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CFPB to Supervise Credit Reporting Agencies

July 17, 2012

WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) adopted a rule Monday to begin supervising larger consumer reporting agencies, which include what are popularly called credit bureaus or credit reporting companies. This is the first time these companies will be supervised at the federal level.

“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,” said CFPB Director Richard Cordray. “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.”

Although a small number of large businesses dominate the credit reporting market, there are about 400 consumer reporting agencies in the United States. The market includes the largest credit reporting companies that sell comprehensive consumer reports, consumer report resellers, specialty consumer reporting companies that primarily collect and provide specific types of information, and companies that analyze consumer report data.

The Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the CFPB to supervise nonbanks in the residential mortgage, payday and private education lending markets. For other markets providing consumer financial products or services, the CFPB has the authority to supervise nonbank “larger participants” as defined by rule.

Monday’s rule states that the CFPB will, for the first time, supervise consumer reporting agencies that have more than $7 million in annual receipts. The CFPB’s supervisory authority extends to an estimated 30 companies that account for about 94 percent of the market’s annual receipts. Altogether, the three largest credit reporting companies issue more than 3 billion consumer reports a year and maintain files on more than 200 million Americans.

Previously, consumer reporting was subject only to law enforcement authority at the federal level. And authority to write rules under the federal law governing this system was shared among several agencies. Officials with the CFPB said no single federal government agency could adequately see the entire picture of what was happening in these companies. Now, the CFPB will be authorized to supervise the larger consumer reporting agencies as well as write rules and enforce the law as needed.

The CFPB’s approach to supervising credit reporting will be just like its approach to supervising banks and other nonbanks already subject to CFPB supervision, officials said. The companies will be subject to review of compliance systems and procedures, on-site examinations, discussions with relevant personnel, and they will be required to produce relevant reports.

The rule outlining the CFPB’s supervision of this market will take effect on Sept. 30. At that time, the CFPB will begin its first exams. Officials said the CFPB will publish exam procedures that will provide guidance on how it will be conducting its monitoring.

In February, the CFPB issued a proposed rule to supervise the credit reporting and debt collection markets. The CFPB started with those two markets because of their widespread impact on consumers. The public weighed in on the CFPB’s proposals, and today’s rule is a result of that process. The CFPB plans to finalize its “larger participant” rule on debt collection this fall, and plans to propose additional “larger participant” rules in the future.

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