WASHINGTON, D.C. — The Consumer Financial Protection Bureau
took aim at the three major credit reporting agencies again this week.

This time, CFPB officials released a bulletin to nationwide
specialty consumer reporting agencies — primarily Experian, Equifax and TransUnion — for what they said was for "underscoring their obligation under the law to
provide a streamlined process for consumers to request a free annual consumer
report."

After reviewing a number of agencies' practices, the CFPB
issued warning letters to those that may be violating the law by failing to
provide consumers the required streamlined process for accessing their reports.

"Nationwide specialty consumer reporting agencies can have
great influence over a consumer's tenancy, insurance premiums, or even
employment," CFPB director Richard Cordray said.

"The CFPB is reminding these companies that they must follow
the law and provide consumers with easy access to their free annual report. If
we have reason to believe that companies are not following the law, we will
take action," Cordray continued.

The bureau noted nationwide specialty consumer reporting
agencies primarily collect and provide specific types of information on a
consumer's history, such as check-writing, medical payments, tenancy, employment
or insurance claims. They are included in the larger industry category of
consumer reporting agencies, which also includes credit reporting companies or
credit bureaus.

The CFPB acknowledged credit reporting businesses generally
assemble or evaluate a consumer's credit and other information then sell it to
third parties such dealers and lenders.

Officials believe there are roughly 400 consumer reporting
agencies in the U.S., with three companies dominating the market – Equifax,
Experian and TransUnion.

This week's actions aren't the first time the CFPB put
credit reporting companies in its crosshairs.

Back in July, Cordray told a gathering assembled for a
credit reporting field hearing how regulators might oversee how credit report
providers do business.

Cordray insisted at the event in Detroit, "credit reporting
plays a critical role in consumers' financial lives, a role that most people do
not recognize because it is usually not very visible to them. Credit reports on
a consumer's financial behavior can determine a consumer's eligibility for
credit cards, car loans, and home mortgage loans – and they often affect how
much a consumer is going to pay for that loan.

"If you have a credit record that appears to show a greater
risk that you will fail to repay a loan, then you may be denied credit and you
likely will be charged higher interest rates on any loan offered to you," he
continued.

"Because no federal agency has previously had the kind of
broad access to information about the operations of the credit reporting
companies that the bureau will now have, there is much we do not know yet about
the true risks that consumers face in this market," Cordray declared. "As we go
forward, we will be gathering data to determine how the various parts of the
Consumer Bureau can best act to protect consumers."

Cordray spelled out what the three areas of focus the CFPB
intends to take when it comes to credit reporting.

The bureau believes oversight of credit reporting companies will
help make sure that the information provided to them is itself reliable.

Cordray reiterated that lenders and others who furnish
information to the credit reporting companies are legally required to have
policies in place about the accuracy and integrity of the information they
report – which includes identifying consumers accurately, correctly recounting
their actual payment history and keeping their information and record keeping
in order.

"Otherwise, their sloppy work becomes the true source of
harm to the consumer's overall creditworthiness," Cordray said. "We want to
deepen our understanding of the record keeping and reporting practices by
lenders and we want to see what the credit reporting companies can be doing to
test and screen for the quality of information they receive.

Next, the CFPB noted that given the number of complaints it
already has heard from consumers, and the findings reached in some reports on
the subject, regulators want to know more about the accuracy of how credit
reporting companies assemble and maintain the information contained in consumer
credit reports.

"Accuracy is critical for consumers and for markets,"
Cordray said. "We recognize that achieving such accuracy takes a great deal of
discipline and effort, particularly for a company that is handling and
processing a huge volume of information. But because of the increasingly
significant role these reports are taking on in our financial lives, the
collateral consequences of mistakes can greatly harm consumers.

"The wrong information may cause them to be denied a loan,
to be charged a much higher interest rate, or to be passed over for a job,
causing them serious economic hardship," he added. "And inaccurate credit
reports also deprive lenders of essential information they need to assess
credit risk properly."

Furthermore, the CFPB pointed out that it's keenly
interested in understanding more about the problems and frustrations that
consumers say encounter in trying to resolve disputes about the information
contained in their credit reports.

"Some errors may be unavoidable even in the best of system,"
Cordray said. "But when consumers find what they perceive to be erroneous
information in their credit reports, they should not be burdened by
unreasonably laborious processes to get errors removed from their files.

"There are certainly valid reasons why a credit reporting
company must conduct a reasonable investigation when a consumer disputes
information, and follow the procedures outlined in the law," he went on to say.
"But the harm done by errors is borne above all by consumers, and they deserve
straightforward, effective, and timely mechanisms for addressing disputed
items."

This week, the CFPB reiterated consumers have a right to a
free annual report, technically known as a "file disclosure," not only from the
largest three credit bureaus, but also from nationwide specialty consumer
reporting agencies.

"Because many creditors make financial decisions and set
terms on the basis of information contained in these reports, accuracy is
critical," officials said again this week. "Under federal law, consumers have a
right to dispute the information in these reports and the underlying
information consumer reporting agencies have about them. The consumer reporting
agency must then investigate the dispute and correct any inaccuracies it
discovers."

The bulletin released this week emphasized that the Fair
Credit Reporting Act (FCRA), which the CFPB oversees, requires all nationwide
specialty consumer reporting agencies to provide an easy way for consumers to
get free access to their annual reports.

Companies must provide a toll-free number that is published
in every telephone directory in which a number for the company appears, and is
clearly and prominently posted on the company's website.

In addition, federal law requires the company to have clear
and easy instructions for consumers to get these reports, and adequate staff in
place or means to deal with consumers' requests.

The bulletin is available here.

Officials explained their newest actions stem from a CFPB
review of how nationwide specialty consumer reporting agencies are complying
with these requirements.

The CFPB looked at phone listings and websites for
nationwide specialty consumer reporting agencies across the country and also
attempted to request reports. The review identified several problems, such as
companies that are not listing toll-free numbers, and companies that have
toll-free numbers but do not make it easy for consumers to request reports.

The CFPB is sending warning letters to several companies
that advise recipients that they may be in violation of the law, and that they
should review their compliance with requirements to provide consumers
streamlined access to their free annual reports.

"A warning letter is not a determination of wrongdoing,"
officials said. "The CFPB has invited the companies receiving letters to advise
the bureau of the steps they have taken or will take to ensure compliance with
the law, or to explain why they believe these legal requirements do not apply
to them. The CFPB is committed to a fair and reasonable inquiry into these
matters."

An example of a warning letter from the CFPB to the
nationwide specialty consumer reporting companies can be found here.

Companies that the CFPB believes have violated the
requirement to provide consumers streamlined access to their reports could be
subject to enforcement actions.

Through its supervisory and enforcement functions, the bureau
said it will continue to monitor consumer reporting agencies to ensure
compliance with this obligation and other federal consumer financial laws.

In October, the CFPB began accepting individual complaints
about consumer reporting agencies.