Experian, one of the nation's largest credit bureaus, was sued Tuesday by the Consumer Financial Protection Bureau for allegedly improperly handling consumer disputes, which could lead to lower credit scores — one of a number of punitive actions the agency has taken in the waning days of the Biden administration.

The Costa Mesa-based company was accused in a federal lawsuit of failing to properly investigate consumer disputes with creditors and committing other violations of the Fair Credit Reporting Act, leading to incorrect information being included in consumer credit reports.

"When consumers disputed errors on their credit reports, Experian conducted sham investigations rather than properly reviewing the disputes as required by federal law," said CFPB Director Rohit Chopra in a statement. "Credit reporting errors can have serious consequences for a family's finances, and it is critical that credit reporting giants follow the law."

The lawsuit seeks an injunction barring any further violations of the law, forfeiture of ill-gotten gains, restitution to repay consumers and monetary penalties. Experian denied the allegations.

"The lawsuit is completely without merit. It is contrary to longstanding regulatory and judicial precedent and is another example of irresponsible overreach by the CFPB. Our legal position is strong, we will defend it vigorously and are confident we will prevail. We do not expect this to have any material impact on our business," the company said in a statement.

The agency, which has been the target of criticism by Republicans, has filed a series of lawsuits in the past several months alleging various violations of consumer protection laws. It's possible the incoming Trump administration may not pursue the litigation.

On Monday, the agency sued Vanderbilt Mortgage & Finance, owned by Warren Buffett's Berkshire Hathaway, accusing it of setting families up to fail when they borrowed money to buy a manufactured home. Last month, it sued Walmart and another company for allegedly illegally opening deposit accounts for more than 1 million drivers. JPMorgan Chase, Bank of America, and Wells Fargo were sued for allegedly allowing unchecked fraud on the Zelle payment app. The companies have denied the allegations.

Experian, a subsidiary of Experian plc, a data and analytics company headquartered in Dublin, is one of the nation's three largest credit bureaus along with Equifax and Transunion. The bureaus collect credit information from banks, credit card companies and debt collectors and then sell it to businesses who might be considering offering consumers a job, loan, housing or other services.

The lawsuit alleges that Experian uses a faulty intake process that often does not adequately capture the nature of a consumer dispute and conveys inaccurate information to the entity that filed a negative item on a credit report. Such items could include allegedly late payments or charge offs of a debt.

The complaint also claims that in conducting its investigations, Experian "uncritically" accepts the response of whatever entity has filed the report when the response is "improbable or illogical on its face" or when the credit bureau has contradictory information. An example would be when the credit bureau knows a consumer has filed for bankruptcy, which halts the collection of debts.

The credit bureau also is accused of allowing the reinsertion on a consumer's credit report of previously deleted negative information.

In April, the CFPB released the results of an examination into the credit reporting industry that it said found accuracy problems, including a failure by credit bureaus to correct false or fraudulent information sent to them. Experian said that the lawsuit related to matters the industry had been "collectively discussing" with the agency.

"Despite our constructive engagement and long track record of working alongside the CFPB to ensure consumers can easily dispute potentially inaccurate information, the CFPB chose to file a lawsuit with no communication, and no response to our outstanding communications with them," it said.

The National Consumer Law Center applauded the lawsuit, contending Experian is not the only credit bureau that has harmed consumers. "It's about time a credit bureau was held accountable for their deliberately designed biased and inadequate dispute systems," said Chi Chi Wu, a senior attorney at the consumer group, in a statement.

The CFPB was established in 2011 in the aftermath of the financial crisis and has long been the target of Republicans who want to rein it in, accusing it of heavy-handed actions that stifle economic growth. The first Donald Trump administration redrafted proposed rules aimed at tightening regulations on payday lenders. Consumer advocates considered the final regulations watered down.

Billionaire Elon Musk, who is leading an effort to streamline the federal government through the so-called Department of Government Efficiency, or DOGE, want to abolish the agency. In a November post on X he said, "Delete CFPB. There are too many duplicative regulatory agencies."

However, the agency scored a big victory earlier this year when the Supreme Court turned down an effort by a payday lending trade group to declare the bureau's structure unconstitutional because it is funded by bank fees instead of congressional appropriations.

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