Congress considers credit-reporting overhaul, including putting government in charge of scores

From USA Today.com (July 2):

Amid all of this week's news, one potentially game-changing piece of legislation seemed to slip under the radar: the idea of dramatically overhauling the U.S. credit reporting industry.

"Good credit is a gateway to wealth," said House Committee on Financial Services chair Maxine Waters, D-Calif., said Tuesday. "Yet, for far too long, our credit reporting system has kept people of color and low-income persons from access to capital to start a small business; access to mortgage loans to become homeowners; and access to credit to meet financial emergencies."

Waters added that the House passed two bills out of the committee before the pandemic – the Comprehensive CREDIT Act and the Protecting Your Credit Score Act of 2021– which "provide long overdue reforms to our credit reporting system."

Both bills are now back under consideration.

During Tuesday's hearing, Waters and her committee heard from consumer-protection advocates like Chi Chi Wu of the National Consumer Law Center, who proposed replacing the privately-run three-credit bureau system with a public credit registry. It would operate under the umbrella of the Consumer Financial Protection Bureau, which guards consumers against unfair or abusive practices.

"While public agencies are not perfect, at least they would not have profit-making as their top priority," Wu told the House Committee on Financial Services during her testimony. "They would be responsive to public pressure and government oversight. They could also be charged with developing credit scoring models to reduce the yawning racial and economic inequality in this country."

Wu added, "The fact that these are private, profit-seeking companies explains why the credit bureaus are constantly expanding their products into uses, such as employment, insurance, and tenant screening, that ultimately harm Americans and contribute to the massive inequality in our nation."

Waters noted that creating a credit reporting agency that is consumer-oriented "would be a major upgrade over today’s broken, biased credit reporting system."

In addition to the single credit bureau idea, Wu also proposed several other policies, that, if implemented, could improve the financial lives of Americans struggling to improve their credit scores and financial lives:

• Prohibiting the use of credit score information for purposes unrelated to credit decisions. This means most employers could no longer use credit reports in their candidate screening process.
• Reduce the amount of time negative information remains on your credit report. Information like missed payments and collections would fall after 4 years instead of 7. Bankruptcies would continue to stay on for 7 years.
• Limit the reporting of medical debt. They would prohibit the reporting of medical debt for medically necessary services and delay the reporting of unpaid medical bills for one year to give you time to resolve issues with hospitals and insurance carriers.
• Protect economic victims of COVID-19. The lawmakers hope to put a moratorium on the reporting of negative information incurred during the pandemic and other disasters.

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Gov’t taking over the credit system? I am sure that won’t be weaponized or abused. 😟