There are three major credit reporting companies in the United States: Equifax, Esperian, and TransUnion. These companies calculate credit scores for consumers, which can affect approval and interest rates for a mortgage, a car loan, or a credit card. A credit score is a three-digit number, usually between 300 and 850. (Higher scores are better than lower scores.) The score is intended to represent the credit risk of the consumer, or the probability that they will pay their bills on time.
Between March 17 and April 6 of this year, Equifax suffered from a coding error. This skewed the credit scores of millions of customers. Since consumers submitted these scores when applying for loans, the error caused some of them to be improperly rejected. After investigating the issue, Equifax has claimed that most scores did not shift because of the error. The company further asserts that only a small number of consumers who received an incorrect score could have received a less favorable outcome as a result.
However, a Florida resident has sued Equifax in Georgia, arguing that her car loan was much more expensive because of the coding error. Nydia Jenkins was allegedly pre-approved for a loan in January before it was denied in April due to a credit score that was inaccurate by 130 points. As a result, Jenkins bought her car from a different dealership with a higher interest rate, amounting to about $2,350 more per year.
The lawsuit seeks to proceed as a class action. This means that Jenkins would litigate the case on behalf of other consumers who have similar claims against Equifax, and any judgment or settlement would resolve the claims of those consumers as well. A class action can be a useful way to hold a corporation accountable for misconduct that affected many people but did not cause massive losses to any single person. Jenkins and her attorneys are seeking compensation for extra costs resulting from the credit score error, as well as damages for emotional harm. Equifax could face additional damages if the error was willful. If the case proceeds as a class action, the total amount of damages will depend on the number of consumers involved.
This is not the first time that errors at Equifax have harmed consumers. In 2018, a Congressional investigation found that the company failed to take proper preventative measures to shield the personal information of 148 million consumers. This resulted in a data breach, which cost Equifax $700 million in various penalties. Its CEO at the time left the company in the wake of the scandal.
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