It's usually the other way around–the credit reporting agencies scrutinize consumers' creditworthiness, but now the Consumer Financial Protection Bureau (CFPB), announced this month that it will take a closer look at these agencies.
The CFPB was established by the Dodd-Frank Wall Street Reform in 2010. The mission of the agency is to "ensure that the consumer financial marketplace actually works for consumers," states the CFPB is a video press statement. The bureau helps to inform consumers so that they can make responsible educated choices.
There are several general and specialty (focused on specific industry) credit-reporting firms, but typically consumers are familiar with the big three: Equifax, Inc., TransUnion, and Experian.
Now, these credit-reporting agencies are being checked to see if the companies are responding to consumer complaints about alleged errors on their credit reports, according to The New York Times.
In a video statement, Director of CFPB's, Richard Cordray, said, "It affords an opportunity to gain a more thorough understanding of their business models and their business practices, to work with them to correct any problems we find, and to find ways to resolve matters that may be causing harm to consumers".
According to the CFPB, nearly every adult in America has a credit file and the three biggest credit reporting companies maintain files (based on information recorded from more than 10,000 providers) on about 200 million Americans.
The credit reporting market is "the heart of our lending systems", the Director stated. When functioning properly, it enables many to afford–by borrowing money–homes, college educations, cars, and more.
However, when the system and the credit reporting agencies fail, it can be very painful for the consumer, explains Cordray. "For example, sometimes credit reports contain errors that inaccurately reflect people's financial histories and can unfairly block them from getting approved for credit or can make it cost more than it should. Consumers also can encounter great difficulties at times in getting errors corrected."
This same bureau is very busy. It's also attempting to create new, shorter (simpler and easier to understand) mortgage documents such as the Loan Estimate (which is a combination of the Truth in Lending disclosure and the Good Faith Estimate) given to buyers. Other documents such as the Closing Disclosure are also being revised and right now the CFPB is offering online visitors the opportunity to review the proposed documents to see how they compare to currently used documents. Visit ConsumerFinance.com to have a look.
This effort is part of what the bureau calls "Know Before You Owe" mortgage disclosure project. "The Dodd-Frank Act requires us to combine the Truth in Lending and Real Estate Settlement Procedures Act disclosures, and we began 'Know Before You Owe' to make sure the people who would use the new forms were part of the process of creating them," states the CFPB on its website.
According to the CFPB, the changes include making the forms simpler, highlighting information consumers need, making it easier to spot risks, and providing more time to consider choices.
The efforts by the CFPB are aimed at ensuring that the problems that plagued the financial and housing markets do not occur again.