their legal duty to ensure
22
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they do not provide fmancing to assist in these criminal activities. However, upon
information and belief, and in light ofthe enormous harm to a consumer cut-off
from credit as a result of having been mistakenly identified as appearing on the
OFAC list, Experian does not maintain adequate procedures to ensure that
consumers are not listed in error. Experian issues an OFAC alert_
48. Expcrian has attempted to distance itself from any representation that its OFAC
alerts are well-tested or accurate.
Experian again shifts its burden to ensure accurate information, this time to the
purchaser of the information, requiring its customer to affirm that any.
However, Expenan cannot contract out of its legal
obligation to ensure the accuracy of information included in its credit reports.
Especially given the damage that falsely identifying a consumer as being on a
terrorism watch-list can cause, Experian has an obligation to have reasonable
procedures to ensure maximum possible accuracy of this information, not to
disclaim it.
23
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49.
50.
-
5. Experian fails to ensure that accounts extinguished in
bankruptcy are reported accurately.
51. Another type of inaccuracy in Experian credit reports relates to trndelines or
collection accounts that were discharged in bankruptcy that are reported on credit
reports as due or delinquent instead of resolved through bankruptcy. Upon
infonnation and belief, Experian has the capability to
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_to ascertain if they were resolved in bankruptcy, but fails to do so
adequately and on a routine basis. Further, upon information and belief, Experian
may report the tradeline or collection in a non-bankruptcy status __ .
;,24 Upon information
and belief, Experian does not require furnishers to provide __
52. Consumer 4 of Long Beach, MS filed for bankruptcy in 2010. Once the process
was completed, be discovered that accounts covered by the bankruptcy continued
to appear as active delinquencies on his credit report. He repeatedly called
Experian to try to resolve the errors, and often found it difficult to reach an agent,
having to answer a maze of questions and provide a credit report number in order
to get through. After four years, he gave up. Though he says that he now pays aU
of his bills on time, he is unable to get any loans or credit cards.
53. Experian's failure to ensure that tradelines and collection accounts are accurately
reported as discharged in bankruptcy constitutes a failure of its procedures to
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ensure maximum possible accuracy of credit reports. Experian knows that
tradelines and collection accounts discharged in bankruptcy often are reported
incorrectly, not only from the volume of consumer disputes about such
inaccuracies. Experian was on notice of these inaccuracies as of at least 2008,
when Experian, as part of a settlement, agreed to injunctive relief on how it
reports accounts discharged in bankruptcy.
54. 'This conduct is also unfair. Having trade1ines or co\Iection accounts discharged
in bankruptcy appear as active accounts on consumer credit reports causes or is
likely to cause substantial injury to consumers in their efforts to obtain
employment or credit, as well as causing emotional harm and embarrassment,
among other injuries, which are not reasonably avoidable by Mississippi
consumers.
B. Experlan Fails to Address Errors that Come to its Attention.
55, To ensure maximum possible accuracy (and, separately, to comply with the
FCRA's command that credit reporting agencies reinvestigate consumer disputes,
see Section II), the credit bureaus must maint