Bills to reform credit bureaus unveiled on eve of hearing
WASHINGTON — Ahead of a hearing with the chief executives of the three major credit reporting agencies, House Financial Services Committee leadership has released two bills aimed at reforming the bureaus and protecting credit scores for government employees affected by the shutdown.
The heads of Equifax, Experian and TransUnion will testify before the panel Tuesday, about a year and a half after the Equifax data breach. Lawmakers are expected to discuss a sweeping reform proposal for the credit bureaus, as well as legislation to keep negative financial information caused by the shutdown from hurting government workers' credit profiles.
The first bill, which was posted on the committee's website, includes roughly 200 pages of reforms. The Comprehensive Consumer Credit Reporting Reform Act of 2019, sponsored by House Financial Services Committee Chair Maxine Waters, would expand access to free consumer reports and credit scores, and reform the dispute process to shift the burden from consumers to the credit bureaus and furnishers.
The bill would also restrict the use of credit checks for employment purposes, and give the Consumer Financial Protection Bureau explicit authority to monitor the development of credit scoring models.
But parts of the legislation will likely face pushback from the credit bureaus, analysts say.
“We believe the biggest takeaway is that some of the reforms [Waters] is pushing could make credit reports less informative and used less frequently,” Jaret Seiberg, an analyst with Cowen Washington Research Group, said in a note Monday. “This is a double attack on the business model and goes beyond credit monitoring and other changes that the 115th Congress discussed in response to the Equifax breach. She also restricts the business of providing credit monitoring services to consumers.”
Based on prepared remarks to the committee, the CEOs of the credit bureaus are expected to defend the credit reporting industry and the Fair Credit Reporting Act, which Waters’ legislation seeks to amend.
“Credit bureaus help stabilize the safety and soundness of the nation’s consumer lending sector,” Experian North America CEO Craig Boundy said in his prepared remarks.
Boundy added that Experian was investing in data security even before the Equifax breach. He also noted that the company implemented a program to enable underserved consumers to include utility and telecom payments in their credit files to help boost their scores, and has been supportive of a federal data breach standard since 2005.
Equifax CEO Mark Begor highlighted organizational and cultural changes the company has made since the 2017 data breach in his prepared remarks, and defended the current credit reporting system.
“We currently operate under a clearly defined and robust regulatory structure established by the FCRA, with continuous, active oversight by the Consumer Financial Protection Bureau and the Federal Trade Commission,” Begor said. “Under the FCRA, consumer reporting agencies, as well as data furnishers and users of consumer reports such as banks and other companies, must meet stringent requirements around accuracy, fairness and privacy of information.”
But Seiberg said those responses likely won’t prevent Waters from pushing her reforms.
“Nothing the three could say in their opening remarks would be able to defeat the policy risk the industry is facing,” Seiberg said. He added, "Waters wants to make changes. We believe that is just the reality.”
The second bill the committee is expected to discuss is co-sponsored by Reps. Greg Meeks, D-Mo., Brad Sherman, D-Calif., Jennifer Wexton, D-Va., and Jesús García, D-Ill. It would restrict credit bureaus and furnishers from including negative financial information resulting from a government shutdown in affected consumers’ credit profiles for the duration of a shutdown plus 90 days.
The bill follows the longest shutdown in U.S. history, during which several Democratic lawmakers called on the credit bureaus to ensure that federal employees who didn’t receive their paychecks on time wouldn’t get hit with negative credit reports.