Equifax has been slapped with a lawsuit over incorrect credit scores it sent out this spring for millions of customers.
In a lawsuit filed Wednesday in the Northern District of Georgia, Florida, seeking class-action status, lawyers for Nydia Jenkins allege that Equifax’s error landed her with a substantially pricier car loan. Equifax’s error, which was in place for about three weeks, potentially affected millions of people, the suit says.
On Tuesday, the Wall Street Journal reported that Equifax sent out incorrect credit scores for millions of customers applying for home and auto loans. A coding error at the company affected customers’ scores by as much as 20 points in either direction — enough for some prospective borrowers to be rejected for loans, the Journal reported.
As one of three major credit-reporting companies in the U.S., Equifax provides financial information and scores for consumers, affecting whether people are approved for products including mortgages, credit cards and car loans, and what interest rate they pay. Most credit ratings range from 300 to 850, with higher-scoring consumers getting more favorable loan terms.
In a statement to CBS News, Equifax said that very few people were affected by the error, which it called a “coding issue.”
“This issue, which was in place over a period of a few weeks between March 17 and April 6, was fixed on April 6,” the company said.
“As part of our commitment to resolving this issue, Equifax has conducted an 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. For those consumers that did experience a score shift, initial analysis indicates that only a small number of them may have received a different credit decision. While the score may have shifted, a score shift does not necessarily mean that a consumer’s credit decision was negatively impacted.”
The company said it would respond further in court filings.
Pre-approved, then denied
According to the suit, resident Nydia Jenkins was pre-approved for a car loan in January, but Jenkins’ loan denied in early April, because her reported credit score from Equifax was off by 130 points, the complaint states.
Because the loan was denied, Jenkins was forced to buy a car from a differerent dealership at much higher interest, the suit says. Under the initial loan, Jenkins would have paid $350 a month, but she now pays $272 every two weeks — or about $2,352 more per year, according to the suit.
“For a credit reporting agency, one of only three, that so many million Americans depend upon in context with seeking extensions of credit, we have to rely upon the accuracy and competence of those organizations,” said John Yanchunis, an attorney at Morgan & Morgan who is representing Jenkins.
“This is a major misstep,” he said.
Yanchunis said that damages could be in the “millions,” depending on how many other plaintiffs join. The suit demands that Equifax repay defendants’ extra costs brought on by wrong credit scores and compensate them for emotional damage. If a jury finds that Equifax’s error was willful, the company could be on the hook for up to $1,000 more in damages for each defendant.
Credit score swings
According to the Wall Street Journal’s report, incorrect scores were sent to Ally Financial, JPMorgan Change and Wells Fargo, among other lenders. The report said that a small number of people affected by Equifax’s breach went from having no credit score to having a score in the 700s, or vice-versa.
The news was previously reported by National Mortgage Professional, a trade publication, in May.
Equifax, in its response, emphasized that underlying credit report information did not change. “[T]here was no shift in the vast majority of scores during the three-week timeframe of the issue,” the company said. “For those consumers that did experience a score shift, initial analysis indicates that only a small number of them may have received a different credit decision.”
Equifax CEO Mark Begor acknowledged the error at a financial conference in June.
“We had a coding issue that was a mistake made by our technology team in one of our legacy applications that resulted in some scores going out that had incorrect data in it. And we fixed the issue,” he told attendees, according to a transcript of the event.
Begor added that the company was working with affected consumers, noting, “We think the impact is going to be quite small, not something that’s meaningful to Equifax.”
Equifax was previously implicated in a 2017 data breach that exposed sensitive information of nearly 150 million Americans and resulted in the ouster of the company’s then-CEO. Equifax paid $700 million in fines and restitution after the breach.