CFPB to start supervising credit bureaus

Finally, the Consumer Financial Protection Bureau is going to start supervising the credit bureaus.  The legislation creating the CFPB was enacted shortly after President Obama took office but the CFPB is just now getting up to cruising speed, having survived attacks by the Republican side of the aisle regarding its purpose and who would lead it.

Below is the official reaction by the National Consumer Law Center to the CFPB's supervision of the credit bureaus:

WASHINGTON─Advocates at the National Consumer Law Center (NCLC) applauded today’s announcement by the Consumer Financial Protection Bureau (CFPB) that the agency would begin oversight of the nation’s largest credit reporting agencies on September 30. “The fact that the CFPB will oversee the large credit reporting agencies is a game changer,” stated Chi Chi Wu, staff attorney at National Consumer Law Center. “This could potentially improve the economic lives of millions of Americans by improving the accuracy of the system and its responsiveness to consumers.”

A credit report is a record of how a consumer has borrowed and repaid debts. About 200 million Americans have their credit reports on file with the three largest credit reporting agencies (CRAs)–Equifax, Experian and TransUnion (also known as the “Big Three”). These reports also form the basis of credit scores, the three-digit numbers from FICO and VantageScore.

Credit reports and scores have an enormous impact on the economic lives of Americans, because they are used by the vast majority of lenders in the U.S., as well as by insurers, employers, landlords, and others. Yet until today, these three companies were not subject to supervision by any federal agency. The Federal Trade Commission (FTC) had the ability to take law enforcement actions against the Big Three CRAs, but such actions were difficult, rare, and costly.

“The CFPB will have far stronger tools to regulate the Big Three CRAs,” explained Lauren Saunders, managing attorney of National Consumer Law Center’s office in Washington, D.C. “The CFPB will have the authority to examine the policies and procedures of these companies, to go deep in its supervision, and to require changes much more quickly through the supervision process than the FTC could.”

Wu expressed hope that oversight by the CFPB would lead to better accuracy and a better credit reporting system. She noted that there have been longstanding complaints about the accuracy of credit reports, as well as the handling of disputes over errors. Studies by consumer groups have found errors in 25% of credit reports serious enough to cause a denial of credit, while studies funded by the industry have claimed that this rate was less than 1%. Even an error rate of 1% is problematic, given that means that two million consumers would be affected. Consumers can check their credits reports for errors and are entitled to one free report from each of the Big Three CRAs each year, available through www.annualcreditreport.com.

As for the dispute process, the Fair Credit Reporting Act (FCRA) requires that credit reporting agencies conduct a “reasonable investigation” when a consumer files a dispute over an error in their credit reports. Yet a 2009 report by NCLC (http://www.nclc.org/images/pdf/pr-reports/report-automated_injustice.pdf) found that the Big Three CRAs have turned the FCRA dispute process into a travesty by conducting investigations in an automated and perfunctory manner. The Big Three translate the detailed written disputes submitted by desperate consumers into two or three digit codes, and limit their role to little more than selecting and sending these codes off to the creditor or other entity that furnished this information.

“This week, the CFPB celebrates its one-year anniversary, and it is the bureau that is giving the American public a great birthday gift,” noted Wu. “We are thrilled that consumers finally have a government agency on their side whose mission is to make sure that the credit reporting system works for them.”

New scam claims that President Obama will pay your utility bills

Although if true they might help his re-election chances, recent claims that President Obama will pay your utility bills through a new federal program are actually scams. The scammers have reportedly used telephone calls, fliers, social media and text messages in several different states to try to lure their victims into giving the crooks their Social Security numbers and bank routing numbers.  If the victims provides the requesting information, he or she is given a fraudulent bank routing number to pay their bill through an automated telephone payment service.

No matter how hot it is, consumers should not believe these scams.  The end result if they do is likely that their identity ends up being stolen.

The primary reason so many people are falling for this scam (2,000 so far in Tampa, FL and 10,000 so far in New Jersey) is that it appears to work ... for a little while.  The payments seem to go through and get credited to the victims' accounts.  The victims then spread the word to family and friends, only to later learn that their payment is rescinded when its too late to warn the people the original victim told about the "federal program".

Don't fall for this scam.  But if you already have and do end up a victim of identity theft, remember that I am more than willing to help you.

Credit Score myths

Here's a link to a good article at Forbes magazine about three myths about credit scores.  I suspect a lot of people think the same thing that the author of this article used to think about her credit score.

Here's the article - http://www.forbes.com/sites/moneywisewomen/2012/06/21/3-myths-i-used-to-believe-about-credit-scores/

The Types of Jobs where your Credit History Matters

I have posted previously about how potential employers often run the credit histories of potential employees as part of the decision making process on whether to hire the potential employee.  A recent poll shows how prevalent this practice really is.

The Society for Human Resource Management (I bet they throw one heck of a Christmas party!) recently polled its members regarding whether they utilize credit reports during the hiring process.  47% of those polled indicated that they run a credit history on at least some candidates and 13% run a credit report on all potential employees.

But what are the types of jobs where employers want to know about your credit history?  The top such jobs are those that include a fiduciary or financial responsibility (I once represented an airline pilot that could not change to a bigger and better airline because of a ding on his credit report - airline pilots get to use the company credit card and they thought he was too much of a risk).  Other jobs where credit reports are often used are top level jobs (i.e. CEOs, CFOs, etc.) and those with access to either highly confidential or highly sensitive information.

What types of bad credit harm potential employees' chances the most?  Judgments top the list (who wants an employee that gets sued a bunch?!) as well as bankruptcies and outstanding collection items.  A high debt to income ratio also appears to be a red flag for employers.

So, if you are planning on applying for one of the types of jobs listed above, you'd better check your credit report first and fix/correct/pay anything you can.

What is rapid re-scoring?

When applying for a mortgage, most lenders offer the consumer the opportunity for a rapid re-score, which is basically a way to quickly dispute errors on a credit report in the hopes of increasing the credit score just enough to get a better rate or qualify for the mortgage at all.

Using rapid re-scoring, the consumer can get accurate information added to his or her credit report in days rather than weeks.  A rapid re-scoring service can get the errors investigated in days, whereas the credit bureaus have 30 days to investigate disputes directly from the consumer.  Of course, rapid re-scoring is usually only available when a consumer is trying to get a mortgage and does not make sense for disputing information at other times.

Rapid re-scoring is also NOT credit repair.  Rapid re-scoring deals with inaccuracies on a consumer's credit report.  Credit repair, which is almost always a scam, deals with trying to get accurate (but derogatory) information removed from a consumer's credit history.

So if you are applying for a mortgage, you should check your credit report to see if there are any inaccuracies that, if rapidly re-scored, might get you a better interest rate.