Congresswoman Urges Proposes Sweeping Changes to Consumer Credit Reporting System
Congresswoman Maxine Waters (D-California), who is a senior member of the House Financial Services Committee, unveiled a proposal that would make drastic changes to the way consumer credit is scored.
Waters made her proposal, entitled “Fair Credit Reporting Improvement Act of 2014,” because of many recent cases and studies which have shown flaws in our country’s current consumer reporting system. The Federal Trade Commission (FTC) provides details that one in every five Americans (approximately 40 million) has at least one error on their credit report, and that error is important enough in about 10 million of those cases that it could possibly increase the cost of credit that is available to those consumers.
“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,” Waters said in a press release. “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.”
A subcommittee of the House Financial Services Committee has scheduled a hearing entitled “An Overview of the Credit Reporting System” in Washington, D.C. to discuss Waters’ proposal and other consumer reporting issues.
The major positions of Waters’ prospective reform to the consumer reporting system include:
Shortening the time that adverse information stays on a consumer’s credit report from seven to four years
Removing negative information from credit reports that is the outcome of illegal, deceptive, or fraudulent practices of predatory mortgage lenders and servicers
Removing settled debt, such as medical expenses, which is not necessarily a reliable predictor of a consumer’s ability to repay a loan or worthiness to obtain credit
Removing private student loan defaults when the distressed borrower makes nine consecutive monthly on-time payments
Requiring furnishers to retain all records as long as adverse information remains on a consumer’s credit report.