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welcome to the consumer financial protectionbureau's public meeting of its consumer advisory board, or the cab, as we like to call it,which is taking place at constitution center in washington, d.c. today's public meetingwill gather feedback about credit reporting and the consumer experience. my name is zixtamartinez. i am the associate director for external affairs at the cfpb. the cfpb's mission is to help consumer financemarkets work by making rules more effective, by consistently and fairly enforcing thoserules, and by empowering consumers to take more control over their economic lives. as many of you know, the dodd-frank wall streetreform and consumer protection act, which
created the cfpb, also provided for the establishmentof the cab. the cab is informed with the mission of providing advice and consultation withthe cfpb in the exercise of its functions, and they provide information on emerging practicesin the consumer financial products or services industry, including regional trends, concerns,and other information. today's public cab meeting is in support of that mission. let me just spend a few moments telling youabout what you can expect at today's public meeting. first, you will hear remarks fromthe cfpb's director, richard cordray, after which the cab's chair, jose quinonez, alongwith the cfpb's general counsel, meredith fuchs, will facilitate a discussion amongcab members and a panel of invited guest industry
and community experts, who will examine consumerexperience with credit reporting. they will highlight key credit reporting trends andidentify areas for improving the consumer experience with credit reporting and creditagencies. following the panel discussion, there willbe an opportunity to hear from audience participants. as a reminder, the views of the cab and theviews of the guest panelists are greatly appreciated; however, they do not represent the view ofthe cab�of the cfpb. sorry about that. today's public meeting is being livestreamedat consumerfinance.gov, and you can follow cfpb on twitter and facebook. so let's get started with an introductionof the cab members and cfpb staff. i would
invite cab members and staff to please raiseyour hand as i call out your name. the chair is jose quinonez. jose, will you raise yourhand? [laughter.] he is the executive director of mission assetfund in san francisco, california. the vice chair is bill bynum. bill is theceo of hope enterprise corp in jackson, mississippi. gary acosta. gary acosta is the ceo and co-founderof the national association of hispanic real estate professionals in san diego, california. jo ann barefoot. jo ann is a co-chair of treliantrisk advisors in washington, d.c. maeve brown. maeve is the executive directorof housing and economic rights advocates in
oakland, california. steve carlson. steve is the former head ofmarketing and business development at intuit.com, for mint.com, in mountain view, california. laura castro de cortes. laura is the presidentof latino banking solutions in omaha, nebraska. elizabeth costle. elizabeth is the directorfor consumer and state affairs at the aarp public policy institute in washington, d.c. prentiss cox. prentiss is an associate professorof law at the university of minnesota in minneapolis, minnesota. patty hasson. patty is the president of clarifiin philadelphia, pennsylvania.
patricia garcia duarte. patricia is the presidentand ceo of neighborhood housing services of phoenix in arizona. adam levitin. adam is a professor of law atgeorgetown law center in washington, d.c. james mccarthy. jim is the president and ceoof the miami valley fair housing center in dayton, ohio. william nelson. william is the associate directorfor military programs at the university of north georgia. dory rand. dory is the president of woodstockinstitute in chicago, illinois. the honorable annette rizzo. judge rizzo isa judge at the first judicial district of
pennsylvania in philadelphia. ellen seidman. ellen is a senior fellow atthe urban institute in washington, d.c. josh silverman. josh is president for u.s.consumer services at american express in new york. robert stoll. bob is the founder of stollberne llc in portland, oregon. jane thompson. jane is the ceo and founderof jane j. thompson financial services llc in chicago, illinois. and jonathan zinman. jonathan is a professorof economics at dartmouth college in hanover, new hampshire.
we also have with us delicia hand, cfpb staffdirector for the cab; meredith fuchs, general counsel for cfpb; corey stone, assistant directorfor credit and deposit markets. i think we got everyone. i am now pleased to introduce richard cordray.prior to his current role as the cfpb's director, he led the cfpb's enforcement office. beforethat, he served on the front lines of consumer protection as ohio's attorney general. inthis role, he recovered more than $2 billion for ohio's retirees, investors, and businessowners, and took major steps to help protect its consumers from fraudulent foreclosuresand financial predators. before serving as ag, he also served as an ohio state representative,ohio treasurer, and franklin county treasurer.
director cordray? thank you. thank you for joining us as wemeet with our consumer advisory board, whom you just met. we all look forward to our dialoguewith our cab members. it's been very valuable to us for them to share their perspective,their expertise, and their actual experience on the ground. we are all here because wecare deeply about how people are being treated in the consumer financial marketplace. i will be focusing today's remarks on oneparticular component of this marketplace, which is the credit reporting industry. everyconsumer who seeks to make use of credit to help manage his or her financial affairs isaffected by this industry. for whether they
are aware of it or not, people's ability toaccess credit and how much they pay for credit is typically governed by what is containedin their credit profiles. credit reports and scores can determine theterms of people's mortgages, whether they qualify for auto loans, or if they are eligiblefor different credit cards. a potential employer may look at a consumer's credit report asa factor in making a hiring decision, or a landlord may review it before deciding whetherto approve a potential renter. in short, credit reports and the scores derived from them playa fundamental role in determining whether and how each of us will be able to take advantageof the opportunities that credit provides to shape our futures.
most americans have a credit file. in fact,each of the three biggest credit reporting companies maintains files on over 200 millionconsumers. they compile consumer credit profiles based on information supplied by thousandsof providers known as "data furnishers." using information from the furnishers, credit reportingcompanies track people's payment records and other aspects of their credit history. thecompanies then use all of this data to compile scores that assess the risks lenders facewhen deciding whether to extend credit to a given consumer. consumers with high creditscores generally pose lower risk and therefore get approved for loans and on better terms. this financial scorekeeping exerts a tremendousand growing influence over consumers' lives.
the amount of data collected and exchangedin the credit reporting industry is astounding. each year, approximately 36 billion updatesare made to consumer credit files at the three largest credit reporting companies alone.assuring that such personal financial information is updated timely and accurately and thatit is maintained securely is a critical responsibility. when i addressed this group a year ago, iexpressed concern that the credit reporting industry is a market in which consumers canbecome largely incidental to a business relationship between others. that is because consumershave no real say in decisions made about their credit report in the first instance. whenconsumers cannot vote with their feet by choosing to take their business elsewhere, their influenceis inevitably limited. this can be very frustrating
to the consumers whose information is at stake,since this industry can have such a profound influence on their lives. indeed, we have heard from many people whoare at their wit's end. one woman said she was struggling to obtain copies of her creditreport and felt like she was at, quote, a dead end. consumers should never be made tofeel that way in the marketplace. our job at the consumer bureau is to stand on theirside and ensure that the industry deals with consumers in a fair and transparent manner.so let me begin by discussing the progress we are making to help ensure that people arebeing treated fairly in the credit reporting market. i will also touch on where we thinkmore could be done, and we look forward to
hearing your thoughts. too often, consumers feel like they are gettingthe runaround. if they cannot get the credit reporting companies to listen, they cannotget problems resolved. to enhance consumers' voice in this process, we began acceptingconsumer complaints on these issues in october 2012. since then, we have handled approximately31,000 credit reporting complaints. nearly three-quarters of these complaints have beenabout the accuracy and completeness of credit reports. consumers report that key information is wrongor missing from their report and that they have trouble getting errors corrected. maybea debt has been misreported or maybe some
of the consumer's personal information iswrong. we have even heard about credit reporting companies and data furnishers refusing tochange information that identifies consumers as deceased when, as the consumers themselvesare frustrated to attest, they are very much alive. other consumers complained about being unableto get a copy of their report or about having problems with how a credit reporting companyinvestigated a dispute. some reported that an investigation took too long or that theycould not get proper help over the phone. these are not minor matters for people. whenconsumers have unresolved problems with their credit reports, it can prevent them from qualifyingfor a job or can block them from securing
a rental home, a mortgage, or a car loan.in addition to these very tangible troubles, these problems generate significant frustrationand stress, and they reinforce a basic distrust in the market. when a consumer complaint is submitted tothe bureau, we forward it to the appropriate company and work to get a response from themon a relatively fast time frame. complaints are listed in our consumer complaint databasewhen the company responds to the complaint confirming a relationship with the consumeror after the company has had the complaint for 15 calendar days, whichever comes first.we make the database available to the public online so that anyone can see what complaintsare coming in and analyze that information.
today, we are releasing a snapshot of theconsumer credit reporting complaints that we have received. it shows that companiesare already responding to over 90 percent of complaints made about them. we are helpingconsumers to be heard and to get their issues addressed. another way we are seeking to make creditreporting fairer for consumers is by exercising our supervisory authority over the largercredit reporting companies and many of their largest furnishers. our examination teamsensure that they are complying with the consumer financial laws. we now oversee companies thataccount for about 90 percent of the annual receipts in this market.this oversight allows us to step behind the
curtain of these companies and their internalprocesses. we then can find specific pain points for consumers, identify problem areas,and work directly to improve their responsiveness to consumer problems. our supervisory authorityextends to the largest financial institutions and collections agencies, which provide amajority of the credit reporting companies' trade lines and collection items. we have also identified major process changesthat were needed. when consumers find a problem with their credit report that they want todispute and get corrected, they often send along copies of the relevant documents tosupport their claim. anyone would naturally assume that this information will be sharedbetween the credit reporting company and the
furnisher to respond appropriately in addressingthe dispute. this, however, was not how matters were being handled. the three largest nationwide credit reportingcompanies use an established system, which is known as "e-oscar," to communicate consumerdisputes to furnishers. in december of 2012, we reported that when credit reporting companiesforwarded disputes, they did not send attachments, such as account statements, supplied by consumers.instead, they simply reduced everything submitted by the consumer to a three-digit code andoccasionally a few words that described the dispute. without any of the crucial supportinginformation from the consumer, disputed claims were often denied because there was nothingto dictate any change in the outcome.
this is completely unacceptable. consumersare often in the best position to explain why a particular account or item in a fileis inaccurate. they should have a full chance to explain their disputes to furnishers, butthey lose this opportunity when the credit reporting companies do not forward consumer-supplieddocuments. last fall, we announced that the three majorcredit reporting companies had agreed to upgrade the e-oscar system to correct these problems.at first, they made the necessary changes so that they could send furnishers any relevantdocuments that consumers either mailed or faxed to them. obviously, that was only apartial fix, though an important step forward. but today, we are pleased to update you withfurther enhancements to the e-oscar system.
now consumers can upload documents wheneverthey file a credit dispute online, and furnishers will have direct access to those documents. these changes will make it easier and moreconvenient for consumers to support their claims. they will also make it more feasiblefor companies to investigate fully and address the actual details in context. the resultshould be more disputes being resolved correctly, leading to credit reports that more accuratelyreflect the current facts about consumers' credit histories. moreover, in september 2013, we put furnisherson notice that they are responsible for following the law by investigating consumer disputes,correcting inaccurate information, and sharing
the corrected information with the creditreporting companies. we expressly informed furnishers that they are to have reasonablesystems and technology in place to receive and process notices of disputes and informationabout disputes, including any relevant documentation that is forwarded to them by the credit reportingcompanies. when consumers know they have a better chanceof having their disputes resolved, they are likely to be more proactive in tackling problemswith their credit reports. we want to see even more of that. in order for consumersto know to dispute items in their credit reports, they need to be checking their reports regularlyenough to notice any mistakes. yet fewer than one in five americans check their credit reportsin any given year. we need to do more to see
that everyone understands the importance ofdoing so. consumers often learn the importance of their credit standing when it is too late,after a credit application is denied or after identity theft has had time to cause extensivedamage. sometimes they fail to see the importance of their credit standing even after it hasaffected them in a material way, such as being rejected for a job or charged a higher pricefor a loan. that is why we are focused on empowering consumersto take more control of their financial lives by providing consumers with information tohelp them know what to do when they encounter a problem or to avoid problems in the firstplace. in the area of credit reporting, we are working to make this information availableto consumers through multiple channels. ask
cfpb is our interactive online tool that helpsconsumers find unbiased, authoritative answers to their financial questions accessibly statedin plain language. two of the most viewed questions are "where can i get my credit score?"and "how do i dispute an error on my credit report?" we also offer a range of short, plain-languagepaper guides that can be downloaded and distributed for free and also can be ordered in bulk bynonprofit and government organizations. two of our most popular paper guides are "checkyour credit report" and "pay attention to your credit." we have designed these resourcesto help people take control of their money. nevertheless, we remain keenly aware thatinformation about credit standing needs to
be made more salient for consumers. so today, i am also pleased to announce theconsumer bureau's strong support for a major initiative in the credit card industry. thisinitiative will make credit scoring information more easily and regularly available to creditcard customers at no cost. recently, several issuers, including discover who is here withus today, have introduced programs that promise to expand dramatically the number of consumerswho are more routinely acquainted with their credit information. the programs provide customers,directly and at no cost, with the same credit scores these issuers obtain in their normalcourse of business, along with educational materials to help them understand the creditscore.
although credit scores provide just a partialpicture of one's finances, they could raise awareness of credit issues and prompt busyamericans to review their credit standing. if scores are lower than expected or if theychange over time, more consumers may take the initiative to request their credit reports.this will allow them to address concerns, dispute errors or fraud-related entries, andimprove negative aspects of their credit usage. so we consider this initiative to be a "bestpractice" in the industry. making this information available throughexisting channels, such as including credit scores with other online account informationand on monthly statements, is likely to yield positive returns that are worth the effort.customers who monitor and manage their credit
standing should, on average, be less likelyto become delinquent or to default, and given that more than two-thirds of americans haveat least one credit card, having their credit score made available through their creditcard issuer or through other creditor statements could broadly improve consumer well-being. with these purposes in mind, i recently sentletters and followed up with phone calls to the ceos of the nation's top credit card companiesstrongly encouraging them to consider making credit scores and educational content freelyavailable to their customers on a regular basis. i believe this initiative will benefitboth providers and consumers by making people more capable of protecting themselves, moreable to benefit by the opportunities that
credit can create, and ultimately more productivemembers of our economy. indeed, i see no reason why this approach should not be replicatedwith customers across other product lines as well, and some of the ceos indicated thatthey are moving in that direction. this is just one example of how we can findways to work together with financial providers to strengthen financial education effortsacross this country. similarly, recent upgrades have been made to annualcreditreport.com,which is the only website where consumers can get their free annual credit reports,as the law requires. we contributed to these upgrades, which have resulted in better educationalcontent for the millions of americans who visit that website each year. the upgradesinclude over 40 web links to helpful content
about credit reporting developed by the consumerbureau and the federal trade commission. with all of the examples i have discussedhere today, from e-oscar upgrades to financial education about credit standing, we can seethe prospect of significant improvements for consumers trying to navigate the complexitiesof the credit reporting market, but more needs to be done to prevent unnecessary frustrationand obstacles that consumers frequently encounter. we continue to observe problems with thosethat provide information to the credit reporting companies. some furnishers are taking shortcutsto avoid undertaking appropriate investigations of consumer disputes. for example, a consumermay find an error on the credit report and file a dispute about an incorrect debt ora credit card that was never opened. in response,
the furnisher may simply delete that accountfrom the information it passes along to the credit reporting company. this practice can be detrimental because itdeprives consumers of an important protection. not only do investigations determine the accuracyof a particular consumer's dispute, but they also help furnishers uncover and correct broaderproblems within the systems they use to provide information to the credit reporting companies.when a furnisher learns more about these types of problems, it benefits not only the consumerwho submitted the dispute but also all other similarly situated consumers who did not.a furnisher that does not actually investigate disputes is cutting corners and will haveless effective checks on the accuracy of its
information. in addition, without an investigation thatcorrectly resolves the dispute, consumers are left with less assurance that the inaccurateinformation will not reappear later on. they also may not get the intended benefit of havingthe credit reporting company notify those who have already received the report thatthe inaccurate information has been identified and corrected. so today, we are issuing a supervision bulletinputting furnishers on notice that taking a shortcut by simply deleting a line in a creditreport does not generally constitute a reasonable investigation of a consumer dispute that isenough to satisfy their obligations under
the law. we will continue to use our supervisory authorityto require responsible behavior in the credit reporting market, and we will also use ourenforcement authority where appropriate. we know that fixing just one error on a creditreport could save people thousands of dollars in the long run by increasing their creditscore and thereby helping them secure a mortgage or a credit card when they might otherwisehave been denied or charged a higher rate. for all of these reasons, we believe thatconsumers must have their voices heard. everyone deserves to be treated fairly. at the consumer bureau, we are dedicated tofostering a marketplace for financial products
and services where sensible practices benefitboth industry and consumers alike. as the american economy continues on its path torecovery, we need to have confidence that consumers enjoy the full benefits of creditreports that are accurate and reliable. consumers bear their own share of responsibility tomonitor and manage their credit standing. as we have discussed, however, there are somesteps that can be taken to put them in a better position to succeed in protecting themselves. when consumers do take the initiative to managetheir credit reports, they also deserve to have their disputes investigated in a meaningfulway and to have their reports corrected where that result is justified on the facts. inthe end, we can all agree that people who
apply for financial products should be evaluatedon the basis of their true credit history, reflecting how they have actually managedtheir financial affairs. but we can also appreciate that it is nota simple matter to accomplish this shared goal in a diverse and vibrant free-marketeconomy driven every day by the aggregate activity of more than 300 million americans.that makes the credit reporting industry a fitting topic for the expertise and experienceof our cab members, and we appreciate all of you joining us here today to engage inwhat i am sure will be a most robust conversation. thank you. [applause.]
thank you, director cordray. next, cab chair jose quinonez and cfpb generalcounsel meredith fuchs will lead a panel discussion about credit reporting and the consumer experience.i would ask our guest panelists to please take their seats. i have already introducedjose quinonez, so let me just share a few words about meredith fuchs. she joined thecfpb in january 2011 and currently serves as the bureau's general counsel. she previouslyserved as cfpb's chief of staff as well as principal deputy general counsel. she joinedthe cfpb from the u.s. house of representatives where she served as chief investigative councilto the committee on energy and commerce. jose and meredith, you have the floor.
thank you, zixta. welcome, everyone. you havejust heard from director cordray, and you have heard him speak about the importanceof accurate credit reporting and helping consumers out of the dead-end situations by making thecredit reporting market fairer through supervision and oversight. building on that foundation, cab chair quinonezand i are about to moderate a discussion about the evolution of the consumer experience withcredit reporting. we are going to highlight key trends in consumer complaints and identifyareas for improving the consumer's experience with credit reporting. this discussion isgoing to include comments from our invited guest panelists, who i am going to introducein a moment, and from members of our consumer
advisory board, as well as some cfpb staff. so let me begin by introducing our invitedguests. with us is�and maybe you could each just raise your hand, so folks know when iintroduce you�is ed mierzwinski, who is the consumer program director and senior fellowat the u.s. public interest research group. we have stuart pratt, who is the presidentand ceo of the consumer data industry association; leonard bennett, who is with consumer litigationassociates; brian hughes, who is the senior vice president of cardmember marketing atdiscover financial services; and in addition, we have corey stone, who is the assistantdirector for deposits, cash, collections, and reporting markets at cfpb.
jose, why don't you get us started today. well, thank you for that. i think we definitelywill have a robust conversation, so let's just get to it. i wanted to sort of just invite our guestpanelists to start us off with some introductory remarks, and let's start with stuart. well, chairman quinonez, members of the consumeradvisory board, and the staff of the cfpb, thanks for the invitation to join your dialoguetoday. it is an important dialogue. it is one that makes sense to us. cdia is a tradeassociation. we represent a large community of data companies that help american businessesmanage risk, and amongst those companies are
the three nationwide credit bureaus, whichare really the subject of today's discussion. credit reporting here in the united statesis still the premier system globally. nowhere else in the world do you have a system withsuch a large amount of data that is used for risk management. nowhere else in the worlddo we have more consumers who have the opportunity to access credit than here in the united states,and in fact, an indication of that is cdia will soon host a delegation from indonesia,where they will learn a little bit more about u.s. credit reporting systems, how they'rebuilt, why they are built the way that they are built, and how they can expand their ownconsumer economy. but today's conversation isn't about the macroeconomicsof credit reporting, but today's conversation
is about us as consumers. it's an importantconversation. some do suggest that our relationship is primarily a credit bureau relationshipwith lenders, but i would suggest that that is just not as true as it once was, and infact, it is fundamentally not the way cdia's members view the relationship they want tohave with consumers. we want a market-based relationship with consumers that's successful.there are products and services that connect consumers today with their credit reports,help them prevent identity theft, help them to monitor their credit reports. they getaccess to their credit scores, and these are tremendously successful products that contributeto credit report literacy and, broadly, financial literacy.
we also have a relationship that is establishedby law, and i think director cordray outlined some of the requirements under law, and ourmembers are committed to having that relationship work equally successfully. it is importantfor each one of us to have confidence when we call a credit bureau that the dispute willbe processed successfully, and it's a partnered relationship. credit reporting is really anecosystem, and i applaud the cfpb for their 2012 white paper on the ecosystem of nationwidecredit reporting. there are various parties in this conversation. there are credit bureaus.there are more than 10,000 data furnishers furnishing 3 billion updates a month intothis system. there are consumers, and we as consumers have opportunities to connect withcredit bureaus as well.
so we look forward to this dialogue. we'repleased to have it, and again, chairman quinonez, thanks for the invitation. we certainly appreciateit. thank you for that. so let's make the introductionsbrief, and then�so that way, we can have some time for the actual questions, so thatwe'll get to it. so just briefly introduce yourself. good morning. my name is brian hughes withdiscover, svp of cardmember marketing, and i'd also like to say thank you, chairman cordrayand members of the advisory board, for having me in today's discussion. it's an importanttopic to discover, to consumers, and to the financial industry. we are one of america'slargest issuers of credit cards, third largest
provider of private student loans, and homelines and personal loans as well, and the accuracy of consumer information is very importantfor us to satisfy the needs of regulators, consumers, and our shareholders. we work veryhard in that regard to make sure that the information we provide to the credit bureausis accurate and recently began providing the free fico scores to our cardmembers on a monthlybasis. this makes it easy and convenient for our cardholders to check their credit scoreon a monthly basis and then to seek more information if they need it, and we've seen a great responsefrom our consumers to this service, overwhelmingly positive, and i know our chairman david nelmswas very pleased, director cordray, at your outreach and your phone call and your letter,and we're very proud of this service.
so i look forward to this morning's discussionand to your questions. great. thank you. ed? thank you, jose, and i'll try to be brief,but the fair credit reporting act was enacted in 1970. i've been fighting the credit reportingwars since 1989. congress did pass major reforms in 1996 and then again in 2003, but i thinkthe most significant reform for consumers was the enactment of the dodd-frank act thatcreated the cfpb and gave it the tools needed to finally bring these powerful gatekeepersinto a controlled environment. so i'm looking forward to the discussion today. and i'll disagree with stuart on one point.he expects me to disagree on more than one
later on, and i will, but� consumer do not have the same relationshipwith credit bureaus that they do with other businesses. you can choose your bank or creditunion. you can choose where you buy a car. the credit bureaus sell information aboutyou, and you have no control over that. it's a different market, and it needs differentrules. thank you. good morning. i expect i will throughout thislook the most out of place and most uneasy. i am not a government relations person. self-described,although stuart wouldn't probably agree, but i would see myself as an emergency room physicianor a mash unit surgeon. the thousands of consumers who i have represented in my 16-some years,helping them in this unique field, when they
believe they are failed, they come to us.we are the ones that review the actual documents we receive from the credit reporting agenciesor the consumer complaints that come in through the cfpb. my firm does almost exclusively fair creditreporting litigation. we don't do credit repair. we don't charge consumers when we try to helpthem fix a dispute, and in that context later on, if i haven't worn out my welcome, i willsound more as a doomsayer. i don't believe that the system of dispute and investigationsfor consumers has improved. it's gotten markedly worse. with that said, i have had an opportunityto speak before congress several times, including
with facta on behalf of the national associationof consumer advocates. i'm on the board. i've spoken and worked with the federal trade commission,and i can say publicly i do not know of any instances in which in the history of thisstatute as dramatic improvement in consumer empowerment has occurred than under the cfpb'swatch. the changes that the director just suggested are not insubstantial. the changesto e-oscar discovers to be greatly commended for offering credit cards. these are not cosmeticfrom our side, from where we see it. these are very significant improvements, so thanksyou. thank you. appreciate you being here. well, let's get to it. i'm going to directthe first question to ed and stuart, just
to see if we can get some agreement here atsome point, and then i also want to be inviting some of the cab members to join in the conversation.so the first question is really about how have you seen credit reports being used inhiring for employment, and who should be ensuring the businesses that actually use the creditreports for hiring? how should be ensuring that they use the reports following the law?so ed and then stuart. thank you, jose. the original 1970 act said you could use creditreports for credit insurance, employment, or other legitimate business needs. in 1996,congress recognized that their use for employment was a pretty serious use in the tough jobmarket that we had in the 1990s, and so congress
gave applicants and employees greater consumerrights when their report was going to be used for a negative purpose. but since the 2008collapse of the economy and the many losses of jobs, i think their use for employmenthas become even a more stark problem in the marketplace. you shouldn't be denied a jobbecause of a mistake on your credit report. also, you shouldn't be denied a job becauseyour credit score might be low, because you paid your bills late, because you were laidoff, because wall street wrecked the economy. and why do i say that? well, because the creditbureaus themselves have testified in state legislatures that there is no correlationbetween a credit report and how good a job somebody will do.
now, the federal trade commission has alsolooked at another problem, which is that there is kind of a bottom feeder group of companiesthat try to avoid being regulated under the act, employment check companies that use creditreports and credit report-like information to make decisions about people to prescreenthem against getting jobs, but i think it's important that the cfpb continue to investigatethe accuracy of credit reports and the use of credit reports for job purposes. again,credit bureaus are no longer simply gatekeepers for financial opportunity. they are gatekeepersfor employment opportunity, and it needs to be better regulated. great. stuart?
so, first of all, i agree with ed that thelaw in 1970 did permit the use of credit reports for employment, so i suppose that's the pointof agreement we'll work on here. and i would also agree that credit reportsshould be used fairly, correctly, and within the scope of the law. so i think we have absoluteagreement on that as well. so just a couple of quick thoughts. the societyfor human resources management reached out to their community of human resources professionalsand asked them the question how and when do you use credit reports, and they came backand made very clear, they used them in a very select, very limited areas of employment.so in other words, while sometimes folks look at the macro number and they say, "wow! lookat all the companies that are using the credit
report," they are really using it in veryselect purposes for very select job categorizations. a good example in the data industry wouldbe those folks who work in the data center. those folks who have access to sensitive personalinformation, those folks who could walk out with a hard drive with sensitive personalinformation and commit identity theft are folks who generally might be subjected toa more robust review of their background credentials, which might include a credit report. however, we pulled out members who are backgroundscreening companies, and they on average provide a credit report in only 5 percent of all ofthe product they issue in the marketplace, which i think is indicative of the limiteduse and the careful use.
also, society for human resources managementconfirms that 80 percent of their respondents to their survey indicated that they certainlyare hiring individuals where a credit report shows financial distress. so i think the realquestion is making sure there's a difference between, and i think ed is right. there isa difference between financial distress that resulted from, for example, the financialcrisis and patterns of behavior which might be more indicative of an individual who maybe less reliable than somebody else. i think they are being used responsibly. we want themto be used responsibly, and if there's more dialogue around this, we would welcome thatopportunity to have that dialogue. well, thank you for that.
i wanted to bring in one of the cab membersinto the conversation, just to kind of get a feel for what we are seeing on the ground.gary, i know you had some thoughts on this. i want to see if you can join in the conversation. sure, jose. well, one of the things that ithink is important for maybe the public to understand and i think everybody in generalis that there is a difference between credit reports and credit scores, and that thoseservices are provided by two separate companies, generally. while i think the number that wasexpressed by the director of 200 million people having credit reports, a large percentageof those folks don't have credit scores. so not having a credit score is equivalent toreally not having a credit report from the
perspective of creditors and perhaps evenemployers or some of the other folks that are using these services. so i think one of the challenges that we seein the marketplace right now is perhaps a lack of competition. there are only a handfulof providers on the credit scoring space, and credit scores are embedded in aus systemsand have a profound effect on people's ability to acquire mortgages and other services likethat. and i think that one of the things that thebureau has articulated earlier was a desire to stimulate competition in the marketplaceand innovation, and i think this is definitely a space where we can benefit from that.
great. thank you for that. dory, i know you have some experience in thismatter as well. what are you seeing on the ground? i want to emphasize what ed mentioned. i thinkit's extremely important that people understand that there is no research documenting a legitimateconnection between credit histories and credit scores and ability to do specific jobs. thisis not a proper use of credit histories and credit scores, and the last time i heard,about 60 percent of employers were using these credit scores and credit histories in makinghiring decisions, and i think stuart really underemphasized the extent to which this happens.
and given the high levels of unemploymentthat we have�in the chicago region, it is above the national average, and we know incommunities of color that levels of unemployment are even higher. use of credit histories andscores to screen out people who desperately need jobs is really a huge problem and exacerbatingthe existing income and wealth gap. so we're very concerned about this, and even thoughstates like illinois have passed laws that restrict the use of credit histories for thispurpose to extent, there are a lot of loopholes in the law, and really, we'd rather see somethingat the federal level that really drastically restricts the use of credit histories forthis purpose. thank you. thanks. i am going to jump in on one of thedisputes that was raised a little bit earlier.
as director cordray mentioned, consumers don'thave the opportunity to vote with their feet in this area. stuart, you mentioned that consumers are partof the ecosystem of how this whole industry works, and yet, ed, you reaffirmed that consumershave no choice here. i wonder if each of you could comment a little bit on how the consumerexperience in credit reporting has changed or improved, and what more can be done toimprove that experience today? stuart, why don't you start. actually, i am going to go through some thoughtsagain that, director cordray, you spoke to in your opening speech, and thank you, bythe way, for acknowledging some of the work
that's been done. one of the most important things we can doin this dialogue and be on the borders of this dialogue is decide how can we get moreconsumers connected with their credit reports. how can we get more consumers to come to annualcreditreport.comand get the free report that they are entitled to under law? and the reason i say that is because, of course,more eyeballs on the data ensures that that data is just right, and that's elementallyimportant for credit reporting. it's important for each of us as consumers. it ensures thata report that is going to be used in an employment context, lawfully, appropriately, correctly,responsibly, that it works that way.
so for us, for example, we have, as directorcordray mentioned�we have streamlined the language of annualcreditreport.com. that wasan important step forward, and it wasn't done in the silo of just company folks reviewingsome language and making some adjustments. we went to several major universities in theunited states. we had laboratory tests with consumers of various ages, urban-centered,rural, to make sure that the new design was effective in terms of how consumers wouldbe able to exercise their right, because we want them to come to that website and thenbe effective in using it. we have also, as director cordray mentioned�wehave put much, much more information, financial literacy-focused information on the website.and by the way, director cordray, i agree
with you. one of the best things about thewebsite is the fact that it links consistently back to the cfpb site, so that consumers canget access to the information that is informed by your thinking at the cfpb. by the way, one of the interesting statistics,whereas maybe 12 percent of consumers were looking at information on the website, wenow know that 25 percent of consumers�of the 21 million consumers who have come tothe website since it was upgraded, we know that 25 percent are looking at financial literacyinformation, and we think that's a good success story, and it's a good starting point. finally, we ran a psa campaign, financialcredit report literacy campaign, this past
year. we reached 167 million readers. we knowthat we have more work to do in that regard. that was a pilot test for us to get some ideaof how we might reach consumers and whether we were effective. we are sponsoring a symposium later this yearwith the credit builders alliance, a consumer advocacy group that actually is involved inensuring that small-dollar loans, urban-centered loans are being reported to credit bureausto thicken up credit bureau files, to make sure more consumers have a credit report that'sscorable. and we are going to ask those urban-centered lenders more about what are the impedimentsto various communities in terms of getting access to credit reports. so this is partof the beginning of a dialogue. we are encouraged
by that, but we think we have a better baselineto work from, and we think there's more to be done. ed, why don't you take a shot at this. well, thank you, meredith. the original 1970act required the credit bureaus to have reasonable procedures for maximum possible accuracy ofcredit reports. they simply do not, but as the internet grew and as the ability to marketto consumers grew, they started selling products to consumers because of their fallacies. theysaid, "your credit score could be bad. you better buy our credit score monitoring service.you could be a victim of identity theft. buy this service." instead of improving theirservices, they started selling consumers products
that they shouldn't have to pay for that shouldbe part of the work that the credit bureaus do anyway. there are a lot of reasons for this. untilthe cfpb, which has supervisory authority, the ability to look under the hood of thecredit bureaus, which the ftc never had, the cfpb has rulemaking and other tools on itsbehalf. that is going to make a big difference going forward, but i think the consumer experienceis that the credit bureaus don't answer the phone, and they don't help them. they simplyencourage them to buy overpriced products that don't stop identity theft and don't improvetheir credit score, and then when a consumer attorney, a top gun consumer attorney likelen bennett tries to help someone who has
a problem, the credit bureaus hide behinda firewall in chile, and they say that len bennett cannot get the information he needsbecause it belongs to some corporate affiliate in chile. len can tell more about that storyif he wants to. thank you. i want to get to some of our cabmembers, but before i do so, given what you've talked about, it's hard not to turn to brianhughes and ask him to talk a little bit about the experience discover has had with providingmonthly credit scores, making them available to consumers, and how what you have learnedabout how to draw consumers' attention to that, so they will actually check their scoreand use it to monitor their own situation. thank you. it has been a good experience providingthe free credit scores.
just an overview, really quick, what we didwas put the credit score on page 1 of the statement, so every discover customer cansee their credit score. they don't have to go somewhere to hunt it down. it's right there.there is a simple graphic next to it. it tells you if you are above or below the average,and it comes every month, right? so it's easy and it's convenient. we have information on our website that explainshow the score is calculated, and then for every customer, it gives the specific coupleof reasons as to why their credit score is what it is and what they can do to make itbetter, and that information is right on the website. it's specific to the customer.
and then we direct them to annualcreditreport.comif they want to get a free copy of their credit report. so we've seen very positive reaction,a lot of positive commentary from our customers calling in, going on social media. we've had600,000 visits to the website portion that explains more about the credit score, andwe have directed 30,000 customers to annualcreditreport.com, where they have been able to click throughon that link. so i think what we have seen from it is ifwe make credit information easier, more convenient, and more understandable, that we can get consumersto want to learn more about their credit and engagement in improving it. great. thank you. i am going to bring thisdiscussion up to our cab members a bit. steve
carlson, do you have thoughts on this topic? sure. i think over the last years, there'sbeen a pretty significant change in the consumer experience, at least on the up-front angle,and things that discover are doing, obviously. but if i took it back just a few years ago,if i was a consumer, i had just a couple options. option number one was i could go to annualcreditreport.com,but i would have to remember to go in once every 4 months, because i think you couldpull from each of the three bureaus, spread that out and then that way i am getting myfree access to monitor what's going on. and that's just very difficult and painful. the other option you had is you would go andyou would buy your report one time, and maybe
it's be $30 or $35, or you would enroll ina subscription service, which would be $15 a month to be monitoring and having access. fast forward. you have the programs that discoveris doing now. you also have a couple other programs that have launched that are reallyeasy for the consumer. credit sesame, credit karma, which i believe is partly owned bytransunion or there's a relationship there, these are services that in the case of creditkarma, about 20 million customers are enrolled in today. they give you access, in the caseof credit karma, to transunion, so just one bureau report, but they monitor it for you.it's very easy. you get a push notification on your phone. i don't work for them, by theway, but you do get a push notification on
your phone if anything is changing and ona monthly basis on your score. but they also help you understand what impacts your scorein a very easy, simple way. i think where the breakdown still occurs,at least from what i've seen, is on the dispute resolution side. so it is getting easier toknow what your score is. it is getting much easier to have that monitored for you, soyou really don't have to do a lot of work, but what happens if you do have a disputeresolution? i haven't seen as much innovation in that aspect. i also wanted to give patty a chance to commentabout this question about how we can get consumers to look at their credit score and use it tobenefit their financial position.
and i do concur. i think there are a lot ofgreat things happening in the marketplace that will allow consumers to get their score,but a simple solution would be to put it on the tax return, right? we all have to payour taxes. so if there was a box that you could check that would take you right to annualcreditreport.com,i think that's the best service there is, of even better yet, if they defaulted youinto it that you're paying your taxes, right, at that point, you would get our free annualcreditreport.com.that way, we could ensure that everyone in america who is paying their taxes would gettheir annualcreditreport.com. it might even be an incentive to pay your taxes. there you go. well, i think from our perspective,i think there is really no question that consumers
really understand the impact of credit scores.i mean, it really just takes one denial, somebody saying, "no, you can't do this," "no, youcan't get that apartment," "no, you can't get that loan to buy that car," "no, you can'tget the job," for them to understand that the credit report is such an important document. so i think from my perspective, the questionis about how can we get them to access and also to engage more in improving their credithistory. so there is the question about the consumer themselves. i wanted to kind of bringup the question, kind of following brian's comments about or your experiences in providingthe score to consumers. what sort of behavior or what sort of interventions, additionalinterventions can we provide, so that more
people can actually obtain copies of the creditreports? i actually wanted to start this discussionby bringing jonathan into this question. where are you, jonathan? i can't really see you.oh, there you are. i know you have done a lot of work around this field, and i wantto see if you can sort just give some of your thoughts from a behavioral standpoint, whatsort of ideas or suggestions can you bring to the table about how to get more peopleto access credit scores. yeah. so if i were to accept the objectivethat we want to get more people with their eyeballs on their credit reports, i wouldthink about the intersection of teachable moments and easy-on ramps, because we're notselling beer or smartphones here. we are trying
to get people to undertake an unpleasant task,and so that gets us thinking, certainly gets us thinking about tax time, because for mostof americans, that's the closest thing to an annual financial checkup that they have. so i would think�patty's ideas are interesting,but i would also think about partnerships with the tax preparation industry, since manypeople get their taxes prepared for them, and many people might be more likely to undertakethis unpleasant task if they had a bit of hand-holding through it, perhaps with theirtax preparer. so i would think about that. i would also think about piggybacking offof direct marketing that's done by lenders, either in direct partnership with lendersand their direct marketing and messaging or
by capturing or replicating some of the intelligencethat exists out there in the industry about when people are likely to be shopping forloans, and consequently, when the value prop of getting a better handle on your creditreport and credit score might actually resonate with people. having said that, i also think it's importantto step back and question where this objective fits in with the bigger picture. there aremany, many things that we might wish or think that consumers would benefit from paying moreattention to. we happen to be talking about credit reporting today, but if we were toreframe the question of, all right, we've got 10 minutes of tax time and we want toget consumers to do one thing that will improve
their financial condition, do we really thinkthat the highest return on investment from that 10 minutes is getting more knee-deepinto credit reporting? maybe. maybe not. maybe that 10 minutes is better spent encouragingconsumers to make a plan to pay down some expensive debt. so i do think it's importantto not just solve for this problem, but also figure out sort of where this problem fitswithin the overall big picture of how we might plan to tax consumer bandwidth in terms oftrying to help encourage folks to get their house in order. well, i must say you [audio break] beer. somaybe there is something we can connect credit scores with beer.
stuart, you had a thought about how to bringthe beer industry into this? yeah. just as we're thinking�well, i'm alwayshaving to talk about beer, but my children don't think my job is very exciting becausei don't represent the beer institute, which to them would be a much more exciting associationto work for. so in this case, i think just a couple ofthoughts about scores, big picture. first of all, we have a competitive credit scoringindustry in this country, and i think, gary, to your point, we want to encourage competitionin scoring and in credit reporting and the types of data that can be brought forward,giving more consumers access to traditional markets, and there's a lot of work that'sbeing done. i realize that's not central to
the topic today. but i would say that we mustpreserve that competitive market. if discover chooses to disclose a particular company'sbrand, we think other companies, other banks should be able to choose the partner thatthey think is most important for them. for example, vantagescore sponsors a surveyalong with the consumer federation of america to help inform our thinking about consumers'knowledge of scores. we think it's important for that competitive market to be part ofthe mix of this and for the cfpb, by the way, to continue to help educate consumers thatthere is no one score. there is no one place to go to find the single answer, that scoredisclosure is educational. that it really is key to make sure that the right informationgoes along with the score, and that ultimately,
consumers are pointed back to getting a report,so that they can see the underlying data, which will cut across a whole series of differentscores. but we think that a competitive marketplaceis important. director cordray, in your outreach to banks, it is not entirely clear that theyunderstand exactly what they are supposed to do, so perhaps some more dialogue aroundthat would be helpful, but we think that excellent providers in the marketplace should be giventhat same chance to compete, if you will, in terms of that bank marketplace where theymake decisions about what they might disclose in a voluntary initiative such as puttinga score on a billing statement, so . . . i do. i think that the assumption that isbeing made is that we have a single uniform
commodity, and the question is how do we putthat uniform commodity in front. and stuart, i think makes my point for me; that is, ifyou have limited consumer bandwidth and you are trying to focus on we want them to haveinformation. we have got one shot at getting it in front of them. you want it to be thescore that everybody uses. you want it to be the credit report that matches what discoverhas. one of the reasons i am very pleased withthe cfpb from the consumers i represent has received the cooperation of companies likediscover is that's the real score. discover doesn't determine whether to lower your limitbased on the vantagescore, which is a product created and not used by anyone of the institutionalcreditors by the credit reporting agencies.
the credit monitoring services are an issuetoo; credit karma, with all due respect. there are lots of credit monitoring products. thedifficulty that i have with annualcreditreport.com is that�the interface is fantastic and hasimproved, but then you leave annual credit report, and you are diverted to the creditreporting agencies, where they try to get you to make an online dispute, which it isunquestionable that there is zero human being involved at the reporting agencies if youmake your dispute online. it's the worst of the dispute options. they will try to marketyou scores and other products. on top of the distraction that you have from annualcreditreport.comis the pirate commercials and various other products that stuart's client experian sellsat freecreditreport.com. all of the reporting
agencies have their own credit monitoringservice. i will say that if there are some�myfico.com�westrongly recommend our clients to use my fico to avoid the arbitration limitations or theuse of vantagescore, but i do think the question is not simply how do you get information infront, because the assumption there is that you have an empty room, and you want to introduceinformation into the room. the more accurate analogy is you have a loud, boisterous roomwith lots of people screaming information at you, and how do you make the accurate score,like discover is doing, or the correct dispute system or the correct annualcreditreport.comlouder than all of this marketing noise? the credit reporting agencies just a coupleyears ago, the number has likely grown. a
quarter of the income from stuart's clients,the big three, comes from these direct-to-consumer products. they are making their money thatway. they are making money through e-oscar. it's a for-profit company that charges furnisherswhen discover has to do a dispute, and so the concept of everybody wants the same thing,everybody wants to have the same score and the same report in front of consumers, i thinkis a mistaken assumption when you have this really loud room with everybody screaming. corey, you wanted to make a comment here. i just want to provide a little bit of a clarificationaround the director's letter and respond to both len and stuart's comment about the score.
the letter specifically talks about the lenderproviding a score on which it relies. there's no inference that there is one score thatthe lenders rely on, and we know many companies in the credit card industry and other industriesare developing internal customer scores all the time. the point is a score on which theywould rely would be helpful for that particular relationship between that particular creditorand the consumer, and the hope is that it's educational enough to point the consumer totheir credit report to identify what are the underlying ingredients that caused the scoreto be what it was and enough content, so that when the consumer saw the score, they wouldunderstand relatively in the spectrum of scores that they could have what their standing isand how that particular creditor views them.
the bureau is not making any statement aboutthe relative merits or predictiveness of one score over another, and certainly, the intenthere is to preserve, as stuart was saying, a competitive market in scores. i just wantedto add that. great. a lot of issues have been raised sofar, and i wanted to dig deeper on one of them. we've talked a little bit about someof the innovations, particularly with disclosure of the credit scores. one of the things stevecarlson mentioned was the absence of innovation with respect to credit disputes, and so iwanted to dig a little bit deeper on that. the bureau, as the director mentioned, releaseda snapshot of the consumer complaints that we have received. many of these relate tothe handling of disputes, and so i wanted
to talk a little bit about what can be doneto improve the consumer experience resolving credit disputes and what can close the informationloop between credit furnishers, consumers, and the credit reporting agencies. i'm sure several of you will have views onthis. i thought i might start with stuart and then perhaps len, and maybe we'll comeback to steve, since you raised the issue, and see if you have any follow-up thoughts. so a couple of things. first of all, twicelast year and again�this just refers back to director cordray's comments. twice lastyear, our members undertook voluntary programs to adjust how e-oscar operates. it's absolutelyright. we started with mail. we image that
mail, and then that mail is now sent directlyto the lender, so the lender can see what its customer is saying about some data thatis the subject of the dispute. and then by the end of the year, i believe in december,in discussion with the cfpb, they launched the online version as well. and so, by the way, i think the online abilityto upload consumer information enriches an online dispute, and it may address perhapssome of the concerns that were raised initially about sort of the extensiveness of an onlinedispute. many consumers are going to operate online. i think that's just the facts. sowhat we have to do is make sure that the online dispute mechanism works well, not just simplyto say somehow there must be a different mechanism
in place. but those two innovations are inthe pilot test. they're real. they're alive. it's happening every day, but the real questionis, ultimately, we have to learn about how do creditors respond to that information,how orderly is the information that consumers provide. sometimes it's very thick and dense,and we've heard from some lenders that that density is a complexity that they are nowhaving to learn to work with. so we're midstream in really a pilot test which is live for theentire nation, but that is an important pilot test and one that our members supported, andwe're happy to be where we are. so we see that as really one of the fundamentals inall of this, is this information exchange. also, the fair credit reporting act in 2003did address this question of exactly where
should you go to be able to provide a dispute.so the fcra gives me two choices as a consumer. i can go to the credit bureau, and i can submitmy dispute through them to my lender, or i also have a right to go directly to my lender.and candidly, i've talked with many card issuers who say we want to hear from our customers.the first thing we want to do is keep that customer. it's expensive to go get customers.we would like to resolve that issue quickly, and if we're the data furnisher and it's anissue about our data, we're happy to hear from our customer to resolve that issue andto then report that information back to the bureau, to the credit bureau. and in thiscase, by the way, we also provide an automated system for the furnisher not to wait untilthe next reporting cycle but to immediately
be able to transmit to us and update to theaccount information in the credit bureau, so it is updated on a timely basis and wellbefore, for example, the next 30-day billing cycle. so those are just some of the waysthat we have used technology as well as people as well as law, i think, to address some ofthe issues in dispute resolution. too much to say, literally whole chaptersin a treatise and whole conferences of weeks end. you can imagine how exciting that wouldbe to attend, right? their dispute system�and if you understandthe way that the fair credit reporting act began, until 1997, there was not a responsibilityof the furnishers. in my world, not where there's a courtroom�and i can't speak asdirectly to the judge�the case law is very
well established, and the phrase that's usedis that the grave responsibility of a consumer reporting agency has to consist of somethingother than parroting what the furnisher tells it. there has been�and without exaggeration�therehas been an entire abandonment of any responsibility on the part of the consumer reporting agenciesto do the investigation. all the discussion, with all due respect, director, in your speechand the efforts with e-oscar are all supporting the shift of this responsibility entirelyto the furnishers. now, it's a big improvement. for a long time, the furnishers�when thefurnishers were trained on how you do a dispute, they'd go to a cdia conference. the furnishers�cdiahas a program that they sell, very active,
with some of the major debt buyers, called"automated batch interface," sold through e-oscar company, the for-profit entity thathad a spinoff from cdia because it made too much money. e-oscar sells automated batchinterface. that system is a computer interface that is very widely used in which the creditreporting agency computer�this is how a dispute happens. the credit reporting agencydisputer communicates to the furnisher computer. the furnisher computer has no human beinginvolved, and the automated batch interface sends these dispute forms, called "acdvs,"to the computer, and there's this regurgitation back and forth. if you want an in-person dispute, let's takebank of america. you have your identity stolen
with bank of america. you make a dispute tobank of america, and you do not do online, because if you do online, no human being isinvolved. i just completed the deposition of two of the people that run the disputesystem for experian. no human being is involved if you make an online dispute, which is oneof the big problems with the way the annualcreditreport.com referral to the cra websites. but if you makea dispute and you write a letter to transunion, transunion scans the letter and sends it toan outsource company, intellinet in mumbai, india, where the single job of this personin mumbai, india, is to choose the code, make sure the documents are forwarded, and sendan electronic code, which is usually two digits, and there's about six codes that are mostcommonly used, not like his/hers. "this isn't
my account. here's a copy of all my documents." that has been sent to bank of america or salliemae or any of the other companies that use mumbai, india. they have their own folks thathandle the same, and the single job there, even despite the furnisher regulations thatoccurred, is to match up and make sure that the credit reporting data matches the datathat is in the computer already. there is�and we will see how the changes with the furnisherbulletin and other efforts the cfpb is making have an effect, and respectfully, i haven'thad many discover experiences, discover or american express, but the effect of thoseregulations or efforts not yet incurred, the furnisher side of the dispute has this ideathat the credit reporting investigation is
not the�that's not the time to determinethe accuracy or correctness of information. the debt collectors believe that time occurswhen you make a direct fair debt collection practices act dispute. the mortgage companiesbelieve that time is when you make a qualified written request under respa. that time fora credit card company is when you have a fair credit billing act dispute, all the directdisputes, and consumers should make direct disputes. but there is also this very substantialright and worse. everything we were telling consumers through the ftc, through the cfpb,is tell consumers how to make disputes to the credit reporting agencies. all of thatis sending consumers into this automated system where neither at the credit reporting agencyor at the furnisher level, there is a meaningful
dispute. and that is how you have a seven-attorneylaw firm that does nothing but represent consumers who have credit reporting disputes. my closing argument�and i've tried moreof these to juries. the record was not mine, but an $18 million verdict against equifaxrecently. you shouldn't have to go into a wood-paneled courtroom to hire a gray-suitedlawyer to get your credit report fixed, but if my mom came to me and said, "i need a creditreport fixed," and other than trying to find corey stone's e-mail and help that way, theonly thing i could do is to say, "you have to sue." that is unfortunately, unfortunatelyfor all but plaintiff's lawyers, the current state of affairs, and it's the state of affairsnotwithstanding the government relations that
i see for the thousands of consumer disputesfor�we have through discovery, all of the cfpb disputes that were sent to one of thecredit reporting agencies, not just simply database. the hard copy. we represent nowhundreds of those people, and there is no means currently set up for a substantive disputefor most of the disputes that come in through the credit reporting agencies. i'm seeing stuart look like he wants to saysomething, so . . . that would be a shock, wouldn't it? so one thought that has nothing to do withlen's views, but which i think for the consumer advisory board, it's important, just one ofthe steps that the cfpb can take and state
ags and the federal trade commission is toaddress fraudulent credit repair. it's not something we really talked about here today,but when a credit repair agency says, "i'm going to promise to delete all kinds of accurateinformation"�or even sometimes now�i'm using my air quotes here�unverifiable information,this is really wrong. they are generally prohibitive from taking money up front, some of them doanyway. they are hard to find, because they move from state to state fairly quickly, butthey are taking money from consumers who can ill-afford it, but they are also cloggingthe system with disputes. and one of their strategies is to dispute the balance and then15 days later to dispute a payment history and then 15 days later to dispute the meritsof the account overall, and eventually, a
community bank says, "you know what, i'm justdone with this. i can't continue to report this information," and that's harmful to aconsumer, because, by the way, it's not just the address information which was accuratethat gets deleted. quite often, it's the whole account that gets deleted, which thins upa credit report, which means it's not as scorable, and certainly, consumers aren't getting creditfor the fact that they have been paying a loan on time and effectively over long periodsof time. so i would just urge the cfpb to continue to think about that. that is a system.it clogs our system. it clogs the creditor's system, because we have to pass that on tothe creditor as well. just a reminder about e-oscar. e-oscar wasn'tdeveloped just because business wanted to
be efficient. e-oscar was developed becausein the oversight hearings�and i'm old enough to remember this going back to 1988�theissue on the table was why can't disputes be resolved more quickly, and why can't disputesbe resolved once between multiple credit bureaus in a competitive credit bureau market. sothe e-oscar system was designed with creditors, with nationwide credit bureaus, to createa faster system, and so as opposed to waiting 30 days or 40 days or whatever law would havepermitted, we now on average are able to resolve a dispute in 15. now, len paints a horrible picture of automation,but if the automation question is "i don't like the balance on my credit card billing,and here's a document that i think supports
that," we have a system today that allowsthe consumer to upload the document. we have a system that allows our credit bureau tothen transmit the fact of that dispute to the lender, and the lender has a system togo look at the balance and make a determination as to whether or not they want to update thebalance, which, by the way, often they will so automation isn't always the enemy of people,and speed and precision are definitely not the enemy of people. so the question is toensure the system is both quick, but it's also precise, and this is simply where i woulddisagree with sort of the broad paintbrush statements that all of this speed is justinevitably leading to lots and lots of bad results. we have polled consumers to ask themabout the results of reinvestigations in various
studies, and we received 95 percent at highsatisfaction with a result, not with the experience of, by the way, looking at a credit reportbut just the results, you know, what did i get, did i agree with what i got. now, that's the 5 percent we still want tofocus on. maybe that's the 5 percent we're sometimes talking about here today. maybethat's part of the 5 percent that ends up at the cfpb. interestingly enough, with the complaint data,we've done a couple of deep dives into the complaint data, and some of our members arekeeping track of how often did the complaint from the cfpb ever show up as a dispute priorto the�so we know some consumers are disputing�they're
submitting their dispute through the cfpb,like an e-oscar system, to the creditor. in fact, we know about 25 percent of the time,at least some of our members are tracking data, and about 25 percent of the time, theconsumer submits a complaint about our member at the same time that they submit the disputeto the bureau, or there's no previous dispute submitted to the bureau, or the consumer submitsa complaint about the bureau during the 30-day period that our member is trying to resolvethe dispute with the creditor. so that doesn't mean that system is broken.we want to learn from complaints. there's things to learn from complaints, but whenyou get into the details, details matter. this is a much more complex dialogue; hence,the reason for a sophisticated consumer advisory
board to think through these things, and toinform not just the thinking of cfpb staff but really to inform our thinking as industryas well, so . . . so i think what you've both described is asituation where perhaps there's issues with some of the complaints that are coming in,but there's also complaints about serious disputes that may be getting lost in the mix. steve, i don't know if you want to comment.you had introduced this topic earlier about need for innovation. so we will give you anopportunity to weigh in on sort of how do we get to innovations that solve these problems. so i am not an expert on the dispute resolutionside. i would say that my key point was, i
think, access to the score and the monitoringof the report itself has improved over the last few years, but what you don't see isthat on the dispute resolution side if you are a consumer. stuart, you mentioned quick and precise, right,obviously? but i think there's also easy access to the process itself and transparency aroundthe process and what's actually going on. we've had a lot of discussion as a group abouthow do you test into these things and drive them forward, so it sounds like there is apilot underway right now that may be leading towards something along those lines, but ithink until you actually take it to a consumer being able to see the report, seeing somethingthat's wrong on that report, being able to
very quickly and seamlessly then dispute what'son that report, i think it's broken, and it's disjointed. i wanted to touch a little bit�i mean, thoseissues about the sort of access and transparency are important ones that affect how a consumeractually behaves in this area, and i'm curious�len, maybe you could talk a little bit to this�aboutthe hassle factors or the behavioral aspects for consumers when they are dealing with acredit reporting system. i have strong opinions, if you hadn't pickedthat out by now. i would think combining the two tirades thati had, the two�the biggest difficulty, the consumer who comes to us usually has beenthrough other efforts. they have disputed
a number of times. we don't charge any consumerfor this, but a real challenge�and i do this; my office does nothing but�is actuallygetting a copy of the normal credit report, the credit report that the creditor uses. and so this had been under facta an unsuccessfuleffort on the part of the consumer movement to try to get the federal trade commissionto support when you have a credit denial or an adverse action or come up with some meansfor the consumer to see the actual credit report that's used, because that's gold. the most distressing circumstances, if youhave somebody who is declared deceased or if you have a circumstance where somebody'sidentity is mixed up, which occurs because
the credit reporting agencies will match onnine social security digits, those people aren't deceased, they then ask for their report.the credit reporting agencies say, "i'm sorry. you can't have your report. you don't exist.you're deceased." somebody who comes in and says �i represented�irepresent a lot of individuals who have mixed files, where they both come in to me. so i'mmixed up with joe, and i'm mixed up with betty. and the consumer can't get a copy of theirreport, because when the consumer says, "my social security number is 123-45-6789," thecredit reporting agency may have mixed it up, and its computer will�just imagine.this, unlike the other stuff, i've never seen, but i imagine smoke coming out, because it'smatched it, and so the consumer can't actually
see the report on which they're mixed. teresa davis was a case i had in which theonly way we got it was eventually a community bank, which i strongly support, a communitybank actually showed the report after a woman kept going back and disputing it three times.the report she got that mixed with her mother was perfect. when a consumer asks for theirown report and the machine doesn't smoke and they provide�they have to provide nine socialsecurity digits. if they don't, they can't get their report. whereas, if discover asksfor it, though they likely do provide all nine digits, they don't need them. they canprovide name. that's enough. last name, address would be enough for a bank.
so when a consumer uses all nine, they geta report that matches all nine, but if they had been mixed up with someone with sevenout of nine digits�and it's a big deal, for example, with naturalized citizens. wheni was young, when many of us were young, we got our social security number when our parentsdecided it was time. nowadays, when my two children were born, it happens automatically,but for naturalized citizens, they have to go and apply for the social security number.so if you have jose rodriguez and jose rodriguez jr. come in, real clients�jose, sorry�thattheir social security numbers will be one digit off, because they went in to apply together,or�and it happens again and again and again, and so those individuals do not have accessto their own credit report. they can't see
it. they only see the sterilized nine-digitmatch version, not the one that discover gets that results in my client's credit denial. on topic, one of the biggest things i thinkthat the cfpb should consider is reconsider, reevaluate, look under the hood for the supervisoryrole to look at these matching rules and matching criteria. i've seen them. they're under protectiveorders. if anyone wants them, i can't give them to them, but take a look at them, andtake a look at how restricted the consumer access requirements are versus the creditoraccess for seeing the actual report that the creditor uses. meredith, i just want to reinforce what lenhas said. if any of the members of the panel
have not requested their reports, they should.you've got to go through kind of a spanish inquisition to get your own report, and it'sbeen filtered and sterilized. you've got to provide your name, your last name, your previousname, your current address, your past address, your social. you provide so many filters thatyou get a sterilized report, the mixed file, identity theft-laden report is only providedto the merchant who then denied you. and you don't see that report. you see a differentreport. when you get the notice of an adverse action and you say you have the right to geta free credit report, you don't see the same report. so we would like consumers to seethe same report that the creditor used. and getting back to [audio break], why doesn'tthat report include the score that creditor
used? it's great that discover is providingthe real score. why don't all credit reports include the real score? i could go through the 20-year history ofhow we got to where we are finally seeing some credit scores today, but we don't havetime. and i think we actually ran out of time. so,ed, you are right on the mark there. i want to thank you for the very robust discussion.i think we definitely have hit a lot of key points that we need to further discuss andunderstand how the system works and governs a lot of these issues for us. where is zixta? i am trying to look for her.oh, there she is. okay. so, zixta, back to
you. thanks, jose. at this time, i'd like the guest paneliststo rejoin the audience. it's been a fascinating and complex discussion, but we're not quitedone yet. it's now time to hear from audience participants. an important part of how thebureau keeps informed about what's happening to consumers is to hear directly from consumers,from industry and community advocates, as well as others. and a number of you have signedup to share comments and observations about the discussion that just unfolded. each personthat signed up will have about 2 minutes to share their observations and comments andpoints related to this discussion. what we
hear from you is invaluable. it's importantto the cfpb, so we please encourage you to observe the 2-minute limit. so why don't we get started with our firstaudience participant, and she is becky thiess, americans for financial reform. becky, someonewill bring you a microphone shortly. did we lose becky? i thank you so much for this discussion andfor allowing comments from the audience. i definitely thought this was a fascinatingconversation. i would like to thank the cfpb for taking action through supervision andoversight to make this process more efficient for consumers and work better for the public.i'd like to really highlight some of the points
that ed and len made regarding issues thatconsumers have. i think that access to correct information and the ability for consumersto fix information on their reports that are wrong is huge, and it's really important whenpeople's jobs are on the line, especially. we still have a big jobs crisis, and thisis just another thing that's holding people back, so thanks again. thank you, ms. thiess. next, we have tom feltner,consumer federation of america. thank you, zixta. tom feltner, consumer federationof america. i'd like to thank all the members of the cab and the cfpb for organizing thisevent today. my particular comment is around how creditscores are used, and we've heard about the
use of credit scores for employment checks.the cfa research has also found that credit scores are widely used to help set auto insuranceprices, and so when we look at the incidences of errors�and the ftc found that about 10million americans have very serious errors on their credit reports�we recognize thatthat has very real implications for consumer credit choice, for consumer credit pricingand across a wide range of products as well as issues like auto insurance. so we encourage you to continue to work veryclosely with the credit bureaus to make sure that error correction processes are in placeand that they are working effectively to make sure that consumers are getting the most fairlypriced credit that they qualify for as well
as the best-priced auto insurance. thank you. thank you, mr. feltner. next, we have nessafeddis with the american bankers association. yes. this is just sort of a question on thecredit score on the credit card. this is not a q&a. it's comments and observations,please. oh, okay. i guess the�oh, just comments.oh, gees. don't get to ask a question. i think one of the things the bankers�i'mwith the american bankers association, and i think everybody agrees that there shouldbe accuracy in credit reports. it's not just good for consumers. from the lender's perspective,accuracy helps inform their decision, so they can make better decisions.
i think one of the challenges on providingthe credit score in the statement is that there may be other ideas other than just thebureau's endorsed solution and arguably endorsed vendor because of the nature of the creditscore market where you have one score maker who is dominant, but i think that there maybe other ideas out there that credit companies may wish to choose to help their customersensure that they understand their credit reports and credit scores. thank you, ms. feddis. zixta, i'll just say the tenor of my discussionswith ceos about this was there may be various approaches people will take. in general, whatwe want is to have this information be made
freely and regularly available to consumers.the information may differ from one creditor to another that they choose to provide, thatthere should be educational content with it. we're not trying to dictate a particular solution,and in fact, this is�at this point, it's a voluntary exercise and nothing compulsoryabout it, but it's going to be better for them and for their customers. ruth susswein, consumer action. hi. i'm ruth susswein. so i also want to thankthe bureau for putting so much effort into this issue and also for requiring that documentsbe forwarded to furnishers. we think that's going to be really important. we look forwardto see what happens there.
i'll just focus on the dispute process fora moment and just say that we think there needs to be very clear and shared accountabilityand responsibility by both the creditors as well as the cras, and we also feel that thereshould be a clear definition of reasonable investigation and clear duties spelled outfor reasonable investigations of disputes, because as we've heard already�and i won'treiterate�i will just confirm what len and ed have said. these cause the real problemsthat were mentioned by them earlier today. thank you. dwayne carson, center for americanracial equality. thank you very much for the event today, theinformation that you guys shared, and the conversation was great.
my conversation is actually going to focuson payday loans. i'm actually aware that the cfpb is in the process of regulating paydayloans and short-term consumer products. we are care feel that these products are essentialand vital to the minority community, and minorities really love these products. and if you takeaway the payday loans and the short-term-product lending, you are actually sending a messageto the minority communities basically saying that they are not smart enough to make theirown financial decisions. so we at care are a personal freedom organization. we thinkthat if you give them the opportunity to make the decisions and leave it up to the familiesand the individuals in the minority community, they best can make those decisions when itcomes to payday loans, because we also think
that free market solutions is never a badthing. thank you very much for your time, guys. thank you, mr. carson. ben kahrl, global debtregistry. thank you for hosting this event and for permittingthis opportunity to speak. the cfpb is currently going through the processof an advanced notice of proposed rulemaking on fair debt collection practices act issuesand updating rules in conjunction with that act. a lot of the discussion in that act centersaround debt buying, and often these debts that are in dispute do get charged off andget sold to entities that maybe the consumers had no interaction with. and i'd just urgeall the panelists to consider�and certainly
the cfpb�how the debt buying experienceimpacts the fair credit reporting act issues. and one of the issues that has come up inthat anpr is whether the cfpb should encourage the use of centralized repositories that trackthe ownership information when debts are sold in the secondary market, and the answer tothat question could perhaps solve some of these issues with regard to the fcra in termsof letting consumers know who owns their debt now and how to resolve disputes with thatparticular entity. thank you. fran rosebush, assets and opportunitynetwork. hi. i'm here representing the assets & opportunitynetwork, which is a group of over 1,400 organizations from around the country working on asset-buildingstrategies, and my comments are actually related
to what the gentleman behind me just spokeabout and the debt collection industry and how it relates to the credit reporting disputes. from the network, we actually have three recommendationsthat we have for regulating the debt collection industry. we'd be happy to take them for the record. and we will be submitting a letter tomorrow. and it kind of�it echoes what was talkedabout earlier about tackling the credit disputes from the front end, and so the first recommendationis around creditors to be prohibited from both referring debt to collections and sellingdebt to third-party buyers when they lack
full documentation, and that documentationshould travel with the debt. second, creditors should also be requiredto supply this documentation to consumer reporting agencies when reporting delinquent or defaulteddebt in order to support a more fair dispute system. and third, prevent collectors from circumventingany applicable wage garnishment limits and require federally chartered banks to takeadditional proactive measures to prevent improper seizures of debtor's deposits. so thank you so much for this opportunity,and we're happy to be here and see this being talked about.
thank you. scott estrada, national councilof la raza. hello. thank you very much for putting thisdiscussion together. one of the things that i just wanted to highlight was the focus andthe need for developing an accurate and accessible credit dispute system that was brought upby a lot of the panelists. while the access to the information on thefront end is essential, what consumers can do with that in terms of remedying incorrector fraudulent activity is just as important, and one of the common concerns that we havefrom our national affiliates and their interactions with consumers is the inability for creditdispute resolution, and that multiple requests over multiple months still amount to no actionor no correction of the data. and when you
need that job or need that credit or needthat mortgage, you can't wait years or multiple months for the credit bureau to finally addressthat dispute. so we just want to highlight that, the importance of that, and the needfor that system. thank you. thank you. pam banks, consumers union. thank you. thank you very much for holdingthe meeting today. it was indeed a pleasure to have the opportunity to discuss an issuethat is of extreme importance to us at consumers union. we applaud the cfpb's focus on credit reporting,and in recent months, we have collected over a thousand stories from consumers across thenation documenting problems that they have
had with their credit reports and even understandingthe system. consumer reports will issue a report on that, and we would be happy to shareit with the board. but also, we are delighted that the cfpb isencouraging banks to offer consumers free credit scores, the scores that are actuallyused in a lending decision. hopefully, banks will do it across the board for all productlines, which would be excellent, but i have to say that is part of the problem. more needsto be done. we feel that all consumers, especially the un-bank or under-bank, should also geta free credit score, and ideally, that score could be given when they get their free creditreport. and the score given should be a score that is relevant and used by lenders in themarketplace. thank you.
thank you, ms. banks, and we'd be happy totake the report in support of the record for the public meeting. i want to thank everyone who took the timeto join us from their busy day today. i want to thank our cab member and in particularour guest panelists. it's been a really terrific conversation. that concludes today's public meeting of thecab, and i want everyone to have a great afternoon. [applause.]32
