The consumer reporting system is undergoing rapid change, raising important questions for financial institutions, consumer reporting agencies, data furnishers, and consumers. In this week’s episode of the Consumer Finance Monitor podcast, our host Alan Kaplinsky (founder, former practice group leader for 25 years and now Senior Counsel of our Consumer Financial Services Group) is joined by Dan Smith, President and CEO of the Consumer Data Industry Association (CDIA), and Adam Maarec, a member of our Consumer Financial Services Group, for an in-depth discussion of the legal, regulatory, and technological developments reshaping the consumer reporting ecosystem.
Although consumer reporting is often associated primarily with credit scores and traditional credit bureau reports, its reach is considerably broader. Consumer reporting data plays an important role in credit underwriting, tenant and employment screening, fraud prevention, identity verification, and other activities that affect consumers’ everyday lives. Meanwhile, the growing use of artificial intelligence (AI), alternative data, and consumer-permissioned financial information is creating new opportunities while raising important questions about accuracy, privacy, compliance, and consumer protection.
Our discussion begins with the Fair Credit Reporting Act (FCRA) and the obligations of consumer reporting agencies and data furnishers to maintain accurate information and investigate consumer disputes. Dan discusses the scale of the consumer reporting system and explains why he believes the existing statutory dispute-resolution framework remains essential to its effective operation.
We then turn to the CFPB’s recent changes to its consumer complaint portal following a substantial increase in credit reporting complaints. Dan explains his concerns about AI-assisted disputes and the activities of credit repair organizations that, in his view, use the complaint process to pursue the removal of accurate but negative information from consumers’ credit reports. We discuss the distinction between the FCRA’s formal dispute process and complaints submitted to the CFPB, as well as the implications of the Bureau’s efforts to address potential misuse of its complaint portal.
The conversation also examines the expanding role of alternative data in credit underwriting. Rental payments, utility bills, and other recurring obligations may help lenders evaluate consumers who have limited traditional credit histories. Dan explains why he believes alternative data can complement conventional credit reporting and expand access to credit, while identifying practical and regulatory challenges that may discourage some data providers from participating.
Adam then leads a discussion of Section 1033 of the Dodd-Frank Act and the developing open banking and consumer-permissioned data-sharing ecosystem. We explore how access to consumers’ financial account information could complement traditional credit reporting, particularly through cash-flow underwriting. The discussion also addresses the differences between these systems, the status of the CFPB’s Section 1033 rulemaking, and the privacy, security, and data-accuracy protections consumers should expect.
AI is another major focus. Dan discusses how AI tools can help identify anomalies in data, improve data quality, and accelerate the evaluation of new data sets for underwriting. Adam emphasizes the importance of testing and learning as new technologies develop, while establishing appropriate risk-management safeguards to protect consumers and financial institutions.
Finally, we examine the regulatory outlook for the consumer reporting industry, including the importance of national consistency in credit reporting requirements, the challenges posed by differing state laws, and the strategic investments financial institutions should consider as new data sources and technologies become more prevalent.
This episode offers a timely and practical examination of an industry in transition. For financial institutions, fintech companies, consumer reporting agencies, data furnishers, and their counsel, understanding these developments is increasingly important to navigating compliance obligations, evaluating emerging underwriting tools, and preparing for the next generation of consumer reporting.
Listen to the episode to hear Dan Smith and Adam Maarec discuss these developments and their implications for the future of consumer financial services.
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