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.
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