The Consumer Financial Protection Bureau announced on Tuesday that it would begin supervising consumer credit reporting agencies like TransUnion, Equifax and Experian — the first time such institutions have been subject to federal oversight.
Credit reporting agencies issue approximately three billion reports every year, and the firms have files on 200 million Americans. This data affects the ability of a U.S. consumer to obtain a loan, the loan’s accompanying interest rate, and, in some cases, the ability to obtain employment.
Consumers have complained that the error reporting process is inefficient and that making corrections to an inaccurate credit report can be tedious, according to Time.
The consumer credit reporting industry says that only about one percent of credit reports contain errors that can have a significant impact on an individual’s financial status. Consumer watchdog agencies, however, maintain that even if the industry’s estimate is accurate, the number reflects two million Americans, adding that their studies reveal different estimates.
According to a study by the National Association of State and Public Interest Research Groups, almost 80 percent of credit reports contain errors, and 25 percent of all reports have “serious errors,” mistakes that could prevent a consumer from obtaining credit, Time reports.
While the CFPB’s oversight encompasses 94 percent, or 30 of the largest credit reporting agencies, there are approximately 400 total consumer reporting agencies that collect American consumers’ data.
Chi Chi Wu, a staff attorney at the National Consumer Law Center, said in a statement that any efforts on behalf of the CFPB to increase credit reporting accuracy and improve efficiency in error reporting disputes “could potentially improve the economic lives of millions of Americans,” according to Time.
Before the creation of the CFPB by the 2010 Dodd-Frank Act, the Federal Trade Commission oversaw credit agencies under enforcement authority, meaning that the regulator could only take action if a firm had breached the law. The new CFPB supervision, however, requires that credit bureaus submit compliance reviews, provide the agency with documentation upon request and allow for examinations.
The CFPB’s supervisory authority will take effect on Sept. 30, and the agency will begin its examination of the credit reporting firms shortly thereafter, Time reports.