Commentary: Credit Reporting and Debt Collection: Huge Pitfalls for Consumers
By: Linda Cook, Senior Attorney, Ohio Poverty Law Center
Credit reporting agencies . . . need to be much more transparent, accountable and accessible for consumers.”
This week, the Columbus Dispatch ran a four-part series titled “Credit Scars,” exposing problems and telling the stories of consumers who have been harmed as a result of problems in the credit reporting industry. Gene King and I talked to Jill Riepenhoff, one of the investigative reporters, last fall when she was starting her investigation. We were glad to see Jill and her colleague take the story and run with it. Each piece of the investigative report emphasizes different aspects of the credit reporting industry and highlights the consumer nightmares that happen when things go wrong. To me, this stuff is scarier than the horror films I avoid because once I see them, I cannot get the horrific images out of my brain. It is scary because credit reporting agencies are poorly understood, barely regulated agencies lurking in the background of our lives, exercising influence over our economic health and wellbeing, using personal and private information in ways we as ordinary consumers have little or no control over.
Credit reporting agencies actually can have a positive function in the economy for both consumers and businesses. However, they need to be much more transparent, accountable and accessible for consumers. The system for correcting errors must be more user-friendly. In many ways, these agencies are set up like mortgage servicers – most of their resources are dedicated to collecting and reporting credit information to businesses, and very few of their resources are reserved for addressing consumer issues. So, the more problems are exposed, the better for all of us. As Justice Louis Brandeis said: “Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants . . . .”
Exposing problems with the credit reporting industry also exposes problems with its sister industry, debt collection. Parking ticket judgments on consumer credit reports is a highly effective collection tool, and has spawned an entire dubious for-profit industry dedicated to cleaning up credit reports and improving credit scores. All of these industries are in need of some strong disinfectant.
The Dispatch investigative series is one ray of sunshine; another is the attention that the Consumer Financial Protection Bureau is beginning to focus on the credit reporting and debt collection industries. The Bureau’s first step was to issue a proposed regulation defining “larger participants” in certain consumer financial product and service markets. The consumer reporting and debt collection markets fall into this category. Only larger market participants will fall under the supervisory authority of the CFPB, so the definition is a critical first step toward greater accountability and better protection for consumers.