Regulation V Defined

What Is Regulation V?

Regulation V is a federal regulation that is intended to protect the confidential information of consumers. In particular, it aims to protect the privacy and accuracy of the information contained in consumer credit reports.

The Federal Reserve adopted Regulation V in order to comply with the Fair Credit Reporting Act (FCRA), which was introduced in 1970. In July 2011, responsibility for enforcing the FCRA was transferred to the Consumer Financial Protection Bureau (CFPB).

Understanding Regulation V

Regulation V applies directly to banks that are members of the Federal Reserve. However, it has indirect bearing on any parties which obtain and use consumer credit information. 

Typically, consumer credit information is used to determine a person's suitability to receive credit products, such as credit cards or home mortgages. But credit reports also fill a broader role in society, in that they are also used to screen employment candidates and in other such vetting processes.

Although a consumer may believe that only a specific institution has access to their credit information, in actuality this information is widely shared among affiliated financial institutions. For this reason, there are many opportunities in which information might be lost or inaccuracies might enter. This fact is especially dangerous considering the growth in identity theft that has coincided with the rise of prolific Internet usage.

To help mitigate this risk, Regulation V requires that all entities providing information to a consumer reporting agency are responsible for ensuring the accuracy of that information. The information must be specific in nature, providing a detailed record of the customer's payment history, such as whether they met their payment due dates on time. The amount that has been paid toward the outstanding balance of debts, and the length of time for which those debts have been owing, are also taken into account.

Importantly, Regulation V gives consumers the right to initiate a formal dispute if they feel that their credit information has been inaccurately entered or improperly handled by a financial institution. For instance, it permits dispute resolution over issues such as the reported history of debt payments by the consumer, their stated income, and personal information such as their name and address.

Enforcement of the FCRA

Enforcement of the FCRA is carried out by the CFPB, which also has responsibility for educating the public on a range of financial products. It was created in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Real World Example of Regulation V

In July 2011, the responsibility for overseeing the rules of the FCRA was transferred from the Federal Reserve to the CFPB. For the most part, however, the rules in question have not materially changed as a result of this handover.

In addition to the Federal Reserve, other institutions which have now delegated authority to the CFPB include the Federal Trade Commission (FTC), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), among others.

This consolidation of regulatory responsibility is a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed in 2010 in the wake of the 2007–2008 financial crisis.