We’re just a few months into a new year and already there are clear signs how the Consumer Financial Protection Bureau (CFPB) plans to further advance its regulatory authority over bank and non-bank entities across the credit ecosystem.
Here is a look at the top three priorities for the CFPB in this space:
1) Debt Collection
Complaints about debt collections are near the top of the list of consumer comments for both the CFPB and the Federal Trade Commission. In fact, according to a semi-annual report by the CFPB released in December 2014, 36% of consumer complaints concerned continued attempts to collect debt that was not owed.
The high number of consumer complaints coupled with the complexities of the debt collection industry, in general, has prompted the CFPB to take action. The bureau put out an advanced notice of proposed rulemaking in November 2013 that drew more than 23,000 comments and it’s expected to release a proposed rule later in the spring of 2015.
In addition, during a field hearing last December, the CFPB released a report focusing on both medical and non-medical collections. The report highlights the lack of standardization concerning how and when collection tradelines are furnished to credit reporting agencies (CRAs). Specifically, the report suggests that these variations can lead to consumer confusion and may impact accuracy.
With collections under the microscope, expect to invest more in data management and data governance systems as part of new compliance and standardization initiatives as well as to alleviate consumer complaints.
2) Consumer financial education and empowerment
Consumer financial education and empowerment remains a top priority of the CFPB, since it is baked into the bureau’s organizational structure. The CFPB has encouraged financial institutions to simplify disclosures and to provide credit scores on monthly statements.
In remarks before a Consumer Advisory Board meeting in February, CFPB Director Richard Cordray made clear that the initiative is aimed at helping increase transparency and awareness of credit scores so that consumers can better understand the impact that they have on their lives.
Furthermore, Director Cordray has stated that, “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.”
To that end, expect renewed calls for improvements in customer service, education and credit data transparency as part of an ongoing move to facilitate consumer empowerment.
3) Accuracy of consumer credit data
The accuracy and completeness of information contained in consumer credit files will continue to take center stage as the CFPB focuses on the responsibilities and duties of both credit bureaus and data furnishers, particularly debt collectors.
Hearkening back to the field hearing conducted last December in which the CFPB’s study focused on the lack of standardization in collection tradelines, CFPB Director Cordray emphasized the responsibilities of data furnishers — including both debt collectors and lenders — to provide credit bureaus with complete and accurate data. In addition, the CFPB remains highly interested in ensuring that the consumer dispute resolution system operates efficiently.
The CFPB also announced it would require CRAs to provide accuracy reports on data furnishers that identify key risk areas for consumers. New reporting requirements for CRAs include identifying furnishers with the most disputes, industries with the most overall disputes, and furnishers with the highest overall disputes relative to industry.
While data reporting will remain voluntary, furnishers will need to take greater steps to ensure fair and accurate reporting of consumer credit data or face greater scrutiny by the CFPB.
These top priorities demonstrate some of the key focal points by the CFPB within the consumer credit environment anticipated this year. To that end, it will be important for covered entities to ensure that they not just comply with current federal and state laws, but also strive to advance industry best practices while keeping consumers front and center.
For information on the responsibilities of furnishers submitting information to consumer reporting agencies, access Section 623 of the Fair Credit Reporting Act.
For information on how to act and comply with new data quality rules, visit Experian Data Integrity Services.