The CFPB continues to move forward in its efforts of being a good steward for the nation’s consumers. It announced that it would oversee the thirty largest credit score companies, including Experian, TransUnion and Equifax.
Wonderful for American Public
This is the first time ever that a sole government agency will step into such an all-inclusive role and it could lead to an entirely different approach to the way consumers are treated. Not only that, but the way these companies keep information on consumers could shift, as well.
Richard Cordray, who is the agency’s director, spoke to the media and said on- site examinations and a blanket requirement that allows the bureau to look at any credit file, for any reason and for any consumer are just a few of the compliance issues his agency is setting up. Consumer Reports attorney Pam Banks said these changes are a “wonderful thing for the American public”. She also says it will continue to lead towards a more transparent industry and therefore, a new consumer trust for the financial sector as a whole.
It’s the Fair Credit Reporting Act that requires the three major bureaus to maintain current information on consumers. Between those three agencies – Experian, TransUnion and Equifax – there are more than 200 million credit files. Within those credit files exists everything from a consumer’s ability or willingness to repay loans, their payment history, how much credit card debt they carry and how many credit cards they have.
These data are then used to calculate that consumer’s credit scores. And of those 200 million credit scores, it’s believed close to one third have errors that could affect the way consumers are offered credit, the interest rates they pay and the amount they pay for home, health and automobile insurance.
For the most part, analysts believe these changes will benefit consumers on many levels. One especially important benefit is that the credit bureaus may be required to respond to credit disputes in a much more timely fashion. Plus, knowing there’s consistent oversight will likely result in a more concerted effort of reducing errors. Banks said,
They (credit agencies) won’t want the CFPB breathing down their necks.
The Fair Credit Reporting Act could be revised too. The clause that requires credit agencies to investigate consumer challenges to the information contained in their credit report needs to be better defined. Specifically, clarification on what defines a “reasonable investigation” could soon be made. As it is now, agencies simply attempt to confirm the figures being reported.
Credit Agencies Respond
The credit agencies that will be affected are not surprised, especially considering the CFPB’s announcement earlier this year that it would soon be stepping up to the plate. One spokesperson for Experian, Gerry Tschopp, says the federal government has been overseeing the collective industry since 1970, when the Fair Credit Reporting Act went into effect. “We’re not a stranger to regulation,” he said. “We’ve been regulated for four-plus decades.” He went on to say his agency wasn’t overly concerned about these changes and that CFPB shares the agency’s goal of ensuring consumers have “access to fair and affordable credit”.
CFPB was formed due to the thousands of complaints consumers file each year on everything from credit card interest rates to predatory lending to inaccurate marks on their credit histories. It was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act).
It works to provide transparent and streamlined guidance for consumers while also making available information needed for smarter financial decisions. Further, it works to ensure banks and credit card companies have in place information for consumers – and that it’s concise and easy to understand.
Other requirements of the Consumer Financial Protection Bureau include authoring rules and enforcement policies for the credit industry, restricting deceptive or abusive practices, collecting consumer complaints, promoting financial education, researching consumer behaviors for further clarity, monitoring various financial markets for risks that could affect consumers and ensuring laws are in place – and being upheld – that prevents discrimination or other unfair policies within the consumer finance market.
Since its formation, it launched Know Before You Owe, an effort to combine two federally required mortgage disclosures into a single, simpler form that makes the costs and risks of the loan clear and allows consumers to comparison shop. It brought together many industry representatives, government experts, consumer groups and others for a data review of the 2009 CARD Act, the effects of the recession and the changes in the credit card market.
It’s created a host of reports for both consumers and the industry, including credit score variations sold by consumer reporting agencies. It’s worked to form relationships from smaller community banks around the nation and continues to collect feedback in order to provide the best service.