Credit Reporting Agencies to Get First-Ever Federal Oversight

The Consumer Financial Protection Bureau said today its supervision of the large consumer reporting agencies, which include the three major credit bureaus: Experian, Equifax and TransUnion, will begin Sept. 30.
This marks the first time these companies will be supervised at the federal level by a single agency.
Credit bureaus are private businesses that track a consumer’s credit history and other transactions, relaying them to lenders who must decide if a consumer’s profile meets their standards for mortgages, car loans, credit cards and student loans.
Moreover, many employers are pulling credit reports to get a fuller picture of a prospective hire’s character, a practice that is drawing the opposition from consumer advocates and many lawmakers.
Consumers often find it challenging and frustrating to correct even the simplest mistakes on their credit reports when dealing with the major agencies. Some errors, such as erroneously designating mortgages as foreclosed, can be vital for someone qualifying for a mortgage, auto loan, or trying to find a job.
“Credit reporting is at the heart of our lending systems and enables many of us to get credit, afford a home, or get an education,” said CFPB Director Richard Cordray. “Supervising this market will help ensure that it works properly for consumers, lenders, and the wider economy. There is much at stake in making sure it is both fair and effective.”
The reports that the three largest credit reporting companies sell are used in determining everything from consumer eligibility for credit to the interest rates you will pay on various types of loans.
Although a small number of large businesses dominate the credit reporting market, there are about 400 consumer reporting agencies in the U.S.
The market includes the big three credit bureaus that sell comprehensive consumer reports,  and consumer report resellers that buy the data from the largest agencies then typically provide further input to the report to resell them.
There are also specialty consumer reporting companies that primarily collect and provide specific types of information, such as data on payday loans or checking accounts. Separate companies also analyze consumer report data.
The Dodd-Frank Wall Street reform law authorizes the CFPB to supervise non-banks in the specific markets of residential mortgage, payday and private education lending.
The CFPB rule issued today states that the agency will supervise consumer reporting agencies that have more than $7 million in annual receipts.
The CFPB’s authority extends to an estimated 30 companies that account for about 94 percent of the market’s annual receipts. Altogether, the three largest credit reporting companies issue more than 3 billion consumer reports a year and maintain files on more than 200 million Americans.
Previously, consumer reporting was subject only to law enforcement authority at the federal level.
Authority to write rules under the federal law governing the consumer reporting system was shared among several agencies.
No single federal government agency could adequately see the entire picture of what was happening in these companies, the CFPB said.
The rule outlining the CFPB’s supervision of this market will be effective Sept. 30, 2012.
Before it begins exams, the CFPB will publish exam procedures that will provide guidance on how it will be conducting its monitoring.
The CFPB has issued similar procedures for other companies that it is currently supervising, including mortgage originators, mortgage servicers, and payday lenders.
In February, the CFPB issued a proposed rule to supervise the credit reporting and debt collection markets. The CFPB started with those two markets because of their widespread impact on consumers.
The public weighed in on the CFPB’s proposals, and the rule issued today is a result of that process.
The CFPB plans to finalize its “larger participant” rule on debt collection this fall, and plans to propose additional “larger participant” rules in the future.
Read the fact sheet about the CFPB’s supervision of credit reporting.

2 thoughts on “Credit Reporting Agencies to Get First-Ever Federal Oversight

  • July 16, 2012 at 3:31 pm

    This is not the first time the credit reporting agencies have been under federal regulation. In fact, the industry has been regulated since 1970 by the FCRA.

  • July 16, 2012 at 5:25 pm

    Yes, but the FCRA (Fair Credit Report Act) is federal law. The CFPB would be the first single federal agency with supervising authority over consumer reporting agencies. To quote the CFPB:
    “Previously, consumer reporting was subject only to law enforcement authority at the federal level. Authority to write rules under the federal law governing the consumer reporting system was shared among several agencies.”
    thank you

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