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DETROIT — With a credit report being such a significant element
in the vehicle financing process, Consumer Financial Protection Bureau director
Richard Cordray told the gathering assembled for a credit reporting field hearing
how regulators might oversee how credit report providers do business.

Cordray insisted earlier today that, "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 at the Detroit Institute of Arts.

"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 — chiefly Experian, Equifax and TransUnion — 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 cautioned. "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 emphasized. "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 acknowledged. "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."

Before Cordray made his comments in Detroit, Experian
spokesman Gerry Tschopp told the Wall Street Journal, "Further careful study
will continue to confirm the high degree of accuracy achieved by
credit-reporting companies in a highly complex environment."

Tuschopp added "the industry has implemented effective
solutions for consumers to dispute what they identify as errors."

Equifax and TransUnion declined to comment in this report.

After giving the brief outline, Cordray informed the
gathering that today's proclamation is "just a start" of what the CFPB plans to
do in connection to credit reporting.

"These initial areas of concern – accuracy of the
information received by the credit reporting companies, their accuracy in
assembling and maintaining that information, and the processes that govern
error resolution – are just a start," Cordray insisted. "They are the obvious
and essential basics. But as we learn more about this market from consumers,
from the supervised firms, and from others, we will adapt and adjust.

"The Fair Credit Reporting Act sets out an ambitious goal:
Credit reporting companies ‘shall follow reasonable procedures to assure
maximum possible accuracy of the information' contained in credit report,"
Cordray continued. "In this context, we are here to correct what is not going
well, and we are here to see that this market is made to work better for those
who are affected the most. And we will exercise our supervisory authority to
make sure that the consumer financial laws are being followed.

"This country's credit reporting system is a resource in
which we all have a stake," Cordray went on to say. "That system must merit our
trust and confidence for the credit markets to be perceived as fair. We all
share in this responsibility. But the credit reporting market is not one where
consumers can shop around among different providers, for people have no choice
about whether to have any of the credit reporting companies keep track of their
credit history. That is why the Consumer Bureau's new authority is so
important, and why it must be exercised carefully and effectively.

As much burden as the CFPB appears to be putting on credit
reporting companies, Cordray closed his comments by pointing out the
responsibilities that fall on consumers.

"What consumers can do, however, is be smart about how they manage
their own credit," the director recommended. "They need to know how to build up
their creditworthiness, so that they can take control over their credit history
in a positive way. They also need to be aware that federal law gives them the
right to a free credit report from each of the nationwide credit reporting
companies.

"It is critical for each of us to exercise that right. Keep
in mind that nobody else has as much incentive to protect you as you have to
protect yourself," he concluded.

Cordray's entire speech at today's credit reporting field hearing
can be found here.