The Center for Public Integrity

The Consumer Financial Protection Bureau will analyze tens of thousands of consumer credit scores from major credit reporting agencies to get a clearer picture of why an individual’s credit score can vary widely.

In May, iWatch News reported how unregulated consumer credit bureaus use proprietary formulas to calculate credit scores that largely determine if a consumer can qualify for a mortgage, car loan or other major purchase, and how high the interest rate will be. Consumer advocates have complained that when a borrower and a lender each buy a credit score from the same company, they often receive different numbers.

The CFPB, in a report to Congress released today, reviewed the credit scoring industry in general and said it will take a more rigorous look at disparities in credit scores by analyzing 200,000 credit reports from each of the three biggest credit bureaus.

Equifax Inc., Experian Plc and TransUnion Corp. compile credit information about consumers and run the data through algorithms to produce credit scores. The numeric scores – often ranging from 300 to 850 – are used by mortgage lenders, auto dealers, insurance companies and others to determine credit rates and limits.

A multitude of algorithms exist to tailor the picture of the borrower to the kind of credit in question, so a consumer might receive an “educational score” that is different than a custom-weighted score provided to a credit card company, for example.

“The most substantial harm would likely result if, after purchasing a score, a consumer has a different impression of his or her creditworthiness than a lender would,” the report said.

The Dodd-Frank reform law marks its one-year anniversary Thursday amid a growing drumbeat by Republican lawmakers and banking groups to undo at least some of its stricter financial regulations.

The lobbying push has others questioning whether the tightened regulatory measures that helped stabilize Wall Street will still be in place when the next crisis hits.

The Republican-led House is entertaining two dozen bills which seek to dismantle various parts of the law that was passed last summer to prevent a repeat of the 2008 near-collapse of U.S. housing and financial markets, according to the New York Times. Business groups complain that new regulations stifle U.S. economic growth, while banks claim tougher rules gives their overseas competitors an advantage.

Lawmakers have taken more indirect shots at the law as well, with Senate Republicans vowing to stop the nomination of key regulators and to slash the budgets for regulatory bodies such as the Commodity Futures Trading Commission (CFTC) and Consumer Financial Protection Bureau (CFPB).

President Barack Obama said he remains committed to financial reform.

“The financial crisis and the recession were not the result of normal economic cycles or just a run of bad luck,” Obama said Monday in introducing his nominee, Richard Cordray, to head the CFPB. “There were abuses and there was a lack of smart regulations.  So we’re not just going to shrug our shoulders and hope it doesn’t happen again.”

But critics and supporters of Dodd-Frank alike bemoan the missed and postponed deadlines for finalizing rules, which they say creates uncertainty in the marketplace. The CFTC, for example, is charged with overseeing the $600 trillion global derivatives market but has delayed some rules until December.

Just three days before the Consumer Financial Protection Bureau throws open its doors for business, President Barack Obama nominated former Ohio Attorney General Richard Cordray to head the new agency.

"We are going to stand up this bureau and ensure it is doing the right thing for middle class families all across the country," Obama said at a Rose Garden ceremony announcing his choice to direct the CFPB.

Cordray, 52, has been helping special presidential adviser Elizabeth Warren set up the bureau since he lost re-election as attorney general in November. Cordray, now head of enforcement at the CFPB, was elected Ohio state treasurer in 2007 and served two years in the Ohio legislature.

In choosing Cordray, Obama sidestepped Warren, who has spent the past year assembling the bureau amid stiff Republican opposition.  Senate Minority Leader Mitch McConnell reiterated today that 44 Republican senators will block any nominee until the CFPB director is replaced with a five-member commission, and other steps are taken to weaken its power.

“Republicans have voiced our serious concerns over the creation of the CFPB because it represents a government-driven solution to a problem government helped create,” McConnell said. “We have no doubt that, without proper oversight, the CFPB will only multiply the kind of countless burdensome regulations that are holding our economy back right now, and that it will have countless unintended consequences for individuals and small businesses that constrict credit, stifle growth, and destroy jobs.

The Financial Stability Oversight Council, made up of major Wall Street regulators throughout the federal government, has the power to veto any CFPB decisions.

As part of our ongoing Debt Deception series, iWatch News is publishing stories about borrower nightmares, profiling Americans from different walks of life who borrowed money with terms they didn’t understand and couldn’t afford.

To get a better understanding of issues that many consumers are dealing with, we'd like to hear from more borrowers who are having trouble repaying their debt. Do you owe money on a loan with high interest rates? Did you sign up for a cash advance, but were unclear on the terms? Are you having trouble keeping up with your monthly payments?

Tell us about your experience by taking a few minutes to fill out the form below. Your response will remain confidential to reporters in our newsroom, and trusted partners within the Public Insight Network. You can also share your debt with us on Twitter by tweeting the amount you owe, type of loan, and interest payment with the hashtag #mydebt.

The new Consumer Financial Protection Bureau, which opens for business next week, does not plan to ban specific financial products, presidential adviser Elizabeth Warren told Congress.

Banning fraudulent financial products and services "is a tool in the toolbox, and that's where it should stay," Warren testified at a Republican-led House Oversight and Government Reform hearing on Thursday, the Wall Street Journal, Politico and other media reported. “We have no present intention to ban a product, but we are still learning about what’s out there” she said.

Republicans on the panel, who questioned Warren at a contentious hearing in late May, grilled Warren about whether the CFPB may try to outlaw payday loans and try to regulate new car loans.

"The American people have a right to know how the bureau will advance and enforce its regulatory assignment," said Committee Chairman Darrell Issa, a California Republican. “Consumers deserve opportunities to choose between lending alternatives and other financial tools that establish credit and give buyers the chance for affordable enhancements to their standards of living.”

A C-span video of the three and one-half hour hearing is posted here. 

To mark the July 21 launch of the Consumer Financial Protection Bureau, a new regulator with broad powers,  iWatch News is publishing stories about borrower nightmares: Americans from different walks of life who borrowed money with terms they didn’t understand and couldn’t afford.

The stories build on our Debt Deception? investigation, begun in February, of how lenders are accused of exploiting gaps in existing laws to make predatory and confusing loans. Here's a brief description of the borrowers we will profile in this installment:

$700 college fee costs family its car

Mildred Morris, a single mother with a federal job in West Virginia, was overjoyed when her high school son won a coveted spot at a famous New York performing arts college to continue his education. But to come up with an unexpected $700 dormitory fee before a college loan was ready, Morris had to put up her fully paid 2002 Pontiac Sunfire as collateral for an auto-title loan. Faced with a 300 percent interest rate, she soon fell behind in her payments and the car – worth several times the amount of the loan – was repossessed.

Small-town shame over credit card bills

The Obama administration today threatened to veto a House spending plan that would limit fiscal 2012 funding for the Securities and Exchange Commission and Consumer Financial Protection Bureau.

The Office of Management and Budget said it would recommend that the president veto a financial services spending bill that has been approved by the Republican-led House Appropriations Committee and is still making its way through Congress, The Hill reported. The House bill would limit CFPB funding to less than half the $550 million the Dodd-Frank law set as its funding, a cut that OMB said would “severely undercut” its ability to police consumer financial services.

The House bill would keep SEC funding flat in 2012, rejecting a $222 million increase requested by the White House to pay for the agency's additional Dodd-Frank responsibilities. The SEC is funded by fees that it assesses on financial transactions, and the agency now generates more in fees than it spends.

Kill Dodd-Frank, kill the economy - The Dodd-Frank reform law is necessary to protect the U.S. economy in the future, a top Treasury Department official said today.

"Scaling back or repealing major parts of the Dodd-Frank Act, or not providing regulators with the funds they need to implement the Act, will leave our economy exposed to a cycle of collapses and crises," said Mary Miller, Treasury’s assistant secretary for financial markets.

Miller spoke at a Securities Industry and Financial Markets Association regulatory reform event to mark the July 21 one-year anniversary of the Dodd-Frank Act.