For the first time, the federal government will begin overseeing credit bureaus. As outlined in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (CFPB) will gain new powers over non-bank financial service providers. The CFPB on July 16 announced the new rules, which will start in September.
“Credit reporting is at the heart of our lending systems and enables many of us to get credit, afford a home, or get an education,” CFPB Director Richard Cordray said in a statement issued by CFPB. “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.”
CFPB will review the performance of credit reporting companies that have accrued $7 million or more in annual receipts. There are about 30 bureaus that size or larger, which account for about 94 percent of the market, according to CFPB.
Credit bureaus monitor nearly every American adult, and the information they collect and share affects people’s lives.
False information on a credit report can prevent a person from qualifying for a car loan or mortgage, and it can spike the costs of a loan. Apartment leasing agents and hiring managers can check credit reports and reject an applicant due to unfavorable data, even if it is a mistake.
False information creeps onto credit reports in many ways.
Katherine Durant, an attorney in Atlanta, was shocked when she was turned down for a mortgage to buy a condo. “I had nearly perfect credit, but this one really bad thing showed up.” It was a credit card registered in her name with over $15,000 in unpaid debt, but to an address that was not hers.
Durant told her lender that she had never heard of the bank that issued the credit card, and that she had never lived at that address.
When a staff member at the mortgage bank looked more closely at the address for the bogus credit card, he told Durant that he knew who was responsible.
A criminal group based overseas was targeting people with good credit, taking out loans or credit cards in their names, and absconding with the money.
He connected Durant with the bank that issued the credit card. The bank contacted the credit bureaus and had the fraudulent information cleared.
Durant got the mortgage and bought her condo. “It had a happy ending,” she said.
Tom Carr of Atlanta got a call from a bank in Philadelphia asking if he had just tried to open a credit account. He had not.
His identity had been stolen. Fortunately, something had alerted his banker, and she told him how to correct the problem. “It all seemed pretty efficient, like they had it down to a science,” said Carr. He filed a police report, mailed it to the credit bureaus, and had a fraud alert placed on his credit report.
CFPB Director Cordray spoke in Detroit on July 16. “This country’s credit reporting system is a resource in which we all have a stake,” he remarked in the Credit Reporting Field Hearing posted on CFPB’s website. “That system must merit our trust and confidence for the credit markets to be perceived as fair. We all share in this responsibility.”
The bureaus are required to correct false information within 30 days, which is one of the things the CFPB will review.
“Checking your credit report can reveal odd entries you do not recognize, which may be signs of identity theft. It also can uncover errors that will hurt your creditworthiness unless you dispute them and get them fixed,” said Cordray.
Individuals should watch their own credit and report errors. The law requires the three primary credit bureaus—TransUnion, Experian, and Equifax—to give individuals a free credit report every year.
There are three ways to get a report: Visit www.annualcreditreport.com, mail in a request, or call 1-877-322-8228.
It is not necessary to enroll in a credit-monitoring program or buy anything in order to get the reports.
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