The Consumer Financial Protection Bureau said on Monday it will begin closely supervising credit reporting companies in September, a move that will bring the industry under strict federal supervision for the first time.
Starting Sept. 30, credit reporting agencies with more than $7 million in annual receipts - accounting for 94% of the industry total - will enter the CFPB's nonbank supervision program. Following that date, the bureau said, it plans to conduct exams, but before doing so will publish additional examination guidance.
"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," CFPB Director Richard Cordray said in a statement. "Supervising this market will help ensure that it works properly for consumers, lenders, and the wider economy."
The CFPB officially started in July 2011. The agency proposed in February to supervise credit reporting agencies and debt collection companies. It was the agency's first proposed rule under its authority to regulate "larger participants" in consumer financial markets. Cordray said at the time that the industries were chosen because of the increased role they are playing in consumers' lives after the 2007-2009 financial crisis.
The supervision for the credit reporting agencies will share characteristics with how the CFPB has supervised banks and nonbanks that already fall under its oversight, the bureau 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 CFPB said.
In prepared remarks scheduled to be given in Detroit on Monday, Cordray said the consumer reporting agencies' "scorekeeping exerts a tremendous and growing influence over the ways and means of" consumers' "financial lives."
"So it is important for all of us to understand more about their work and the ways it can affect us," he said in the prepared remarks, scheduled for a field hearing.
An estimated 30 credit reporting companies fall into the $7 million in annual receipts threshold and will be subject to CFPB's new rule.
The CFPB said there are an estimated 400 consumer reporting agencies in the U.S. The largest companies in the industry are Equifax, Experian and TransUnion.
The agency said consumer reporting to date has been subject only to law enforcement authority at the federal level, with several agencies sharing responsibilities for writing rules.
This meant no single federal agency could fully see how the companies operated. The three largest issue more than 3 billion reports each year and keep files on more than 200 million Americans, according to the CFPB.