Editorial Policy

Government Watchdog to Keep an Eye on Credit Reporting Agencies

Marcia Frellick

July 16, 2012

On Sept. 30, the biggest private agencies that collect information on how you manage credit will have to answer to a federal watchdog.

Credit reporting agencies are private companies that keep files and issue reports on your current and past records on dealing with loans, payments and bankruptcies. Those reports can be used in deciding whether you can get a car loan, mortgage, a job or an apartment and at what interest rates.

Until now, there was no formal federal regulation of the industry. But on July 16, the new Consumer Financial Protection Bureau announced it would oversee the top 30 agencies (of about 400 in the U.S.) — those with more than $7 million in annual receipts.

Consumers may be most familiar with the big three — Equifax, Experian and TransUnion — which issue more than 3 billion reports a year, according to the CFPB. Each holds records on more than 200 million people.

Consumers complained errors weren’t easily fixed
The move came in light of the number of complaints about incorrect information on credit reports that was not quickly or easily fixed — such as paid-off accounts showing up as delinquent, accounts opened fraudulently and account holders’ information getting mixed up with that of others.

Getting these mistakes corrected quickly to free consumers from undeserved financial trouble is a primary goal of the CFPB oversight plan. Making sure that the information reported to the agencies by lenders is accurate and reliable is another.

Currently, to fix a credit report error consumers must follow instructions contained in the credit report to dispute the mistake. The credit bureau then has 30 days in which to investigate and must pass your mistake to the creditor or lender with which you have the dispute. If the mistake is truly an error, then the credit bureau is required to notify other the other agencies of that resolution and remove or fix the information in your file.

“Some errors may be unavoidable even in the best of systems,” Richard Cordray, the bureau’s director, said in a statement. “But when consumers find what they perceive to be erroneous information in their credit reports, they should not be burdened by unreasonably laborious processes to get errors removed from their files.”

As of Sept. 30, the CFPB will be able to monitor practices, conduct on-site examinations and write new rules.

Federal law has applied for decades
Credit reporting agencies are already governed by federal law under  the Fair Credit Reporting Act, and have also been subject to congressional oversight. What they haven’t had until now is a single federal regulator.

“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,” Cordray said.

An Experian executive said in a blog post ahead of the CFPB announcement that the reporting market is already both those things.

Tony Hadley, senior vice president of government affairs and public policy for Experian, said in a July 12 post that Experian “is no stranger to regulation.”

“The Fair Credit Reporting Act was enacted in 1970, and for over four decades, the Federal Trade Commission has enforced the Act vigorously,” he said. “Today, consumers enjoy unparalleled access to fair and affordable credit, due in part to the existence of a robust, transparent and well regulated consumer credit reporting system.”

Even with federal oversight, of course, consumers still have a responsibility to check their own credit report for errors. You can get a free copy of your report every 12 months from each of the credit reporting agencies at AnnualCreditReport.com.