In October, credit rating companies under CFPB jurisdiction

[JonahQ]

For years, credit worthiness has been determined by the credit reporting companies, which heretofore, had not been under as much scrutiny as other institutions of consumer finance. However, starting this fall, they run under supervision by the Consumer Financial Protection Bureau. Source for this article:

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Regulatory attention focused on credit rating companies



The financial activity of almost every adult American is supervised and logged by credit bureaus, as their proprietary metrics are, ostensibly, designed to predict how credit-worthy an individual is. Timely payment of obligations and debt are recorded, the amount of debt relative to accessible credit and so forth are tracked by credit reporting agencies and used to determine a credit rating. Those scores are then sold to loan lenders, landlords and so forth.



MSNBC said that over 3 billion reports are sent out each year to interested parties, though the government is not doing a lot to scrutinize people up to this point. CNN points out that over 400 credit reporting agencies exist to look at your spending with personal loans, charge cards, auto loans and more.



The beginning of monitoring soon



All credit reporting companies will be watched carefully by the CFPB beginning on Sept 30. Any credit rating bureau doing less than $7 million per year in business does not have to follow the federal agency rules, but the three major credit bureaus, Experian, TransUnion and Equifax, will all be watched carefully. The Consumer Financial Protection Bureau will be responsible for regulation.



The Fair Isaac Corporation, or FICO, is not a credit bureau or lender, so it is exempt. It will not be regulated because it just sells formulas for determining credit scores.



The regulation will even include businesses similarly reporting on checking account activity, such as ChexSystems. ChexSystems is used by roughly 80 percent of the country's banks to screen possibly risky account holders.



Just a small mistake



A credit report error can result in a low score and then denial of credit to a consumer and a potential for losing a job. That is why the CFPB wants to look to the businesses, according to Reuters. It wants to figure out how simple it is to fix an error and just how common errors are.



People have to determine how common errors are on reports. Once a year, everyone has the chance to get a free credit rating to make sure there are no problems, but only 4 percent of people really do that, according to MSNBC. The Fair Credit reporting Act is in place to shield consumers, but it is not enforced typically.



Sources



CNN

MSNBC

Reuters