What Are The CFPB Examination Procedures for Consumer Reporting Agencies?

In March 2012, the Consumer Financial Protection Bureau (CFPB) announced that they were targeting consumer reporting agencies (CRAs) with at least $7 million in annual revenue. This included 30 companies, representing 94 percent of the market and 7 percent of the companies.  The thirty companies included the three major consumer credit bureaus – Equifax, Experian and TransUnion, which issue more than 3 billion consumer reports annually on 200 million Americans. The research gathering ended in July 2012; the procedures to exam credit bureaus and other consumer reporting companies were released in September 2012.

The examiners will evaluate how the consumer reporting agencies comply with consumer federal law.  They will review information and analyze data and conduct on-site examinations.  If there is harm to consumers, appropriate action will be taken. The Consumer Financial Protection Bureau will begin supervising the consumer reporting companies on September 30, 2012.  The Consumer Financial Protection Bureau has issued similar procedures for other companies under its supervision, such as mortgage originators, mortgage servicers, and payday lenders.

Four key areas will be examined

Examiners will verify that these companies are complying with the law which includes:

1. Using and Providing Accurate Information: Examiners will assess whether consumer reporting agencies have reasonable procedures to ensure accuracy of consumer information in their reports. This includes how they screen the information for accuracy and match incoming information to a correct consumer’s report.

2. Handling Consumer Disputes: Examiners will verify if these companies conduct reasonable investigations in response to consumer disputes regarding the accuracy or completeness of their files. Examiners will also evaluate the systems, procedures, and policies used by the company for tracking, handling, investigating, and resolving consumer inquiries, disputes, and complaints.

3. Making Disclosures Available: Examiners will evaluate whether the consumer reporting agencies disclose credit file and scores as required by law and if the personnel are trained to explain the information.

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4. Preventing Fraud and Identity Theft: Examiners will determine if these companies are addressing identity theft.  They want to make sure active duty military consumers are protected through fraud and active duty alerts, and blocking of reporting of information that stems from identity theft.

“Consumer reporting, and especially credit reporting, plays a significant role in a consumer’s life. It can dictate whether or not a consumer is able to get a credit card, a mortgage, or a student loan,” said CFPB Director Richard Cordray. “Our supervision program will benefit hundreds of millions of consumers by making sure these companies are playing fairly and by the rules, and our field guide will ensure that all companies are held to the same standards.”

The Consumer Financial Protection Bureau has a huge responsibility to police the financial services industry, and other industries including payday lenders, mortgage industry, student loan lenders, collection agencies and consumer reporting agencies. Hopefully they will be successful.

There have been many consumer complaints about the credit reporting industry, particularly about correcting errors.  Information on the credit report determines whether you are able to qualify for a loan or credit card. This includes not only the interest rate you pay, but also insurance premiums and employment.

Credit Reporting Expert, 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.  Follow him on Twitter here.