Ed's Blog

CFPB May Announce It Has "Guns, Lots of Guns" To Regulate Credit Bureaus

By Ed Mierzwinski
Senior Director, Federal Consumer Program

The CFPB travels to Detroit Monday, July 16th, for a field hearing on credit reporting. It seems like a fine opportunity to announce a final anticipated rule (read comments) giving it full authority to look inside the black box operations of Trans Union, Equifax and Experian-- the Big Three self-anointed and little-scrutinized gatekeepers to financial and employment opportunity despite their long record of mistakes and failure to give consumers a chance to fix them. There are a number of powerful specialty bureaus that are also expected to be covered by the rule, which applies to "larger participants" in the marketplace.

PIRG reports over the years have documented that while the bureaus have grown to become powerful gatekeepers of financial and employment success, they have failed to fix mistakes nor improve their consumer response mechanisms, meaning many consumers pay too much for credit or insurance or are denied credit, insurance, a place to live, the right to open a bank account or even a job.

While Congress has twice enacted comprehensive reforms of the 1970 Fair Credit Reporting Act, first in 1996 and then in 2003, the bureaus have ignored the changes designed to improve report accuracy. The FTC, the agency previously charged with enforcement over the bureaus, which are largely run by machines (they have as few human helpers as possible), was never given enough guns by Congress to fight back. In the Matrix movie trilogy --set in a future dystopia where humans fight back against computers and machines, hero Neo asks for "guns, lots of guns." Well, the Wall Street Reform and Consumer Protection Act establishing the CFPB gave it guns that the FTC has never had. By law, the CFPB has supervisory authority over big banks and over payday lenders, mortgage lenders and private student lenders of any size.  Unlike the FTC, CFPB gained the additional big gun of supervisory authority  -- the right to go inside a firm's operations at any time  -- if it defines other firms as "larger marketplace participants." Certainly the powerful credit bureaus qualify and are deserving to be the first larger participants in the marketplace to be investigated by an agency with "guns, lots of guns." Especially in this economy, you should not be denied a job or a credit card or a mortgage or even a place to live because your credit report is full of mistakes and the machine gatekeeper won't fix them.

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