Equifax has been slapped with a lawsuit over incorrect credit scores it sent millions of customers this spring.
In a court case filed Wednesday in the Northern District of Georgia, Florida, seeking class-action status, attorneys for Nydia Jenkins allege Equifax’s mistake landed her a much more expensive car loan. Equifax’s error, which had been in place for about three weeks, potentially affected millions of people, according to the lawsuit.
On Tuesday, the Wall Street Journal reported that Equifax sent incorrect credit scores to millions of customers applying for home and auto loans. A coding error at the company affected customer scores by up to 20 points in either direction – enough to have some potential borrowers rejected for loans, according to the Journal reported.
As one of the top three credit reporting companies in the United States, Equifax provides financial information and scores to consumers, determining whether people are approved for products such as mortgages, credit cards and auto loans, and the interest rate they pay. Most credit scores range from 300 to 850, with higher-rated consumers getting more favorable loan terms.
In a statement to CBS News, Equifax said 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 resolved on April 6,” the company said.
“As part of our commitment to address this issue, Equifax conducted an analysis of the credit scores used by consumers seeking credit during the time of the issue. Our analysis indicates that for these consumers, there was no change in the majority of ratings over the period. For consumers who experienced a score change, initial analysis indicates that only a small number may have received a different credit decision. Although the score may have changed, a change in score does not necessarily mean that a consumer’s credit decision has been negatively affected.”
The company said it would respond further in court filings.
Pre-approved, then declined
According to the lawsuit, resident Nydia Jenkins was pre-approved for a car loan in January, but Jenkins’ loan was denied in early April because her Equifax-reported credit score was 130 points lower, the lawsuit says.
Because the loan was declined, Jenkins was forced to buy a car from another dealership at a much higher interest rate, the lawsuit says. Under the original 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 millions of Americans depend on when seeking credit extensions, we must rely on the accuracy and competence of these organizations,” said John Yanchunis, an attorney at Morgan & Morgan who represents Jenkins.
“It’s a major misstep,” he said.
Yanchunis said damages could run into “millions”, depending on how many other plaintiffs join them. The lawsuit demands that Equifax reimburse defendants for the additional costs caused by poor credit scores and compensate them for emotional damages. If a jury finds Equifax’s mistake was deliberate, the company could have to pay up to $1,000 more in damages for each defendant.
The credit score fluctuates
According to the Wall Street Journal report, incorrect scores were sent to Ally Financial, JPMorgan Change and Wells Fargo, among other lenders. The report says a small number of those affected by the Equifax breach went from no credit score to a score in the 700s, or vice versa.
The news was previously reported by National Mortgage Advisora specialized publication, in May.
Equifax, in its response, pointed out that the underlying credit report information had not changed. “[T]there was no change in the vast majority of scores over the three-week period of the issue,” the company said. different credit decision.”
Equifax CEO Mark Begor admitted the error at a financial conference in June.
“We had a coding issue which was an error made by our technology team in one of our legacy apps that caused some scores to be output with incorrect data. And we have fixed the issue,” he said. he told attendees, according to a transcript. of the event.
Begor added that the company was working with affected consumers, noting, “We believe the impact will be quite small, not anything significant for Equifax.”
Equifax has previously been involved in awhich exposed the sensitive information of nearly 150 million Americans and led to the . Equifax paid $700 million in fines and restitution after the breach.