WASHINGTON, D.C. – Citing the countless Americans who have experienced heartbreak, frustration and devastation as a result of incomplete or erroneous information on their credit reports, today Congresswoman Maxine Waters, Ranking Member of the Financial Services Committee, released a proposal that would make sweeping reforms to our nation’s consumer reporting system.
The draft proposal, entitled the “Fair Credit Reporting Improvement Act of 2014,” will enhance requirements on the consumer reporting agencies (CRAs), and furnishers that provide information to these CRAs, to guarantee consumers have the capacity to ensure that the information on their credit reports is accurate and complete. The draft proposal comes in the aftermath of a number of recent court cases, news reports and studies that have detailed the significant problems and flaws in the current consumer reporting system.
Today at 2:00pm, a subcommittee of the House Financial Services Committee will hold a hearing entitled “An Overview of the Credit Reporting System,” where these issues – and Waters’ proposal – will be discussed.
“Credit reports are no longer just used exclusively by lenders in making a credit decision. More and more, credit reports are used in a variety of ways, from employment decisions, to determining a consumer’s ability to rent a home, buy a car, or purchase insurance,” said Congresswoman Waters, top Democrat on the committee of jurisdiction. “A person’s credit report is too important in determining access to a wide array of opportunities for these reports to contain inaccurate and incomplete information. This proposal addresses many of the flaws with the existing consumer reporting system, by making common-sense changes that enhance consumers’ rights, create more transparency over the consumer reporting and credit scoring process, and increase the accountability of credit reporting agencies, furnishers, and companies that develop credit scoring models and formulas.”
According to the Federal Trade Commission, one in five, or roughly 40 million consumers, have had an error on one of their credit reports. About 10 million consumers have errors that could increase the cost of credit available to them.
The draft proposal makes vital reforms to the Fair Credit Reporting Act to protect consumers. Key provisions include:
- Providing relief to millions of borrowers who were victimized by predatory mortgage lenders and servicers, by removing adverse information about these residential loans that are found to be unfair, deceptive, abusive, fraudulent or illegal.
- Ending the unreasonably long time periods that most adverse information can remain on a person’s credit report, shortening such periods by three years.
- Giving consumers the tools to truly verify the accuracy and completeness of their credit reports, by mandating that furnishers retain all records for as long as adverse information about these accounts remains on a person’s credit report.
- Eliminating punitive credit scoring practices by removing fully paid or settled debt from credit reports, including medical debt, which has been found not to be a reliable predictor of a person’s creditworthiness.
- Giving distressed private education loan borrowers the same chance to repair their credit as federal student loan borrowers, by removing adverse information when delinquent private education loan borrowers make consecutive on-time monthly payments for a certain period of time on their loans.
The draft proposal also restricts the use of credit reports for employment purposes, which employers are increasingly using to screen qualified job applicants despite a lack of adequate data to show that a person’s credit is predictive of their job performance. It also sets a dollar amount that a consumer can be charged to buy their credit score from CRAs, while also requiring CRAs to provide consumers with a free annual credit or educational credit score upon a consumer’s request.
Waters added, “Over 10 years ago, Congress tried to strengthen consumer protections, but our consumer reporting system still has a number of systemic flaws. I believe we must take action to end the heartache that has plagued millions of consumers who have been unable to obtain a job, go to college, or buy a car because of their credit score. Many of these problems have stemmed our country’s economic growth. This draft proposal attempts to meet our obligation to ensure that consumers who have fallen victim – or fallen on hard times – are not deprived of the chance to achieve the American Dream.”
Text of the draft proposal can be found here.
A summary of the draft proposal can be found here.