Consumers have a new set of federal eyes to look over their finances.
Starting this fall, the Consumer Financial Protection Bureau (CFPB) will begin to watchdog 30 credit reporting companies, including Equifax, Solutions Inc., and Experian Information, which account for nearly 94 percent of the industry'sÂ annual receipts.
This should create some indigestion in the executive suite, as the credit honchos observe the $140 million in refunds the CFPB has ordered Capital One to shell out to consumers.
"Supervising this market will help ensure that it works properly for consumers, lenders and the wider economy said Richard Cordray, bureau director of CFPB. "There is much at stake in making sure it is both fair and effective."
Beginning Sept 30, 2012 CFPB will have the authority to write new rules for credit reporting agencies to follow under the Dodd-Frank and the Fair Credit Reporting Act, and have the power to conduct on-site audits at credit sites.
CFPB's says it will examine the agencies level of compliance with federal laws, while also looking for any holes in policy or practice that would be potentially harmful to the consumer.
The federal agency's monitoring will also be coupled with an educational component, as it plans to teach consumers about credit reporting laws and how to fully understand and utilize these laws to maximum benefit.
CFPB also will release a series of informational questions and answers that could potentially be helpful for those seeking an auto loan, home loan or other lines of credit.
According to a report released by CFPB, the U.S. has about 400 credit reporting agencies, which account for over $4 billion in yearly receipts. In addition, the three biggest consumer reporting agencies have credit files on over 200 million Americans, thus having a large say in theÂ credit and financial destiny ofÂ everyÂ consumer.
According to the Consumer Data Industry Association, 3 billion consumer reports are dispensedÂ and 36 billion updatesÂ are made to consumer's credit files.
The sheer influence that credit companies possess and the potential harm they can do if unsupervised, is what made CFPB initially announce its plans to monitor credit agencies back in February of 2012.
"Credit reporting is at the heart of our lending systems and enables many of us to get credit, afford a home or get an education," said Cordray. "Up to this point, no single federal government agency could access all the information necessary to generate a complete picture of what was happening inside these companies."
This new effort is an added piece of supervision from a 2003 amendment by Congress that allowed consumers to receive their credit reports from national agencies upon request, once a year.
Inattention and error
Cordray also explains that inattention and common error can harm the consumer's future in various ways, and this new type ofÂ policing will force credit agencies to be more mindful of itsÂ transactions, and be heldÂ more accountable whenÂ errors are made.
"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 said. And inaccurate credit reports also deprive lenders of essential information they need to assess credit risk properly."
Â Earlier this month the consumer protection agency created a website that allows credit card users to file and track complaints, whether it be a charge dispute, a complaint about aÂ creditÂ decision, or unfair interest rates.
The site will also grow to include complaints or questions about other types of loans whether personal, auto or student.
Creators of the site say having the ability for complaints to be seen and publicly known will better empower the consumer, as they can compare complaints and not feel isolated in their particular credit or financial challenge.
CFPB also says that most consumer issues and complaints should be remedied within 60 day's time.
Between the website and the watchdog group's new authority of supervision, CFPB believes consumers now have the proper tools to make better credit decisions, and have a safety net if they make a mistake or if they're wronged by a financial institution.
"Our country's credit system is a resource in which we all have much at stake," said Cordray. "Both directly and indirectly, and we need this system to operate effectively in order for the credit markets to work properly and fairly."