The U.S. Credit Rating Agency Reform Act is a set of laws, enacted by the American government to improve the quality of credit ratings. The U.S. Credit Rating Agency Reform Act was passed by the U.S. Senate in 2006, under the title “Credit Rating Agency Reform Act of 2006”. The American credit rating agencies mattered a lot to the Senate, as a significant national asset. So, it was necessary that every aspect of their activities including analyses, writings, preparing the credit reports and finally credit ratings must have some guidelines to follow, in order to avoid unwanted fallacies, frauds and corruptions, on the part of the American credit rating agencies. Moreover, the Act also protects the interests of investors and layman simultaneously.
Some significant aspects and clauses of the Credit Rating Agency Reform Act of 2006:
The Credit Rating Agency Reform Act of 2006 involves some of the following clauses and criteria:
- Procedure for Registration: It is compulsory that all American credit rating agencies must register themselves, by making an official application. However, all the registration application forms must be provided with the following general information about the applicant:
- The performance statistics of the applicant which will measure his/her credit rating activities.
- The applicant's organizational framework
- The required steps (policies, etc.) taken by the applicant to prevent the abuses of both material and information.
- The procedure and methods used by the applicant in determining the credit ratings.
