NY AG Settlement with Three Largest National Credit Reporting Agencies Promises Critical Reform to Credit Reporting Industry
On March 9, 2015, New York Attorney General Eric Schneiderman announced its settlement with the nation’s three largest national credit reporting agencies (“CRAs”): Experian, Equifax, and TransUnion. This announcement underscores the recent heightened state and federal regulatory scrutiny in this area, and likely is the first of a wave of broad consumer-facing reforms to the credit reporting industry.
The settlement terms will overhaul existing practices in the credit reporting industry that long has been criticized for its lack of transparency. Indeed, Consumer Financial Protection Bureau (“CFPB”) Director Richard Cordray described the credit reporting industry as a consumer “dead end” last month in a speech to the National Association of Attorneys General. The industry has been “something of a mystery” for decades due in large part to the lack of transparency in how credit report information is used to access consumers’ credit-worthiness. A recent CFPB study found that consumers are confused and frustrated about how to check credit reports and scores, what information these include, and how to improve them. As a result, consumers often do not feel empowered to take action to improve their credit histories, and they rarely apply credit information in their daily lives, such as using their credit reports and scores to negotiate better credit terms.
The settlement seeks to cure the myriad deficiencies that exist in this market. It requires the CRAs to institute the following national reforms over a three-year period:
- Improved Dispute Resolution Process
- Improved Processes Related to Medical Debt
- Provisions Related to the Free Annual Credit Report
- Furnisher Monitoring
The NY AG settlement’s robust measures may be the start of a wave of broad consumer-facing reforms. The CFPB recently announced it would be exercising, for the first time ever, supervisory authority over credit reporting companies. The CFPB further intends to establish clear and regular oversight by supervising the larger credit reporting companies as well as their largest furnishers. Now that the three largest credit reporting agencies have agreed to substantial reform, it is only a matter of time before their furnishers of consumer data follow suit. It is of vital importance for these companies to closely monitor the impending overhaul of current practices and seek prompt legal advice should CFPB initiate enforcement proceedings.
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