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CFPB reports credit reporting industry doing better

Summary

The CFPB has made strides to protect consumers from credit report mix-ups, but it may not live to finish the job

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CFPB’s progress on credit reporting industry could stall

The U.S. consumer finance watchdog is fixing flaws in the credit reporting industry, but it may not live to finish the job.

In a March 2 report, the Consumer Financial Protection Bureau (CFPB) touted positive changes it has effected since it began regulating the credit reporting industry in 2012 – fixing credit bureaus’ data accuracy, repairing a “broken” dispute process and cleaning up information that lenders and other data furnishers report to bureaus.

But Director Richard Cordray said in a speech the bureau is far from completing its work of protecting consumers from credit report mix-ups.

“Our oversight work has spurred a great deal of progress by the consumer reporting companies and their data furnishers in the past several years in improving data accuracy and dispute handling,” he said. “Nonetheless, there is more to be done to improve these practices.”

The CFPB may never get a chance to fully transform the credit reporting industry for the better. Republicans in Congress have been on a mission since the November election to wrest control of the bureau away from the Federal Reserve, replace Obama appointee Cordray or scrap the bureau altogether.

Despite its progress regulating the credit reporting industry, the CFPB continues to deal with a torrent of negative consumer feedback about credit bureaus. In early examinations of the credit reporting agencies, the CFPB found the companies lacked good quality control to check consumer records’ accuracy and were not following federal rules about notifying consumers of dispute results.

CREDIT REPORTING COMPLAINTS
BY THE NUMBERS
  • 185,700: Number of consumer credit reporting complaints fielded by the CFPB as of Feb. 1, 2017.
  • 76: Percentage of complaints related to incorrect credit report information.
  • 9 percent: were related to a credit reporting company’s investigation.
  • 3 out of 4: Of the four companies that generated the most complaints filed with the consumer agency, three were big credit bureaus. For the three months ending November 2016, complaints against Equifax, TransUnion and Experian were exceeded only by complaints against Wells Fargo.

Source: Consumer Financial Protection Bureau

However, the bureau said the companies have since fallen in line with its directives, stepping up their efforts to fix and prevent mistakes and investigate and respond to disputes.

While the credit bureaus have cleaned up their act, federal examiners continue to find violations among data furnishers. Last August it penalized Wells Fargo for failing to update and correct inaccurate information reported to credit reporting companies about some student loan borrowers, among other violations. Meanwhile, other furnishers have thrown more resources at handling disputes, communicating with consumers and correcting erroneous information.

Halting the CFPB’s momentum on credit report mistakes could wreak havoc on many Americans’ financial plans. Negative credit report information – correct or not – can prevent consumers from qualifying for credit cards, auto and student loans, mortgages and other types of borrowing.

But the charge to defang or dissolve the CFPB hasn’t slowed in the months since the election. In a February op-ed piece in The Wall Street Journal, House Financial Services Committee Chairman Jeb Hensarling spelled out how Congress would stop the bureau, which the Texas Republican called “unaccountable and unconstitutional.”

Meanwhile, Cordray vowed to press on with holding credit bureaus’ and furnishers’ feet to the fire.

“This is a realistic and responsible standard that accords with the important ways this industry affects people’s financial lives,” he said.

See related: Poll: Few are aware of embattled consumer watchdog, CFPB’s complaint system makes friends and enemies

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