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Consumer Financial Protection Bureau
« on: July 21, 2011, 03:49:01 PM »
Daily Market Commentary for July 21, 2011

Equifax, Experian and TransUnion come under scrutiny. (read more at Millennium-Traders.Com)

While the full extent of the Consumer Financial Protection Bureau oversight of these companies is unclear. It is also unclear as to whether the new watchdog agency will help to cut what consumer advocates say are unusually high credit-report error rates and credit-reporting firms’ failure to resolve consumer disputes in a timely manner. It has been proven that these credit reporting agencies make too many errors, in part because they mismatch the files of different people or allow a fraudulently created identity to get mingled with a real person’s records (as is the case with identity theft, when accounts are falsely opened or used by a thief). Consumer advocates also complain that the firms’ procedures for resolving disputes raised by consumers are broken.

As of today, the CFPB will join the Federal Trade Commission in fulfilling obligations set out by the Fair Credit Reporting Act, which governs credit-reporting companies. The Dodd-Frank bank-reform law calls for the new bureau to write rules based on the statute and to enforce violations. Industry watchers say that ultimately the CFPB will supervise the credit-reporting companies, that they will be required to register with the CFPB, open up their books to periodic exams and reporting. Supervisory powers will be delayed until the White House succeeds in getting its nominee to head the agency, Richard Cordray, approved by Congress. Exams would help CFPB write rules to limit mixed-file errors and to set minimum standards for dispute-resolution investigations. Currently, instead of conducting investigations, reporting companies send the dispute to a vendor who matches it to a four-digit code that sends the furnisher of the information, usually the borrower’s lender, a sentence or two of text about the problem. The bureau could force compliance by hiking fines imposed on lenders for failing to comply with their obligations under the Fair Credit Reporting Act.

A study from May 2011 funded by the credit-reporting industry trade group found that less than 1% of cases had one or more disputes that when settled, resulted in a 'material' credit score increase of 25 points or greater. Consumer advocate groups point out that each of the credit-reporting companies has roughly 200 million consumer files which means that a 1% error rate means there are errors in about 2 million files. That is a huge and unsatisfactory amount of errors for consumers.

Consumers facing erroneous entries on their credit report are urged to contact their local legislators in an effort to draw attention to the urgency of fixing the problem that effects millions of Americans.

Companies remain reluctant to hire, per Labor Department data released today. The average number of new jobless claims over the past four weeks fell 2,750 to 421,250 striking the lowest level seen since late April. The claims report show little change in our ongoing, struggling U.S. economy. After several large increases in early 2011, the number of new jobs created has fallen off dramatically resulting in the U.S. unemployment rate climbing to 9.2% from rate of 8.8% during March. With two-thirds of U.S. growth accounted for by consumer spending, lack of jobs results in less money in consumers pockets. As we await for employment hiring to increase, the U.S. economy will continue to struggle. The U.S. Labor Department reported that the number of Americans who continue to receive state unemployment checks fell by 50,000 to 3.7 million in the week ended July 9. Additionally, for week ended July 2, 3.7 million people received extended federal benefits which is down nearly 133,000 from the previous week. Week of July 2, a total of 7.33 million people received some kind of state or federal benefits.

Meridian Bioscience (NasdaqGS: VIVO) shares were down 19% into early afternoon trading, after company lowered their financial forecast.

Alexion Pharmaceuticals (NasdaqGS: ALXN) shares were higher by 9% after company raised its 2011 financial forecast.

MedcoHealth Solutions (NYSE: MHS) shares surged higher by 16% in early afternoon trading after buyout announced by Express Scripts (NasdaqGS: ESRX).

Robert Half International (NYSE: RHI) shares were higher by 15% in early afternoon trading after company reported strong quarterly earnings.

Travelzoo (NasdaqGS: TZOO) shares got slammed by 33% in early afternoon trading after company reported quarterly earnings well below analysts’ estimates.

F5 Networks (NasdaqGS: FFIV) shares got hit by 10% into early afternoon trading after company reported Q3 results that disappointed the street.

Genworth Financial (NYSE: GNW) shares were lower by 14% mid-day after the insurer reported a Q2 loss amid worsening trends in its mortgage-guarantee business.

Economic data released today:

Initial Jobless Claims: U.S. Initial Unemployment Claims rise to 418,000 from 408,000, slightly more than expected and Four-week claims average drops 2,750 to 421,250.

Continuing Jobless Claims: Declined by 50,000 to 3.7 million.

Philadelphia Fed Manufacturing Index: July Philly Fed index 3.2 vs. -7.7 in June; July Philly Fed index above consensus -2.7; July Philly Fed new orders 0.1 vs. -7.6 in June.

CB Leading Index: June leading economic indicators up 0.3%.

House Price Index per FHFA: House prices rise 0.4% in May; House price increase in May revised down to 0.2%; House prices down 6.3% over past year.

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