Following a number of failure throughout the financial industry, the Consumer Finance Protection Bureau (CFPB) was formed in 2010. It is a government agency maintains the majority of power in the financial markets when it comes to protecting consumers by writing rules, clarifying regulations, curbing unfair and abusive practices, enforcing laws, promoting financial education, and conducting financial research.
The CFPB released a report at the end of 2012 that showed how credit bureaus and their operations in the system have failed. The report included information that showed:
· Social Security Numbers are not required for many credit reporting activities, with only about 3% of public records submitted to the three main bureaus containing SSNs.
· Quality control performed on incoming data is limited and really only includes logical comparisons and algorithms used only when data doesn’t make sense. There is no process that verifies the accuracy of incoming data.
· There is a gap between when data is submitted and when the credit bureau accepts it. Much of the data is initially rejected because it does not pass quality control checks. It was also noted that data from collection agencies have a higher rejection rate than that submitted by credit card trade lines.
· Only a few big furnishers supply credit bureaus with most of their payment and account data.
· The data matching process used by credit bureaus is a big area of concern. Accurate reports require the right data be matched to the right consumer. The matching process is complicated by a number of factors, including inconsistencies among furnishers, similar names among consumers, name changes by marriage, divorce, or for other reasons, and lack of Social Security Numbers. Sometimes data is matched based on “best match,” which doesn’t mean correct match.
During its most recent annual meeting of the Association of Credit and Collection Professionals in 2016, it was pointed out that the CFPB still hasn’t issued a notice of proposed rules regulating the credit and collection industry. However, it continues to oversee the industry through enforcement, supervision, and examination.
CFPB officials responded “… the next step in the rulemaking process would be to convene a SBREFA (Small Business Regulatory Enforcement Fairness Act) panel and publish an outline of the panel’s findings on how the proposed rule would impact small businesses.” No specific date was given for when this will occur. Officials did say the rule would be intended to cover many categories of business operations and collection activities.