Inside FICO and the Credit Bureau Cartel

Mortgage lenders are facing challenges as a cartel comprising Experian, TransUnion, and Equifax collaborates with FICO to potentially drive them out of business. Rohit Chopra, the director of the Consumer Financial Protection Bureau, is pushing back against this alliance. Chopra highlighted the lack of competition in accessing data and reports needed for loan origination, emphasizing the dominance of a few firms in the market. The credit bureau cartel, along with FICO, imposes increasing costs on mortgage lenders, impacting every mortgage application or transaction in the country. Despite initial skepticism, Chopra's remarks resonated with mortgage bankers at a recent conference, shedding light on the significant expenses incurred by lenders due to credit reports and scores. The historical context of credit reporting, from localized practices to the national market shaped by the Fair Credit Reporting Act of 1970, underscores the evolution and impact of credit bureaus and FICO on the financial industry. The consolidation of credit bureaus and the widespread use of FICO scores have transformed the lending landscape, with implications for mortgage lenders and consumers alike.