Just One Month Of Credit Agency Oversight Reveals Big Concerns

PITTSBURGH, PA, November 26, 2012

The Consumer Financial Protection Board (CFPB) took on new oversight responsibilities last month, assuming authority over credit bureaus and most credit reporting companies. Because these companies collect and report the financial information that lenders use to determine whether to offer various opportunities to consumers, it is important for a government agency to hold them accountable.

Prior to this change, no single federal agency had any oversight role involving this industry - the companies only needed to comply with the Fair Credit Reporting Act. As a result, observers said that America knows relatively little about how the credit reporting companies operate. This creates a big consumer protection problem for Pennsylvanians and consumers around the country: it is hard to know how the industry is calculating and reporting credit information.

After just one month of oversight, two big concerns are already coming to light.

One in Four Credit Reports May Contain Mistakes

Over the summer, a number of reports indicated that as many as 25 percent of credit reports contain potentially damaging errors. These errors occurred the most often in several categories. Reports often listed loans or credit cards that consumers never opened. Some reports got the credit cards right but included inaccurate information about the credit limits on those accounts. Even more concerning, reports sometimes inaccurately said that consumers had delinquent accounts or made late payments. Some even got the consumer's Social Security Number wrong.

These mistakes can potentially cause big problems for consumers. Accurate credit information is important to obtain favorable loan terms, credit cards, and mortgages. Even some jobs and student loans look at credit scores. A mistakenly low score can deprive consumers of big opportunities.

Credit Agencies Use Different Models, Resulting In Score Discrepancies

Last month, the CFPB released a report indicating another common problem. Credit agencies often send different scores to consumers and requesting lenders - this means that lenders sometimes see significantly different credit information than a consumer thinks they will.

The CFPB said that discrepancies between reporting occurred in as many as 20 percent of cases, affecting up to one in five consumers. Unbeknownst to many consumers, credit reporting agencies all use proprietary scoring models. Each company processes credit information independently and uses different methods to come up with the final credit score.

If discrepancies between companies were not concerning enough, some reporting companies also use a variety of models internally. For example, FICO (the company for which the credit score is named) uses 49 different scoring models. Because of how the reporting system works, consumers cannot know in advance whether their lender will see the same information or score.

Conclusions

While this is an indication that the CFPB's new oversight will have big benefits for consumers in Pennsylvania and around the nation, these findings are concerning. Credit errors can easily result in a loss of important opportunities like much-needed student loans or favorable mortgage terms.

Consumers who believe an error caused them to lose an important opportunity should contact a qualified consumer protection attorney. Experienced representation can help set the record straight.

Pittsburgh Office
Law Offices of Kenneth Hiller, PLLC
301 Grant Street
Pittsburgh PA 15219

Website: http://www.kennethhillerlaw.com