Democratic Senators Push CFPB to Reform Credit Reporting

Nov 22, 2021Federal Regulation, Financial Literacy, News

Last week, in a letter sent to CFPB Director Rohit Chopra, seven Democratic Senators urged the Consumer Financial Protection Bureau (CFPB) to take steps toward reforming the credit reporting industry. Specifically, they pushed Director Chopra to use the agency’s supervisory, enforcement, and rulemaking authority to improve credit report accuracy, hold credit reporting agencies accountable, and streamline the dispute resolution process.

“In an industry that affects all Americans so directly, even a small error rate means tens of millions of people can be denied jobs or housing through no fault of their own,” the senators wrote. “As a result of simple mistakes, consumers may pay more for credit or be denied loans altogether; they might face obstacles applying for a job, getting a mortgage, or renting an apartment. These impacts can persist for years, putting innocent people in positions that are nearly impossible to resolve.”

The Senators also noted that the credit report errors can intensify the racial wealth gap. Research from the CFPB found that consumers in mostly Black neighborhoods are twice as likely to have disputes on their credit reports than those in white neighborhoods in each category, including student loans, auto loans, and credit cards.

“We ask that you evaluate persistent errors in credit reporting and how CRAs consistently fail to resolve these errors, especially by failing to devote sufficient personnel and resources for dispute resolution—a shortcoming the CFPB could use its supervisory authority to remedy,” they wrote. “You should also consider creating an ombudsman position at the CFPB to facilitate the dispute resolution process and help ensure accuracy.”

A 2021 Consumer Reports survey found that more than 33 percent of the 6,000 participating consumers discovered at least one mistake in their credit reports. Consumers typically have to go through lengthy processes to correct credit reporting errors and to protect themselves from fraud.

The letter was signed by Senator Sherrod Brown (D-Ohio), Chairman of the Senate Banking, Housing, and Urban Affairs Committee, as well as Senators Brian Schatz (D-Hawai’i), Ron Wyden (D-Ore.), Elizabeth Warren (D-Mass.), Jack Reed (D-R.I.), Chris Van Hollen (D-Md.), and Ben Ray Luján (D-N.M.).

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