The Senate
Committee on Banking, Housing, and Urban Affairs conducted a hearing on
Wednesday titled "Making Sense of Consumer Credit Reports." Witnesses appearing before the committee were
Corey Stone, Assistant Director for the Office of Deposits, Cash, Collections,
and Reporting Markets, Consumer Financial Protection Bureau (CFPB); Stuart
Pratt, President and CEO, Consumer Data Industry Association (CDIA); and Chi
Chi Wu, Attorney, National Consumer Law Center.
Stone led
off the testimony, speaking briefly about a CFPB report on the credit reporting
industry released earlier this month that was covered extensively by MND. That report found that the industry was
highly concentrated both in respect to the type of accounts reported of which
more than 50 percent are credit card lines and those who report the data; more
than three-quarters of the lines are reported by 100 furnishing parties. CFPB also found that only about 20 percent of
consumers look at their reports each year and that the credit reporting bureaus
rely on those that furnish the information to clear consumer complaints.
Pratt, whose organization represents more than 180 credit reporting
agencies, addressed himself to specific areas about which the Committee had
requested information: the dispute resolution process for consumers, communication between furnishers
and
credit reporting agencies,
and specialty credit
reporting agencies and
their duties under the Fair Credit
Reporting Act (FCRA). His statements in
those areas reflected to a large degree what had been reported earlier in the
CFPB study.
In addition, Pratt
said that several studies have provided reassuring information about how well
consumers understand facts about credit scores and how they are used, the
importance of periodically checking the accuracy of their credit reports and
maintaining a good credit history. "It is good news
that
consumers' knowledge of
credit reports and how scores analyze credit report data is improving," he said. "However it is critical that
consumers remain vigilant
and do not fall prey to
fraudulent credit repair schemes," which he said remain a problem for consumers and for CDIA
members.
Pratt said his members
have successfully operated
in a highly-regulated context for decades. Recent
changes in how the federal government enforces various consumer protection
laws, most notably the Fair Credit
Reporting Act do not materially alter
this fact and that it is
essential that the CFPB remain an
organization
focused on the facts
and not driven by the headlines.
CDIA members are
very proud of their dispute resolution procedures and these, Pratt said, have
resulted in a high level of customer satisfaction. A quality study called PERC that Pratt
referenced several times in his testimony found that 95 percent of consumers
were satisfied with the reinvestigation process bureaus used to investigate
consumer complaints.
When it comes to
consistency of credit scoring, Pratt said a CFPB analysis of differences
between consumer and creditor-purchased credit scores found that four out of
five consumers get exactly the same result regardless of the score they chose
and where this isn't the case it
is a result of how lenders set their
prices in the
market place. No one credit score will match up with all
lender pricing strategies or with their internal underwriting systems.
Wu put quite a different face on the credit reporting system. In her testimony she said that:
- Credit reports are plagued by inaccuracies such as mismatched data among individuals, errors caused by furnishers of information and the fallout from identity theft.
- The nationwide consumer reporting agencies (CRAs) – Equifax, Experian, and TransUnion -- are in gross violation of the FCRA’s requirements to conduct “reasonable” investigations when consumers dispute errors in their credit reports. Wu called the dispute resolution system “a travesty of justice.”
- The CFPB has the authority and ability to reform this system, and in the short time that it has existed it has taken significant steps and her organization has high hopes it will write regulations to implement provisions of the FCRA regarding accuracy and dispute resolution as it has supervision authority over the large participants in the credit reporting industry such as large banks.
- Problems are not limited to the nationwide CRAs but extend to specialty consumer reporting agencies.
Finally, there are a number of other issues and problems with the credit reporting system that Congress should address including giving consumers the right to obtain credit scores, and the right to ask a court to order the CRAs and furnishers to correct errors; removing medical debt from reports, restricting use of credit reports by employers, and restores the disclosure of adverse actions to consumers,