New CFPB Report on Problems at Experian, Equifax and TransUnion

The Consumer Financial Protection Bureau’s has found numerous problems and deficiencies during its examinations of Experian, Equifax and TransUnion. The CFPB is directing certain reforms.

Problems Uncovered at Experian, Equifax and TransUnion

As CFPB Director Richard Cordray characterized it, “Standards on the accuracy of information in consumer credit files were distinctly sub-par.” Some of the problems that the CFPB documented in its report include:

  • No programs to test the accuracy of credit reports that the CRCs produced, prompting Director Cordray to remark“we were surprised to find that [the CRCs’] quality control systems were either rudimentary or virtually non-existent.”
  • Deficiencies regarding the CRCs’ relationship with furnishers and information sources such as:
    • Insufficient monitoring and re-vetting of furnishers to ensure they were continuing to meet their legal and other obligations
    • No policies to monitor dispute data regarding furnishers
    • Lack of oversight of public records vendors
    • Furnishers were rarely provided with feedback regarding data quality, and were sometimes charged fees for data-quality reports
  • Deficiencies regarding the dispute process, leading Director Cordray to call the system “badly broken,” such as:
    • Failure to review and consider all relevant information submitted by consumers when conducting dispute reinvestigations
    • Failure to consistently notify furnishers of disputes, as well to inform them of modifications and deletions resulting from disputes
    • Failure to properly describe the results of dispute investigations in notices to consumers

Of particular interest regarding disputes is that the CFPB noted “one or more CRCs failed to review and consider the attached documentation and relied entirely on the furnisher to investigate the dispute. To correct this violation, examiners directed the CRC(s) to revise policies and procedures…” This statement clearly refutes the oft-repeated argument by the Big Three CRCs that they have no independent responsibility when conducting dispute investigations and can defer automatically to the furnisher.

Required Reforms

The CFPB is directing the companies to make the following reforms:

  • Formalize and centralize data governance policies
  • Establish robust quality control programs
  • Enhance standards for public records data including greater frequency of updates and stricter identity-matching criteria
  • Monitor furnishers on an ongoing basis, including a process to temporarily stop accepting data from furnishers that have accuracy problems or that fail to provide regular updates
  • Track furnisher dispute data
  • Provide data-quality reports to data furnishers at no cost
  • Correct the deficiencies in dispute handling by ensuring appropriate review of consumer proof documents, and proper provision of notices to both furnishers and consumers.

CFPB examiners required similar reforms when supervising furnishers, resellers and specialty reporting agencies.

After federal and state agencies and consumer litigants have been fighting the Big Three CRCs for the last forty years over their abuse of consumers, it appears that large-scale improvements are finally being made. While the CFPB admits this is a work in progress, the Bureau has succeeded in moving the needle by forcing the Big Three CRCs to adopt systemic policies and procedures to improve accuracy. Instituting “compliance management systems” may not seem sexy, but it’s the type of reform that is necessary in order to impove the overall accuracy of data on a large scale.

However, the reforms announced by the CFPB in its report are only the first step. Whether the CFPB is successful in obtaining meaningful and lasting reform of the credit reporting system depends on its ability to continue supervision of the Big Three.  Republicans in Congress have proposed to dismantle or seriously weaken the CFPB. If that happens, the progress made by CFPB may be undone if the Big Three backslide into their bad old ways.

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