On February 26, the House Financial Services Committee held a hearing entitled “Who’s Keeping Score? Holding Credit Bureaus Accountable and Repairing a Broken System,” with the CEOs of the big three credit bureaus – TransUnion, Equifax, and Experian – testifying. The hearing was the first time the current CEOs of the major credit bureaus have testified before the Committee since the cyberattack on Equifax that affected more than 100 million Americans and spawned extensive litigation. As a result, legislators focused heavily on data security issues and the steps the major credit bureaus have taken to improve security.

But the hearing also involved discussion of two bills introduced by Chairwoman Maxine Waters (D-Calif.) that would make sweeping changes to the Fair Credit Reporting Act: the Comprehensive Consumer Credit Reporting Reform Act and the Protecting Innocent Consumers Affected by a Shutdown Act. These bills would have a tremendous impact not only on the big three credit bureaus, but also the dozens of other nationwide consumer reporting agencies.

Waters’s Proposed Legislation

The Protecting Innocent Consumers Affected by a Shutdown Act would establish a nationwide database of consumers affected by a shutdown of the federal government and would prevent credit reporting agencies from including any adverse financial information that occurs during the shutdown or within 90 days thereafter. The proposal would also prevent the users of consumer reports from considering adverse information regarding a consumer affected by a shutdown.

The Comprehensive Consumer Credit Reporting Reform Act would, as the name suggests, impose changes with far-reaching ramifications. In Waters’s own words, the bill is designed to place “the burden of removing mistakes from credit reports onto the credit bureaus and furnishers.” Among other sweeping changes, the legislation would:

  • Largely eliminate the use of credit checks for employment purposes;
  • Establish new requirements on consumer reporting agencies when notified of inaccurate or incomplete information;
  • Create a right to appeal the results of investigations into disputed information;
  • Require furnishers to maintain records to verify the accuracy of disputed information;
  • Require the removal of paid or settled derogatory accounts;
  • Restrict the appearance of information about medical debts;
  • Reduce the amount of time most derogatory items are permitted to remain on a consumer’s credit report, from 7 years to 4 years, with bankruptcies being permitted to remain on credit reports for a maximum of 7 years instead of the current 10-year maximum;
  • Prevent the reporting of adverse information relating to mortgage loans if the information relates to “an unfair, deceptive, or abusive” act or practice;
  • Require a loan rehabilitation option for consumers with private student loans “who were defrauded or misled”;
  • Grant the Consumer Financial Protection Bureau the authority to regulate the development of new credit scoring models; and
  • Require consumer access to free annual credit scores

Impact on Consumer Reporting Agencies

The proposed legislation would impact nationwide consumer reporting agencies, including agencies that specialize in reporting residential or tenant history, medical records or payments, and employment history. The Comprehensive Consumer Credit Reporting Reform Act in particular would require a dramatic reworking of the information reported and the handling of disputes over the accuracy of information. The bill seeks to all but eliminate the use of credit screening for employment purposes, carving out narrow exceptions where screening is required by local, state, or federal law.

Democratic representatives at the Financial Services hearing focused on perceived abuses in the financial system, while many Republican representatives expressed concerns that the proposed legislation would impose unnecessary regulatory burdens and remove so much information from consumers’ records so as to render credit reports ineffective. The House Financial Services Committee has scheduled a hearing regarding the CFPB’s semi-annual review for March 7 but has not scheduled any other hearings specifically regarding Waters’s proposed bills. Troutman Sanders will continue to monitor these legislative proposals.