CFPB Defines Larger Participants” of the Consumer Reporting Market

On July 16, 2012, the Consumer Financial Protection Bureau (CFPB) issued a final rule granting it supervisory authority over leading credit reporting agencies. Those firms newly subject to the CFPB’s oversight include the big three consumer reporting agencies, Equifax, Experian, and TransUnion, as well as nonbank entities engaging in consumer reporting activities with more than $7 million in annual revenue. This is the first in a series of rules to be issued by the CFPB to define larger participants” of certain consumer markets for purposes of establishing the scope of the CFPB’s nonbank supervision program under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

Director Richard Cordray announced the issuance of this final rule at a credit reporting field hearing in Detroit, Michigan. Given the critically important role credit reporting agencies play in ensuring consumers’ financial stability, Director Cordray explained the need for federal supervision of a market that up to this point has been subject to limited regulation. According to various federal reports cited by the CFPB, each of the big three consumer reporting agencies is estimated to maintain credit files on more than 200 million customers. Approximately three billion consumer reports are issued every year, and 36 billion updates are made yearly to consumer files at consumer reporting agencies. In light of this activity, the CFPB believes that supervising this market will further its mission to ensure consumer access to fair, transparent, and competitive markets for financial products and services.

Among the more significant provisions, the final rule defines the consumer reporting market” to include the following entities: consumer reporting agencies selling consumer reports; consumer report resellers, which are typically those entities that purchase consumer information from agencies and then resell the reports to lenders and other users; analyzers of consumer reports and other account information, for example, those entities that develop and sell credit scoring services and products; and specialty consumer reporting agencies, such as those that focus on payday loans and checking accounts. The final rule establishes the following test to assess whether a nonbank covered person is a larger participant” of the credit reporting market: more than $7 million in annual receipts resulting from relevant consumer reporting activities. Covered persons meeting the test are accordingly subject to the CFPB’s supervision authority under the Dodd-Frank Act.

This final rule has an effective date of September 20, 2012. All affected entities are strongly encouraged to review their consumer reporting practices in light of the CFPB’s new supervisory authority.