Equifax settles complaint of coding error impacting scores

A 2022 "coding error" by Equifax will cost the credit repository $725,000 in a settlement announced by New York Attorney General Letitia James.

The incident occurred on March 17, 2022, and was resolved by April 8 of that year, the result of a code change introduced to Equifax's Online Model Server. Equifax estimated that it lowered the credit scores on approximately 76,000 New Yorkers, although the New York Attorney General put the number at over 77,000 including soft pulls.

"Credit scores affect some of the most significant parts of New Yorkers' lives, from the cars they can buy, to the housing they live in, to their ability to start a small business," said James in a press release. "This settlement will help those affected get restitution, and my office will continue to hold companies accountable when they wrongly raise costs for consumers."

During a three-week period, certain scoring models used a static date for the calculation rather than the then-current date, according to the agreement, formally known as an assurance of discontinuance.

Equifax notified lenders and insurers by the summer of 2022 that the credit scores generated by its data used in their decision making might have been lowered by the coding error. The company offered to reimburse lenders for any interest rate adjustments they would have to make or the insurance premium they would have qualified for if the scores were correct, the press release noted. "Dozens of lenders and insurers" provided remediation to their clients and obtained a reimbursement from Equifax for the cost.

"Consumers depend on credit bureaus like Equifax to report their credit history accurately," James said. "Equifax's failure to do its most basic job inflated costs for consumers across New York."

In another category of those impacted were the consumers who paid Equifax directly for products that showed them their credit score during this period, the number of which was also put at "dozens" in the press release.

Equifax in the agreement, did "not admit any negligence, wrongdoing or violation of law in connection" with the issue that created the errors.

That includes any willful violation of the federal Fair Credit Reporting Act, the New York Fair Credit Reporting Act and the New York General Business Law.

While the coding issue in the OMS did affect how some credit scores were calculated, information in consumer credit reports was not changed as a result of the issue, an Equifax spokesperson said.

"We recognize the important role our company plays in supporting businesses and in the financial lives of consumers," the spokesperson continued. "We take this responsibility very seriously and have stood behind our customers and consumers since informing them of this issue in 2022."

Equifax has invested over $1.5 billion as part of "a complete technology transformation," with its North American Equifax Cloud migrations principally completed last year.

"When we began this process, we intended to redefine how Equifax data is ingested, governed, provisioned and produced," the spokesperson said. "Our vision for the Equifax Cloud is to help our customers innovate faster to create more effective insights into the people and communities they serve."

This case is separate from past legal action Equifax faced as the result of a 2017 data breach.

Also facing its own legal issue over credit report errors is Experian, which was sued in January by the Consumer Financial Protection Bureau alleging its response to borrower complaints is met with half-hearted efforts. At the start of 2023, CFPB Director Rohit Chopra targeted all three bureaus regarding how they handled complaints about consumer data.

In October 2023, the CFPB and the Federal Trade Commission entered into a settlement with TransUnion for $15 million over allegations it failed to ensure the accuracy of credit screening reports.