The Consumer Financial Protection Bureau this week released the procedures it will use for examining credit bureaus and other consumer reporting companies, another step toward implementing its nonbank supervision program.
The procedures serve as a field guide for CFPB examiners checking to see if the companies are following the law and include details on how to handle credit report notifications from collection agencies.
“Consumer reporting, and especially credit reporting, plays a significant role in a consumer’s life. It can dictate whether or not a consumer is able to get a credit card, a mortgage, or a student loan,” said CFPB Director Richard Cordray. “Our supervision program will benefit hundreds of millions of consumers by making sure these companies are playing fairly and by the rules, and our field guide will ensure that all companies are held to the same standards.”
The Dodd-Frank Act gave the CFPB authority to supervise “larger participants” in the consumer financial markets as defined by rule. In July, the CFPB identified a market for consumer reporting and defined larger participants to include companies in that market that have more than $7 million in annual receipts. The CFPB’s supervisory authority will cover an estimated 30 companies that account for an estimated 94% of the market’s annual receipts.
The CFPB officially started in July 2011. The agency proposed in February to supervise both credit reporting agencies and collection agencies. 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.
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 - Equifax, Experian and TransUnion - issue more than 3 billion reports each year and keep files on more than 200 million Americans, according to the CFPB.
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.