Congresswoman Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, recently introduced landmark legislation to overhaul the American credit reporting system so that it is fairer, more accurate, and less confusing for consumers.
Consumer reporting agencies compile and maintain files for about 200 million adults. These reports play an important role in Americans’ lives as most creditors use them to make decisions about whether to extend credit and on what terms. These reports are also used for non-credit decisions, including by employers and landlords.
Unfortunately, roughly 40 million Americans have credit reports that contain inaccurate information and must jump through numerous hoops to correct these errors. The “Comprehensive Consumer Credit Reporting Reform Act of 2016,” H.R. 5282, corrects the current imbalance in the system by ending the onerous burdens unfairly imposed on consumers to fix mistakes on their reports.
“American consumers are increasingly reliant on credit information that is used to determine their ability to buy a house, open a checking account, or even get a job,” Waters said. “We’ve all heard the horror stories about the serious problems with credit reporting practices that unjustly restrict so many people’s economic opportunities. But I believe it is also time to shine light into the mysterious ‘black boxes’ that generate credit scores and give victims, who are saddled with poor credit because of predatory and unfair practices, the chance for a fresh start. This bill will bring much-needed accountability to the credit reporting industry, which will enhance consumer and creditor confidence in the integrity of information on reports and restore fairness in the system.”
The legislation builds on a draft proposal Waters unveiled in 2014. Key reforms in the measure include:
• Fixing the dispute process so that credit bureaus and furnishers, not consumers, bear the burden to prove the accuracy and completeness of credit information.
• Shortening the time most adverse credit information stays on reports to four years and quickly removing paid and settled debts
• Protecting the credit standing of victims of predatory and abusive practices related to foreclosures caused by discriminatory loans, delinquent or defaulted private education loans obtained to attend deceptive for-profit colleges, or fraudulent credit items resulting from shady caregivers, abusive domestic partners, or family members
• Rehabilitating credit for distressed private education loan borrowers when they demonstrate consistent loan repayments for a certain period of time, which is similar to the relief available to federal student loan borrowers
• Expanding access to free consumer reports and credit scores so that consumers can better understand and improve their creditworthiness
• Restricting the use of credit checks for employment purposes, which is an unfounded and wide-spread practice.
• Further empowering the Consumer Financial Protection Bureau by providing explicit authority to monitor the development of credit scoring models
The legislation is supported by Americans for Financial Reform, National Consumer Law Center (on behalf of its low-income clients), AFL-CIO, Center for Digital Democracy, Consumer Action, Consumer Federation of America, Consumers Union, Demos, Empire Justice Center, Greenlining Institute, International Brotherhood of Teamsters, NAACP, National Association of Consumer Advocates, National Coalition for Asian Pacific American Community Development (National CAPACD), National Council of La Raza, National Patient Advocate Foundation, National Urban League, New Economy Project, and U.S. PIRG.
“This bill will vastly improve the credit reporting system, and with it, the economic lives of millions of Americans,” said National Consumer Law Center attorney Chi Chi Wu. “We thank Congresswoman Waters for her leadership in introducing this bill.”
Waters also sent a letter to House Financial Services Committee Chairman Jeb Hensarling requesting a series of hearings to thoroughly examine problems in the industry and legislative proposals to address them.