Happy bank customers are all happy in the same ways, but unhappy bank customers are each unhappy in their own special way.
The short history of Payment Reporting Builds Credit (“PRBC”) is only a minor chapter in the epic story of how the financial services industry has hurt consumers and it one that differs from almost any other.
PRBC set out to give people with bad credit or with thin credit a chance to prove that they could be trustworthy in the eyes of a potential lender.
People were optimistic about the prospects of PRBC. The Washington Post wrote a glowing article in 2004 about the company. The wrote another in 2005. The Ford Foundation, the Omiydar Network, and the Center for Financial Services Innovation funded the new company. This week, the Washington Post offered a new story with a much darker perspective.
“…now the reams of personal data PRBC compiled are being sold into the subprime market of payday lenders and debt collectors that the company was supposed to help consumers avoid.”
There are two types of people that PRBC wanted to serve. Some of their clients were people with bad credit. Having not paid their bills, these consumers found themselves in a catch-22: they could not qualify for new credit, and without new credit they could not create a record of on-time payments.
The other group was the “thin-file” crowd. This includes people that don’t have much in the way of a payment history. Some are young people, some are immigrants, and others are just people that never got into the pattern of using credit. Many people do not have a credit card, a mortgage, or a car loan. Those consumers do not create the trail of data that is entered into a credit scoring algorithm. As a result, the Big Four (TransUnion, Equifax, Experian, Innovis) credit scoring agencies cannot give a read on their credit.
PRBC created a service for consumers based on the assumption that even without debt, people would still have to pay rent or their utility bill. PRBC offered to record those payments and then make the data available to lenders.
There were a few unique procedural elements. First, consumers were responsbile to do the work of submitting their payment records. Second, consumers were told that they would have control over when and who was able to see their credit.
It turned out that PRBC didn’t live up to those promises.
When PRBC couldn’t get major lenders to use their data. Bank of America, for one, said that they would not accept PRBC reports.
Microbilt, a company that sells credit data, bought PRBC. MicroBilt has never honored PRBC’s promise to give consumers control over the privacy of their data. Instead, MicroBilt actively sells the data that PRBC collected.
Rather than give customers a chance to connect with mainstream prime lenders, MicroBilt uses PRBC data to help subprime lenders reach out to the un-banked. MicroBilt is not a B2C (business-to-consumer) company. It is a B2B (business to business) firm.
MicroBilt markets the PRBC data to debt collection firms.
Today, the nationwide payday lender Cash America offers its customers the chance to sign up for Microbilt’s PRBC.
MicroBilt is not the only company out there that tracks payments made by underbanked people. “The Fourth Bureau,” as the industry has been called, is very diverse and operates without any kind of registry. While the Big Four have to give consumers one free copy of their credit report every year, the Fourth Bureau companies have no obligation to provide one for free.