Credit Bureau Regulation – The Who and the What.
The top three consumer reporting agencies (Equifax, Experian, and TransUnion) collect consumer credit information and sell that information to third parties. They collect that data from creditors (i.e. banks and credit card companies) and provide it to institutions, typically other lenders, who are determining your creditworthiness in order to make the decision whether or not to lend you money.
Holding, disseminating and making changes to this data on a daily basis is a huge responsibility. That’s why the government created a supervisory bureau for these agencies (CFPB). Along with a federal law that spells out how consumer credit information may be collected, distributed and used (FCRA).
The Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) supervises consumer credit reporting agencies to help ensure that the system is working properly for consumers, lenders and the economy as a whole. The primary goal of the CFPB is to make sure that the consumer reporting agencies are being both fair and effective.
Believe it or not, there are over 400 consumer reporting agencies in the U.S. The three largest are mentioned above. Consumer report resellers that merge the larger agency data with other company data in order to resell the information; specialty consumer reporting companies that utilize data for specific loans or checking accounts; and companies that exist solely to analyze consumer report data.
The CFPB supervises those agencies with more than $7 million in annual receipts, which is an estimated 30 companies. However, it’s important to know that the three largest credit reporting agencies issue more than 3 billion consumer reports a year and maintain files on more than 200 million Americans.
The Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) was developed to require that credit bureaus and other consumer reporting agencies provide you with a copy of your credit file when you request it.
Here are a few important benefits consumers receive under the FCRA:
A free credit report, once annually, through annualcreditreport.com
An investigation of any credit file dispute you may have (as long as you provide enough and correct information)
Deletion of outdated (negative) information that’s more than 7 – 10 years old
Only businesses that have a legitimate purpose for viewing your file can have access
Provide file access to employers only with your written consent
Give you the opportunity to opt-out of pre-screened credit offers
A business that provides information to the credit agencies must also follow rules under the FCRA. Some of these are:
Provide only accurate information
Promptly update and correct any inaccurate information previously provided to the credit agencies
Inform you within 30 days of any negative information report to the credit agencies
Notify the credit bureaus when you voluntarily close an account
To read the FCRA in full, you can always visit the FTC website. It’s a lot of information, but if you need to know anything about the FCRA, it should all be in that document.