Elizabeth Warren must have eaten her Wheaties Thursday morning, because the brand-new Consumer Financial Protection Bureau is already busy. Bright and early this morning (we checked at 6:30 a.m. ET), a link to a new “credit card complaint” form was up on the main page, consumerfinance.gov. And two days ago, before the CFPB had even officially launched, it published a report on its website examining the confusing and sometimes detrimental inconsistencies between the credit scores people can buy and the ones lenders actually use.
The 20-page report says:
A consumer, unaware of the variety of credit scores available in the marketplace, may purchase a score believing it to be his or her “true” (or only) credit score, when in fact there is no such single score. … The consumer may be frustrated to learn that they cannot know exactly how a creditor will view them.
This ambiguity can have real consequences for consumers, the report explains. If someone applying for a loan or line of credit buys a score that’s significantly higher than the one the lender uses, they can be rejected or wind up paying much more in interest because the lender deems them a greater risk. On the other hand, if a would-be borrower goes into a transaction thinking their credit is poor based on the score they received, they may not object if the lender gives them a rate less favorable than the one for which they would otherwise qualify. Again, the end result is that the consumer pays more than they should.
The Federal Reserve Board and Federal Trade Commission are also working to shed more light on the issue. Last week, new rules went into effect requiring lenders to share with consumers the credit score used if they turned someone down for a loan or gave them a higher rate as a result of that score.
Following the publication of the CFPB’s report, “The next step is to get a handle on how the big credit bureaus operate and the effects on consumers,” says Travis Plunkett, legislative director for the Consumer Federation of America. “We’re going to urge them to make sure credit bureaus are at the top of the list of non-banks they’ll supervise, look at what they’re doing and how they’re treating consumers.”