Many consumers believe that credit bureaus like Equifax, TransUnion, and Experian are somehow owned, managed or otherwise controlled by the federal government, but, in fact, they aren’t.
At a fundamental level, all credit bureaus operate as private, for-profit companies. While steps have been taken by the government to closely regulate credit bureaus — such as the creation of the Consumer Financial Protection Bureau or the Fair Credit Reporting Act — none of the bureaus are in any way government mandated. In reality, they are private businesses.
Credit bureaus are private businesses
The primary business model of credit bureaus is to collect consumer credit information and then sell it to businesses. Banks, credit card companies and other businesses that require financial screenings will purchase credit reports to determine risk. That is, the likelihood you will successfully manage a large expense or pay back a loan. In addition to account information, credit bureaus also pull bankruptcy, tax lien and other information available from public records to help businesses make informed decisions about a consumer’s credit.
Credit bureaus also work directly with consumers. The bureaus are tasked with responding to and resolving any credit disputes you may have due to mistakes or missing information on your credit report and offer access to credit scores. They place fraud alerts or credit freezes on your credit report in the event of fraudulent activity.
Like most for-profit companies, credit bureaus work independently of one another. However, some consumer account information may be shared among multiple credit bureaus due to the fact that businesses often have relationships with more than one credit bureau. This is why you can usually find your credit information available in a few different places.
Credit bureaus are subject to laws and regulation
The Fair Credit Reporting Act (FCRA) dates all the way back to 1970 in its original form, and exists to protect consumer rights when it comes to “accuracy, fairness, and privacy” of credit information. According to the FCRA, as a consumer, you have the right to:
- Be told if information in your credit report has been used against you
- Know what’s in your credit report
- Access your credit score
- Dispute incorrect or incomplete information
- Have incorrect or incomplete information resolved by the credit bureaus
- Have outdated, negative information withheld from your report
- Limit who can access your file
- Give consent to your report being given to employers
- Limit pre-screened credit and insurance offers sent to you
- Seek damages from violators
- Be given additional protections if you’re the victim of identity theft or are on active military duty.
States may have additional consumer reporting laws that extend beyond what the FCRA provides.
Fair credit laws are designed to protect the consumer side of credit reporting from any negligent actions or overreach by the credit reporting agencies. But, what regulates how bureaus conduct business?
In 2012, the Consumer Financial Protection Bureau (CFPB) began supervising the larger credit bureaus, specifically those which had more than $7 million in annual receipts (around 30 companies, or about 94 percent of the market) as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. What had previously been the domain of the bureaus to self-regulate and federal law enforcement to enforce now became the responsibility of the CFPB. The agency would oversee the industry — at least from the standpoint of the larger bureaus — as well as write the rules and enforce the laws.
In short, it’s now the job of the CFPB to:
- Review the compliance systems and procedures of the larger credit bureaus.
- Publish and deliver on-site examinations to the bureaus as part of their monitoring process.
- Seek relevant reports from the bureaus.
Because the CFPB supports the consumer side as well, they seek to educate consumers about how to monitor their credit, what to look for in their credit reports, how to dispute anything that’s incorrect and how to protect against identity theft and/or request fraud alerts if they are a victim of identity theft.
It’s easy to mistake “credit bureau” for a government entity
Even though we’ve established that credit bureaus are private businesses subject to laws and regulations as in other industries, where has the confusion developed in linking credit bureaus with government run entities?
One simple reason may lie with the terms “bureau” and “agency.” Both terms regularly apply to government entities. You’ve heard it all the time: the Environmental Protection Agency, the Bureau of Land Management, and so on. The CFPB itself uses the word “bureau” in their name and defines themselves as a government agency. So it’s easy to see how consumers mistake “credit bureau” or “credit reporting agency” as being part of the government.
On top of that, legislation and information coming out of the credit reporting industry are not often well understood by consumers. Without knowing who is who and responsible for what, consumers have to navigate a murky world in which their financial information could very well belong to, or be managed by, anyone — including the government.
It’s important to keep in mind that, in reality, your credit history and report are generated and maintained by for-profit businesses who make money from it. This is why it’s important that there are laws surrounding credit reporting: in order to prevent your credit from being hurt or misused. Also, to curtail potentially harmful practices by the bureaus against consumers, such as misrepresenting “free” credit scores, the fees charged to obtain scores and the type of information given to consumers.
Are you currently going through a credit bureau dispute, or do you have general concerns about your credit? Contact Lexington Law to learn how lawyers can address your credit concerns and help you repair your credit.