Senate Hears Views on Credit Reporting Agencies

The SenaternCommittee on Banking, Housing, and Urban Affairs conducted a hearing onrnWednesday titled “Making Sense of Consumer Credit Reports.”  Witnesses appearing before the committee werernCorey Stone, Assistant Director for the Office of Deposits, Cash, Collections,rnand Reporting Markets, Consumer Financial Protection Bureau (CFPB); StuartrnPratt, President and CEO, Consumer Data Industry Association (CDIA); and ChirnChi Wu, Attorney, National Consumer Law Center. </p

Stone ledrnoff the testimony, speaking briefly about a CFPB report on the credit reportingrnindustry released earlier this month that was covered extensively by MND.  That report found that the industry wasrnhighly concentrated both in respect to the type of accounts reported of whichrnmore than 50 percent are credit card lines and those who report the data; morernthan three-quarters of the lines are reported by 100 furnishing parties.  CFPB also found that only about 20 percent ofrnconsumers look at their reports each year and that the credit reporting bureausrnrely on those that furnish the information to clear consumer complaints. </p

Pratt, whose organization represents more than 180 credit reportingrnagencies, addressed himself to specific areas about which the Committee hadrnrequested information: the dispute resolution process for consumers, communication between furnishersrnandrncredit reporting agencies,rnand specialty creditrnreporting agencies andrntheir duties under the Fair CreditrnReporting Act (FCRA).  His statements inrnthose areas reflected to a large degree what had been reported earlier in thernCFPB study.</p

In addition, Prattrnsaid that several studies have provided reassuring information about how wellrnconsumers understand facts about credit scores and how they are used, thernimportance of periodically checking the accuracy of their credit reports andrnmaintaining a good credit history.   “It is good newsrnthatrnconsumers’ knowledge ofrncredit reports and how scores analyze credit report data is improving,” he said. “However it is critical thatrnconsumers remain vigilantrnand do not fall prey tornfraudulent credit repair schemes,” which he said remain a problem for consumers and for CDIArnmembers.</p

Pratt said his membersrnhave successfully operatedrnin a highly-regulated context for decades. Recentrnchanges in how the federal government enforces various consumer protectionrnlaws, most notably the Fair CreditrnReporting Act do not materially alterrnthis fact and that it isrnessential  that the CFPB remain anrnorganizationrnfocused on the factsrnand not driven by the headlines.  </p

CDIA members arernvery proud of their dispute resolution procedures and these, Pratt said, havernresulted in a high level of customer satisfaction.  A quality study called PERC that Prattrnreferenced several times in his testimony found that 95 percent of consumersrnwere satisfied with the reinvestigation process bureaus used to investigaternconsumer complaints.</p

When it comes tornconsistency of credit scoring, Pratt said a CFPB analysis of differencesrnbetween consumer and creditor-purchased credit scores found that four out ofrnfive consumers get exactly the same result regardless of the score they chosernand where this isn’t the case itrnis a result of how lenders set theirrnprices in thernmarket place.  No one credit score will match up with allrnlender pricing strategies or with their internal underwriting systems. </p

Wu put quite a different face on the credit reporting system.  In her testimony she said that:</p<ul