In Tuesday's blog, I posed the question whether FICO, the most widely used credit score, would be subject to the federal consumer watchdog's oversight.
I based the hypothesis on the Consumer Financial Protection Bureau's final rule released Monday that defined which types of companies are included in the consumer reporting market. One of the types is analyzer, some of which may "develop and sell credit-scoring services and products," according to the final ruling.
When I contacted FICO itself on Tuesday, it wasn't sure if it was included in the final rule. On Friday, I received a response from the CFPB itself. The agency wouldn't comment on specific companies such as FICO, but CFPB spokeswoman did say this:
This definition might also include entities such as credit-scoring companies. Whether such an entity is covered under this definition would depend upon its particular activities. To the extent that a credit-scoring company is engaged in collecting, analyzing, maintaining, or providing consumer report or other account information for the purposes described above, it would be covered by the proposed definition.
I followed up with an email, making sure a company only had to engage in one of these activities (collecting, analyzing, maintaining or providing consumer report …) to qualify as a participant in the credit reporting market that the agency is going to supervise. No response yet.
Digging deeper into the ruling (which is a whopping 98 pages long), I found more evidence that FICO may be under the CFPB's watch.
For example, many media reports are saying that FICO is not part of the CFPB's supervision because it is not a credit reporting company as defined by the Fair Credit Reporting Act, which the agency has been tapped to enforce.
But the final ruling says outright that the bureau did not intend "the definition of consumer reporting to mirror the scope of the FCRA's definitions of consumer report and consumer reporting agency." It goes further to say that resellers, national credit repositories, specialty consumer reporting agencies, analyzers and others engaged in consumer reporting activities "are properly included in a single market."
The ruling further defends including analyzers of consumer report information in its definition of the credit reporting market, calling the activity an "important factor in decisions regarding the offering or provision of consumer financial products or services."
And that's true about credit scores, certainly the most popular one. Credit scores are used to help set interest rates on loans and credit cards. Credit scores are used to determine if someone even qualifies to get a loan or credit card. (If they are denied or given unfavorable terms, they receive a credit score disclosure showing the score a lender used to make that decision.)
It would only make sense that the CFPB would want to make sure things are kosher at credit-scoring companies. But I don't make these decisions, and it's certainly still murky whether FICO is included.
I've contacted smarter people than me who know their way around consumer law. I'll let you know what they say.
Weigh in. Do you think the CFPB wants to include FICO in its oversight?
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