TWO NEW legal challenges to the dominance of the American credit system by three private corporations - Equifax Inc., Experian Information Solutions Inc., and Trans Union LLC - could have far-reaching effects on homebuyers and mortgage applicants nationwide.
In separate class action suits, independent credit reporting companies have accused the three national credit bureaus of antitrust violations and predatory pricing designed to put them out of business. That, according to the suits, would harm millions of home mortgage applicants whose credit files contain erroneous, incomplete and outdated information.
The independent reporting companies pioneered and specialize in "rapid re-scoring," a technique that allows mortgage applicants' credit files to be corrected within days, rather than a month or more it takes through the national bureaus. Rapid re-scoring typically allows homebuyers to qualify for better interest rates and terms than they'd receive with erroneous information artificially depressing their credit scores.
In suits filed in federal and state courts in California, the independent agencies said Equifax, Experian and Trans Union have tried to eliminate them by charging them higher wholesale prices for credit reports and scores than the bureaus charge the independent agencies' own mortgage lender customers.
The plaintiffs also charged that the three bureaus have drastically raised prices for rapid re-scoring while simultaneously prohibiting local re-scoring specialists from "directly or indirectly" passing on those costs to the consumers seeking the re-scoring services.
Equifax and Experian declined to comment on the suits. Trans Union did not respond to requests to comment.
In the federal case, filed in U.S. District Court in Santa Ana, Calif., the plaintiffs are 23 independent credit agencies with home offices in 15 states. In the second suit, filed in California Superior Court in Alameda County, the sole plaintiff is the National Credit Reporting Association , which represents small, independent credit agencies.
The independents are known in the trade as "resellers." They buy raw credit file data and scores from each of the national bureaus and merge the information into credit reports for mortgage applications. They also frequently help home loan applicants correct inaccuracies in the national bureau files.
