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Credit scores, bureaus & technology. Bankruptcty activity. Credit-related lawsuits, announcements and coverage of F a i r Isaac, E q u i f a x, E x p e r i a n, F I C O, V a n t a g e Score & T r a n s Union.

Credit Reporting Journal

Recent credit reporting regulatory action, policies and services

March 11, 2013

By AIMEE BROWN Mortgage Daily

Federal agencies are playing hardball as they work to clean up credit reporting agencies pitching fouls detrimental to consumers. While regulators pinch hit for consumers with recent enforcement activities, policies and findings, a few corporate fielders revealed a few credit report servicing hat tricks of their own.

Recently, several companies learned what dirty ball play would earn from the Consumer Financial Protection Bureau and other federal regulators.

According to its Oct. 1 press release, the CFPB and three other federal agencies hammered out an $85 million consumer refund to three American Express subsidiaries -- American Express Centurion Bank, American Express Travel Related Service Company Inc and American Express Bank FSB -- for illegal credit card practices. Approximately 250,000 affected customers were expected to receive their refund portion by Mar. 15, 2013.

"Several American Express companies violated consumer protection laws and those laws were violated at all stages of the game -- from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt," CFPB Director Richard Cordray said.

The agencies slid in an additional $27.5 million in civil penalties on the companies while also outlining corrective actions for illegal practices such as basing credit decisions on age, charging unlawful late fees and failing to provide credit bureaus with consumer dispute reports.

The Federal Trade Commission also went to bat for consumers allegedly charged an up-front fee for credit repair information software.

As part of their settlement agreement, Luebke Baker & Associates owner Kevin Luebke and other defendants paid over $11,000 to the FTC for violating its Telemarketing Sales Rule. The FTC's Sept. 28 media statement said this money allowed the FTC to mail 831 checks totaling $13.70 each to consumers charged the illegal advance fee for the Credit Solutions CD.

Besides power hitting money ball activity, the CFPB power hitter led the roster of federal regulators' policy-related activity.

In December, the CFPB announced its major league deal with the Department of Justice -- combining forces for fighting consumer credit discrimination. Both agencies pledged to coordinate fair lending enforcement and avoid executing duplicate legal efforts.

"The Department of Justice welcomes the new tools and resources the CFPB can bring to the fight against lending discrimination," Assistant Attorney General for the Civil Rights Division Thomas E. Perez said. "Cooperation between our two agencies promotes strong and effective civil rights enforcement, and today's agreement will further our ongoing collaborative efforts."

Also that month, a Federal Register CFPB notice walked the $11.50 maximum credit reporting agency fee for an extra copy of a consumer-ordered credit report into a Jan. 1 effective date. The fee remains unchanged since April 3, 2012.

In two final double plays, the CFPB issued a warning to specialty credit reporting agencies and started consumer credit reporting complaint acceptance.

A Nov. 29 CFPB statement said the U.S. had approximately 400 specialty credit reporting agencies, and these agencies had a legal obligation -- giving consumers efficient, easy avenues for requesting free annual credit reports and providing adequate staff or systems for processing consumer requests. In addition, specialty agencies must provide and publish a toll-free number an company websites and in every phone directory they appear.

Consumers have acquired individual, federal-level help with consumer credit reporting complaints. On Oct. 22, the CFPB added consumer credit reporting agency grievances to its existing credit card complaint processing duties. To protect important consumer rights, the CFPB recommends filing credit report disputes with the agency first. After a complaint filing, consumers can contact the CFPB if dissatisfied with the resolution or if the credit reporting agency never responds. Example issues for CFPB-level support include incorrect credit report information or use, inaccessibility to copies of credit score or file and credit monitoring or identity protection services problems.

Two federal agency studies uncovered potentially game-changing credit reporting agency, consumer and credit report statistics that form the ball field for federal laws and regulatory compliance enforcement.

The FTC's recent credit reporting industry study revealed five percent of consumers had credit report errors potentially resulting in higher cost loans. According to the Feb. 11 statement, the FTC encouraged study participants to resolve potential errors through the Fair Credit Reporting Act process. As a result, one in five consumers disputing an error had it corrected on at least one report by a CRA.

"These are eye-opening numbers for American consumers," FTC Bureau of Economics Director Howard Shelanski said. "The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don't, they are potentially putting their pocketbooks at risk."

In similar news, the CFPB released its report on the big three credit bureaus -- Equifax, Experian and TransUnion -- and their consumer information management processes. In Cordray's Dec. 13 press comments, he said the report showed consumers' credit card history comprised more than half the information on credit reports, a few large companies provided most credit report information, credit cards weighed heavily in credit profiles, collection items totaled over one-third of consumer disputes and credit reporting agencies resolved approximately 15 percent of consumer disputed items in-house.

"As a data-driven agency, we believe in informational reports like this," Cordray said. "Today's report establishes a baseline knowledge about the industry as we embark on our regulatory and supervisory mission."

While this recent activity may leave companies feeling roughed up by federal regulators, three service providers did offer relief pitching aimed at beating the regulatory slump.

Cleveland, Ohio-based Credit Repair Resources and Silver Spring, Md.-based OriginationPro announced their partnership to pitch credit repair regulatory compliance and coach players in the mortgage and real estate leagues through training and marketing support. According to the Nov. 13-joint announcement, the companies will accomplish their goal through consumer and trade professional education centered around consumer rights and the credit repair process.

On Oct. 22, National Credit-reporting System Inc. broke out new report templates and data sorting features to its TRV Service products. The new features allow NCS clients to choose a report template and remove unnecessary tax return information requested when using the Internal Revenue Service's 4506-T form. Additionally, NCS users can highlight specific data fields, sort tax return information a number of ways and gather income verification information while realizing a 50 percent page number and printing cost reduction.

The FICO Mortgage Score, powered by CoreLogic, bested the traditionally used FICO credit score in a head-to-head examination by the CEB TowerGroup. CEB issued a CoreLogic-commissioned report titled Enhanced Credit Data and Scoring: Deeper Insight into Mortgage Applicants in Sept. The report examined results from a CoreLogic and FICO joint study analyzing predictive power of both scoring models. The study showed both scores assessed order and default risks well, but improved analytics for credit scoring would enhance risk assessment for mortgage loans. For instance, the FICO Mortgage Score, powered by CoreLogic, provided supplemental scoring analytics for consumer, loan and property information and increased the predictive risk assessment over a standard FICO Score.

"Extending credit to more consumers is top of mind for lenders and consumers," CoreLogic Senior Vice President of Product Management Tim Grace said. "Lenders want quantitative evidence of how supplemental credit data can improve their lending decisions. The CoreScore Solution addresses this need."

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