Join us on LinkedIn Follow us on Twitter Like us on Facebook Follow us on Instagram
 
  OCTOBER RESEARCH STORE Already a subscriber? LOG IN
AddControlToContainer_DynamicNavigation6

CFPB, FTC officials cite flaws in credit bureau accountability

Email A Friend Printer Friendly Version
0 comments
Nonbank Financial
Friday, July 27, 2018

Numerous financial trade organizations and members of Congress have advocated for federal regulators to hold credit reporting bureaus accountable for the security of vast amounts of personal information in their possession.

However, because of certain federal statutes dictating what actions certain regulators can and cannot take against certain market participants, the task of holding those credit bureaus responsible when things go wrong is more convoluted than many realize.

Peggy Twohig of the Consumer Financial Protection Bureau (CFPB) and Maneesha Mithal of the Federal Trade Commission (FTC) said their agencies want to focus more attention on credit reporting agencies while testifying before the Senate Banking Committee, but noted that the bureau could not enforce against data breaches and the FTC could not hand out civil penalties to violators.

The hearing, titled “An Overview of the Credit Bureaus and the Fair Credit Reporting Act,” also featured Maneesha Mithal, assistant director of privacy and identity protection at the FTC’s Bureau of Consumer Protection.

Twohig said the bureau believes that credit agencies should be examined for data security compliance and held accountable when negligence is revealed.

When asked by Sen. Elizabeth Warren (D-Mass.) why the bureau has not issued rules regulating credit agencies, Twohig responded by noting that the bureau although the bureau has authority to make rules enforcing the Fair Credit Reporting Act (FCRA), it does not have authority under the Gramm-Leach-Bliley Act, which implements the FTC's Safeguards Rule, to regulate large credit bureaus pertaining to the safeguarding of sensitive consumer information.

“The bureau’s rules are applicable to any person subject to the FCRA, except certain motor vehicle dealers,” Twohig said. “The bureau does not, however, have rulemaking authority (or supervisory or enforcement authority) under Sections 615(e) and 628 of the FCRA. These provisions direct the federal banking agencies, the National Credit Union Administration, the FTC, the Commodity Futures Trading Commission and the Securities and Exchange Commission to promulgate regulations relating to red flags and [the] disposal of records.”

As a covered person, the bureau also would be able to subject a credit rating agency to its UDAAP authority in a case involving data breaches or security, similar to what the CFPB did in its 1016 enforcement action against Dwolla.

Mithal backed up Twohig’s point regarding which agency has the regulatory authority to hold credit reporting bureaus accountable when breaches occur, noting that the FTC “has exclusive enforcement authority with respect to nonbank consumer financial services providers.”

However, Mithal also said the FTC could benefit from increased authority to pursue civil penalties in cases involving data breaches where companies violate the laws. Thus, the bureau would not have enforcement oversight over safeguarding information, but could issue civil penalties. The FTC has enforcement capabilities in security actions but cannot issue civil penalties, simply redress for consumers.

Mithal also noted that the FTC’s Safeguards Rule “requires financial institutions, or companies that are significantly engaged in offering consumer financial products or services, to develop, implement, and maintain a comprehensive information security program for handling customer information,” and that such a plan “must be appropriate to the company’s size and complexity, the nature and scope of its activities, and the sensitivity of the customer information it handles.”

Highlighting the fact that credit bureaus hold the most sensitive information about consumers of any entity, Mithal said it is on them to protect that information. The statement came in response to questions from Senate Banking Committee Chairman Mike Crapo (R-Idaho) about the data breach at Equifax, which compromised sensitive information belonging to more than 145 million people.  

Ahead of the hearing, NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt wrote committee leaders in support of measures to strengthen the credit reporting system while increasing oversight to prevent major breaches.

“Negligent entities should be held financially liable for any losses that occurred due to breaches on their end so that consumers aren’t left holding the bag,” Hunt wrote. “When a breach occurs at a credit bureau, depository institutions should be made aware of the breach as soon as practicable so they can proactively monitor affected accounts. Furthermore, compliance by credit bureaus with GLBA [the Gramm-Leach-Bliley Act] and these notification requirements should be examined for, an enforced by, a federal regulator. Finally, any new rules or regulations to implement these recommendations should recognize credit unions’ compliance with GLBA and not place any new burdens on them.”

A letter endorsed by the American Bankers Association (ABA), the Consumer Bankers Association (CBA), the Credit Union National Association (CUNA), the Financial Services Roundtable (FSR), the Independent Community Bankers of America (ICBA), the National Association of Federally-Insured Credit Unions (NAFCU) and The Clearing House in the wake of the Equifax breach stressed the trades’ contention that there should be a national cybersecurity standard to hold companies that collect and store consumer data accountable. ICBA filed suit against Equifax in December 2017 in response to the breach.

“Data security breaches continue to put millions of consumers at risk, and protecting consumer information is a shared responsibility of all parties involved,” the trades wrote. “That is why the undersigned financial organizations and our members have supported comprehensive data protection and consumer notification legislation across several Congresses and have worked closely with key members of this committee and many others in the House and Senate to help advance this worthy cause.”

Sen. Tim Scott (R-S.C.) used the hearing as an opportunity to promote his bill, titled the “Credit Access and Inclusion Act of 2018” (S. 3040), introduced in June, which would amend the Fair Credit Reporting Act, to allow certain consumer credit information to be reported to consumer reporting agencies to help individuals who are considered “credit invisible.”

Twohig said the bureau is interested in alternative scoring models, noting that “if that information is accurate and predictive” it could be the solution to providing more credit.

Today's other top stories
Bank of America fined $12 million for falsified HMDA data
FHFA finalizes GSE capital framework rule, increases 2024 loan limits
CFPB, 11 states sue for $30 million over deceptive, abusive debt collection practices
Banking agencies extend long-term debt rule comment period
FDIC to undergo external review of workplace culture


COMMENT BOX DISCLAIMER:
October Research is not responsible for the comments posted on its websites by readers. We will do our best to remove comments that include profanity or personal attacks or other inappropriate comments.
Comments:

Be the first to leave a comment.

Leave your comment
CAPTCHA Validation
CAPTCHA
Code:
: 
: 
Your Email is for reporting purposes only. It will NOT be displayed.
Popularity:
This article has been viewed 3463 times.

Monthly Newsletter

Dodd Frank Update December 2023

Cover Story:

Regulatory compliance expert shares initial take on CRA rule changes


News by Topic   News by Edition   News by Agency   News by Industry   Special Reports   Events
Banking
Case Law
Consumer Protection
Financial Stability
Industry Spotlight
Legislation
Nonbank Financial
The TRID Journey
 
Dodd Frank Update October 2023
Dodd Frank Update November 2023
Dodd Frank Update December 2023
Archives
 
CFPB NCUA
CFTC OCC
FDIC OFR
FHFA SEC
FRB States
FSOC Treasury
FTC  
 
Appraisal
Broker-Dealer
Community Banks & Credit Unions
Land Title
Mortgage
Payday Lending
 
Who's My Regulator?
Fair Lending
2023 State of the Industry
Mortgage Technology
Real Estate Compliance Outlook
Marketing Compliance for Lenders
Archives
 
National Settlement Services Summit (NS3)
Women's Leadership Summit (WLS)
Webinars

Library   About   Subscribe   Other Publications
The Dodd-Frank Act Position Papers
Dodd-Frank Summary & History Legislation
Court Actions Regulations
Enforcement Documents Reports, Studies and Surveys
Guidance Documents Federal Register Notices
White Papers  
 
Dodd Frank Update
Contact / Editors
Advertise
Social Media
Are You An Expert?
Subscriber Agreement
 
Subscriptions
Free Email Updates
Try a Free Edition
 
The Title Report
The Legal Description
Valuation Review
RESPA News
Copyright © 2011-2023 Dodd Frank Update
An October Research, LLC publication
3046 Brecksville Road, Suite D, Richfield, OH 44286
(330) 659-6101, All Rights Reserved
www.doddfrankupdate.com | Privacy Policy
VISIT OUR OTHER WEBSITES
> The Legal Description
> RESPA News
> The Title Report
> Valuation Review
> NS3 The Summit
> Women's Leadership Summit
> October Research, LLC
> The October Store


Loading... Loading...
Featuring:
  • Delivery 3X a week plus breaking news as it happens
  • Comprehensive title insurance industry news
  • Recent acquisitions, mergers, real estate stats
  • Exclusive in-depth coverage of the industry's hottest stories
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Comprehensive Dodd-Frank coverage
  • The latest information from the CFPB
  • Full coverage of Congressional hearings
  • Updates on all agency actions
  • Analysis of controversial provisions
  • Release of newest studies and reports
Sign up today and...
  • Be one of the first to know where NS3 is being held
  • Learn about NS3 speakers and sessions
  • Save on registration with Super-Early Bird rates
  • Discover the networking opportunities NS3 offers
  • Find out if CE credits will be offered for your area
  • And much more
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Preview the latest RESPAnews.com Top Story
  • RESPA related headline news
  • Quote of the Week
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Legal, regulatory and legislative information impacting the settlement services industry
  • News from HUD, Congress, state legislatures and other regulatory agencies
  • Follow the lobbying efforts of all the major national real estate services organizations.
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • The industry's only full-time newsroom
  • Relevant, up-to-date appraisal industry news
  • Covering the hottest stories and industry trends
NEWS BY TOPIC
EDITION
AGENCY
INDUSTRY
SPECIAL REPORTS
EVENTS
LIBRARY
EMAIL UPDATES
ABOUT
SUBSCRIBE
Banking
Case Law
Consumer Protection
Financial Stability
Industry Spotlight
Legislation
Nonbank Financial
The TRID Journey
Current Edition
October 2023
September 2023
August 2023
Archives
CFPB
CFTC
FDIC
FHFA
FRB
FSOC
NCUA
OCC
OFR
SEC
States
Treasury
Appraisal
Broker-Dealer
Community Banks & Credit Unions
Land Title
Mortgage
Payday Lending
Real Estate Compliance Outlook
Who's My Regulator?
Fair Lending
2023 State of the Industry
2022 Mortgage Techology
Marketing Compliance for Lenders
Archives
National Settlement
Services Summit (NS3)
Women's Leadership
Summit (WLS)
Webinars
Industry and Regulatory Outlook
2023 Economic Forecast Series
RESPA Compliance Essentials
Compliant Marketing Tactics
Avoiding Mortgage Payoff Fraud
CFPB Unconstitutionally funded?
Evolving Lender and Title
Relationships
Evolving Realtor Relationships
Manufactured Housing
Special Purpose Credit Programs
Webinar Archives
Executive Interview Series
eClosing Solutions Showcase
Lender Associations
The Dodd-Frank Act
Dodd-Frank Summary
Court Actions
Enforcement Documents
Guidance Documents
White Papers
Position Papers
Legislation
Regulations
Reports, Studies and Surveys
Federal Register Notices
Proposals
Final Rules
GAO
Agency
Contact Us
Advertise
Social Media
Are You An Expert?
Subscriber Agreement