Marking the first time they have been comprehensively supervised at the federal level, the Consumer Financial Protection Bureau (CFPB) adopted a rule on Monday that begins its oversight of credit bureaus and credit reporting companies.

The Dodd-Frank Act authorizes the CFPB to supervise nonbanks in the specific markets of residential mortgage, payday, and private education lending. For other markets for consumer financial products or services, the CFPB has the authority to supervise nonbank “larger participants.” 

The new rule gives the CFPB supervision of consumer reporting agencies that have more than $7 million in annual receipts.

Previously, consumer reporting was subject, at the federal level, only to law enforcement authority through the Fair Credit Reporting Act. Authority to write rules under the federal law governing this system was shared among several agencies, with no single federal government agency in charge.

Although a small number of large businesses dominate the credit reporting market, there are about 400 consumer reporting agencies in the U.S. The supervisory authority extends to an estimated 30 companies that account for about 94 percent of the market's annual receipts.

The market includes: the largest credit reporting companies that sell comprehensive consumer reports; consumer report resellers (for example, those that merging files from multiple agencies); specialty consumer reporting companies that primarily collect and provide specific types of information like on payday loans or checking accounts; and companies that analyze consumer report data.

Altogether, the three largest credit reporting companies (TransUnion, Experian and Equifax) issue more than 3 billion consumer reports a year and maintain files on more than 200 million Americans.

Like banks and other nonbanks already subject to CFPB supervision, these companies will be subject to review of compliance systems and procedures, on-site examinations, discussions with relevant personnel, and they will be required to produce relevant reports.

The rule outlining the CFPB's supervision of this market will be effective Sept. 30, 2012. Before it begins exams, the CFPB will publish procedures and guidance on how it will conduct monitoring.

In February, the CFPB issued a proposed rule to supervise the credit reporting and debt collection markets. It plans to finalize its “larger participant” rule on debt collection this fall.

A factsheet about the CFPB's supervision of credit reporting is available on its website.