Washington, D.C.: Consumer Advisory Board Meeting


Welcome to the Consumer Financial Protection
Bureau’s Public Meeting of its Consumer Advisory Board, or the CAB, as we like to call it,
which is taking place at Constitution Center in Washington, D.C. Today’s Public Meeting
will gather feedback about credit reporting and the consumer experience. My name is Zixta
Martinez. I am the Associate Director for External Affairs at the CFPB. The CFPB’s mission is to help consumer finance
markets work by making rules more effective, by consistently and fairly enforcing those
rules, and by empowering consumers to take more control over their economic lives. As many of you know, the Dodd-Frank Wall Street
Reform and Consumer Protection Act, which created the CFPB, also provided for the establishment
of the CAB. The CAB is informed with the mission of providing advice and consultation with
the CFPB in the exercise of its functions, and they provide information on emerging practices
in the consumer financial products or services industry, including regional trends, concerns,
and other information. Today’s public CAB meeting is in support of that mission. Let me just spend a few moments telling you
about what you can expect at today’s public meeting. First, you will hear remarks from
the CFPB’s Director, Richard Cordray, after which the CAB’s Chair, Jose Quinonez, along
with the CFPB’s General Counsel, Meredith Fuchs, will facilitate a discussion among
CAB members and a panel of invited guest industry and community experts, who will examine consumer
experience with credit reporting. They will highlight key credit reporting trends and
identify areas for improving the consumer experience with credit reporting and credit
agencies. Following the panel discussion, there will
be an opportunity to hear from audience participants. As a reminder, the views of the CAB and the
views of the guest panelists are greatly appreciated; however, they do not represent the view of
the CAB�of the CFPB. Sorry about that. Today’s public meeting is being livestreamed
at consumerfinance.gov, and you can follow CFPB on Twitter and Facebook. So let’s get started with an introduction
of the CAB members and CFPB staff. I would invite CAB members and staff to please raise
your hand as I call out your name. The Chair is Jose Quinonez. Jose, will you raise your
hand? [Laughter.] He is the Executive Director of Mission Asset
Fund in San Francisco, California. The Vice Chair is Bill Bynum. Bill is the
CEO of Hope Enterprise Corp in Jackson, Mississippi. Gary Acosta. Gary Acosta is the CEO and co-founder
of the National Association of Hispanic Real Estate Professionals in San Diego, California. Jo Ann Barefoot. Jo Ann is a Co-Chair of Treliant
Risk Advisors in Washington, D.C. Maeve Brown. Maeve is the Executive Director
of Housing and Economic Rights Advocates in Oakland, California. Steve Carlson. Steve is the former head of
Marketing and Business Development at Intuit.com, for Mint.com, in Mountain View, California. Laura Castro de Cortes. Laura is the President
of Latino Banking Solutions in Omaha, Nebraska. Elizabeth Costle. Elizabeth is the Director
for Consumer and State Affairs at the AARP Public Policy Institute in Washington, D.C. Prentiss Cox. Prentiss is an associate professor
of law at the University of Minnesota in Minneapolis, Minnesota. Patty Hasson. Patty is the President of Clarifi
in Philadelphia, Pennsylvania. Patricia Garcia Duarte. Patricia is the President
and CEO of Neighborhood Housing Services of Phoenix in Arizona. Adam Levitin. Adam is a professor of law at
Georgetown Law Center in Washington, D.C. James McCarthy. Jim is the President and CEO
of the Miami Valley Fair Housing Center in Dayton, Ohio. William Nelson. William is the Associate Director
for Military Programs at the University of North Georgia. Dory Rand. Dory is the President of Woodstock
Institute in Chicago, Illinois. The Honorable Annette Rizzo. Judge Rizzo is
a judge at the First Judicial District of Pennsylvania in Philadelphia. Ellen Seidman. Ellen is a Senior Fellow at
the Urban Institute in Washington, D.C. Josh Silverman. Josh is President for U.S.
Consumer Services at American Express in New York. Robert Stoll. Bob is the Founder of Stoll
Berne LLC in Portland, Oregon. Jane Thompson. Jane is the CEO and Founder
of Jane J. Thompson Financial Services LLC in Chicago, Illinois. And Jonathan Zinman. Jonathan is a professor
of economics at Dartmouth College in Hanover, New Hampshire. We also have with us Delicia Hand, CFPB Staff
Director for the CAB; Meredith Fuchs, General Counsel for CFPB; Corey Stone, Assistant Director
for Credit and Deposit Markets. I think we got everyone. I am now pleased to introduce Richard Cordray.
Prior to his current role as the CFPB’s Director, he led the CFPB’s Enforcement Office. Before
that, he served on the front lines of consumer protection as Ohio’s Attorney General. In
this role, he recovered more than $2 billion for Ohio’s retirees, investors, and business
owners, and took major steps to help protect its consumers from fraudulent foreclosures
and financial predators. Before serving as AG, he also served as an Ohio State Representative,
Ohio Treasurer, and Franklin County Treasurer. Director Cordray? Thank you. Thank you for joining us as we
meet with our Consumer Advisory Board, whom you just met. We all look forward to our dialogue
with our CAB members. It’s been very valuable to us for them to share their perspective,
their expertise, and their actual experience on the ground. We are all here because we
care deeply about how people are being treated in the consumer financial marketplace. I will be focusing today’s remarks on one
particular component of this marketplace, which is the credit reporting industry. Every
consumer who seeks to make use of credit to help manage his or her financial affairs is
affected by this industry. For whether they are aware of it or not, people’s ability to
access credit and how much they pay for credit is typically governed by what is contained
in their credit profiles. Credit reports and scores can determine the
terms of people’s mortgages, whether they qualify for auto loans, or if they are eligible
for different credit cards. A potential employer may look at a consumer’s credit report as
a factor in making a hiring decision, or a landlord may review it before deciding whether
to approve a potential renter. In short, credit reports and the scores derived from them play
a fundamental role in determining whether and how each of us will be able to take advantage
of the opportunities that credit provides to shape our futures. Most Americans have a credit file. In fact,
each of the three biggest credit reporting companies maintains files on over 200 million
consumers. They compile consumer credit profiles based on information supplied by thousands
of providers known as “data furnishers.” Using information from the furnishers, credit reporting
companies track people’s payment records and other aspects of their credit history. The
companies then use all of this data to compile scores that assess the risks lenders face
when deciding whether to extend credit to a given consumer. Consumers with high credit
scores generally pose lower risk and therefore get approved for loans and on better terms. This financial scorekeeping exerts a tremendous
and growing influence over consumers’ lives. The amount of data collected and exchanged
in the credit reporting industry is astounding. Each year, approximately 36 billion updates
are made to consumer credit files at the three largest credit reporting companies alone.
Assuring that such personal financial information is updated timely and accurately and that
it is maintained securely is a critical responsibility. When I addressed this group a year ago, I
expressed concern that the credit reporting industry is a market in which consumers can
become largely incidental to a business relationship between others. That is because consumers
have no real say in decisions made about their credit report in the first instance. When
consumers cannot vote with their feet by choosing to take their business elsewhere, their influence
is inevitably limited. This can be very frustrating to the consumers whose information is at stake,
since this industry can have such a profound influence on their lives. Indeed, we have heard from many people who
are at their wit’s end. One woman said she was struggling to obtain copies of her credit
report and felt like she was at, quote, a dead end. Consumers should never be made to
feel that way in the marketplace. Our job at the Consumer Bureau is to stand on their
side and ensure that the industry deals with consumers in a fair and transparent manner.
So let me begin by discussing the progress we are making to help ensure that people are
being treated fairly in the credit reporting market. I will also touch on where we think
more could be done, and we look forward to hearing your thoughts. Too often, consumers feel like they are getting
the runaround. If they cannot get the credit reporting companies to listen, they cannot
get problems resolved. To enhance consumers’ voice in this process, we began accepting
consumer complaints on these issues in October 2012. Since then, we have handled approximately
31,000 credit reporting complaints. Nearly three-quarters of these complaints have been
about the accuracy and completeness of credit reports. Consumers report that key information is wrong
or missing from their report and that they have trouble getting errors corrected. Maybe
a debt has been misreported or maybe some of the consumer’s personal information is
wrong. We have even heard about credit reporting companies and data furnishers refusing to
change information that identifies consumers as deceased when, as the consumers themselves
are frustrated to attest, they are very much alive. Other consumers complained about being unable
to get a copy of their report or about having problems with how a credit reporting company
investigated a dispute. Some reported that an investigation took too long or that they
could not get proper help over the phone. These are not minor matters for people. When
consumers have unresolved problems with their credit reports, it can prevent them from qualifying
for a job or can block them from securing a rental home, a mortgage, or a car loan.
In addition to these very tangible troubles, these problems generate significant frustration
and stress, and they reinforce a basic distrust in the market. When a consumer complaint is submitted to
the Bureau, we forward it to the appropriate company and work to get a response from them
on a relatively fast time frame. Complaints are listed in our Consumer Complaint Database
when the company responds to the complaint confirming a relationship with the consumer
or after the company has had the complaint for 15 calendar days, whichever comes first.
We make the database available to the public online so that anyone can see what complaints
are coming in and analyze that information. Today, we are releasing a snapshot of the
consumer credit reporting complaints that we have received. It shows that companies
are already responding to over 90 percent of complaints made about them. We are helping
consumers to be heard and to get their issues addressed. Another way we are seeking to make credit
reporting fairer for consumers is by exercising our supervisory authority over the larger
credit reporting companies and many of their largest furnishers. Our examination teams
ensure that they are complying with the consumer financial laws. We now oversee companies that
account for about 90 percent of the annual receipts in this market.
This oversight allows us to step behind the curtain of these companies and their internal
processes. We then can find specific pain points for consumers, identify problem areas,
and work directly to improve their responsiveness to consumer problems. Our supervisory authority
extends to the largest financial institutions and collections agencies, which provide a
majority of the credit reporting companies’ trade lines and collection items. We have also identified major process changes
that were needed. When consumers find a problem with their credit report that they want to
dispute and get corrected, they often send along copies of the relevant documents to
support their claim. Anyone would naturally assume that this information will be shared
between the credit reporting company and the furnisher to respond appropriately in addressing
the dispute. This, however, was not how matters were being handled. The three largest nationwide credit reporting
companies use an established system, which is known as “e-OSCAR,” to communicate consumer
disputes to furnishers. In December of 2012, we reported that when credit reporting companies
forwarded disputes, they did not send attachments, such as account statements, supplied by consumers.
Instead, they simply reduced everything submitted by the consumer to a three-digit code and
occasionally a few words that described the dispute. Without any of the crucial supporting
information from the consumer, disputed claims were often denied because there was nothing
to dictate any change in the outcome. This is completely unacceptable. Consumers
are often in the best position to explain why a particular account or item in a file
is inaccurate. They should have a full chance to explain their disputes to furnishers, but
they lose this opportunity when the credit reporting companies do not forward consumer-supplied
documents. Last fall, we announced that the three major
credit reporting companies had agreed to upgrade the e-OSCAR system to correct these problems.
At first, they made the necessary changes so that they could send furnishers any relevant
documents that consumers either mailed or faxed to them. Obviously, that was only a
partial fix, though an important step forward. But today, we are pleased to update you with
further enhancements to the e-OSCAR system. Now consumers can upload documents whenever
they file a credit dispute online, and furnishers will have direct access to those documents. These changes will make it easier and more
convenient for consumers to support their claims. They will also make it more feasible
for companies to investigate fully and address the actual details in context. The result
should be more disputes being resolved correctly, leading to credit reports that more accurately
reflect the current facts about consumers’ credit histories. Moreover, in September 2013, we put furnishers
on notice that they are responsible for following the law by investigating consumer disputes,
correcting inaccurate information, and sharing the corrected information with the credit
reporting companies. We expressly informed furnishers that they are to have reasonable
systems and technology in place to receive and process notices of disputes and information
about disputes, including any relevant documentation that is forwarded to them by the credit reporting
companies. When consumers know they have a better chance
of having their disputes resolved, they are likely to be more proactive in tackling problems
with their credit reports. We want to see even more of that. In order for consumers
to know to dispute items in their credit reports, they need to be checking their reports regularly
enough to notice any mistakes. Yet fewer than one in five Americans check their credit reports
in any given year. We need to do more to see that everyone understands the importance of
doing so. Consumers often learn the importance of their credit standing when it is too late,
after a credit application is denied or after identity theft has had time to cause extensive
damage. Sometimes they fail to see the importance of their credit standing even after it has
affected them in a material way, such as being rejected for a job or charged a higher price
for a loan. That is why we are focused on empowering consumers
to take more control of their financial lives by providing consumers with information to
help them know what to do when they encounter a problem or to avoid problems in the first
place. In the area of credit reporting, we are working to make this information available
to consumers through multiple channels. Ask CFPB is our interactive online tool that helps
consumers find unbiased, authoritative answers to their financial questions accessibly stated
in plain language. Two of the most viewed questions are “Where can I get my credit score?”
and “How do I dispute an error on my credit report?” We also offer a range of short, plain-language
paper guides that can be downloaded and distributed for free and also can be ordered in bulk by
nonprofit and government organizations. Two of our most popular paper guides are “Check
Your Credit Report” and “Pay Attention to Your Credit.” We have designed these resources
to help people take control of their money. Nevertheless, we remain keenly aware that
information about credit standing needs to be made more salient for consumers. So today, I am also pleased to announce the
Consumer Bureau’s strong support for a major initiative in the credit card industry. This
initiative will make credit scoring information more easily and regularly available to credit
card customers at no cost. Recently, several issuers, including Discover who is here with
us today, have introduced programs that promise to expand dramatically the number of consumers
who are more routinely acquainted with their credit information. The programs provide customers,
directly and at no cost, with the same credit scores these issuers obtain in their normal
course of business, along with educational materials to help them understand the credit
score. Although credit scores provide just a partial
picture of one’s finances, they could raise awareness of credit issues and prompt busy
Americans to review their credit standing. If scores are lower than expected or if they
change over time, more consumers may take the initiative to request their credit reports.
This will allow them to address concerns, dispute errors or fraud-related entries, and
improve negative aspects of their credit usage. So we consider this initiative to be a “best
practice” in the industry. Making this information available through
existing channels, such as including credit scores with other online account information
and on monthly statements, is likely to yield positive returns that are worth the effort.
Customers who monitor and manage their credit standing should, on average, be less likely
to become delinquent or to default, and given that more than two-thirds of Americans have
at least one credit card, having their credit score made available through their credit
card issuer or through other creditor statements could broadly improve consumer well-being. With these purposes in mind, I recently sent
letters and followed up with phone calls to the CEOs of the nation’s top credit card companies
strongly encouraging them to consider making credit scores and educational content freely
available to their customers on a regular basis. I believe this initiative will benefit
both providers and consumers by making people more capable of protecting themselves, more
able to benefit by the opportunities that credit can create, and ultimately more productive
members of our economy. Indeed, I see no reason why this approach should not be replicated
with customers across other product lines as well, and some of the CEOs indicated that
they are moving in that direction. This is just one example of how we can find
ways to work together with financial providers to strengthen financial education efforts
across this country. Similarly, recent upgrades have been made to annualcreditreport.com,
which is the only website where consumers can get their free annual credit reports,
as the law requires. We contributed to these upgrades, which have resulted in better educational
content for the millions of Americans who visit that website each year. The upgrades
include over 40 web links to helpful content about credit reporting developed by the Consumer
Bureau and the Federal Trade Commission. With all of the examples I have discussed
here today, from e-OSCAR upgrades to financial education about credit standing, we can see
the prospect of significant improvements for consumers trying to navigate the complexities
of the credit reporting market, but more needs to be done to prevent unnecessary frustration
and obstacles that consumers frequently encounter. We continue to observe problems with those
that provide information to the credit reporting companies. Some furnishers are taking shortcuts
to avoid undertaking appropriate investigations of consumer disputes. For example, a consumer
may find an error on the credit report and file a dispute about an incorrect debt or
a credit card that was never opened. In response, the furnisher may simply delete that account
from the information it passes along to the credit reporting company. This practice can be detrimental because it
deprives consumers of an important protection. Not only do investigations determine the accuracy
of a particular consumer’s dispute, but they also help furnishers uncover and correct broader
problems within the systems they use to provide information to the credit reporting companies.
When a furnisher learns more about these types of problems, it benefits not only the consumer
who submitted the dispute but also all other similarly situated consumers who did not.
A furnisher that does not actually investigate disputes is cutting corners and will have
less effective checks on the accuracy of its information. In addition, without an investigation that
correctly resolves the dispute, consumers are left with less assurance that the inaccurate
information will not reappear later on. They also may not get the intended benefit of having
the credit reporting company notify those who have already received the report that
the inaccurate information has been identified and corrected. So today, we are issuing a supervision bulletin
putting furnishers on notice that taking a shortcut by simply deleting a line in a credit
report does not generally constitute a reasonable investigation of a consumer dispute that is
enough to satisfy their obligations under the law. We will continue to use our supervisory authority
to require responsible behavior in the credit reporting market, and we will also use our
enforcement authority where appropriate. We know that fixing just one error on a credit
report could save people thousands of dollars in the long run by increasing their credit
score and thereby helping them secure a mortgage or a credit card when they might otherwise
have been denied or charged a higher rate. For all of these reasons, we believe that
consumers must have their voices heard. Everyone deserves to be treated fairly. At the Consumer Bureau, we are dedicated to
fostering a marketplace for financial products and services where sensible practices benefit
both industry and consumers alike. As the American economy continues on its path to
recovery, we need to have confidence that consumers enjoy the full benefits of credit
reports that are accurate and reliable. Consumers bear their own share of responsibility to
monitor and manage their credit standing. As we have discussed, however, there are some
steps that can be taken to put them in a better position to succeed in protecting themselves. When consumers do take the initiative to manage
their credit reports, they also deserve to have their disputes investigated in a meaningful
way and to have their reports corrected where that result is justified on the facts. In
the end, we can all agree that people who apply for financial products should be evaluated
on the basis of their true credit history, reflecting how they have actually managed
their financial affairs. But we can also appreciate that it is not
a simple matter to accomplish this shared goal in a diverse and vibrant free-market
economy driven every day by the aggregate activity of more than 300 million Americans.
That makes the credit reporting industry a fitting topic for the expertise and experience
of our CAB members, and we appreciate all of you joining us here today to engage in
what I am sure will be a most robust conversation. Thank you. [Applause.] Thank you, Director Cordray. Next, CAB Chair Jose Quinonez and CFPB General
Counsel Meredith Fuchs will lead a panel discussion about credit reporting and the consumer experience.
I would ask our guest panelists to please take their seats. I have already introduced
Jose Quinonez, so let me just share a few words about Meredith Fuchs. She joined the
CFPB in January 2011 and currently serves as the Bureau’s General Counsel. She previously
served as CFPB’s Chief of Staff as well as Principal Deputy General Counsel. She joined
the CFPB from the U.S. House of Representatives where she served as Chief Investigative Council
to the Committee on Energy and Commerce. Jose and Meredith, you have the floor. Thank you, Zixta. Welcome, everyone. You have
just heard from Director Cordray, and you have heard him speak about the importance
of accurate credit reporting and helping consumers out of the dead-end situations by making the
credit reporting market fairer through supervision and oversight. Building on that foundation, CAB Chair Quinonez
and I are about to moderate a discussion about the evolution of the consumer experience with
credit reporting. We are going to highlight key trends in consumer complaints and identify
areas for improving the consumer’s experience with credit reporting. This discussion is
going to include comments from our invited guest panelists, who I am going to introduce
in a moment, and from members of our Consumer Advisory Board, as well as some CFPB staff. So let me begin by introducing our invited
guests. With us is�and maybe you could each just raise your hand, so folks know when I
introduce you�is Ed Mierzwinski, who is the Consumer Program Director and Senior Fellow
at the U.S. Public Interest Research Group. We have Stuart Pratt, who is the President
and CEO of the Consumer Data Industry Association; Leonard Bennett, who is with Consumer Litigation
Associates; Brian Hughes, who is the Senior Vice President of Cardmember Marketing at
Discover Financial Services; and in addition, we have Corey Stone, who is the Assistant
Director for Deposits, Cash, Collections, and Reporting Markets at CFPB. Jose, why don’t you get us started today. Well, thank you for that. I think we definitely
will have a robust conversation, so let’s just get to it. I wanted to sort of just invite our guest
panelists to start us off with some introductory remarks, and let’s start with Stuart. Well, Chairman Quinonez, members of the Consumer
Advisory Board, and the staff of the CFPB, thanks for the invitation to join your dialogue
today. It is an important dialogue. It is one that makes sense to us. CDIA is a trade
association. We represent a large community of data companies that help American businesses
manage risk, and amongst those companies are the three nationwide credit bureaus, which
are really the subject of today’s discussion. Credit reporting here in the United States
is still the premier system globally. Nowhere else in the world do you have a system with
such a large amount of data that is used for risk management. Nowhere else in the world
do we have more consumers who have the opportunity to access credit than here in the United States,
and in fact, an indication of that is CDIA will soon host a delegation from Indonesia,
where they will learn a little bit more about U.S. credit reporting systems, how they’re
built, why they are built the way that they are built, and how they can expand their own
consumer economy. But today’s conversation isn’t about the macroeconomics
of credit reporting, but today’s conversation is about us as consumers. It’s an important
conversation. Some do suggest that our relationship is primarily a credit bureau relationship
with lenders, but I would suggest that that is just not as true as it once was, and in
fact, it is fundamentally not the way CDIA’s members view the relationship they want to
have with consumers. We want a market-based relationship with consumers that’s successful.
There are products and services that connect consumers today with their credit reports,
help them prevent identity theft, help them to monitor their credit reports. They get
access to their credit scores, and these are tremendously successful products that contribute
to credit report literacy and, broadly, financial literacy. We also have a relationship that is established
by law, and I think Director Cordray outlined some of the requirements under law, and our
members are committed to having that relationship work equally successfully. It is important
for each one of us to have confidence when we call a credit bureau that the dispute will
be processed successfully, and it’s a partnered relationship. Credit reporting is really an
ecosystem, and I applaud the CFPB for their 2012 white paper on the ecosystem of nationwide
credit reporting. There are various parties in this conversation. There are credit bureaus.
There are more than 10,000 data furnishers furnishing 3 billion updates a month into
this system. There are consumers, and we as consumers have opportunities to connect with
credit bureaus as well. So we look forward to this dialogue. We’re
pleased to have it, and again, Chairman Quinonez, thanks for the invitation. We certainly appreciate
it. Thank you for that. So let’s make the introductions
brief, and then�so that way, we can have some time for the actual questions, so that
we’ll get to it. So just briefly introduce yourself. Good morning. My name is Brian Hughes with
Discover, SVP of Cardmember Marketing, and I’d also like to say thank you, Chairman Cordray
and members of the Advisory Board, for having me in today’s discussion. It’s an important
topic to Discover, to consumers, and to the financial industry. We are one of America’s
largest issuers of credit cards, third largest provider of private student loans, and home
lines and personal loans as well, and the accuracy of consumer information is very important
for us to satisfy the needs of regulators, consumers, and our shareholders. We work very
hard in that regard to make sure that the information we provide to the credit bureaus
is accurate and recently began providing the free FICO scores to our cardmembers on a monthly
basis. This makes it easy and convenient for our cardholders to check their credit score
on a monthly basis and then to seek more information if they need it, and we’ve seen a great response
from our consumers to this service, overwhelmingly positive, and I know our Chairman David Nelms
was very pleased, Director Cordray, at your outreach and your phone call and your letter,
and we’re very proud of this service. So I look forward to this morning’s discussion
and to your questions. Great. Thank you. Ed? Thank you, Jose, and I’ll try to be brief,
but the Fair Credit Reporting Act was enacted in 1970. I’ve been fighting the credit reporting
wars since 1989. Congress did pass major reforms in 1996 and then again in 2003, but I think
the most significant reform for consumers was the enactment of the Dodd-Frank Act that
created the CFPB and gave it the tools needed to finally bring these powerful gatekeepers
into a controlled environment. So I’m looking forward to the discussion today. And I’ll disagree with Stuart on one point.
He expects me to disagree on more than one later on, and I will, but� [Laughter.] Consumer do not have the same relationship
with credit bureaus that they do with other businesses. You can choose your bank or credit
union. You can choose where you buy a car. The credit bureaus sell information about
you, and you have no control over that. It’s a different market, and it needs different
rules. Thank you. Good morning. I expect I will throughout this
look the most out of place and most uneasy. I am not a government relations person. Self-described,
although Stuart wouldn’t probably agree, but I would see myself as an emergency room physician
or a MASH unit surgeon. The thousands of consumers who I have represented in my 16-some years,
helping them in this unique field, when they believe they are failed, they come to us.
We are the ones that review the actual documents we receive from the credit reporting agencies
or the consumer complaints that come in through the CFPB. My firm does almost exclusively fair credit
reporting litigation. We don’t do credit repair. We don’t charge consumers when we try to help
them fix a dispute, and in that context later on, if I haven’t worn out my welcome, I will
sound more as a doomsayer. I don’t believe that the system of dispute and investigations
for consumers has improved. It’s gotten markedly worse. With that said, I have had an opportunity
to speak before Congress several times, including with FACTA on behalf of the National Association
of Consumer Advocates. I’m on the board. I’ve spoken and worked with the Federal Trade Commission,
and I can say publicly I do not know of any instances in which in the history of this
statute as dramatic improvement in consumer empowerment has occurred than under the CFPB’s
watch. The changes that the director just suggested are not insubstantial. The changes
to e-OSCAR discovers to be greatly commended for offering credit cards. These are not cosmetic
from our side, from where we see it. These are very significant improvements, so thanks
you. Thank you. Appreciate you being here. Well, let’s get to it. I’m going to direct
the first question to Ed and Stuart, just to see if we can get some agreement here at
some point, and then I also want to be inviting some of the CAB members to join in the conversation.
So the first question is really about how have you seen credit reports being used in
hiring for employment, and who should be ensuring the businesses that actually use the credit
reports for hiring? How should be ensuring that they use the reports following the law?
So Ed and then Stuart. Thank you, Jose. The original 1970 Act said you could use credit
reports for credit insurance, employment, or other legitimate business needs. In 1996,
Congress recognized that their use for employment was a pretty serious use in the tough job
market that we had in the 1990s, and so Congress gave applicants and employees greater consumer
rights when their report was going to be used for a negative purpose. But since the 2008
collapse of the economy and the many losses of jobs, I think their use for employment
has become even a more stark problem in the marketplace. You shouldn’t be denied a job
because of a mistake on your credit report. Also, you shouldn’t be denied a job because
your credit score might be low, because you paid your bills late, because you were laid
off, because Wall Street wrecked the economy. And why do I say that? Well, because the credit
bureaus themselves have testified in state legislatures that there is no correlation
between a credit report and how good a job somebody will do. Now, the Federal Trade Commission has also
looked at another problem, which is that there is kind of a bottom feeder group of companies
that try to avoid being regulated under the Act, employment check companies that use credit
reports and credit report-like information to make decisions about people to prescreen
them against getting jobs, but I think it’s important that the CFPB continue to investigate
the accuracy of credit reports and the use of credit reports for job purposes. Again,
credit bureaus are no longer simply gatekeepers for financial opportunity. They are gatekeepers
for employment opportunity, and it needs to be better regulated. Great. Stuart? So, first of all, I agree with Ed that the
law in 1970 did permit the use of credit reports for employment, so I suppose that’s the point
of agreement we’ll work on here. And I would also agree that credit reports
should be used fairly, correctly, and within the scope of the law. So I think we have absolute
agreement on that as well. So just a couple of quick thoughts. The Society
for Human Resources Management reached out to their community of human resources professionals
and asked them the question how and when do you use credit reports, and they came back
and made very clear, they used them in a very select, very limited areas of employment.
So in other words, while sometimes folks look at the macro number and they say, “Wow! Look
at all the companies that are using the credit report,” they are really using it in very
select purposes for very select job categorizations. A good example in the data industry would
be those folks who work in the data center. Those folks who have access to sensitive personal
information, those folks who could walk out with a hard drive with sensitive personal
information and commit identity theft are folks who generally might be subjected to
a more robust review of their background credentials, which might include a credit report. However, we pulled out members who are background
screening companies, and they on average provide a credit report in only 5 percent of all of
the product they issue in the marketplace, which I think is indicative of the limited
use and the careful use. Also, Society for Human Resources Management
confirms that 80 percent of their respondents to their survey indicated that they certainly
are hiring individuals where a credit report shows financial distress. So I think the real
question is making sure there’s a difference between, and I think Ed is right. There is
a difference between financial distress that resulted from, for example, the financial
crisis and patterns of behavior which might be more indicative of an individual who may
be less reliable than somebody else. I think they are being used responsibly. We want them
to be used responsibly, and if there’s more dialogue around this, we would welcome that
opportunity to have that dialogue. Well, thank you for that. I wanted to bring in one of the CAB members
into the conversation, just to kind of get a feel for what we are seeing on the ground.
Gary, I know you had some thoughts on this. I want to see if you can join in the conversation. Sure, Jose. Well, one of the things that I
think is important for maybe the public to understand and I think everybody in general
is that there is a difference between credit reports and credit scores, and that those
services are provided by two separate companies, generally. While I think the number that was
expressed by the Director of 200 million people having credit reports, a large percentage
of those folks don’t have credit scores. So not having a credit score is equivalent to
really not having a credit report from the perspective of creditors and perhaps even
employers or some of the other folks that are using these services. So I think one of the challenges that we see
in the marketplace right now is perhaps a lack of competition. There are only a handful
of providers on the credit scoring space, and credit scores are embedded in AUS systems
and have a profound effect on people’s ability to acquire mortgages and other services like
that. And I think that one of the things that the
Bureau has articulated earlier was a desire to stimulate competition in the marketplace
and innovation, and I think this is definitely a space where we can benefit from that. Great. Thank you for that. Dory, I know you have some experience in this
matter as well. What are you seeing on the ground? Thank you, Jose. I want to emphasize what Ed mentioned. I think
it’s extremely important that people understand that there is no research documenting a legitimate
connection between credit histories and credit scores and ability to do specific jobs. This
is not a proper use of credit histories and credit scores, and the last time I heard,
about 60 percent of employers were using these credit scores and credit histories in making
hiring decisions, and I think Stuart really underemphasized the extent to which this happens. And given the high levels of unemployment
that we have�in the Chicago region, it is above the national average, and we know in
communities of color that levels of unemployment are even higher. Use of credit histories and
scores to screen out people who desperately need jobs is really a huge problem and exacerbating
the existing income and wealth gap. So we’re very concerned about this, and even though
states like Illinois have passed laws that restrict the use of credit histories for this
purpose to extent, there are a lot of loopholes in the law, and really, we’d rather see something
at the federal level that really drastically restricts the use of credit histories for
this purpose. Thank you. Thank you. Thanks. I am going to jump in on one of the
disputes that was raised a little bit earlier. As Director Cordray mentioned, consumers don’t
have the opportunity to vote with their feet in this area. Stuart, you mentioned that consumers are part
of the ecosystem of how this whole industry works, and yet, Ed, you reaffirmed that consumers
have no choice here. I wonder if each of you could comment a little bit on how the consumer
experience in credit reporting has changed or improved, and what more can be done to
improve that experience today? Stuart, why don’t you start. Actually, I am going to go through some thoughts
again that, Director Cordray, you spoke to in your opening speech, and thank you, by
the way, for acknowledging some of the work that’s been done. One of the most important things we can do
in this dialogue and be on the borders of this dialogue is decide how can we get more
consumers connected with their credit reports. How can we get more consumers to come to annualcreditreport.com
and get the free report that they are entitled to under law? And the reason I say that is because, of course,
more eyeballs on the data ensures that that data is just right, and that’s elementally
important for credit reporting. It’s important for each of us as consumers. It ensures that
a report that is going to be used in an employment context, lawfully, appropriately, correctly,
responsibly, that it works that way. So for us, for example, we have, as Director
Cordray mentioned�we have streamlined the language of annualcreditreport.com. That was
an important step forward, and it wasn’t done in the silo of just company folks reviewing
some language and making some adjustments. We went to several major universities in the
United States. We had laboratory tests with consumers of various ages, urban-centered,
rural, to make sure that the new design was effective in terms of how consumers would
be able to exercise their right, because we want them to come to that website and then
be effective in using it. We have also, as Director Cordray mentioned�we
have put much, much more information, financial literacy-focused information on the website.
And by the way, Director Cordray, I agree with you. One of the best things about the
website is the fact that it links consistently back to the CFPB site, so that consumers can
get access to the information that is informed by your thinking at the CFPB. By the way, one of the interesting statistics,
whereas maybe 12 percent of consumers were looking at information on the website, we
now know that 25 percent of consumers�of the 21 million consumers who have come to
the website since it was upgraded, we know that 25 percent are looking at financial literacy
information, and we think that’s a good success story, and it’s a good starting point. Finally, we ran a PSA campaign, Financial
Credit Report Literacy Campaign, this past year. We reached 167 million readers. We know
that we have more work to do in that regard. That was a pilot test for us to get some idea
of how we might reach consumers and whether we were effective. We are sponsoring a symposium later this year
with the Credit Builders Alliance, a consumer advocacy group that actually is involved in
ensuring that small-dollar loans, urban-centered loans are being reported to credit bureaus
to thicken up credit bureau files, to make sure more consumers have a credit report that’s
scorable. And we are going to ask those urban-centered lenders more about what are the impediments
to various communities in terms of getting access to credit reports. So this is part
of the beginning of a dialogue. We are encouraged by that, but we think we have a better baseline
to work from, and we think there’s more to be done. Ed, why don’t you take a shot at this. Well, thank you, Meredith. The original 1970
Act required the credit bureaus to have reasonable procedures for maximum possible accuracy of
credit reports. They simply do not, but as the Internet grew and as the ability to market
to consumers grew, they started selling products to consumers because of their fallacies. They
said, “Your credit score could be bad. You better buy our credit score monitoring service.
You could be a victim of identity theft. Buy this service.” Instead of improving their
services, they started selling consumers products that they shouldn’t have to pay for that should
be part of the work that the credit bureaus do anyway. There are a lot of reasons for this. Until
the CFPB, which has supervisory authority, the ability to look under the hood of the
credit bureaus, which the FTC never had, the CFPB has rulemaking and other tools on its
behalf. That is going to make a big difference going forward, but I think the consumer experience
is that the credit bureaus don’t answer the phone, and they don’t help them. They simply
encourage them to buy overpriced products that don’t stop identity theft and don’t improve
their credit score, and then when a consumer attorney, a top gun consumer attorney like
Len Bennett tries to help someone who has a problem, the credit bureaus hide behind
a firewall in Chile, and they say that Len Bennett cannot get the information he needs
because it belongs to some corporate affiliate in Chile. Len can tell more about that story
if he wants to. Thank you. I want to get to some of our CAB
members, but before I do so, given what you’ve talked about, it’s hard not to turn to Brian
Hughes and ask him to talk a little bit about the experience Discover has had with providing
monthly credit scores, making them available to consumers, and how what you have learned
about how to draw consumers’ attention to that, so they will actually check their score
and use it to monitor their own situation. Thank you. It has been a good experience providing
the free credit scores. Just an overview, really quick, what we did
was put the credit score on page 1 of the statement, so every Discover customer can
see their credit score. They don’t have to go somewhere to hunt it down. It’s right there.
There is a simple graphic next to it. It tells you if you are above or below the average,
and it comes every month, right? So it’s easy and it’s convenient. We have information on our website that explains
how the score is calculated, and then for every customer, it gives the specific couple
of reasons as to why their credit score is what it is and what they can do to make it
better, and that information is right on the website. It’s specific to the customer. And then we direct them to annualcreditreport.com
if they want to get a free copy of their credit report. So we’ve seen very positive reaction,
a lot of positive commentary from our customers calling in, going on social media. We’ve had
600,000 visits to the website portion that explains more about the credit score, and
we have directed 30,000 customers to annualcreditreport.com, where they have been able to click through
on that link. So I think what we have seen from it is if
we make credit information easier, more convenient, and more understandable, that we can get consumers
to want to learn more about their credit and engagement in improving it. Great. Thank you. I am going to bring this
discussion up to our CAB members a bit. Steve Carlson, do you have thoughts on this topic? Sure. I think over the last years, there’s
been a pretty significant change in the consumer experience, at least on the up-front angle,
and things that Discover are doing, obviously. But if I took it back just a few years ago,
if I was a consumer, I had just a couple options. Option number one was I could go to annualcreditreport.com,
but I would have to remember to go in once every 4 months, because I think you could
pull from each of the three bureaus, spread that out and then that way I am getting my
free access to monitor what’s going on. And that’s just very difficult and painful. The other option you had is you would go and
you would buy your report one time, and maybe it’s be $30 or $35, or you would enroll in
a subscription service, which would be $15 a month to be monitoring and having access. Fast forward. You have the programs that Discover
is doing now. You also have a couple other programs that have launched that are really
easy for the consumer. Credit Sesame, Credit Karma, which I believe is partly owned by
TransUnion or there’s a relationship there, these are services that in the case of Credit
Karma, about 20 million customers are enrolled in today. They give you access, in the case
of Credit Karma, to TransUnion, so just one bureau report, but they monitor it for you.
It’s very easy. You get a push notification on your phone. I don’t work for them, by the
way, but you do get a push notification on your phone if anything is changing and on
a monthly basis on your score. But they also help you understand what impacts your score
in a very easy, simple way. I think where the breakdown still occurs,
at least from what I’ve seen, is on the dispute resolution side. So it is getting easier to
know what your score is. It is getting much easier to have that monitored for you, so
you really don’t have to do a lot of work, but what happens if you do have a dispute
resolution? I haven’t seen as much innovation in that aspect. Thank you. I also wanted to give Patty a chance to comment
about this question about how we can get consumers to look at their credit score and use it to
benefit their financial position. And I do concur. I think there are a lot of
great things happening in the marketplace that will allow consumers to get their score,
but a simple solution would be to put it on the tax return, right? We all have to pay
our taxes. So if there was a box that you could check that would take you right to annualcreditreport.com,
I think that’s the best service there is, of even better yet, if they defaulted you
into it that you’re paying your taxes, right, at that point, you would get our free annualcreditreport.com.
That way, we could ensure that everyone in America who is paying their taxes would get
their annualcreditreport.com. It might even be an incentive to pay your taxes. [Laughter.] There you go. Well, I think from our perspective,
I think there is really no question that consumers really understand the impact of credit scores.
I mean, it really just takes one denial, somebody saying, “No, you can’t do this,” “No, you
can’t get that apartment,” “No, you can’t get that loan to buy that car,” “No, you can’t
get the job,” for them to understand that the credit report is such an important document. So I think from my perspective, the question
is about how can we get them to access and also to engage more in improving their credit
history. So there is the question about the consumer themselves. I wanted to kind of bring
up the question, kind of following Brian’s comments about or your experiences in providing
the score to consumers. What sort of behavior or what sort of interventions, additional
interventions can we provide, so that more people can actually obtain copies of the credit
reports? I actually wanted to start this discussion
by bringing Jonathan into this question. Where are you, Jonathan? I can’t really see you.
Oh, there you are. I know you have done a lot of work around this field, and I want
to see if you can sort just give some of your thoughts from a behavioral standpoint, what
sort of ideas or suggestions can you bring to the table about how to get more people
to access credit scores. Yeah. So if I were to accept the objective
that we want to get more people with their eyeballs on their credit reports, I would
think about the intersection of teachable moments and easy-on ramps, because we’re not
selling beer or smartphones here. We are trying to get people to undertake an unpleasant task,
and so that gets us thinking, certainly gets us thinking about tax time, because for most
of Americans, that’s the closest thing to an annual financial checkup that they have. So I would think�Patty’s ideas are interesting,
but I would also think about partnerships with the tax preparation industry, since many
people get their taxes prepared for them, and many people might be more likely to undertake
this unpleasant task if they had a bit of hand-holding through it, perhaps with their
tax preparer. So I would think about that. I would also think about piggybacking off
of direct marketing that’s done by lenders, either in direct partnership with lenders
and their direct marketing and messaging or by capturing or replicating some of the intelligence
that exists out there in the industry about when people are likely to be shopping for
loans, and consequently, when the value prop of getting a better handle on your credit
report and credit score might actually resonate with people. Having said that, I also think it’s important
to step back and question where this objective fits in with the bigger picture. There are
many, many things that we might wish or think that consumers would benefit from paying more
attention to. We happen to be talking about credit reporting today, but if we were to
reframe the question of, all right, we’ve got 10 minutes of tax time and we want to
get consumers to do one thing that will improve their financial condition, do we really think
that the highest return on investment from that 10 minutes is getting more knee-deep
into credit reporting? Maybe. Maybe not. Maybe that 10 minutes is better spent encouraging
consumers to make a plan to pay down some expensive debt. So I do think it’s important
to not just solve for this problem, but also figure out sort of where this problem fits
within the overall big picture of how we might plan to tax consumer bandwidth in terms of
trying to help encourage folks to get their house in order. Well, I must say you beer. So
maybe there is something we can connect credit scores with beer. Stuart, you had a thought about how to bring
the beer industry into this? Yeah. Just as we’re thinking�well, I’m always
having to talk about beer, but my children don’t think my job is very exciting because
I don’t represent the Beer Institute, which to them would be a much more exciting association
to work for. So in this case, I think just a couple of
thoughts about scores, big picture. First of all, we have a competitive credit scoring
industry in this country, and I think, Gary, to your point, we want to encourage competition
in scoring and in credit reporting and the types of data that can be brought forward,
giving more consumers access to traditional markets, and there’s a lot of work that’s
being done. I realize that’s not central to the topic today. But I would say that we must
preserve that competitive market. If Discover chooses to disclose a particular company’s
brand, we think other companies, other banks should be able to choose the partner that
they think is most important for them. For example, VantageScore sponsors a survey
along with the Consumer Federation of America to help inform our thinking about consumers’
knowledge of scores. We think it’s important for that competitive market to be part of
the mix of this and for the CFPB, by the way, to continue to help educate consumers that
there is no one score. There is no one place to go to find the single answer, that score
disclosure is educational. That it really is key to make sure that the right information
goes along with the score, and that ultimately, consumers are pointed back to getting a report,
so that they can see the underlying data, which will cut across a whole series of different
scores. But we think that a competitive marketplace
is important. Director Cordray, in your outreach to banks, it is not entirely clear that they
understand exactly what they are supposed to do, so perhaps some more dialogue around
that would be helpful, but we think that excellent providers in the marketplace should be given
that same chance to compete, if you will, in terms of that bank marketplace where they
make decisions about what they might disclose in a voluntary initiative such as putting
a score on a billing statement, so . . . I do. I think that the assumption that is
being made is that we have a single uniform commodity, and the question is how do we put
that uniform commodity in front. And Stuart, I think makes my point for me; that is, if
you have limited consumer bandwidth and you are trying to focus on we want them to have
information. We have got one shot at getting it in front of them. You want it to be the
score that everybody uses. You want it to be the credit report that matches what discover
has. One of the reasons I am very pleased with
the CFPB from the consumers I represent has received the cooperation of companies like
Discover is that’s the real score. Discover doesn’t determine whether to lower your limit
based on the VantageScore, which is a product created and not used by anyone of the institutional
creditors by the credit reporting agencies. The credit monitoring services are an issue
too; Credit Karma, with all due respect. There are lots of credit monitoring products. The
difficulty that I have with annualcreditreport.com is that�the interface is fantastic and has
improved, but then you leave Annual Credit Report, and you are diverted to the credit
reporting agencies, where they try to get you to make an online dispute, which it is
unquestionable that there is zero human being involved at the reporting agencies if you
make your dispute online. It’s the worst of the dispute options. They will try to market
you scores and other products. On top of the distraction that you have from annualcreditreport.com
is the pirate commercials and various other products that Stuart’s client Experian sells
at freecreditreport.com. All of the reporting agencies have their own credit monitoring
service. I will say that if there are some�myfico.com�we
strongly recommend our clients to use My FICO to avoid the arbitration limitations or the
use of VantageScore, but I do think the question is not simply how do you get information in
front, because the assumption there is that you have an empty room, and you want to introduce
information into the room. The more accurate analogy is you have a loud, boisterous room
with lots of people screaming information at you, and how do you make the accurate score,
like Discover is doing, or the correct dispute system or the correct annualcreditreport.com
louder than all of this marketing noise? The credit reporting agencies just a couple
years ago, the number has likely grown. A quarter of the income from Stuart’s clients,
the Big Three, comes from these direct-to-consumer products. They are making their money that
way. They are making money through e-OSCAR. It’s a for-profit company that charges furnishers
when Discover has to do a dispute, and so the concept of everybody wants the same thing,
everybody wants to have the same score and the same report in front of consumers, I think
is a mistaken assumption when you have this really loud room with everybody screaming. Corey, you wanted to make a comment here. I just want to provide a little bit of a clarification
around the Director’s letter and respond to both Len and Stuart’s comment about the score. The letter specifically talks about the lender
providing a score on which it relies. There’s no inference that there is one score that
the lenders rely on, and we know many companies in the credit card industry and other industries
are developing internal customer scores all the time. The point is a score on which they
would rely would be helpful for that particular relationship between that particular creditor
and the consumer, and the hope is that it’s educational enough to point the consumer to
their credit report to identify what are the underlying ingredients that caused the score
to be what it was and enough content, so that when the consumer saw the score, they would
understand relatively in the spectrum of scores that they could have what their standing is
and how that particular creditor views them. The Bureau is not making any statement about
the relative merits or predictiveness of one score over another, and certainly, the intent
here is to preserve, as Stuart was saying, a competitive market in scores. I just wanted
to add that. Great. A lot of issues have been raised so
far, and I wanted to dig deeper on one of them. We’ve talked a little bit about some
of the innovations, particularly with disclosure of the credit scores. One of the things Steve
Carlson mentioned was the absence of innovation with respect to credit disputes, and so I
wanted to dig a little bit deeper on that. The Bureau, as the Director mentioned, released
a snapshot of the consumer complaints that we have received. Many of these relate to
the handling of disputes, and so I wanted to talk a little bit about what can be done
to improve the consumer experience resolving credit disputes and what can close the information
loop between credit furnishers, consumers, and the credit reporting agencies. I’m sure several of you will have views on
this. I thought I might start with Stuart and then perhaps Len, and maybe we’ll come
back to Steve, since you raised the issue, and see if you have any follow-up thoughts. So a couple of things. First of all, twice
last year and again�this just refers back to Director Cordray’s comments. Twice last
year, our members undertook voluntary programs to adjust how e-OSCAR operates. It’s absolutely
right. We started with mail. We image that mail, and then that mail is now sent directly
to the lender, so the lender can see what its customer is saying about some data that
is the subject of the dispute. And then by the end of the year, I believe in December,
in discussion with the CFPB, they launched the online version as well. And so, by the way, I think the online ability
to upload consumer information enriches an online dispute, and it may address perhaps
some of the concerns that were raised initially about sort of the extensiveness of an online
dispute. Many consumers are going to operate online. I think that’s just the facts. So
what we have to do is make sure that the online dispute mechanism works well, not just simply
to say somehow there must be a different mechanism in place. But those two innovations are in
the pilot test. They’re real. They’re alive. It’s happening every day, but the real question
is, ultimately, we have to learn about how do creditors respond to that information,
how orderly is the information that consumers provide. Sometimes it’s very thick and dense,
and we’ve heard from some lenders that that density is a complexity that they are now
having to learn to work with. So we’re midstream in really a pilot test which is live for the
entire nation, but that is an important pilot test and one that our members supported, and
we’re happy to be where we are. So we see that as really one of the fundamentals in
all of this, is this information exchange. Also, the Fair Credit Reporting Act in 2003
did address this question of exactly where should you go to be able to provide a dispute.
So the FCRA gives me two choices as a consumer. I can go to the credit bureau, and I can submit
my dispute through them to my lender, or I also have a right to go directly to my lender.
And candidly, I’ve talked with many card issuers who say we want to hear from our customers.
The first thing we want to do is keep that customer. It’s expensive to go get customers.
We would like to resolve that issue quickly, and if we’re the data furnisher and it’s an
issue about our data, we’re happy to hear from our customer to resolve that issue and
to then report that information back to the bureau, to the credit bureau. And in this
case, by the way, we also provide an automated system for the furnisher not to wait until
the next reporting cycle but to immediately be able to transmit to us and update to the
account information in the credit bureau, so it is updated on a timely basis and well
before, for example, the next 30-day billing cycle. So those are just some of the ways
that we have used technology as well as people as well as law, I think, to address some of
the issues in dispute resolution. Too much to say, literally whole chapters
in a treatise and whole conferences of weeks end. You can imagine how exciting that would
be to attend, right? Their dispute system�and if you understand
the way that the Fair Credit Reporting Act began, until 1997, there was not a responsibility
of the furnishers. In my world, not where there’s a courtroom�and I can’t speak as
directly to the judge�the case law is very well established, and the phrase that’s used
is that the grave responsibility of a consumer reporting agency has to consist of something
other than parroting what the furnisher tells it. There has been�and without exaggeration�there
has been an entire abandonment of any responsibility on the part of the consumer reporting agencies
to do the investigation. All the discussion, with all due respect, Director, in your speech
and the efforts with e-OSCAR are all supporting the shift of this responsibility entirely
to the furnishers. Now, it’s a big improvement. For a long time, the furnishers�when the
furnishers were trained on how you do a dispute, they’d go to a CDIA conference. The furnishers�CDIA
has a program that they sell, very active, with some of the major debt buyers, called
“automated batch interface,” sold through e-OSCAR company, the for-profit entity that
had a spinoff from CDIA because it made too much money. e-OSCAR sells automated batch
interface. That system is a computer interface that is very widely used in which the credit
reporting agency computer�this is how a dispute happens. The credit reporting agency
disputer communicates to the furnisher computer. The furnisher computer has no human being
involved, and the automated batch interface sends these dispute forms, called “ACDVs,”
to the computer, and there’s this regurgitation back and forth. If you want an in-person dispute, let’s take
Bank of America. You have your identity stolen with Bank of America. You make a dispute to
Bank of America, and you do not do online, because if you do online, no human being is
involved. I just completed the deposition of two of the people that run the dispute
system for Experian. No human being is involved if you make an online dispute, which is one
of the big problems with the way the annualcreditreport.com referral to the CRA websites. But if you make
a dispute and you write a letter to TransUnion, TransUnion scans the letter and sends it to
an outsource company, Intellinet in Mumbai, India, where the single job of this person
in Mumbai, India, is to choose the code, make sure the documents are forwarded, and send
an electronic code, which is usually two digits, and there’s about six codes that are most
commonly used, not like his/hers. “This isn’t my account. Here’s a copy of all my documents.” That has been sent to Bank of America or Sallie
Mae or any of the other companies that use Mumbai, India. They have their own folks that
handle the same, and the single job there, even despite the furnisher regulations that
occurred, is to match up and make sure that the credit reporting data matches the data
that is in the computer already. There is�and we will see how the changes with the furnisher
bulletin and other efforts the CFPB is making have an effect, and respectfully, I haven’t
had many Discover experiences, Discover or American Express, but the effect of those
regulations or efforts not yet incurred, the furnisher side of the dispute has this idea
that the credit reporting investigation is not the�that’s not the time to determine
the accuracy or correctness of information. The debt collectors believe that time occurs
when you make a direct Fair Debt Collection Practices Act dispute. The mortgage companies
believe that time is when you make a qualified written request under RESPA. That time for
a credit card company is when you have a fair credit billing act dispute, all the direct
disputes, and consumers should make direct disputes. But there is also this very substantial
right and worse. Everything we were telling consumers through the FTC, through the CFPB,
is tell consumers how to make disputes to the credit reporting agencies. All of that
is sending consumers into this automated system where neither at the credit reporting agency
or at the furnisher level, there is a meaningful dispute. And that is how you have a seven-attorney
law firm that does nothing but represent consumers who have credit reporting disputes. My closing argument�and I’ve tried more
of these to juries. The record was not mine, but an $18 million verdict against Equifax
recently. You shouldn’t have to go into a wood-paneled courtroom to hire a gray-suited
lawyer to get your credit report fixed, but if my mom came to me and said, “I need a credit
report fixed,” and other than trying to find Corey Stone’s e-mail and help that way, the
only thing I could do is to say, “You have to sue.” That is unfortunately, unfortunately
for all but plaintiff’s lawyers, the current state of affairs, and it’s the state of affairs
notwithstanding the government relations that I see for the thousands of consumer disputes
for�we have through discovery, all of the CFPB disputes that were sent to one of the
credit reporting agencies, not just simply database. The hard copy. We represent now
hundreds of those people, and there is no means currently set up for a substantive dispute
for most of the disputes that come in through the credit reporting agencies. I’m seeing Stuart look like he wants to say
something, so . . . That would be a shock, wouldn’t it? So one thought that has nothing to do with
Len’s views, but which I think for the Consumer Advisory Board, it’s important, just one of
the steps that the CFPB can take and state AGs and the Federal Trade Commission is to
address fraudulent credit repair. It’s not something we really talked about here today,
but when a credit repair agency says, “I’m going to promise to delete all kinds of accurate
information”�or even sometimes now�I’m using my air quotes here�unverifiable information,
this is really wrong. They are generally prohibitive from taking money up front, some of them do
anyway. They are hard to find, because they move from state to state fairly quickly, but
they are taking money from consumers who can ill-afford it, but they are also clogging
the system with disputes. And one of their strategies is to dispute the balance and then
15 days later to dispute a payment history and then 15 days later to dispute the merits
of the account overall, and eventually, a community bank says, “You know what, I’m just
done with this. I can’t continue to report this information,” and that’s harmful to a
consumer, because, by the way, it’s not just the address information which was accurate
that gets deleted. Quite often, it’s the whole account that gets deleted, which thins up
a credit report, which means it’s not as scorable, and certainly, consumers aren’t getting credit
for the fact that they have been paying a loan on time and effectively over long periods
of time. So I would just urge the CFPB to continue to think about that. That is a system.
It clogs our system. It clogs the creditor’s system, because we have to pass that on to
the creditor as well. Just a reminder about e-OSCAR. e-OSCAR wasn’t
developed just because business wanted to be efficient. e-OSCAR was developed because
in the oversight hearings�and I’m old enough to remember this going back to 1988�the
issue on the table was why can’t disputes be resolved more quickly, and why can’t disputes
be resolved once between multiple credit bureaus in a competitive credit bureau market. So
the e-OSCAR system was designed with creditors, with nationwide credit bureaus, to create
a faster system, and so as opposed to waiting 30 days or 40 days or whatever law would have
permitted, we now on average are able to resolve a dispute in 15. Now, Len paints a horrible picture of automation,
but if the automation question is “I don’t like the balance on my credit card billing,
and here’s a document that I think supports that,” we have a system today that allows
the consumer to upload the document. We have a system that allows our credit bureau to
then transmit the fact of that dispute to the lender, and the lender has a system to
go look at the balance and make a determination as to whether or not they want to update the
balance, which, by the way, often they will So automation isn’t always the enemy of people,
and speed and precision are definitely not the enemy of people. So the question is to
ensure the system is both quick, but it’s also precise, and this is simply where I would
disagree with sort of the broad paintbrush statements that all of this speed is just
inevitably leading to lots and lots of bad results. We have polled consumers to ask them
about the results of reinvestigations in various studies, and we received 95 percent at high
satisfaction with a result, not with the experience of, by the way, looking at a credit report
but just the results, you know, what did I get, did I agree with what I got. Now, that’s the 5 percent we still want to
focus on. Maybe that’s the 5 percent we’re sometimes talking about here today. Maybe
that’s part of the 5 percent that ends up at the CFPB. Interestingly enough, with the complaint data,
we’ve done a couple of deep dives into the complaint data, and some of our members are
keeping track of how often did the complaint from the CFPB ever show up as a dispute prior
to the�so we know some consumers are disputing�they’re submitting their dispute through the CFPB,
like an e-OSCAR system, to the creditor. In fact, we know about 25 percent of the time,
at least some of our members are tracking data, and about 25 percent of the time, the
consumer submits a complaint about our member at the same time that they submit the dispute
to the bureau, or there’s no previous dispute submitted to the bureau, or the consumer submits
a complaint about the bureau during the 30-day period that our member is trying to resolve
the dispute with the creditor. So that doesn’t mean that system is broken.
We want to learn from complaints. There’s things to learn from complaints, but when
you get into the details, details matter. This is a much more complex dialogue; hence,
the reason for a sophisticated Consumer Advisory Board to think through these things, and to
inform not just the thinking of CFPB staff but really to inform our thinking as industry
as well, so . . . So I think what you’ve both described is a
situation where perhaps there’s issues with some of the complaints that are coming in,
but there’s also complaints about serious disputes that may be getting lost in the mix. Steve, I don’t know if you want to comment.
You had introduced this topic earlier about need for innovation. So we will give you an
opportunity to weigh in on sort of how do we get to innovations that solve these problems. So I am not an expert on the dispute resolution
side. I would say that my key point was, I think, access to the score and the monitoring
of the report itself has improved over the last few years, but what you don’t see is
that on the dispute resolution side if you are a consumer. Stuart, you mentioned quick and precise, right,
obviously? But I think there’s also easy access to the process itself and transparency around
the process and what’s actually going on. We’ve had a lot of discussion as a group about
how do you test into these things and drive them forward, so it sounds like there is a
pilot underway right now that may be leading towards something along those lines, but I
think until you actually take it to a consumer being able to see the report, seeing something
that’s wrong on that report, being able to very quickly and seamlessly then dispute what’s
on that report, I think it’s broken, and it’s disjointed. Thank you. I wanted to touch a little bit�I mean, those
issues about the sort of access and transparency are important ones that affect how a consumer
actually behaves in this area, and I’m curious�Len, maybe you could talk a little bit to this�about
the hassle factors or the behavioral aspects for consumers when they are dealing with a
credit reporting system. I have strong opinions, if you hadn’t picked
that out by now. I would think combining the two tirades that
I had, the two�the biggest difficulty, the consumer who comes to us usually has been
through other efforts. They have disputed a number of times. We don’t charge any consumer
for this, but a real challenge�and I do this; my office does nothing but�is actually
getting a copy of the normal credit report, the credit report that the creditor uses. And so this had been under FACTA an unsuccessful
effort on the part of the consumer movement to try to get the Federal Trade Commission
to support when you have a credit denial or an adverse action or come up with some means
for the consumer to see the actual credit report that’s used, because that’s gold. The most distressing circumstances, if you
have somebody who is declared deceased or if you have a circumstance where somebody’s
identity is mixed up, which occurs because the credit reporting agencies will match on
nine Social Security digits, those people aren’t deceased, they then ask for their report.
The credit reporting agencies say, “I’m sorry. You can’t have your report. You don’t exist.
You’re deceased.” Somebody who comes in and says �I represented�I
represent a lot of individuals who have mixed files, where they both come in to me. So I’m
mixed up with Joe, and I’m mixed up with Betty. And the consumer can’t get a copy of their
report, because when the consumer says, “My Social Security number is 123-45-6789,” the
credit reporting agency may have mixed it up, and its computer will�just imagine.
This, unlike the other stuff, I’ve never seen, but I imagine smoke coming out, because it’s
matched it, and so the consumer can’t actually see the report on which they’re mixed. Teresa Davis was a case I had in which the
only way we got it was eventually a community bank, which I strongly support, a community
bank actually showed the report after a woman kept going back and disputing it three times.
The report she got that mixed with her mother was perfect. When a consumer asks for their
own report and the machine doesn’t smoke and they provide�they have to provide nine Social
Security digits. If they don’t, they can’t get their report. Whereas, if Discover asks
for it, though they likely do provide all nine digits, they don’t need them. They can
provide name. That’s enough. Last name, address would be enough for a bank. So when a consumer uses all nine, they get
a report that matches all nine, but if they had been mixed up with someone with seven
out of nine digits�and it’s a big deal, for example, with naturalized citizens. When
I was young, when many of us were young, we got our Social Security number when our parents
decided it was time. Nowadays, when my two children were born, it happens automatically,
but for naturalized citizens, they have to go and apply for the Social Security number.
So if you have Jose Rodriguez and Jose Rodriguez Jr. come in, real clients�Jose, sorry�that
their Social Security numbers will be one digit off, because they went in to apply together,
or�and it happens again and again and again, and so those individuals do not have access
to their own credit report. They can’t see it. They only see the sterilized nine-digit
match version, not the one that Discover gets that results in my client’s credit denial. On topic, one of the biggest things I think
that the CFPB should consider is reconsider, reevaluate, look under the hood for the supervisory
role to look at these matching rules and matching criteria. I’ve seen them. They’re under protective
orders. If anyone wants them, I can’t give them to them, but take a look at them, and
take a look at how restricted the consumer access requirements are versus the creditor
access for seeing the actual report that the creditor uses. Meredith, I just want to reinforce what Len
has said. If any of the members of the panel have not requested their reports, they should.
You’ve got to go through kind of a Spanish Inquisition to get your own report, and it’s
been filtered and sterilized. You’ve got to provide your name, your last name, your previous
name, your current address, your past address, your Social. You provide so many filters that
you get a sterilized report, the mixed file, identity theft-laden report is only provided
to the merchant who then denied you. And you don’t see that report. You see a different
report. When you get the notice of an adverse action and you say you have the right to get
a free credit report, you don’t see the same report. So we would like consumers to see
the same report that the creditor used. And getting back to , why doesn’t
that report include the score that creditor used? It’s great that Discover is providing
the real score. Why don’t all credit reports include the real score? I could go through the 20-year history of
how we got to where we are finally seeing some credit scores today, but we don’t have
time. And I think we actually ran out of time. So,
Ed, you are right on the mark there. I want to thank you for the very robust discussion.
I think we definitely have hit a lot of key points that we need to further discuss and
understand how the system works and governs a lot of these issues for us. Where is Zixta? I am trying to look for her.
Oh, there she is. Okay. So, Zixta, back to you. Thanks, Jose. At this time, I’d like the guest panelists
to rejoin the audience. It’s been a fascinating and complex discussion, but we’re not quite
done yet. It’s now time to hear from audience participants. An important part of how the
Bureau keeps informed about what’s happening to consumers is to hear directly from consumers,
from industry and community advocates, as well as others. And a number of you have signed
up to share comments and observations about the discussion that just unfolded. Each person
that signed up will have about 2 minutes to share their observations and comments and
points related to this discussion. What we hear from you is invaluable. It’s important
to the CFPB, so we please encourage you to observe the 2-minute limit. So why don’t we get started with our first
audience participant, and she is Becky Thiess, Americans for Financial Reform. Becky, someone
will bring you a microphone shortly. Did we lose Becky? I thank you so much for this discussion and
for allowing comments from the audience. I definitely thought this was a fascinating
conversation. I would like to thank the CFPB for taking action through supervision and
oversight to make this process more efficient for consumers and work better for the public.
I’d like to really highlight some of the points that Ed and Len made regarding issues that
consumers have. I think that access to correct information and the ability for consumers
to fix information on their reports that are wrong is huge, and it’s really important when
people’s jobs are on the line, especially. We still have a big jobs crisis, and this
is just another thing that’s holding people back, so thanks again. Thank you, Ms. Thiess. Next, we have Tom Feltner,
Consumer Federation of America. Thank you, Zixta. Tom Feltner, Consumer Federation
of America. I’d like to thank all the members of the CAB and the CFPB for organizing this
event today. My particular comment is around how credit
scores are used, and we’ve heard about the use of credit scores for employment checks.
The CFA research has also found that credit scores are widely used to help set auto insurance
prices, and so when we look at the incidences of errors�and the FTC found that about 10
million Americans have very serious errors on their credit reports�we recognize that
that has very real implications for consumer credit choice, for consumer credit pricing
and across a wide range of products as well as issues like auto insurance. So we encourage you to continue to work very
closely with the credit bureaus to make sure that error correction processes are in place
and that they are working effectively to make sure that consumers are getting the most fairly
priced credit that they qualify for as well as the best-priced auto insurance. Thank you. Thank you, Mr. Feltner. Next, we have Nessa
Feddis with the American Bankers Association. Yes. This is just sort of a question on the
credit score on the credit card. This is not a Q&A. It’s comments and observations,
please. Oh, okay. I guess the�oh, just comments.
Oh, gees. Don’t get to ask a question. I think one of the things the bankers�I’m
with the American Bankers Association, and I think everybody agrees that there should
be accuracy in credit reports. It’s not just good for consumers. From the lender’s perspective,
accuracy helps inform their decision, so they can make better decisions. I think one of the challenges on providing
the credit score in the statement is that there may be other ideas other than just the
Bureau’s endorsed solution and arguably endorsed vendor because of the nature of the credit
score market where you have one score maker who is dominant, but I think that there may
be other ideas out there that credit companies may wish to choose to help their customers
ensure that they understand their credit reports and credit scores. Thank you, Ms. Feddis. Zixta, I’ll just say the tenor of my discussions
with CEOs about this was there may be various approaches people will take. In general, what
we want is to have this information be made freely and regularly available to consumers.
The information may differ from one creditor to another that they choose to provide, that
there should be educational content with it. We’re not trying to dictate a particular solution,
and in fact, this is�at this point, it’s a voluntary exercise and nothing compulsory
about it, but it’s going to be better for them and for their customers. Ruth Susswein, Consumer Action. Hi. I’m Ruth Susswein. So I also want to thank
the Bureau for putting so much effort into this issue and also for requiring that documents
be forwarded to furnishers. We think that’s going to be really important. We look forward
to see what happens there. I’ll just focus on the dispute process for
a moment and just say that we think there needs to be very clear and shared accountability
and responsibility by both the creditors as well as the CRAs, and we also feel that there
should be a clear definition of reasonable investigation and clear duties spelled out
for reasonable investigations of disputes, because as we’ve heard already�and I won’t
reiterate�I will just confirm what Len and Ed have said. These cause the real problems
that were mentioned by them earlier today. Thank you. Thank you. Dwayne Carson, Center for American
Racial Equality. Thank you very much for the event today, the
information that you guys shared, and the conversation was great. My conversation is actually going to focus
on payday loans. I’m actually aware that the CFPB is in the process of regulating payday
loans and short-term consumer products. We are CARE feel that these products are essential
and vital to the minority community, and minorities really love these products. And if you take
away the payday loans and the short-term-product lending, you are actually sending a message
to the minority communities basically saying that they are not smart enough to make their
own financial decisions. So we at care are a personal freedom organization. We think
that if you give them the opportunity to make the decisions and leave it up to the families
and the individuals in the minority community, they best can make those decisions when it
comes to payday loans, because we also think that free market solutions is never a bad
thing. Thank you very much for your time, guys. Thank you, Mr. Carson. Ben Kahrl, Global Debt
Registry. Thank you for hosting this event and for permitting
this opportunity to speak. The CFPB is currently going through the process
of an Advanced Notice of Proposed Rulemaking on Fair Debt Collection Practices Act issues
and updating rules in conjunction with that Act. A lot of the discussion in that Act centers
around debt buying, and often these debts that are in dispute do get charged off and
get sold to entities that maybe the consumers had no interaction with. And I’d just urge
all the panelists to consider�and certainly the CFPB�how the debt buying experience
impacts the Fair Credit Reporting Act issues. And one of the issues that has come up in
that ANPR is whether the CFPB should encourage the use of centralized repositories that track
the ownership information when debts are sold in the secondary market, and the answer to
that question could perhaps solve some of these issues with regard to the FCRA in terms
of letting consumers know who owns their debt now and how to resolve disputes with that
particular entity. Thank you. Thank you. Fran Rosebush, Assets and Opportunity
Network. Hi. I’m here representing the Assets & Opportunity
Network, which is a group of over 1,400 organizations from around the country working on asset-building
strategies, and my comments are actually related to what the gentleman behind me just spoke
about and the debt collection industry and how it relates to the credit reporting disputes. From the network, we actually have three recommendations
that we have for regulating the debt collection industry. We’d be happy to take them for the record. And we will be submitting a letter tomorrow. And it kind of�it echoes what was talked
about earlier about tackling the credit disputes from the front end, and so the first recommendation
is around creditors to be prohibited from both referring debt to collections and selling
debt to third-party buyers when they lack full documentation, and that documentation
should travel with the debt. Second, creditors should also be required
to supply this documentation to consumer reporting agencies when reporting delinquent or defaulted
debt in order to support a more fair dispute system. And third, prevent collectors from circumventing
any applicable wage garnishment limits and require federally chartered banks to take
additional proactive measures to prevent improper seizures of debtor’s deposits. So thank you so much for this opportunity,
and we’re happy to be here and see this being talked about. Thank you. Scott Estrada, National Council
of La Raza. Hello. Thank you very much for putting this
discussion together. One of the things that I just wanted to highlight was the focus and
the need for developing an accurate and accessible credit dispute system that was brought up
by a lot of the panelists. While the access to the information on the
front end is essential, what consumers can do with that in terms of remedying incorrect
or fraudulent activity is just as important, and one of the common concerns that we have
from our national affiliates and their interactions with consumers is the inability for credit
dispute resolution, and that multiple requests over multiple months still amount to no action
or no correction of the data. And when you need that job or need that credit or need
that mortgage, you can’t wait years or multiple months for the credit bureau to finally address
that dispute. So we just want to highlight that, the importance of that, and the need
for that system. Thank you. Thank you. Pam Banks, Consumers Union. Thank you. Thank you very much for holding
the meeting today. It was indeed a pleasure to have the opportunity to discuss an issue
that is of extreme importance to us at Consumers Union. We applaud the CFPB’s focus on credit reporting,
and in recent months, we have collected over a thousand stories from consumers across the
nation documenting problems that they have had with their credit reports and even understanding
the system. Consumer Reports will issue a report on that, and we would be happy to share
it with the board. But also, we are delighted that the CFPB is
encouraging banks to offer consumers free credit scores, the scores that are actually
used in a lending decision. Hopefully, banks will do it across the board for all product
lines, which would be excellent, but I have to say that is part of the problem. More needs
to be done. We feel that all consumers, especially the un-bank or under-bank, should also get
a free credit score, and ideally, that score could be given when they get their free credit
report. And the score given should be a score that is relevant and used by lenders in the
marketplace. Thank you. Thank you, Ms. Banks, and we’d be happy to
take the report in support of the record for the public meeting. I want to thank everyone who took the time
to join us from their busy day today. I want to thank our CAB member and in particular
our guest panelists. It’s been a really terrific conversation. That concludes today’s public meeting of the
CAB, and I want everyone to have a great afternoon. Thank you. [Applause.]
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