Capital One Financial Corp. has decided to reverse a long-standing policy and will begin reporting cardholders' credit limits to the credit bureaus.
The $148.7 billion-asset company is believed to be the last major card issuer that withholds such information, which the bureaus began pressing lenders to report several years ago. It has long argued that revealing customers' credit limits would put it at a competitive disadvantage. Related Link
For years policymakers and consumer advocates have criticized Capital One for not reporting credit limits, because the practice depressed consumers' credit scores. In late June the U.S. District Court for South Carolina allowed a lawsuit to proceed that alleges the bureaus violated the Fair Credit Reporting Act by not obtaining credit-limit information from Capital One.
Ms. Stead said that "our decision to change our policy is unrelated" to that suit, to which Capital One is not a party.
J. Dann Adams, a group executive at the Atlanta bureau Equifax Inc., said that providing information about cardholders' credit limits is "very important" and that his company scores each lender according to how much borrower data it provides.
Lenders' withholding information increases Equifax's operational costs, he said. But when asked whether his company leaned on Capital One to change its policy, Mr. Adams said, "We hope that we were part of it, but this was a Cap One decision."
Similarly, Susan Hanson, a spokeswoman for the bureau Experian Information Solutions Inc., said that reporting credit limits provides "clearer information about that consumer, but it's really up to the card issuer."
The Chicago bureau TransUnion LLC said that it has always advocated "full-file reporting. It is important for both consumers and credit grantors, so we support Cap One's decision."
In a 2003 hearing, Sen. Richard Shelby of Alabama admonished Scott Hildebrand, a Capital One vice president, for not providing credit limits.
"It seems you deliberately withhold furnishing to credit bureaus information that has a material bearing on your customers," Sen. Shelby said. "Some have claimed that Capital One is gaming the system to prevent its customers from appearing like worthwhile marketing targets to its competitors. Do you think your customers know of, let alone understand, Capital One's policy?"
At the hearing, Mr. Hildebrand said that Capital One had found no evidence that its procedures hurt consumers. Protecting the confidentiality of a customer's credit limit is critical for the company, he said then.
In the South Carolina case, the district court ruled that the bureaus' failure to include credit limit data was not in "compliance with the" Fair Credit Reporting Act's "maximum possible accuracy requirement." It also said that the plaintiff, who is seeking class-action status, "has produced evidence that … [the bureaus] successfully took action against creditors — other than Capital One — that were not providing credit limit information."
Omitting credit limits "can unfairly depress consumer credit scores because of the way credit scoring models … substitute the historic high balance on a credit card account for the missing credit limit, making consumers appear 'maxed out' on accounts or closer to being 'maxed out' than is the case," the court said.
In a 2003 report to Congress, the Federal Trade Commission said that the bureaus "in some cases" refuse to sell consumer reports to creditors that do not furnish complete data. In 1999, TransUnion stopped selling consumer reports to subprime lenders that did not furnish data. Also that year, Equifax said that credit card issuers that did not furnish credit limit data would not receive such information from it.
Steven Sheronas, a group manager at JPMorgan Chase & Co., said Tuesday that providing full information puts no lender at a disadvantage. "It's better for everyone involved to use the same information for all of their decision-making," he said.
