By Ross Yednock, Director, Economic Opportunity Initiatives/Coordinator, Michigan Earned Income Credit Coalition
A couple of weeks ago I attended the Consumer Financial Protection Bureau’s field hearing on credit reporting in Detroit. During a private roundtable discussion that followed, I, along with other community leaders, spoke with CFPB Director Richard Cordray about other issues in the financial marketplace impacting Michigan communities. This was an opportunity for representatives from across the state, including Jonathon Bradford from Inner City Christian Federation in Grand Rapids, Steve Tobocman representing Community Development Advocates of Detroit and Neeta Delaney with the Michigan Foreclosure Task Force, to engage Director Cordray in a discussion on how to protect Michigan families and communities from abusive lending and financial services practices.
For those unaware, the CFPB was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and is charged with “making the consumer financial markets work for families by empowering consumers.” Specifically, the CFPB is working to ensure a financial services marketplace with transparency in pricing and risk to consumers and one in which “no one can build a business model around unfair, deceptive, or abusive practices.”
That is why I took the opportunity to speak with Director Cordray about the “bait-and-switch” practices of paid tax preparers whereby they advertise “free” services to entice Michigan consumers through the door only to inform them that the “free” services only apply to a small class of tax filers (e.g. most tax filers, including those claiming the Earned Income Tax Credit, or EITC, cannot use the free services). I also highlighted the gross disparity between low income and all other taxpayers in the high-cost refund anticipation loan marketplace (EITC recipients account for nearly 2/3rds of all RALs issued in Michigan).
The private roundtable discussion we had with director Cordray was preceded by a field hearing on credit reporting, one of the new, non-bank sectors under the CFPB’s supervision. During the hearing, Director Cordray announced that beginning in September the CFPB will have supervisory oversight of the largest credit reporting companies. This is a first for these entities, as they have never been subject to federal supervision.
The credit reporting market is enormous. Nearly every adult American has a credit file and score. In fact, it is estimated that each of the three largest credit reporting agencies maintains files on roughly 200 million Americans and annually issues approximately 3 billion credit reports and makes more than 36 billion updates to consumer credit files. Ensuring that this is all done efficiently, accurately and properly is critical to a person’s financial health.
Credit reporting plays a critical role in all of our financial lives and having the CFPB oversee the credit reporting industry is an important change for American consumers. Credit reports on a person’s financial behavior can determine her eligibility for a credit card, mortgage loan or auto loan. It can also affect how much she will pay for that loan and even her ability to rent an apartment or be hired for a job. Learn more about how to check your credit report here and find a credit reporting company that specializes in a particular area here.