Consumer Has the Right to Expect Due Diligence


cfpb (Photo credit: afagen)

A consumer has the right to expect due diligence in all his or her dealings with the credit industry. “Due diligence” is a term used by a number of concepts involving either an investigation of a business prior to contractual obligations or an act providing a consumer with a certain standard of care. The use of the term is most often associated with voluntary investigations, but it can be expected to apply in many legal obligations. Due diligence is becoming the standard bearer representing the relationship between credit business and a consumer in more recent cases.

One of the problems in recent years with the credit industry and a high number of bankruptcy filings has involved the reluctance of the credit industry businesses to cooperate with government regulations in providing the consumer with information that should have been readily available to the consumer. With the turnover of government toward a more liberal influence these past four years, the winds of regulatory government change have been blowing in the favor of the consumer.

According to recent news articles, the Consumer Financial Protection Bureau (CFPB), a bureaucratic watchdog for the federal government, sent out letters to six specialty credit-reporting agencies warning them they could be breaking the law by not making it easy for people to get a free annual copy of their consumer reports. A consumer has the right to receive a free annual report from each reporting company which collects financial information on individuals and businesses.

Providing this type of standard care within the industry is a prime example of what due diligence means in legal terms. As a matter of standard care of doing their business and to uphold their minimum responsibility to the law, credit agencies must provide a certain standard of free information to all consumers inquiring about such. Failure to readily and easily provide this information is a violation of due diligence laws.

Nevertheless, many credit-reporting agencies have failed to provide toll-free numbers or lack a simple process for consumers to obtain a free report. The CFPB spent a considerable amount of time on credit-reporting websites requesting consumer reports to see if the staff was prepared to provide a report when someone requested one. The responses were either negative or nil.

This fact caused Kent Markus, an assistant director for enforcement at the CFPB to say, “this is a due diligence moment for the industry.” CFPB Director Richard Cordray further commented, “Nationwide consumer reporting agencies can have a great influence over a consumer’s tenancy, insurance premiums, or even employment. If we have reason to believe that companies are not following the law, we will take action.”

Unfortunately for a person facing bankruptcy, all of these reports made by credit-reporting agencies frustrate their condition even further. If they cannot be made aware of their state of condition in a timely manner, they might be forced into an untenable financial situation. Every consumer has the right to expect due diligence, especially from credit-reporting agencies which evaluate the consumer.

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