It didn’t work.
Stone’s philosophy never translated into dollars. He was ousted from his position after the company sold out to a larger and troubled firm. The merger was a messy affair, and the top executive eventually landed in prison for tax fraud. And 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.
The rise and fall of PRBC is a case study of the growing market for our personal financial data, where the incentives for helping consumers and making profits don’t always align. After failing to change the industry from the inside, Stone is now tackling it from the outside.
He joined the powerful new Consumer Financial Protection Bureau this spring as the senior official charged with overseeing the nation’s credit reporting system. The agency is the centerpiece of Washington’s financial reforms and will officially open for business Thursday with a mandate to level the playing field for consumers.
For Stone, that means a second chance to unravel the often conflicting interests of lenders, consumers and the warehouses of data that sit between them. Although he has never worked in government, Stone said the job was “a dream opportunity” to put his experience to use.
“I have long been interested in all of the many ways . . . that information about consumers gets used (and occasionally abused) in the markets for consumer financial services,” he said in an e-mailed statement.
This article is based on interviews with former and current executives at Stone’s firm or who were close to it, who spoke on the condition of anonymity to protect their jobs and relationships. Stone agreed to respond on the record to questions via e-mail. His story mirrors those of other officials at the new agency, who signed up for their jobs because they have lost confidence in the ability of the markets to police themselves.
“Sometimes the people you’re talking to don’t care about doing good,” one of Stone’s former colleagues said. “Sometimes they care about making money.”
Credit scores were not created for the benefit of consumers.
Their origins date back nearly a century to general stores that allowed farmers to buy seed on credit, according to a trade group. The stores took note of who paid them back — or, more important, who didn’t — once the harvest came in, and shared the information with other merchants.
That practice evolved into the elaborate credit reporting system in place today: Businesses share information on millions of Americans’ mortgages, car notes, credit cards and student debt through three central credit bureaus. The bureaus sell the information to lenders, who rely on it to determine who is worthy of a loan. The consumer has no say in the process.