Credit Reporting A Pet Peeve from Hawke

At a meeting of the Neighborhood Housing Services of New York, Comptroller of the Currency, John D. Hawke, Jr. discussed what he considers to be a "sharp and shady practice" of some sub-prime lenders.

Hawke is concerned that a growing number of sub-prime lenders do not report credit line and loan payment information to credit bureaus. Their motives are clear. They will tell you that the customers that pay are too valuable to lose. By not reporting, they keep information about their good customers to themselves.

By doing this, the sub-prime lenders are making it impossible for applicants to improve their credit qualifications and to "rise" to better and more affordable credit products. Add to this concern Hawke's belief that close to one third of the customers who borrow from sub-prime lenders could qualify for prime products. They simply don't know it.

Non-reporting also brings a potential problem to banks. The lack of information, Hawke asserts, could become a threat to safety and soundness. Lending is based on information - what the lender knows about the customer. To the extent that some lenders withhold critical information, other lenders will be less able to make sound credit decisions.

Copyright © 1999 Compliance Action. Originally appeared in Compliance Action, Vol. 4, No. 5 & 6, 5/99