There is bi-partisan support to revamp credit reporting in the United States.
If California Representative and Financial Services Chairwoman, Maxine Walters, has her way, credit reporting would be consumer-friendly.
Water seeks to remove negative items from credit reports in four years instead of seven. She’d also like to see all bankruptcies removed in seven years instead of ten.
In an effort to amend the Fair Credit Reporting Act (FCRA), these changes and more are what Waters has long advocated.
During a recent hearing with the three major credit reporting agencies (Transunion, Equifax, and Experian), Waters presented a 199-page draft bill, the “Comprehensive Consumer Reporting Reform Act of 2019”.
In her opening statement, Waters argued, “Consumers did not choose to entrust these companies with their personal information, and they do not have the option today of choosing a different company to maintain their consumer credit data records or having their information deleted from the major credit bureaus’ databases, even following these egregious breaches. To credit reporting bureaus, consumers aren’t consumers. They are commodities.”
The bill would also give consumers more tools to dispute erroneous information. Lenders and reporting agencies would then carry the burden to correct inaccurate data in credit reports.
Another change is a restriction on the use of credit checks for employment purposes.
The most major is the removal of negative items within 45 days after paying in full or settling an account. This is especially beneficial for those who just fell on hard times due to loss of a job or illness.
A rule like this would not penalize consumers for events that were out of their control.
The consumer-friendly bill, which was initially proposed by Waters in 2016, is not without criticism. Many worry that consumers may see this as a way to take advantage of the system by allowing all of their debt to go into default and waiting just four short years for it to be removed. The credit reporting agencies and their allies (lenders) have another concern: properly assessing risk.
Supporters argue that most people aren’t looking to get out of paying their bills. Unexpected events happen in life and many are willing to take responsibility for a debt that was rightfully owed. Especially if that means the removal of negative tradelines from their credit reports.
Personally, I’d be happy to see an overhaul of this magnitude.
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