CFPB to Oversee and Regulate the Credit Reporting Agencies

It’s been a busy couple of weeks for the Consumer Financial Protection Bureau (CFPB). A couple of weeks ago they rolled out their new credit card complaint database. You can read my article about that database on MintLife, here.

And just last week the CFPB announced what many of us knew was coming: that they’d begin actively supervising the consumer reporting agencies.

This announcement by the CFPB represents the first time in history that a Federal agency has supervisory authority over the credit bureaus. This was pretty much the hottest credit story on the planet last week. Now that the fires have died down, what does this likely mean for consumers and the credit bureaus?

Which companies are affected by the new regulation?

The CFPB isn’t just going to oversee the well-known mega credit reporting agencies: Experian, Equifax and TransUnion. They’ll also be overseeing the not-so-mega companies, too.

If you’re a consumer reporting agency and you generate at least $7 million annually by selling credit report-related products and services, then you will be subject to the CFPB’s supervision. There are about 30 or so companies, equaling 94% of the credit industry revenue, that fall under this new regulation.

In other words: everyone that matters.

The list of companies now under CFPB supervision includes some lesser known, but equally influential, names. The list includes Chex Systems, Certegy, Telecheck (bad check databases), Factor Trust, Clarity Services, Microbilt, Teletrack (used by payday lenders), ISO, Insurance Information Exchange, LexixNexis (they track your insurance claims and sell that info to insurance companies), CoreLogic, L2C, PRBC, Innovis, ID Analytics (alternative credit reports), Accurate Background, Early Warning Services, EmployeeScreenIQ, and Intellicorp (used for employment screening).

You can see the full list and company descriptions here.

More clarity into the consumer dispute process.

The CFPB will be able to write rules changing how the credit bureaus operate. This means we will have more clarity into to the consumer dispute process, which has long been criticized by consumer advocates as being too nebulous.

And while I like to think of myself as more of an independent and interested observer, I guess I can see their point. The Fair Credit Reporting Act (FCRA) requires that the credit reporting agencies perform a “reinvestigation” in case the accuracy of credit report data is disputed.

But, the FCRA doesn’t say exactly what that means or which steps have to be taken in order to constitute an investigation per the Act. The Act simply says the credit reporting agencies must conduct a reasonable investigation.

Streamlining dispute resolutions and account investigations.

I can also see the CFPB taking a hard look at the period of time the credit reporting agencies have to perform their investigation. Follow me…

Right now, the law allows for 30 days, or 45 days if supplemental information is provided to the credit bureau during the initial 30-day investigation. If the bank or collection agency doesn’t respond after that time frame, the credit bureaus must delete the item from your credit file as being “unverifiable.” That means you’d have to wait 30-45 days for your credit file to be corrected if the furnishing lender/collector has no intention on responding to the credit bureaus.

30 to 45 days is longer than it would take to completely update every single account on your credit report, as most lenders update your credit file monthly. And now that the credit file dispute process has been largely automated, most disputes are resolved in a few weeks.

I can see the CFPB reducing the “30-45 days” to an amount of time that better reflects today’s credit dispute resolution technology. It seems reasonable for 14-21 days to become the new norm, with a requirement to provide for an even more expedited resolution if the consumer has a loan, insurance policy or a job pending the resolution or correction of a credit file.

What I’d REALLY like to see happen is anything that will improve consumers’ awareness of their ability to get a free copy of their credit reports every 12 months from AnnualCreditReport.com.

I’ve reported on it before, but the take rate of free credit reports is abysmal. About 25 million free credit reports are claimed each year yet over 600 million are available to be claimed. That’s a 4% take rate of credit reports. Not good.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.