House lawmakers on Tuesday called for sweeping reforms to the credit reporting industry – with some Democrats going so far as to propose a nationally managed system, saying the top three bureaus are failing Americans.
Three pieces of legislation were submitted for discussion, including the National Credit Reporting Agency Act which would “establish the Public Credit Registry (PCR) within the Consumer Financial Protection Bureau, creating a public option for consumers who choose to use it” .
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“This is a system that lets down people with perfect credit who can fall victim to identity theft,” President Maxine Waters said at the Financial Services Committee hearing. “It’s a system that lets down people who are trapped in debt because of predatory loans, and it’s a system that lets down people who can’t afford to challenge the mistakes made by them. news agencies. “
The three major credit bureaus – Equifax, TransUnion, and Experian – compile and store financial data about a person’s debts submitted by creditors in a credit report. This report can be used to determine if that person is eligible for a loan and on what terms. Homeowners, employers, utilities, cell phone companies, and insurers can also use this information.
While Republican Ranking Committee member Patrick McHenry has agreed that major reforms of the current “oligarchy” are needed, he does not support a nationally managed system.
“We should promote competition to create better opportunities for consumers,” McHenry said, “not allowing one government entity to handle the credit report process for all Americans”.
The committee also heard testimony about how credit scores – which are calculated from information found in credit reports – can disadvantage certain groups.
“While credit scores never officially take race into account, they are based on data on personal borrowing and payment history that is shaped by generations of discriminatory public policies and corporate practices that limit access to wealth for black and Latin families “, Amy Traub, associate director. policy and research at Demos, testified at the hearing.
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In a 2020 survey of 5,000 people by Credit Sesame, 54% of black Americans and 41% of Hispanic Americans reported having a credit score below 640, while 37% of white Americans and 18% of Asian Americans said the same.
The committee hearing comes after the Supreme Court ruling last week in a case involving TransUnion and credit report errors.
In TransUnion v. Sergio Ramirez, 8,185 people claimed that TransUnion did not use the proper steps to ensure their credit records were accurate. The court ruled in favor of 1,853 of the claimants whose inaccurate information was passed on to third parties, but dismissed the other claimants because they had demonstrated “concrete damage” and lacked standing to sue, according to the claims. court records.
Credit report errors are not uncommon, according to a recent Consumer Reports study. One in three people who volunteered to check their credit report found at least one mistake, and one in nine discovered incorrect account information.
On Tuesday, the Waters representative called for more accountability and alternatives to be offered.
“I encourage my colleagues to join me in re-evaluating how we determine creditworthiness,” she said, “and learn how we can harness new technologies to build a more just and equitable credit system. “
Marissa is a reporter for Yahoo Money and Cashay, a new personal finance site. Follow her on Twitter @MarissaLGamache.
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