From: GoBankingRates.com
By Stacey Bumpus
Credit bureaus, including major agencies like Experian, Equifax and TransUnion, will soon face government oversight for the first time, according to an announcement from the Consumer Financial Protection Bureau (CFPB), a consumer protection agency.
The new regulation is expected to have a positive impact on consumers who rely on annual credit report data to help determine their eligibility for loans and credit cards.
Consumer Protection Agency to Oversee 30 Credit Bureaus
The consumer protection agency announced on Monday that it will be supervising the nation’s largest credit reporting agencies, starting this fall.
Credit reporting firms — private companies that collect financial data such as past and present loans, debts and bankruptcies — present annual credit report data via numerical values known as credit scores to financial institutions that then determine the risk of lending money or extending credit to consumers.
According to the CFPB, the agencies have always had to comply with federal laws like the Fair Credit Reporting Act when managing consumers’ financial and annual credit report information. But the credit bureaus have never been subject to physical government supervision until now.
Currently, there are about 400 credit reporting agencies in the United States; however, about 30 are subject to oversight from the government because they maintain more than $7 million in annual receipts.
Annual Credit Report Data to Improve
With approximately 113 million credit card accounts, personal loans, auto loans, mortgages and home equity lines of credit approved last year based on annual credit report data, it’s crucial that credit reporting agencies maintain accuracy in reporting.
However, there have been complaints over the years that correcting data on credit reports is difficult for consumers. And without federal oversight, the reporting bureaus were not pressured into making annual credit report corrections in an accurate and timely fashion.
Under the new rule, the CFPB will set out to determine the following:
- Data given to reporting agencies by lenders and other agencies is correct.
- Data is processed accurately.
- The dispute resolution process is effective.
The consumer protection agency will also be given authority to oversee specialty agencies that collect checking account data, such as ChexSystems and Telecheck. But FICO, which provides the scoring algorithm most credit reporting agencies use to calculate credit scores won’t be subject to oversight because it is not a credit bureau or lender.
The new rules take effect September 30, at which time, the CFPB will be granted authority to monitor business practices, conduct on-site examinations and write new rules for credit reporting agencies.