The Credit Reporting Landscape Is Changing

FICO’s move to change its credit-score formula may have some consumers worried, but businesses reporting the data that feeds into such models will also face challenges.

In fact, data furnishers—creditors, lenders, debt collection agencies—have perhaps never encountered such a challenging reporting environment. In the past few years, the Federal Trade Commission and Consumer Financial Protection Bureau (CFPB) have made accuracy under the Fair Credit Reporting Act (FCRA) a key priority in their public enforcement actions and reports, with penalties in the millions; the US House of Representatives passed the CREDIT Act, which would establish new reporting guidance and additional oversight from the CFPB; and accuracy issues have continued to plague the industry related to data transmitted through the Metro 2® standard, whose guidelines change annually.

Failure to adapt could mean regulatory actions resulting in significant fines, headline risk and lost revenue. For financial institutions, accuracy and compliance require knowing how to institute adequate policies and procedures, what the key operational and data issues are, and how to manage regulatory and reporting guideline changes.