Poll: Do you agree with the steps the CFPB is taking to ensure consumer protection?
- Yes (51%, 21 Votes)
- No (49%, 20 Votes)
Total Voters: 41
The Consumer Financial Protection Bureau (CFPB), an independent government watchdog instituted under the 2010 Dodd-Frank Act, announced they will begin supervising large credit reporting companies, effective September 30.
In the CFPB’s sights are big game like Experian Information Solutions Inc., Equifax Inc. and TransUnion, not to mention 27 other large credit reporting companies, which together comprise 94% of the market’s annual receipts.
There is substantial reason to implement such vast oversight. Big expenses such as education and home purchases are virtually impossible for the majority of consumers without fair access to credit. A good credit score is crucial to obtain a loan on good terms. Most large purchases traverse through the credit portal, so an error in a reported credit score can be disastrous, first for the consumer and then for the economy.
Enter the CFPB. They will be scrutinizing the nation’s largest credit reporting agencies to ensure consumers’ credit scores are reported accurately. The oversight is intended to prevent improper road blocks from arising on the path to prudent borrowing, and to help borrowers get the correct interest rate which truly reflects their aptitude to repay debt as agreed.
Further, the CFPB will be increasing public awareness by encouraging the public to periodically check on their credit scores and dispute errors. The umbrella goal is greater transparency in credit reporting.
The CFPB won’t just be making the rounds on big credit reporters though. Debt collectors, residential mortgage companies, payday lenders, private student lenders and other firms who analyze and resell credit data are in their crosshairs as well.
first tuesday take
A good credit report is the skeleton key to all facets of lending, and without reliable access to loans, the housing market suffers. For real estate, this is good news. With the CFPB’s feelers out, borrowers can obtain solid credit reports which have been subjected to close, objective analysis.
However, the CFPB’s measures, valiant as they are, don’t cut to the heart of the issue. The loan well isn’t dry; lenders have plenty of cash to go around, thanks to the Federal Reserve’s (the Fed’s) prolific money printing of late. In this new real estate paradigm, a borrower’s creditworthiness cannot be accurately measured by the abstract and purportedly all-encompassing FICO score. Nascent demand in the market will not be free to flourish until lenders change the approval process to include personal details to determine a borrower’s ability to repay their debts.
Considering the fact that FICO doesn’t seem to be going away anytime soon, work with your buyers to examine their credit scores before shopping for a loan, keeping an eye out for any issues that need to be corrected before the loan is originated. Get your buyers pre-approved (not just pre-qualified) for financing with multiple lenders to ensure they receive the most advantageous loan terms possible. The expertise and experience of good agent can be an even better asset than a high credit score.
Re: U.S. consumer agency to oversee big credit reporting firms from the Los Angeles Times