Mar 152012

Believe it or not, the federal government really does have your back sometimes. The Consumer Financial Protection Bureau has recently announced its intention to regulate the credit bureaus. The current recession has seen larger and larger numbers of consumers being pursued by debt collectors while their credit scores tank. The CFPB is stepping in to provide oversight, a move that could help many CJS clients as they take steps to improve their credit scores and clean up their debt.

The Big Three – Experian, Trans Union, and Equifax – are, of course, the largest and most notorious culprits of unfair credit practices, and they will all be under federal supervision. Through oversight, the CFPB aims to restore confidence in the American government to consumers, and to employ the same watchdog practices as they do with banks.

At the same time that so many Americans are suffering financial hardship and material loss – which are reflected on their credit reports – the credit score has become a more and more important indicator of a person’s worthiness. Hence comes the modern term ‘creditworthy’. Would-be employers, lenders, and others have quick access to a person’s credit score and use it as a measuring stick.

Just as alarming are the “Fourth Bureau” firms, who prey on people who are too poor, uneducated, credit-challenged, or young to obtain regular credit cards and bank accounts. While companies like CJS, and some government and nonprofit organizations, have gone a long way to explain the truth about the Big Three credit bureaus, and to educate consumers about how their credit scores are determined, these Fourth Bureau companies target the 30 million Americans who, for whatever reason, are outside of the mainstream financial world. They are shut out from the regular banking system and do their transactions instead with check-cashers, prepaid cards, and by other dubious means.

The Fourth Bureau companies are devising their own systems of credit scoring based on unreliable information obtained from things like cell phone bills and magazine subscriptions. Unfortunately, these companies are not usually subject to the government regulation that the Big Three are, leaving the consumers on whom they report in a very vulnerable position.

Now the CFPB needs to determine which “nonbanks” it will oversee. Debt collection agencies and the credit bureaus will be targeted – not only the Big Three, but at least 30 of the smaller firms are also on the proposed list.

Credit Justice Services

Source: Mui, Ylan. “Consumer agency wants oversight of debt collectors, credit bureaus.” Washington Post, 16 February, 2012.

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