June 6, 2012
The Watchdogs are on the Trail
Mistakes in credit reports cross political-party lines, but the new federal consumer protection agency assigned to regulate credit-reporting companies faces some significant hurdles in that task.
Chief among them is that a majority of Senate Republicans say the office has too much power.
They used that argument to reject President Barack Obama’s appointment of former Ohio Attorney General Richard Cordray to lead the Consumer Financial Protection Bureau.
Then, in a political maneuver that angered the Republicans further, Obama appointed Cordray on Jan. 4 during a congressional recess.Cordray says he intends to push forward soon with regulation of the credit-reporting agencies to address the thousands of consumer complaints highlighted in last week’s four-day Dispatch series, “Credit Scars,” but it’s unclear how quickly he will see results.
So a group of state attorneys general, led by Ohio’s Mike DeWine, are planning to attack the problems from another front. And such efforts by attorneys general on behalf of consumers in the past have led to significant changes.Attorneys general have a long and successful record of seeking justice for consumers: They won settlements against big tobacco in 1998, a big drug manufacturer in 2006 and, in a landmark $25 billion settlement, the country’s largest, with mortgage servicers earlier this year.
Ohio attorney generals serving during those times — Jim Petro (drugmaker) and Cordray and DeWine (both mortgage servicing) — all were on the front lines pushing for change.“You don’t want to hear that 50 attorneys general are on the line,” DeWine said. Such previous actions have produced results “because they’ve worked together.
You get people’s attention real quick.”Relief for consumers facing credit-report errors likely won’t happen quickly, but DeWine said he and other attorneys general are committed to solving the problem.
“It’s a shocking mess,” DeWine said. “We’re not going to let this die.
These agencies hide by responding to the attorneys general and nobody else.
”The Dispatch investigation found that when consumers sought help from an attorney general, their problems most times were resolved quickly. But when they tried to battle mistakes on their own, they had much less success.
“The ultimate club is the Fair Credit Reporting Act. The AGs have authority to file a lawsuit under that act.
That ultimately could happen,” DeWine said.The Consumer Data Industry Association, a Washington-based lobbying group, speaks on behalf of the three national credit-reporting agencies: Equifax, Experian and TransUnion. It did not respond to requests for comment. Previously, it said that the agencies do everything in their power to produce accurate credit reports and respond to consumers’ concerns.
But the agencies are facing scrutiny like never before.For Cordray, the way in which he was appointed “could lead to legal challenges of any CFPB actions,” Rep. Shelley Moore Capito, a West Virginia Republican, warned at a recent House Financial Services Committee hearing.
When Cordray appeared before the committee in March to brief members on the accomplishments of the young consumer-watchdog agency, he didn’t talk about plans to regulate the three national credit-reporting agencies. Rather, he spent hours defending the existence of the agency and vowing that he would not head off on a power trip that could damage the country’s fragile economy.
Before the hearing began, Capito and Texas Republican Jeb Hensarling each greeted Cordray with friendly smiles and small talk.
When the hearing began, they were among a long line of Republicans who offered blistering commentaries and veiled threats.
“You are either an unconstitutional appointee or an unlawful appointee … and you lack credibility,” said Hensarling, before adding that Cordray shouldn’t take his remarks personally.
Lost in the rhetoric are consumers who face financial hardships because their credit reports contain mistakes that they cannot correct. A yearlong Dispatch investigation found that the federal law that governs credit reporting is fraught with loopholes and obstacles that make correcting mistakes difficult, if not impossible.
The newspaper collected and analyzed nearly 30,000 consumer complaints filed with the Federal Trade Commission and attorneys general in 24 states that alleged violations of the Fair Credit Reporting Act by Equifax, Experian and TransUnion.
The complaints document the inability of consumers to correct errors that range from minor to financially devastating.
The newspaper’s investigation prompted a bipartisan call for investigations and reform. Rep. Steve Stivers, a Columbus Republican who sits on the Financial Services Committee, has said that fixing the credit-reporting system should be a priority and not a political issue.
Since the series was published last week, numerous consumers have contacted DeWine’s office either to file complaints or seek information about their credit-reporting history. Nearly 90 of them came when DeWine’s staff took calls during a WBNS-10TV news broadcast last week. The phone lines lit up for the full 90 minutes as consumers asked where they could receive free credit reports, or complained about possible identity theft and problems with their credit reports.
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