U.S. Representative Maxine Waters (D-Cal), the top Democrat on the Republican led House Financial Services Committee, proposed a bill on September 10, 2014 to change many key provisions of the Fair Credit Reporting Act (FCRA) regulating the way lenders report consumer payments to credit reporting agencies. The bill, entitled the “Fair Credit Reporting Improvement Act of 2014”, proposes the most sweeping changes to the FCRA since it was passed in 1970, and would affect consumer reporting agencies, consumers, lenders, employers and furnishers of credit information.
The most dramatic changes implemented by the Fair Credit Reporting Improvement Act would be:
- Reducing the time negative/adverse account information can remain on a credit report from seven years to four years.
- Excluding from credit reports accounts that have been paid off, including collection accounts.
- Removing adverse information about private student loans from credit reports once borrowers make nine consecutive, on-time payments.
- Removing adverse information on mortgage loans found to be “unfair, deceptive, abusive, fraudulent or illegal”, or related to acts, practices, or activities that are the subject of a settlement agreement between a financial institution and local, state or Federal Government.
- Requiring furnishers to retain all records about the information they furnish to consumer reporting agencies for as long as the account remains on the credit report.
- Requiring the seller of an account that furnished information to a credit reporting agency to provider the buyer of the account with all the records supporting the information furnished to the consumer reporting agency.
- Requiring consumer reporting agencies to provide furnishers with all information (not only the relevant information) in connection with the investigation of a consumer dispute.
- Requiring a furnisher to conduct an analysis of all the data “it has access rights to” (in addition to the data it has) in connection with investigating a consumer dispute.
- Requiring a furnisher who has already furnished information about an account to a consumer reporting agency to inform the consumer reporting agency of a dispute within 5 days of receiving notice of the dispute.
- Allowing a consumer to file a lawsuit seeking injunctive relief (e.g., correcting or removing information from a credit report), in addition to damages.
- Limiting an employer’s use of credit reports for employment purposes.
Representative Waters’ bill is one of many actions taken recently regarding credit reporting. The Consumer Financial Protection Bureau has issued a series of studies about the credit reporting process, including one in May questioning whether medical debt should factor into credit scores. Last month, Fair Isaac Corp. (FICO), creator of the most widely used credit score, announced a new version of its scoring model. Also, the House Financial Services Committee heard recent testimony from academics, consumer attorneys and industry representatives on the state of the credit reporting system. Representative Waters’ bill will only foster additional debate over the credit reporting system and amendments to the FCRA.