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FICO under CFPB oversight?

By Janna Herron ·
Tuesday, July 17, 2012
Posted: 4 pm ET

On Monday, the federal consumer agency made itself the official regulator of major credit reporting agencies, or CRAs, starting at the end of September. That means the big three -- Experian, Equifax and TransUnion -- will be under the Consumer Finance Protection Bureau's watch.

But what about FICO? The jury is still out.

The agency proposed to oversee these companies back in February and asked for public opinion on the matter. The proposal fell under its powers to supervise nonbank institutions endowed by the Dodd-Frank Act.

It was a big move because, so far, the CRAs haven't been looked after by one particular government agency. Instead, they followed certain regulations, such as the Fair Credit Reporting Act that is enforced by the Federal Trade Commission.

But the credit reporting industry is huge and affects consumers' lives practically daily. These reports help lenders determine if you get a car loan, mortgage, auto loan, insurance and credit card -- and at what rate. The major trio themselves keep credit files on roughly 200 million Americans, according to its industry trade group. But many other companies maintain records on your taxes, rental payments, utilities, employment history, child support, auto and property insurance, payday loans, medical conditions, and drug prescription purchases among other things.

In fact, CoreLogic (which recently partnered with FICO to offer a new mortgage risk credit score) boasted last year that it had stats on 99.9 percent of the U.S. population. (If you're looking for Big Brother, here he is.)

It seems only fair that Joe and Jill from Main Street get a government agency to watch over these companies watching (and recording) their every financial move.

But that still leaves FIC O, the most widely used credit score available. The company doesn't maintain any credit files because it uses the information found in credit reports to calculate a credit score. It's also not considered a credit reporting agency under the FCRA.

However, the language leaves room to include FICO. The final rule published Monday said the consumer reporting market includes "analyzers of consumer reports and other account information," among other businesses. The rule goes further to say (italics mine):

"Analyzers apply statistical and other methods to consumer reports and other account information to facilitate the interpretation of such information and its use in decisions regarding other products and services. Certain analyzers develop and sell credit scoring services and products."

Ah ha! While that seems to seal the debate, FICO isn't ready to say it falls under the CFPB's purview.

"We have not determined that yet," says FICO spokesman Anthony Sprauve. "We are still reviewing the document they released yesterday."

We'll know soon enough. In the meantime, do you think the government should regulate FICO? Do you like this decision to regulate credit reporting agencies?

Follow me on Twitter: @JannaHerron

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Janna H
July 20, 2012 at 10:49 am

@ABPOPE: You're absolutely right that FICO doesn't collect or maintain credit reporting data. But the CFPB's final ruling broadened the definition of the credit reporting market to include those companies that maintain those files, those companies that resell credit files AND those companies that analyze those credit files (and, in some cases, produce "credit scoring services and products" from those files). That last part could possibly include FICO, but I don't know. FICO didn't know either. And I'm waiting on the CFPB to get back to me to clarify. So stay tuned.

July 19, 2012 at 5:35 pm

To my knowledge they don't collect (actually keep) or maintain any kind of data. I really don't see a point or understand what they would hope to accomplish by monitoring FICO.

July 18, 2012 at 11:27 am

Any company dealing with consumer credit should be held to the same rules and standards. otherwise, it's a free for all and leave too much room for issues in the future. FICO's been claiming for years that they are on an even playing field with the bureaus, but i'm guessing now they're saying they aren't one and this doesn't apply to them?