The consumer reporting industry has been regulated by the Fair Credit Reporting Act for 43 years, with several significant amendments over the years. Some have called it the first consumer protection law ever passed by Congress because most of the language in the law deals with transparency and consumer redress. So, the industry has had a long history of interacting with consumers as provided for by federal law.

But the emergence of the Consumer Financial Protection Bureau (CFPB) to replace the oversight responsibilities of the Federal Trade Commission (FTC) means the consumer reporting industry must now work with a new regulator. While it’s too early to determine exactly how different these regulatory regimes will impact the consumer reporting industry, there are some telling signs.

First, the credit bureaus are subject to periodic exams just as the banks are. Their business practices now come under closer scrutiny by a federal regulator that will spend several weeks on-site reviewing their operations. As a result, the CFPB is becoming an aggregator of data based on these exams. That will undoubtedly inform the bureau’s thinking when it comes to future regulatory actions upon which to evaluate the industry in the future.

The second change is the ability of the CFPB to write rules to “carry out the objectives” of the bureau and those companies under its direct supervision. For example, the bureau can act to address deceptive or unfair practices. In addition, it can offer rules or guidelines concerning the accuracy of data provided to credit bureaus and establish reasonable procedures for the furnishing of that data.

An example of how the bureau will exercise this authority was evident last September. In 2012, a Supervisory Highlights paper published by the CFPB noted that financial institution employees were not up to speed on the Fair Credit Reporting Act (FCRA) and its requirements. It determined that this has sometimes resulted in inaccurate reporting of account information to the credit bureaus.

As a result, it sent out a notice to the financial services community last September, reminding those companies that furnish data to credit bureaus of their responsibility to be diligent in their reinvestigation procedures of consumer disputes. Reaffirming the FCRA language, the CFPB stipulated that “all relevant data” should be considered in reviewing a consumer dispute.

For years, the credit bureaus have been doing their part to assist data furnishers in the reinvestigation process. The most significant program has been the ongoing training outreach efforts aimed at data furnishers and their responsibilities under the law. This has resulted in more than 3,000 employees of financial services institutions going through in-person and online training sessions.

Continued training on the Metro 2 system of formatting the data should also have an impact on the numbers. The Metro 2 has reduced the handling and resolution on consumer disputes to fewer than 14 days in most cases. Timeliness in responding to disputes is important to consumers, especially those engaged in a time-sensitive credit transaction like purchasing or refinancing a home.

The success in the training programs can be gauged by the decline in consumer disputes over the last several years. A CFPB white paper released in December 2012 reported that “the number of credit-active consumers who disputed one or more items with an NCRA (nationwide credit reporting agency) in 2011 ranges from 1.3 percent to 3.9 percent.” This was followed by a study in 2013 by the FTC that found “98 percent of credit reports do not contain a material error.” In short, the data accuracy needle is moving in the right direction.


Another effort to improve on the reinvestigation process was the adoption of an imaging initiative by the nationwide credit bureaus. The credit bureaus and data furnishers recognized that sometimes the nuance of a consumer dispute can be lost in the automated coding of the dispute. So, two years ago, the industry set about resolving this issue. First, it had to develop the software to integrate the consumer correspondence into the dispute processing. Then it was a matter of making sure all 15,000 data furnishers were capable of receiving the written correspondence electronically. That became a reality in August 2013 when consumers who disputed data in the credit report then had the entire dispute sent to the lender for review.

A 2011 study showed that 95% of consumers were satisfied with the consumer dispute process they had just undergone. Additional training and outreach can improve on that percentage.

While there have been some concerns expressed about the ability of the CFPB to collect data and pursue remedies where appropriate, absent congressional oversight, the bureau has been adamant that it will make any judgments based on “research and data analysis” and that it is “going to be fact-based, pragmatic and deliberative” in the process.

The CFPB consumer complaint portal would seem to be one management tool to do just that. As of this writing, 170,000 consumer complaints have been logged in to the portal. Of those, 14,000 or 8% of the complaints referenced credit bureaus. Breaking it down further, 70% of the credit bureau complaints had to do with incorrect information. That’s where the imaging project might make the biggest impact.

However, earlier studies show that the majority of disputes about credit report data are the result of updates, not data that is incorrect. Because credit reports are updated every 30 days, many consumers see payment information that is not current. In their eyes, that is incorrect data, even though it reflects the current and correct status when updated.

The FTC study in February 2013 addressed this very issue. It found that 88% of all credit bureau errors were about how the data was reported to them. A large number of those were singled out as update issues, not data errors. Stuart Pratt, president and CEO of Consumer Data Industry Association (CDIA), said at the time of the FTC report, “While the overall number of errors and their impact on consumer creditworthiness is small, maintaining accurate credit reporting data is essential to both lenders and credit bureaus. We will continue to work with lenders and others who provide data to the credit bureaus to make sure the percentage of material errors impacting consumers is even lower.”

Transparency and financial literacy have been priorities of the consumer reporting industry for years. Recently, there have been questions directed at those companies - other than credit bureaus - that collect and maintain consumer data and fall under the FCRA disclosure requirements. Last fall, the CFPB enlisted the help of CDIA to identify those companies in its membership that fit this category. CDIA provided the CFPB with member companies that support the rental, insurance and check clearing industries, among others with consumer data. They are among the specialty consumer reporting companies the CFPB now lists on its website and which consumers can contact to determine if they maintain any data regarding the consumer.

In addition, CDIA is producing a number of public service announcements (PSAs) that will run this year in the print and electronic media. It will assist the CFPB in carrying the message that specialty consumer reporting companies exist and consumers should avail themselves of a free report as provided for by federal law.

This PSA campaign is an extension of a separate effort that has been ongoing for over a year. Surveys show that between 21% and 37% of consumers have never seen their credit report. This is a surprisingly low percentage considering that since 2004, the FCRA has entitled consumers to get a free copy of their credit report annually from each of the three nationwide credit reporting agencies: Equifax, Experian and TransUnion (www.annualcreditreport.com). The PSAs are an effort to encourage consumers to get their free report and to become more aware of their personal finances. Once they review the information in the report, the PSA urges consumers to notify the credit bureau if they find something wrong or have any questions. The goal is to increase the number of consumers who request and receive a free report.

The consumer reporting industry has undergone a significant number of changes over the years in an effort to keep up with changes in both technology and consumer expectations. This will continue as long as data continues to provide tangible benefits to consumers in helping them reach their financial


Norm Magnuson is vice president of public affairs for the Consumer Data Industry Association. He can be reached at nmagnuson@cdiaonline.org.

Credit Reporting

The Shift In Credit Reporting

By Norm Magnuson

Oversight by the CFPB means both credit bureaus and furnishers are under closer scrutiny.










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