Brown is Working to Ensure that Consumers Have Access to Clear and Accurate Credit Reports and a Fair System to Dispute Inaccurate Claims that Affect Their Ability to Access Credit, Buy a Home, or Start a New Business
WASHINGTON, D.C. – With access to credit critical for getting our economy back on track and creating jobs, U.S. Sen. Sherrod Brown (D-OH), Chairman of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, conducted a hearing entitled, “Making Sense of Consumer Credit Reports.” Today’s hearing examined the credit reporting market, consumer understanding of credit reports, and expanding oversight of key players in the credit reporting industry.
“Americans depend on access to credit to fund their educations, purchase their homes, and run their businesses. That’s why we need to address credit reports—one of the most significant and least understood elements of the consumer credit system—and why I’m holding today’s hearing,” Brown said. “When it comes to accurate credit reports, the burden is too often on consumers, who don’t know enough about their credit reports, or who don’t have time to navigate the arcane and confusing system—that needs to change.”
Witnesses at today’s hearing include (testimony is linked below):
- Corey Stone, Assistant Director for the Office of Deposits, Cash, Collections, and Reporting Markets, Consumer Financial Protection Bureau;
- Stuart Pratt, President and CEO, Consumer Data Industry Association; and
- Chi Chi Wu, Attorney, National Consumer Law Center.
A report released last week by the Consumer Financial Protection Bureau (CFPB) found that consumers filed 8 million disputes to credit reports last year.
The CFPB report came on the heels of a multipart investigation by The Columbus Dispatch. The Dispatch analyzed nearly 30,000 consumer credit report complaints filed with the Federal Trade Commission (FTC) and attorneys general during a 30-month period beginning in 2009. Dispatch investigative reporters spent more than a year documenting multiple cases of mistaken identities, mixed files, and inaccuracies on credit reports.
The Columbus Dispatch found that more than half of consumers who filed credit report complaints with the FTC had been unable to resolve their complaints through the normal dispute process with the credit bureaus.
Brown is working to ensure that consumers have access to clear and accurate credit reports and a fair system to dispute inaccurate claims. In September, Brown wrote to CFPB Director Cordray urging the watchdog agency to use its authority under the Fair Credit Reporting Act (FCRA) to investigate and curtail consumer abuses in the credit reporting industry.
Full text of Brown’s opening statement, as prepared for delivery, is below.
Americans depend on access to credit to fund their educations, purchase their homes, and to run their businesses.
That’s why we need to address credit reports – one of the most significant and least understood elements of the consumer credit system.
This hearing highlights yet another benefit of Dodd-Frank and the new Consumer Financial Protection Bureau (CFPB).
In the past, the FTC had authority over furnishers, including banks, but it did not have the authority to examine the credit bureaus. They could only bring enforcement actions.
The CFPB has comprehensive authority to examine the operations of credit bureaus, to shed new light on the credit reporting industry and to write new rules of the road.
That’s just one reason why the CFPB is so important.
Though consumers are entitled to one free copy of each of their credit reports each year, the CFPB finds that only one in five consumers request a copy of their credit report each year.
And last year, 8 million consumers disputed more than 30 million items on their credit reports.
Even though each American has three credit reports, an error on just one credit report can affect their ability to access credit.
A former colleague in the House of Representatives, who currently lives in Washington State, recently contacted my office.
His wife passed away earlier this year. And when he applied for a mortgage, he was denied because one of his credit reports listed him as deceased.
When he called the credit bureau to tell them that he is still alive, he was told that the error would take 30 days to correct.
He got in touch with his Senator’s office, who fixed the problem for him, but he still does not know what his other credit reports say.
Unfortunately, these stories are all too common.
An investigative series in the Columbus Dispatch, a newspaper in my home state, found that more than half of consumers who filed credit report complaints with the FTC had been unable to resolve their issues through the normal dispute process with the credit bureaus.
Problems abound – even for consumers with nearly flawless credit.
One of the nation’s foremost bankruptcy experts visited my office last week. She has nearly perfect credit, and recently received an auto loan with a rate of 1 percent.
She then received an adverse action notice in the mail, explaining that she may have received a higher than expected rate because of adverse information on her credit report.
Was this just a mistake? Could she actually have gotten a rate below 1 percent?
It was not explained – and like most hardworking Americans, she did not have time to follow up with the organization that sent the notice.
These examples show that the current system is not working for consumers. But it does work – and is often quite profitable for the banking industry.
Creditors make money off of loans with higher rates – and their ability to report negative information gives them leverage over consumers.
Credit bureaus are largely paid by lenders. Conducting thorough investigations costs money and cuts into their profit margins.
Under the law, credit bureaus and creditors have some general commands but few concrete obligations.
Too often, the burden is on consumers, who don’t know enough about their credit reports, or who don’t have time to navigate the arcane and confusing system.
I look forward to hearing from each of our witnesses how we can create a system that truly protects consumers’ interests.