From Legislators to Regulators: What s on the Horizon for Credit Reports and Scores. Jeremy Hancock Director, Government Affairs and Public Policy

Transcription

1 From Legislators to Regulators: What s on the Horizon for Credit Reports and Scores Jeremy Hancock Director, Government Affairs and Public Policy 2014 Experian Information Solutions, Inc. All rights reserved. Experian and the Experian marks used herein are trademarks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian.

2 Fair Credit Reporting Act 1970 Fairness, Accuracy, and Privacy Categories of data (1) Personal information (3) Public records (2) Trade lines (4) Inquiries Permissible purposes Consumer Protections Consumers must be told if information is used against them Access to file Right to dispute inaccurate information Limit on reporting certain information Consent for reports provided to employers Wisconsin Historical Society 2

3 FCRA 1996 amendments Regulation of data furnishers Privacy implications of prescreening consumers Allow for consumer prescreen and postscreen by creditors Notice to be included with prescreen Sharing among affiliates Allow banks to share credit information with affiliates, with consumer opt-out Accuracy of credit reports Information furnisher obligations Dispute process Credit reporting companies liable for knowingly reporting misinformation Investigate errors within a set period of time 3

4 Fair and Accurate Credit Transactions Act Free annual report disclosure: AnnualCreditReport.com Score disclosures by mortgage lenders Educational score disclosures by credit reporting agencies System of fraud alerts Consumer opt-out of all personal information sharing among affiliates for marketing Expanded definition of adverse action, triggering notice Mandated studies by Federal Trade Commission / Federal Reserve 4

5 Risk-based pricing notices Risk-based pricing notices (January 2011) Deny a consumer credit based on information in a consumer report, you must provide an adverse action notice to the consumer. Grant credit, but on less favorable terms based on information in a consumer report, you must provide a risk-based pricing notice Score disclosures by creditors (July 2011) With risk-based pricing notice With adverse action notice CFPB study on score disclosures 5

6 Wall Street and Consumer Protection Act Dodd-Frank 6

7 Consumer Financial Protection Bureau The 4 Ds that plague consumers seeking credit Deceptive marketing Debt traps Making sound financial choices A downward spiral that undermines personal finances Dead ends Cannot chose the businesses they must deal with Discrimination Equal treatment 7

8 Regulatory priorities in the credit ecosystem Data accuracy Dispute resolution Data furnisher responsibilities Consumer education and empowerment 8

9 What s driving CFPB s focus on data accuracy? 9

10 What s driving CFPB s focus on data accuracy? 26% of credit reports were alleged to contain an inaccuracy 21% of credit reports contained an error that did not materially affect their score 5.2% of consumers are affected by a material error, reflecting that consumers have three reports and not all reports may contain an error 2.2% of credit files contained a material error that would move a consumer to a different score band reflecting a higher risk 10

11 The impact of the FTC Report 98% is an A on any test! But, that s still approximately five million consumers affected by a material error! The industry s goal is 100%! The marketplace and regulators will demand it 11

12 CFPB s consumer complaint system Debt collection added in July ,000 complaints received in 2013 Averaging 22,000/mo. in 2014 Collection is the largest and fastest growing number of complaints for ,200 complaints from service members in % about debt collection April 1, 2013 March 31, 2014 Credit reporting Credit reporting Bank account Bank account 10% 15% Other Other 8% Debt collectors Debt collectors 29% Mortgages 29% Credit Credit cards cards 9% Semi-Annual Report of the Consumer Financial Protection Bureau, May

13 CFPB s consumer complaint system Credit Reporting Complaints: Incorrect information on a report (73%) Consumer reporting agency investigation (11%) Inability to obtain report and score (9%) Improper use of credit report (4%) Problems with credit monitoring or identity protection services (3%) April 1, 2013 March 31, 2014 Credit reporting Credit reporting Bank account Bank account 10% 15% Other Other 8% Debt collectors Debt collectors 29% Mortgages 29% Credit Credit cards cards 9% Semi-Annual Report of the Consumer Financial Protection Bureau, May

14 CFPB: Data furnisher responsibilities CFPB Bulletin September 2013 Expectations for companies that supply information to credit bureaus Maintain system to receive CRA information Conduct investigation of disputed information Report results of investigation to every nationwide CRA that received information Modify or delete disputed information, or permanently block the reporting of information The CFPB is monitoring complaints and will prioritize examinations and other actions on the basis of risks posed to consumers. CFPB Bulletin

15 Consumer Financial Protection Bureau Enforcement Third-party vendors In fall 2012, CFPB reached a settlement with several financial institutions on how they market add-on services, including payment protection or credit monitoring September 2013 JP Morgan Chase $309M fine for credit card practices August 2014 First Investors Financial Services Group $2.75M settlement for failing to fix flaws in credit reporting system purchased from third-party vendor Abusive practices In May 2013, action related to consumers who misunderstood terms and conditions 15

16 Consumer education occupies a large swath of CFPB s organizational structure Chief of Staff Christopher D Angelo Senior Advisor Len Kennedy Office of the Director Director - Richard Cordray Deputy Director Steve Antonakes Ombudsman Wendy Kamenshine Chief Operating Officer Sartaj Alag Consumer Education and Engagement Gail Hildebrand Research, Markets and Regulations David Silberman Supervision & Enforcement Steve Antonakes General Counsel Meredith Fuchs External Affairs Zixta Martinez Response Center Scott Pluta Financial Education Janneke Ratcliffe Research Christopher Carroll Fair Lending Patrice Ficklin Principal Deputy GC Robert Gonzales Media Relations Jen Howard Operations / Facilities Suzanne Tosini Procurement David Gragan CIO Ashwan Vasan CFO Stephen Agostini Human Capital Dennis Slagter Inclusion Scott Ishimaru FOIA, Privacy and Records Claire Stapleton Office of Equal Opportunity Employment Stacey Bach Consumer Engagement Peter Jackson Older Americans Nora Dowd Eisenhower Service Members Holly Patraeus Students Rohit Chopra Financial Empowerment Daniel Dodd-Ramirez Chief Technology Officer David Forrest Regulations Kathleen (Kitty) Ryan Card and Prepaid Markets Will Wade-Gery Mortgage and Home Equity Markets Patricia McClung Installment and Liquidity Lending Markets Jeffrey Langer Collections, Deposit and Credit Information Markets Corey Stone Large Bank Supervision Paul Sanford Non-Bank Supervision Peggy Twohig Enforcement Kent Markus Deputy GC Richard Lepley Deputy GC To-Qyuen Truong Deputy GC Steve Van Meter Legislative Affairs Catherine Galicia Small Business Community Banks and Credit Unions Vacant Inter-Governmental Affairs Cheryl Parker Rose Community Affairs Chris Vaeth Consumer Advisory Boards Delicia Hand Office of Financial Institutions and Business Liaison Daniel Smith 16

17 Financial education and empowerment is a top priority the CFPB Financial products can help make life better, but they can also make life harder Responsible businesses must help make the costs, risks, and benefits of financial products easier for consumers to understand. Richard Cordray January 4, 2012 CFPB s most popular educational brochures: Check Your Credit Report Pay Attention to Your Credit Report Save Some and Spend Some 17

18 18

19 Congressional and CFPB focus on medical debt S. 160, Medical Debt Responsibility Act of 2013, (Merkley) Requires deletion of fully paid or settled medical debt within 45 days Senate request for study by CFPB on problems related to medical debt collections and scoring Is paid medical debt predictive of default Is medical debt different than other debt? Unplanned nature of the purchases Opaqueness of medical costs Complex billing procedures High error rate in reporting VantageScore 3.0 and paid debt 19

20 Alternative data in credit reports One possible way to help consumers build or strengthen their credit profiles is for CRAs to incorporate additional, alternative data such as regular telecom and rental payments. CFPB report on Empowering low income and economically vulnerable consumers - November

21 Alternative data in credit reports Credit Access and Inclusion Act H.R Allows utility and telecom companies to report their customers' on-time payments to credit-reporting agencies Not a mandate, but clarifies law to allow for reporting of positive information 21

22 Reform of credit reporting Democratic proposal Fair Credit Reporting Improvement Act Rep. Maxine Waters (D-CA) Shorten the amount of time adverse items can appear on a credit report Modify requirements for adverse information related to education loans Prohibit use of disputed information in reports and scores Require creditors to maintain records on information furnished Remove paid or settled debt from credit reports Combine similar inquiries Study inclusion of alternative data in credit reports 22

23 Questions 2012 Experian Information Solutions, Inc. All rights reserved. 23

24 2012 Experian Information Solutions, Inc. All rights reserved. 24