Normally it's consumers who live in dread of the mysterious calculations and decisions made by credit rating agencies.
Missed and late payments can combine to determine whether your car loan or mortgage application goes through and how much interest you'll have to pay, based on the decisions made by the powerful and mysterious companies.
But for a change, it's now one of the agencies that's facing gnawing uncertainty in the wake of their own technology screwup.
Equifax (EFX) is facing growing fallout from a 'coding issue' this spring that caused tens of thousands of incorrect credit reports to be issued.
The company, one of three major credit reporting agencies in the U.S., is facing a class action lawsuit and calls from a prominent congressperson for greater scrutiny.
In May, the company began telling lenders that about 12% of its credit reports issued in late March and early April could have been miscalculated due to a technology change to its legacy online model platform.
"We know that businesses and consumers depend on our data and Equifax takes this technology coding issue very seriously," the company said in a press release last week. The errors occurred during a three-week period between March 17 and April 6.
Close to 300,000 consumers had a credit score shift of 25 points or more as a result, according to the statement. A shift in credit scores doesn't automatically mean a negative credit decision, the company said in its statement.
Class-Action Lawsuit Filed
Last week, a woman in Florida sued Equifax claiming she was denied a car loan because of a 130-point mistake on her credit report
The class action lawsuit was filed in federal court in Atlanta, Equifax's hometown, on behalf of the woman and others affected by the problem.
“In the modern economy, millions of Americans rely on credit to make the most important purchases of their lives, from homes to cars to appliances and everything in between,” John Morgan and John Yanchunis, the attorneys representing the woman, said in a statement, the Associated Press reported.
“We believe that many of the people impacted – some of whom may still be unaware of what happened – suffered severe financial consequences.”
Investigation Urged by Member of Congress
Now, Equifax is facing an additional problem, as Congresswoman Maxine Waters (D-CA), has called for further investigation.
Waters, who chairs the House Financial Services Committee, didn't mince words in her letter to the Consumer Financial Protection Board.
"I urge you to use the full extent of your authority to hold Equifax and its leadership accountable," the letter said, according to the Wall Street Journal. Waters also called for "more robust enforcement action" against the company.
Equifax did not immediately return a request for comment.
CEO Mark Begor told the Journal that the company has the coding issue under control. "We can confirm that this issue, which was related to a legacy technology platform, was fixed months ago and we have further strengthened our processes and data controls since that time," Begor said. "We are working closely with our customers on this issue and stand behind our customers and impacted consumers.”
Begor said at a Cowen technology event in June that a mistake by its technology team led to a "coding issue" that caused the errors.
Rep. Waters also sent a letter to Equifax asking them how many financial institutions received tainted scores, how many consumers were affected, and how the error occurred.
Equifax is one of three nationwide consumer report providers, along with TransUnion (TRU) and Experian (EXPGY) , recognized by the Consumer Financial Protection Board.
The company ended the second quarter with 144 million current records, a 27% increase year over year, representing 110 million individuals.
Over 50% of the Equifax's records are contributed by individual employers with the rest being contributed through partnerships with payroll companies.
