House of Representatives Passes New Credit Reporting Legislation

Today, the House of Representatives passed the Comprehensive Credit Reporting Enhancement, Disclosure, Innovation, and Transparency (CREDIT) Act (H.R. 3621), introduced by Rep. Ayanna Pressley. While the CREDIT Act—which still needs to go through the Senate—is primarily aimed at credit reporting agencies (CRAs) such as Equifax, Experian, and TransUnion, its impact will likely be felt among data furnishers.

The CREDIT Act points out how important accurate credit reports are to consumers for both banking and non-banking needs. The Act claims that:

The nationwide CRAs have failed to establish and follow reasonable procedures, as required by existing law, to establish the maximum level of accuracy of information contained on consumer reports. Given the repeated failures of these CRAs to comply with accuracy requirements on their own, [this] legislation is intended to provide them with detailed guidance improving the accuracy and completeness of information contained in consumer reports, including procedures, policies, and practices that these CRAs should already be following to ensure full compliance with their existing obligations.

The Act, which is 197 pages in total, incorporates into itself several other house bills, including:

• H.R. 3642, the Improving Credit Reporting for All Consumers Act, a bill sponsored by Representative Alma Adams;
• H.R. 3622, the Restoring Unfairly Impaired Credit and Protecting Consumers Act, a bill sponsored by Representative Rashida Tlaib;
• H.R. 3614, the Restricting Use of Credit Checks for Employment Decisions Act, a bill sponsored by Representative Al Lawson;
• H.R. 3621, the Student Borrower Credit Improvement Act, a bill sponsored by Representative Pressley;
• H.R. 3629, the Clarity in Credit Score Formation Act sponsored by Representative Stephen Lynch; and
• H.R. 3618, the Free Credit Scores for Consumers Act sponsored by Representative Joyce Beatty.

There are some industry-related highlights presented in the CREDIT Act. For example, the Act requires the removal of fully paid or settled medical debt. The Act makes mention of the CFPB's Fall 2016 Supervisory Highlights that found that one or more debt collectors never investigated indirect disputes that lacked detail or were not accompanied by attachments. The Act also points out that, "there are no objective or enforceable standards that determine when a debt can or should be reported as a collection trade line. Because debt buyers and collectors determine whether, when, and for how long to report a collection account, there is only a limited relationship between the time period reported, the severity of the delinquency, and when or whether a collection trade line appears on a consumer's credit report."

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insideARM Perspective

One thing notably absent from the CREDIT Act is the impact that credit repair organizations have had on the ability to effectively investigate credit reporting disputes. Credit repair organizations flood data furnishers with generic disputes in order to either get the trade line deleted—regardless of its accuracy—or to bait data furnishers into inadvertent FCRA violations. The outrageously high volume of such disputes received by data furnishers makes it impossible for a company with even the most sophisticated and robust compliance department to properly categorize and investigate each claim. 

Just last year, a jury found such a credit repair organization guilty of fraud against a debt collector for the practice of sending massive quantities of credit report dispute letters. In 2018, a different debt collector filed a RICO suit against a credit repair organization for the same reason. These are just examples in the limited sphere of the debt collection industry; the financial industry at large has likely seen similar issues. Even the CFPB filed a suit against a credit repair organization for its questionable marketing practices. 

It's troubling that a comprehensive bill designed to promote accuracy in credit reports doesn't even mention one very present threat to the bill's mission.