Congress considers holding government responsible for regulating credit scores

Congress considers holding government responsible for regulating credit scores
Congress considers holding government responsible for regulating credit scores

Photo (c) Peter Dazeley – Getty Imagesmove over Experian, TransUnion, and Equifax — Congress is considering putting the US government in charge of credit scores.

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The big three credit reporting agencies will likely spend their July 4 vacation on two groundbreaking pieces of legislation that could completely overhaul the country’s credit reporting scenario.

Chi Chi Wu, an attorney at the National Consumer Law Center, put the agencies on edge when she testified before a US House of Representatives Committee on Financial Services earlier this week. to hear. At the meeting, she discussed many of the issues consumers face when it comes to credit reporting. At the top of Wu’s trouble spots were:

  • Systemic credit reporting errors, which are the result of deliberate decisions and prolonged credit bureau failures leading to unacceptable error rates, especially with racial communities;

  • An oppressive computerized dispute system used by the credit bureaus; and

  • The need to dampen the punitive impact of a system that characterizes consumers in hard times as “irresponsible fools.”

Requested changes

Wu wasn’t shy about sharing how she would like Congress to change the credit reporting system. She said the following points would be a good start:

  • Prohibit the use of credit score information for anything unrelated to credit decisions. “This means most employers could no longer use credit reports in their candidate screening process,” she said.

  • Reduce the amount of time negative information stays on a credit report. “Information such as missed payments and collections would fall after 4 years instead of 7. Bankruptcies would last 7 years,” Wu said.

  • Limit the reporting of medically-related debts. Two things in this department: prohibit the reporting of medical debts for medically necessary services; and delay the reporting of unpaid medical bills for a year to give consumers time to resolve issues with hospitals and insurance companies.

Wu said many of these issues stem from the fact that Experian, TransUnion and Equifax are private, for-profit companies that are publicly traded, “meaning their highest duty is to achieve profits for shareholders, not the public interest or the American consumer.”

Congress buy-in

Wu certainly preached to the chorus in her testimony, especially with committee chair Maxine Waters.

“Good credit is a gateway to wealth. Yet for far too long our credit reporting system has denied people of color and low income people access to capital to start a small business; access to mortgage loans to become homeowners; and access credit to deal with financial emergencies,” Waters said.

In fact, an overhaul of the credit reporting system could be close to reality, thanks to the fact that the House has passed two bills from the committee — the extended credit law and the Protecting Your Credit Score Act of 2021.

If passed, those bills would do everything from give consumers the right to appeal credit reporting disputes to give consumers the right to seek a court order so that credit bureaus would be forced to file a credit report. to set.

“We need big, bold legislative solutions to transform this broken system,” Waters stressed. “So I encourage my colleagues to re-evaluate with me how we determine creditworthiness and learn how we can use new technologies to build a fairer and fairer credit system.”

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