A new legal design for the credit reporting industry

Under the traditional and well-established conception, credit bureaus are understood as being little more than vessels storing customer data that has been furnished by specific suppliers, such as banks, intermediaries and, more generally, lenders. Accordingly, credit bureaus are deemed to play a 'neutral' role in the credit market. Hence, in Europe and the US, they are generally not responsible for any inaccuracies in the information they put into circulation, despite data quality being crucial for the proper functioning of the market and for a fair allocation of resources. This circumstance engenders, however, a conflict between the market interest in accurate data and the 'endogenous' for-profit interest of credit bureaus. More specifically, despite their performing an important activity in an oligopolistic environment, credit bureaus are presently allowed to pursue their for-profit interest without any substantial accountability as regards their 'exogenous' function of transmitting accurate data. This disequilibrium oftentimes results in under-performance and a low level of data quality. The analysis points out, also through a comparative analysis with the rules governing the US credit report system, how these circumstances in the credit market sector can imperil some pivotal objectives of the EU legal policy, which aims at ensuring equal levels of protection among citizens of Member States within a unique environment dependent on the cross-border exchange of information.