Today, the Senate Banking Committee will hold a hearing to investigate the accuracy and regulation of credit reports. The hearing is called "Making Sense of Consumer Credit Reports" and credit analysts from the Consumer Financial Protection Bureau and consumer data trade advocates will testify about the practices of inaccurate credit reports.
Last week, the Consumer Finance Protection Bureau released a review of how the nation's largest credit bureaus manage consumer data. The report focused on the infrastructure and processes that the National Credit Reporting Agencies (NCRAs)--Experian, TransUnion, and EquiFax--use to collect, compile, and report information about consumers in credit reports.
The credit reporting system is much more than the NCRAs. There are others that play a role in the accuracy of credit reports: businesses provide information about borrowers, providers of public records information, and even the consumer. The CFPB is trying to bring more accuracy to credit reporting and is now examining the processes institutions use to furnish information to the NCRAs. The Bureau is also responding to consumer disputes about information contained in their credit reports.
Some details of the report include:
- The NCRAs each maintain credit files on over 200 million adults provided from approximately 10,000 furnishers of data. These furnishers provide information on over 1.3 billion consumer credit accounts or other "trade lines" each month. The 10 largest institutions furnishing credit information to each of the NCRAs give more than half of all accounts reflected in consumers' credit files. The NCRAs say they perform certain background and quality control checks on would-be furnishers before they accept data and information.
- Credit cards account for nearly 60% of all trade lines.
- It is challenging to correctly assign trade line information to the consumer because of similarities in names and addresses, colloquial variations and inaccuracies provided by consumers when they first apply for credit products. There is no objective, third-party source of information.
- Inaccuracies can easily happen in a credit report. Consumers can give inaccurate information when applying for a loan or the creditor can enter data in its systems incorrectly. Inaccuracies can come from bureaus incorrectly matching information or from the lack of identifying information in government records. Inaccuracies also occur during identity fraud and identity theft.
- The CFPB estimates that only about 20 percent or 44 million consumers get a copy of the credit file from one ore more of the NCRAs each year.
- The NCRAs received an estimated 8 million contacts in 2011 to report an inaccuracy in one or more of the items on their credit files and this resulted in 32 to 38 million disputed items on consumer credit files.
- Items reported by collection agencies have the highest dispute rates. Approximately 40% of disputes handled by the NCRAs are tied to collections items.