CFPB Update: Credit Reporting Agencies Now Subject to Heightened Scrutiny

Earlier this month, the Consumer Financial Protection Bureau issued the procedures it will use to verify that credit bureaus and other consumer reporting companies are complying with federal financial laws. It’s the latest move in the CFPB’s efforts to supervise “larger participants” in the consumer financial markets as required by the Dodd-Frank Act.

According to the agency, essentially all companies in the industry will be affected by the new procedures, which go into effect on September 30, 2012:

“In July 2012, 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 about 94 percent of the market’s annual receipts.” (CFPB)

Three takeaways:

1. The agency is targeting specific four practices:

“Examiners will be looking to verify that consumer reporting companies are complying with requirements of federal consumer financial law, including: using and providing accurate information, … handling consumer disputes, … making disclosures available, … [and] preventing fraud and identity theft.” (Venable)

2. Examiners will look at compliance with a broad set of regulations:

“Significantly, the procedures make it clear that CFPB examiners will be assessing these credit bureaus and consumer reporting agencies for compliance not only with the Fair Credit Reporting Act and Regulation V but also with all other applicable federal consumer financial laws, including the Gramm Leech Bliley Act and Regulation P and the provisions of the Dodd Frank Act that prohibit unfair, deceptive and abusive practices (although not, apparently, with the provisions of the Equal Credit Opportunity Act and Regulation B that address the furnishing of information about spouses).” (Ballard Spahr)

3. CFPB review will be a two-year process:

“… once a company has been designated a ‘larger participant,’ the rule requires that it remain subject to the CFPB’s increased supervision for at least two years, even if its annual receipts subsequently fall below the $7 million threshold.” (Loeb & Loeb)

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