Inside CFPB complaint portal changes, AI-driven rise in credit washing

Additional screening and disclosures have been put in place on the Consumer Financial Protection Bureau ’s database due to a significant increase in the number of consumer complaints. Credit repair companies are using social media to encourage people to file disputes and complaints so they can get negative tradelines removed from their credit reports, including by falsely claiming identity theft or another form of abuse, which is illegal, Consumer Data Industry Association (CDIA) President and Chief Executive Dan Smith told Auto Finance News. “If people are washing their credit and their score appears better than it is, [lenders may be] extending a loan to someone who might not be able to repay it,” he said. The CDIA has been advocating for changes to the Consumer Financial Protection Bureau (CFPB) complaint portal since its inception in 2011, saying that credit repair companies could use it as a tool, Smith said. “We've seen an enormous increase in the number of complaints in the CFPB complaint portal in the past three years,” he said. “This is a combination of credit repair organizations, social media, AI and technology encouraging consumers to credit wash.” [caption id="attachment_57329965" align="alignleft" width="237"] (Courtesy/Bloomberg)[/caption] In fact, consumer complaints lodged with the CFPB jumped to more than 10.8 million during the past three years as of April 1, according to an AFN analysis of the database. Of those, about 88% were related to credit reporting. For comparison, a total of 3.4 million complaints were filed from Dec. 1, 2011, to March 1, 2023. Consumers submitted more than 5.8 million complaints during the past year, about 90% of which were related to credit reporting and consumer reports, according to the database. Additional disclosures The bureau in February added disclosures and screens to its complaint portal to cut down on the number of dispute-related complaints that did not first flow to a credit reporting agency. The disclosures warn consumers that, by law, they must file disputes regarding inaccurate or incomplete information on their credit report with the reporting agency first and require consumers to attest they have done so before submitting a complaint to the CFPB. Under the Fair Credit Reporting Act, businesses have specified time frames in which to investigate disputes and determine if something is accurate or should be removed, Adam Crowell , an attorney and chief legal and strategy officer at automotive compliance software and consulting services provider KPA , told AFN . “Credit repair agencies ... were basically flooding the CFPB offices." -- Adam Crowell, attorney, KPA “Credit repair agencies ... were basically flooding the CFPB offices,” he said. “What it was doing was speeding up [the response] time frame significantly and not allowing businesses to go through what they have a right to do.” Generally, credit reporting companies have 30 days to investigate disputes, with an extension up to 45 days in select cases, according to the CFPB. The bureau in the disclosures notice made it clear that if a consumer does not follow the legal process, the bureau may not respond or may discontinue processing it. “It's important that consumers are given the right to dispute inaccurate information,” CDIA’s Smith said. “The problem is when people are using it to manipulate accurate but negative information and the lenders’ ability to rely upon the credit report and credit score for completeness is questioned. … It puts the whole system at risk.” [caption id="attachment_58360313" align="alignnone" width="1189"] (Screenshot/CFPB complaint database)[/caption] The screening is a “great first step” as complaint volume rises across the financial services industry, Marci Kawski , partner at law firm Husch Blackwell and leader of its consumer financial services practice , told AFN . “The industry wants to fix any issues ... but they’ve been inhibited from doing that when they’re inundated with complaints that are not valid." -- Marci Kawski, partner, Husch Blackwell “The industry wants to fix any issues ... but they’ve been inhibited from doing that when they’re inundated with complaints that are not valid,” she said. “It remains to be seen whether [the CFPB disclosures] dampens the number of meritless complaints over time.” AI adds thousands of complaints AI magnifies the problem by making it easier for many complaints to be submitted quickly that include similar information but are slightly altered to the specific situation, therefore bypassing technology barriers the CFPB has in place, Smith said. “AI can create complaints and narratives and file them in enormous numbers,” he said. “There is a critical system error at the CFPB that is not detecting disputes that are coming from bots [or from] technology that is submitting hundreds, if not thousands, of complaints that are similar. “There is a critical system error at the CFPB that is not detecting disputes that are coming from bots." -- Dan Smith, CEO, CDIA “Now you can have AI create a complaint that's slightly different and slightly more human-like. As technology improves, the bad guys get smarter quicker,” Smith said. An uptick in complaints to the CFPB is just one way the availability of AI is affecting lenders and the volume of pre-litigation demands they must review and respond to, Husch Blackwell’s Kawski said. “With AI, it’s harder to suss out whether [a complaint or dispute] is valid. AI can make things sound really good,” she said, adding that the rise in volume drains resources. “It takes time away from learning about valid issues and compliance concerns.” Lenders must employ AI and technology at their businesses to identify valid complaints, Kawski said. Financiers, she said, must “keep an eye on the ball, address complaints and take them seriously but also adopt tools that can suss out whether something is AI-generated or has some merit to it.” Auto Finance News will present multiple invaluable events for industry professionals in 2026, starting with Auto Finance Summit East and Auto Finance Capital Summit in May. To see event agendas and register, visit autofinance.live .

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Inside CFPB complaint portal changes, AI-driven rise in credit washing

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