The credit reporting agencies are expected to become the subject to a deeper level of the federal oversight soon. On Monday, the Consumer Financial Protection Bureau made an announcement stating that this autumn it is going to start supervising the nation's largest consumer reporting agencies.
Essentially, consumer reporting agencies are the companies of the private sector which collect the consumers' financial information. The data they gather usually includes details about debts, present and past loans and bankruptcies. A number of financial institutions use the reports from these companies while making pricing or lending decisions and defining the risk of individuals applying for loans.
Following the statement of the consumer watchdog, the vast majority of 113 million credit card accounts, mortgages, auto loans, home equity lines and installment loans originated over the last year were priced and approved on the basis of the data presented by these agencies.
In fact, there are nearly 400 credit reporting agencies in the USA and it was determined that about 30 of them have over $7 million in annual receipts ' they were set to become subjects to CFPB's oversight. According to the new rule that is set to become effective on September 30, the consumer bureau will have the full right for monitoring the business practices, conducting on-site examination and writing the new rules.
Richard Cordray, the director of the CFPB, stated that credit reporting agencies play one of the leading parts while helping financial service providers and other institutions assess risk and thus prevent losses. Still some consumers can be blocked credit they deserve unfairly. The bureau received consumer complaints saying that the credit reports are inaccurate and people have problems with correcting them.
The rule will actually apply to the three largest credit bureaus ' Experian, Equifax and TransUnion ' which issue over 3 billion reports per year and each of them holds records on over 200 million Americans. As for FICO that provides the specific scoring algorithm major credit reporting agencies use to estimate the credit scores, it is not a lender or a credit bureau, therefore it will not be a subject to the new rule.
The consumer bureau is planning to start with the three major areas of focus: whether the information provided to the reporting agencies by the lenders and other financial companies is accurate, whether the information is being processed correctly and whether the process of dispute resolution is effective.