The federal government will begin supervising the nation’s larger consumer reporting agencies. How will the new CFPB rule affect credit markets?
For the first time ever, the nation’s credit reporting agencies will be subject to oversight by a single federal agency, the Consumer Finance Protection Bureau, according to a new rule announced today.
“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,” Richard Cordray, director of the CFPB, said at a hearing in Detroit today. “Supervising this market will help ensure that it works properly for consumers, lenders, and the wider economy.”
Consumer reporting agencies, or credit bureaus, track a consumer’s credit history and play a key role in the financial lives of consumers, the CFPB said in a statement. Reports from the three largest consumer credit reporting companies help determine a consumer’s access to credit and the rates charged on loans.
The CFPB, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, has the authority to supervise nonbank lenders of mortgages, payday loans and private student, and “larger” providers of consumer financial products and services. The rule adopted today state that the CFPB will begin supervising consumer reporting agencies with more than $7 million in annual receipts, which includes an estimated 30 companies accounting for 94 percent of the consumer credit reporting market. The three largest agencies, alone, issue more than 3 billion consumer reports each year and track the credit history of more than 200 million Americans, according to the CFPB.
Until today, no single federal agency had oversight over the entire consumer credit reporting process, according to CFPB, which starting Sept. 30, 2012, will begin reviewing procedures at the companies.