WASHINGTON (AP) — Mississippi has sued Experian, the world's largest firm that collects detailed information about consumers to evaluate their financial trustworthiness. The lawsuit — and a separate investigation of the industry by 32 other states led by Ohio — represent a significant new legal challenge to the industry over allegations of paperwork errors and violations of consumer protection laws.
Errors can jeopardize people's ability to get loans and pass job-related background checks. Experian has even wrongly reported that consumers are on a federal terrorism watch list, the lawsuit alleges.
Mississippi Attorney General Jim Hood's complaint accuses Experian Information Solutions of knowingly including error-riddled data in the credit files of millions of Americans, jeopardizing their ability to obtain loans, employment-related background checks and sensitive government security clearances.
The lawsuit against Experian was filed without fanfare last month in a Biloxi state courthouse and transferred to Mississippi federal court late last week.
Experian and its competitors gather and maintain records of consumers' credit history from banks, debt collectors and other sources, keeping files on more than 200 million Americans. Banks, prospective employers and other parties pay the credit bureaus to review this data, using it to determine whether a borrower is financially stable and a good credit risk. Consumers with blemishes like missed credit card payments or recent bankruptcies on their credit will struggle to get loans, while those with a long record of timely debt repayment are courted by lenders.
Both Experian and a spokesman for its trade group, the Consumer Data Industry Association, declined to discuss the litigation or related questions about the quality of the company's data.
Despite the errors added to credit files, the Mississippi lawsuit said, Experian provides no straightforward way for consumers to correct erroneous blemishes affecting them. When consumers file a dispute, Experian reflexively finds in favor of the bank or debt collector that reported the debt, Mississippi said. And when consumers call to complain, the lawsuit said Experian employees attempt to sell consumers credit monitoring products of questionable value.
"Experian has turned its failures to maintain accurate credit reports and its refusal to investigate consumer disputes into a business opportunity," Hood, a Democrat, said in a statement.
In Ohio, Republican Attorney General Mike DeWine has regularly criticized the credit bureaus for inadequate quality control and consumer protections. Attorneys general nationwide have demanded and received records from both Experian and its primary competitors, TransUnion and Equifax. Experian is the largest of the companies, with revenues of $4.8 billion last year.
Equifax also warned shareholders in February that it was under investigation by Ohio and 31 other states, separate from the similar investigations of the industry by Mississippi and New York, and also under investigation by the CFPB. The list of states working with Ohio has not been disclosed by that state. "We are unable to predict the outcomes of these investigations, including whether the investigations will result in any actions or proceedings being brought against us," the company said.
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