In the spring of 2007, we noticed unusual charges starting to appear on our credit report invoices. And it was driving the cost of credit reports to our customers higher.
What we found was that the three national credit bureaus – Experian, TransUnion, and Equifax – had unilaterally reinterpreted federal law and issued policies that force a majority of mortgage originators to pay multiple times for the same credit report during the mortgage transaction.
The new policy created the terms “reissue” and “secondary use” of a consumer’s credit report replacing the Fair Credit Reporting Act’s (FCRA) term, “joint use”. The term “joint use” is recognized by the Federal Trade Commission (FTC), the Federal Reserve Board, and the Office of the Comptroller of the Currency. Joint use allowed the report to be used among multiple lenders in seeking the best price and terms for the borrowing consumer.
The FCRA changed, not by congressional action but by the unilateral action of the three major credit bureaus. They have a monopolistic grip on the mortgage credit reporting due to the required merged credit reporting requirements of Fannie Mae, Freddie Mac and the US Department of Housing (HUD).
The consumer pays the greatest cost as they face multiple issues from the reissue/secondary use policy.
The first and least prohibitive cost is that of the credit report itself. The cost is now multiplied by the number of lenders reviewing the same information. In the past, once a mortgage originator purchased a credit report, the price remained constant no matter how many potential lenders reviewed the information in the search for the best terms for the consumer. Now, if less than a half dozen lenders reviewed the same information it could cause the cost of the original report to expand by more than 100%.
In 2003, when the FCRA required a free credit report for each consumer annually, the bureaus assessed a recovery fee of $0.11 per credit report. We don’t believe that justifies increases of 100% or more. That, our dear readers, is outright gouging.
This is just one significant anti competitive feature of today’s mortgage market.
(Come back for the other, more excessive costs of the policy).