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CFPB: the credit bureau boss?

By Janna Herron · Bankrate.com
Friday, February 17, 2012
Posted: 3 pm ET

The federal consumer watchdog agency is setting its sights on consumer reporting companies.

The Consumer Financial Protection Bureau on Thursday proposed to oversee the largest consumer reporting companies (along with debt collection firms) under its nonbank supervision program. It's unclear whether the proposal includes credit scoring firms such as FICO or VantageScore, and the CFPB didn't immediately clarify.

If finalized, it would mark the first time the three major credit reporting bureaus -- Equifax, Experian and TransUnion -- would be supervised by one government agency. The bureaus now abide by certain federal regulations such as the Fair Credit Reporting Act, which are enforced by the Federal Trade Commission, but they don't report to a certain government department.

"The U.S. consumer reporting industry has long operated in an evolving regulatory environment," says Experian spokesman Gerry Tschopp. "The CFPB's proposal to supervise credit bureaus, such as Experian, is a continuation of that process."

What this potential oversight would mean to the average Joe remains to be seen, though the CFPB said it "would help restore confidence that the federal government is standing beside the American consumer."

The three largest credit bureaus maintain files on roughly 200 million Americans, according to the Consumer Data Industry Association.

Credit reports are used to gauge a consumer's creditworthiness when they apply for mortgages, personal loans, auto loans, student loans and credit cards. The reports are also used to calculate credit scores, another way lenders measure an applicant's likelihood to repay debt.

Companies outside lending also use credit reports. Insurance companies, landlords, utilities and employers pull these reports on consumers to determine premiums, rates and whether to rent to a person or hire someone.

The wide reach of these reports underscores the importance of maintaining accurate information and making sure it is distributed and used in a way that doesn't hurt consumers. Equifax spokeswoman Demitra Wilson echoed that goal in response to the CFPB's proposal.

"Equifax looks forward to working with the CFPB in ensuring that we continue to provide the most accurate and complete information in a timely way to businesses and consumers, and in a way that protects their privacy and is in compliance with all federal and state regulatory requirements," she says.

An oft-cited 2004 study from the National Association of State PIRGs showed that 1in 4 credit reports had serious errors that could result in credit denial. More than half contained misspelled, outdated or incorrect personal information, while 30 percent listed a closed account as open.

However, the CDIA commissioned its own study last year, which found that less than 1 percent of credit reports have meaningful errors. The trade group declined to comment on the CFPB's proposal.

"If that (CFPB oversight) means the resolution of consumer complaints is tracked through the CFPB, then it could help the consumer," says John Ulzheimer, president of consumer education at SmartCredit.com.

TransUnion, FICO and VantageScore all declined to comment on the CFPB's announcement.

Do you think this is a good development? Tell me why.

Follow me on Twitter: @JannaHerron

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1 Comment
Andrea Johnson
February 18, 2012 at 10:54 pm

Well, better or worse, monitoring the credit bureaus and debt collection agancies is a great start. Equifax, Experian & Transunion have too much power and control. Practices I would like to change are 1) no charge for scores. I just do not understand this at all; 2)Easier access to a customer service rep to make inquiries; 3) Not posting negative credit information on a consumer's report until it has been investigated, 4) notifying consumers as soon as a negative posting is created, and 5) sending the consumer the exact same report the bureaus send creditors.
We are currently fighting Equifax's RED TAPE since 01/05/2012. My son was denied a lease on an apartment. As an entering freshman, he does not have a checking accoun nor applied for credit. The Madison apartments told us that there was a fraud alert. Their report indicated Equifax noted that more than one person and social security number was associated with his address. As a side, my family has lived in the same house since 1954. At one time 4 gernerations and currently 3!
The real kicker: mailing a form into Equifax with a enlarged copy of his Driver's License and SSA card and Equifax responded by saying that we did not send what was requested and asked for the same information again! This still has not been resolved. At the same time, All 3 show my FMCC account as closed when it is open and I am making payments as promised and Transunion posted a deliquent book club account for $103. I disputed this and it was immediatley removed.
Collection agencies definitely need to be reigned in by someone. These companies continue to sell your information to other companies. I finally had to hire an attorney to handle a lawsuit for me against LVNV and a collection attorney who was threatning garnishment! I had been to court a year earlier; the attorneys did show up at court and the judge dismissed without prejudice. LVNV waited over a year and used a law firm to try to make me pay.
Please let me know who to write, call or petition to not only oversee these agencies, but to fine them as well!
Sorry for the long winded note! Thank you for your blogs!