The director of the Consumer Financial Protection Bureau (CFPB) wants banks, particularly credit card lenders, to provide consumers with their free credit score on every one of their bills or statements as part of normal billing. Some people think it’s a great idea and will help consumers, but others — like some of the companies which charge for the information — might not think it’s such a great idea.
Richard Cordray heads the CFPB, an agency that was put in place after the financial meltdown of the late 2000s. The mission statement of the agency is to “make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.”
Recently, the CFPB issued a report stating that common complaints from consumers are regarding errors in their credit reports. Following that release, Cordray sent a letter to the top brass at some of the biggest credit card companies, asking them to provide their customers with a free credit score — but not the entire report — on their monthly statements.
“At the Consumer Bureau, we are committed to helping consumers make sound financial choices. We are doing all we can to protect people by ensuring that consumer financial markets work better for them – are transparent, reliable, and fair. But we also recognize that the best form of consumer protection is self-protection, which means helping people avoid problems in the first place and knowing how to address problems when they do occur,” Cordray said to the President’s Advisory Council in February.
This month, Cordray took a similar message to credit card company executives, stating that consumers may not know about errors on their credit reports or be prompted to attempt to fix them if they aren’t aware of the problems. The thinking behind the idea is that regularly viewing one’s credit score may help consumers become aware of problems more quickly.
“Every consumer who seeks to make use of credit to help manage his or her financial affairs is affected by this industry. For whether they are aware of it or not, people’s ability to access credit, and how much they pay for credit, is typically governed by what is contained in their credit profiles,” Cordray told the Consumer Advisory Board at a recent meeting. “Assuring that such personal financial information is updated timely and accurately, and that it is maintained securely, is a critical responsibility.”
The issue becomes more complicated, though, because there are three major credit reporting agencies, and not all of them have access to the same information. Those three companies are Equifax, Experian and TransUnion. If that isn’t confusing enough, there are other agencies out there that will calculate a credit score based on all three of those ratings. The most well-known of those is the FICO score, but it isn’t alone in the game.
Currently, some credit card companies offer a customer’s credit score to them or access to it under certain programs. Discover cards were among the first to offer this service as a perk, and like most other companies doing this, offer the FICO score. Other companies who are in the business of calculating scores to provide to consumers and would-be lenders may not welcome a market which bolsters an already dominant brand, but if providing this information to consumers becomes standard on monthly statements, new opportunities may arise, especially for nimble, entrepreneurial companies. Smaller providers of credit information could conceivably prove to be creative and partner with the lenders to offer enhancements — at a price — to consumers.
The big question now is whether or not it will actually happen.