U.S. Rep. Proposes Sweeping Changes to FCRA, Including Furnisher Mandates

U.S. Representative Maxine Waters (D-Calif.) will propose a bill Wednesday that changes many key provisions of the Fair Credit Reporting Act (FCRA) including a reduction in the time negative information can stay on credit reports and the removal of accounts in collection once paid off.

According to a press release, Waters will introduce the bill in conjunction with a House Financial Services Committee hearing on the credit reporting system scheduled for 2 p.m. Waters is the ranking Democrat on the Committee.

Waters’ bill, to be titled the Fair Credit Reporting Improvement Act of 2014, would mark the most significant change to the FCRA since it was passed in 1970.

The most dramatic change would be a reduction in the time negative account information can stay on a credit report from the current seven years to a proposed four years. Negative marks, ranging from a single missed payment to severely delinquent accounts, would be removed after just four years under the proposal.

The bill would also make changes to the FCRA that have been the focal point of recent debate. Following the lead of FICO in a recent announcement, Waters’ bill would exclude from credit reports accounts that have been paid off, including collection accounts. The legislation does not draw the distinction between medical debt that FICO’s new formula does, also the focus of a recent CFPB report.

But the proposed bill does single out other types of debt for special treatment. Negative marks from private student loan debt would be removed from credit reports once borrowers make “nine consecutive, on-time payments,” the same criteria for rehabilitation of federal loans managed by the Department of Education.

Likewise, derogatory information on mortgage loans found to be “unfair, deceptive, abusive, fraudulent or illegal” would be removed from credit reports.

Most relevant to collection agencies and other credit information furnishers, the bill would mandate that “furnishers retain all records for as long as adverse information about these accounts remains on a person’s credit report.”

The hearing today in the House Financial Services Committee will feature a panel of experts that include representatives from consumer advocacy groups, banking associations, and academics.