114 HR 5282 IH: Comprehensive Consumer Credit Reporting Reform Act of 2016 U.S. House of Representatives 2016-05-19 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 114th CONGRESS 2d Session H. R. 5282 IN THE HOUSE OF REPRESENTATIVES May 19, 2016 Ms. Maxine Waters of California introduced the following bill; which was referred to the Committee on Financial Services A BILL To amend the Fair Credit Reporting Act to improve the consumer reporting system, and for other purposes.

1.

Short title

This Act may be cited as the Comprehensive Consumer Credit Reporting Reform Act of 2016.

2.

Table of contents

The table of contents for this Act is as follows: Sec. 1. Short title. Sec. 2. Table of contents. Sec. 3. Congressional findings. Sec. 4. Effective date. Title I—Fixing the dispute process Sec. 101. Establishes a new right to appeal disputes completed by consumer reporting agencies and furnishers. Sec. 102. Creates reasonable dispute procedures for furnishers of information and meaningful disclosures to consumers about investigations; notices by furnishers to consumers of reporting of negative items to consumer reporting agencies. Sec. 103. Creates reasonable dispute procedures for consumer reporting agencies and meaningful disclosures to consumers about reinvestigations. Sec. 104. Increases consumers’ awareness of dispute rights and tools for challenging errors. Sec. 105. Enhances accuracy and completeness duties for consumer reporting agencies and furnishers. Sec. 106. Requires furnishers to maintain records necessary to verify accuracy of disputes. Sec. 107. Establishes new requirements on consumer reporting agencies when notified of inaccurate or incomplete information from furnishers. Sec. 108. Indication of dispute by consumers and use of disputed information. Sec. 109. Inclusion of public record data sources in consumer reports. Sec. 110. Injunctive relief for victims. Title II—Restricting the use of credit checks for employment decisions Sec. 201. Bans the use of credit information for most employment decisions. Title III—Rehabilitating the credit standing of struggling private education loan borrowers Sec. 301. Removes adverse information for certain defaulted or delinquent private education loan borrowers who demonstrate a history of loan repayment. Sec. 302. Private education loan definitions. Title IV—Restoring the impaired credit of victims of predatory activities and unfair consumer reporting practices Sec. 401. Shortens the time period that most adverse credit information stays on consumer reports. Sec. 402. Mandates the expedited removal of fully paid or settled debt from consumer reports. Sec. 403. Imposes restrictions on the appearance of medical collections on consumer reports and requires the expedited removal of fully paid or settled medical collections from consumer reports. Sec. 404. Provides credit restoration for victims of predatory mortgage lending and servicing. Sec. 405. Provides credit relief for private education loans borrowers who were defrauded or mislead by proprietary education institution or career education programs. Sec. 406. Establishes right for victims of financial abuse to have adverse information associated with an abuser’s fraudulent activity removed from their consumer reports. Sec. 407. Prohibits treatment of credit restoration or rehabilitation as adverse information. Title V—Monitoring the development and use of credit scores Sec. 501. Establishes clear Federal oversight of the development of credit scoring models by the Bureau. Sec. 502. Mandates ongoing review and reports to Congress by the Federal Housing Finance Agency on using additional, alternative, and updated credit scoring models as part of the criteria for loans purchased by Fannie Mae and Freddie Mac. Sec. 503. Requires a Bureau study and report to Congress on the impact of using non-traditional data. Title VI—Providing greater consumer access to and understanding of consumer reports and credit scores Sec. 601. Credit score and educational credit score definitions. Sec. 602. Expands explanatory information given to consumers about how scores are calculated. Sec. 603. Requires consumer reporting agencies to disclose prominently the differences between and limitations of credit scores and educational credit scores required prior to a consumer obtaining such scores. Sec. 604. Provides consumers with free credit score disclosures with their free annual consumer reports upon request and creates instances when consumers automatically receive free consumer reports and credit scores. Sec. 605. Requires private educational lenders to provide consumers with free copies of any consumer reports and credit scores that they used for underwriting before consumers sign loan agreements. Sec. 606. Requires motor vehicle lenders or indirect auto lenders to provide consumers with free copies of any consumer reports and credit scores that they used for underwriting before consumers sign lease or loan agreements. Sec. 607. Requires residential mortgage lenders to provide consumers with free copies of any consumer reports and credit scores that they used for underwriting before consumers sign loan agreements. Title VII—Banning misleading and unfair consumer reporting practices Sec. 701. Prohibits automatic renewals for consumer reporting and credit scoring products and services offered under promotional terms. Sec. 702. Bans misleading and deceptive marketing related to the provision of consumer reporting and credit scoring products and services. Sec. 703. Ends excessive direct-to-consumer sales by giving the Bureau authority to set fair and reasonable fees on consumer reporting and credit scoring products and services sold by consumer reporting agencies to consumers. Sec. 704. Promotes access to consumer reporting and credit scoring disclosures for consumers with limited English proficiency and visual and hearing impairments to enhance their ability to exercise their rights. Sec. 705. Establishes consumers’ right to shop for the best deal on certain large dollar loans without harming their credit standing. Sec. 706. Ends confusion about whether entities are engaged in consumer reporting practices by creating a nationwide consumer reporting agencies registry. Title VIII—Expanding access to tools to protect vulnerable consumers from identity theft, fraud, or a related crime, and protect victims from further harm Sec. 801. Identity theft report definition. Sec. 802. Credit freeze definition. Sec. 803. Enhances fraud alert protections. Sec. 804. Enhances access to credit freezes, limits the cost of such freezes, and provides access to free credit freezes for vulnerable consumers. Sec. 805. Requires disclosure of consumer rights related to credit freezes. Sec. 806. Provides access to fraud records for victims. Sec. 807. Required Bureau to set procedures for reporting identity theft, fraud, and other related crime. Sec. 808. Establishes the right to free credit monitoring and identity theft protection services for certain consumers. Sec. 809. Ensures removal of inquiries resulting from identity theft, fraud, or other related crime from consumer reports. Title IX—Miscellaneous Sec. 901. Definitions related to days. Sec. 902. Technical correction related to risk-based pricing notices. Sec. 903. FCRA findings and purpose; voids certain contracts not in the public interest. Sec. 904. General Bureau rulemaking.

3.

Congressional findings

Congress finds the following: (1)

General findings

(A)Consumer reporting agencies (CRAs) are companies that collect, compile, and provide information about consumers in the form of consumer reports, commonly referred to as credit reports for certain permissible statutory purposes. Data furnishers, such as creditors, lenders, and debt collection agencies, voluntarily submit information to CRAs such as the total amount for each loan or credit limit for each credit card and the consumer’s payment history on these products. These reports may also include information about companies that have asked to see a consumer’s credit report, addresses, current and previous employers, and certain public records. The largest CRAs in this country are referred to as nationwide CRAs, which currently include Equifax, TransUnion, and Experian. (B)In a December 2012 paper, Key Dimensions and Processes in the U.S. Credit Reporting System: A review for how the nation’s largest credit bureaus manage consumer data, the Bureau of Consumer Financial Protection (CFPB or the Bureau) noted that the three nationwide CRAs maintain credit files on approximately 200 million adults and receive information from about 10,000 furnishers. On a monthly basis, these furnishers provide information on over 1.3 billion consumer credit accounts or other tradelines. (C)The 10 largest institutions furnishing credit information to each of the nationwide CRAs account for more than half of all accounts reflected in consumers’ credit files. (D)Consumer reports play an increasingly important role in the lives of American consumers as most creditors are reviewing these reports to make decisions about whether to extend credit and on what terms and conditions. As such, information contained in a person’s credit report not only can affect whether a person is able to get a private education to pay for college costs, secure a mortgage to buy a home, or to obtain a credit card, but also can affect the consumer’s cost of borrowing. (E)Consumer reports are also increasingly used for noncredit decisions, including by landlords to determine whether to rent an apartment to a prospective tenant and by employers to decide whether to hire potential job applicants. (F)Pursuant to the Federal Fair Credit Reporting Act (FCRA), CRAs have a statutory obligation to verify independently the accuracy and completeness of information included on the reports that they provide. (G)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 CRAs to comply with accuracy requirements on their own, 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. (H)The presence of inaccurate or incomplete information on a person’s report may result in substantial financial and emotional harm. Credit reporting errors can lead to the loss of new employment opportunities or a denial of a promotion in an existing job, the inability to obtain credit on favorable terms, the inability to secure rental housing, the mental distress of trying unsuccessfully to remove errors from one’s credit report, among other types of harm. (I)Current industry practices impose an unfair burden of proof on consumers when trying to fix errors on their reports. (J)Consumer reports containing inaccurate or incomplete credit information undermine the ability of creditors and lenders to effectively and accurately underwrite and price credit. (K)Recognizing that credit reporting affects the lives of most Americans and that the consequences of errors on a consumer report can be catastrophic for a consumer the Bureau began accepting consumer’s complaints about credit reporting in October 2012. (L)As of August 2015, the Bureau has handled approximately 105,500 credit reporting complaints, making credit reporting the third most-complained-about subject matter on which the Bureau accepts consumer complaints. The most common credit reporting problems identified by consumers relate to incorrect information contained on consumer reports (comprising a staggering 77 percent) and CRAs investigations (consisting of 9 percent). Other complaints involve the inability to obtain a report or score, the improper use of reports, and credit monitoring or identity protection products and services. (M)The Bureau indicated in its Monthly Complaint Report Volume 2 released in August 2015 that credit reporting complaints showed the greatest month-over-month percentage increase (56 percent) as compared to the other consumer complaints which the Bureau currently tracks. (N)The Bureau’s summer 2015 Supervisory Highlights publication found that one or more of the largest CRAs failed to adequately oversee furnishers to ensure they were adhering to the CRAs vetting policies and to establish proper procedures to verify public record information. (O)A February 2014 Bureau report titled Credit Reporting Complaint Snapshot found that consumers are confused about the extent to which the nationwide CRAs are required to provide them with validation and documentation of a debt which appears on their credit report. (P)As evidence that the current system lacks sufficient market incentives for CRAs to develop more robust procedures to increase the accuracy and completeness of information on credit reports, litigation discovery documented by the National Consumer Law Center, as part of a January 2009 report entitled Automated Injustice: How a Mechanized Dispute System Frustrates Consumers Seeking to Fix Errors in Their Credit Reports, showed that at least two of the three largest CRAs use quota systems to force employees to process disputes hastily and without the opportunity for conducting meaningful investigations. At least one nationwide CRA only allowed dispute resolution staff five minutes to handle a consumer’s call. Furthermore, these CRAs were found to award bonuses for meeting quotas and punish those who didn’t meet production numbers with probation. (Q)Unlike most other business relationships, where consumers can register their satisfaction or dissatisfaction with a particular product or service by taking their business elsewhere, consumers have no say in whether their information is included in the CRAs databases and limited legal remedies to hold the CRAs accountable for inaccuracies or poor service. (R)Accordingly, despite the existing statutory mandate for CRAs to follow reasonable procedures to assure the maximum possible accuracy of the information whenever they prepare consumer reports, numerous studies and the high volume of consumer complaints submitted to the Bureau about incorrect information on consumer reports demonstrates that these CRAs continue to skirt their obligations under the law, year after year. (2)

Incorrect information on consumer reports

(A)Consumers are entitled to dispute errors on their consumer reports with either the CRA or directly with furnishers and request mistakes be deleted or removed. Consumers who believe an investigation has not correctly resolved their dispute have few options other than requesting that a statement about the dispute be included with their future reports. (B)CRAs have a statutory obligation under the FCRA to conduct a reasonable investigation by conducting a substantive and searching inquiry when a consumer disputes an item on their report. In doing so, CRAs must conduct an independent review about the accuracy of any disputed item and cannot merely rely on a furnisher’s rubber-stamp verification of the integrity of the information they have provided to CRAs. (C)The Federal Trade Commission (FTC) in a Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003 released in December 2012 found that 26 percent of survey participants identified at least one potentially material error on their consumer reports, and 13 percent experienced a change in their credit score once the error was fixed. (D)Bureau examiners have identified repeated deficiencies with the nationwide CRAs’ information collection. In the summer 2015 Supervisory Highlights released in June 2015, the Bureau noted continued weaknesses with CRAs’ methods and processes for assuring maximum possible accuracy in consumer reports. Bureau examiners found, with certain exceptions, no quality control policies and procedures to test consumer reports for accuracy. (E)In its Credit Reporting Complaint Snapshot released in February 2014, the Bureau found that consumers were uncertain about the depth and validity of the investigations performed. Consumers also expressed frustration that even though they provided supporting materials that they believed demonstrated the inaccuracy of the information provided by furnishers, errors continued to remain on their reports. (F)Bureau examiners noted in the winter 2015 Supervisory Highlights released in March 2015 that one or more nationwide CRAs failed to adequately fulfill their dispute-handling obligations, including by not forwarding all relevant information found in letters and supporting documents supplied by consumers when they submitted disputes to furnishers, failing to notify consumers that they had completed their investigations, and not providing consumers with the results of the CRAs’ reviews about their dispute claims. (G)Consumers’ increasing frustration about the difficulties of trying to fix credit reporting evidence through the volume of consumer complaints errors submitted to the Bureau, are also echoed in another FTC study on credit report accuracy issued in January 2015. In the Report to Congress under Section 319 for the Fair and Accurate Credit Transactions Act of 2003, the FTC found that nearly 70 percent (84 people) of participants from a previous survey that had filed disputes with CRAs continued to believe that at least some of the disputed information remained inaccurate at the time of the follow-up survey. Despite these views, 50 percent (42 people) of the survey participants decided to just give up trying to fix the errors, with only 45 percent (38 people) of them planning to continue to try to resolve their disputes. (H)The increasing number of consumer complaints about incorrect information to the Bureau, coupled with the largest CRAs’ repeated quality control weaknesses found by Bureau examiners, show that the nationwide CRAs have failed to establish and follow reasonable procedures to assure maximum accuracy of information and to conduct independent investigations of consumers’ dispute claims. These ongoing problems demonstrate the need for legislation to— (i)enhance obligations on furnishers to substantiate information and require furnishers to keep records for the same amount of time that adverse information about these accounts may appear on a person’s consumer report; (ii)eliminate CRAs’ discretion to determine the relevancy of materials provided by consumers to support their dispute claims by instead requiring them to pass all material onto furnishers and eliminating their discretion to deem some disputes frivolous or irrelevant when a consumer resubmits a claim that they believe has been inadequately resolved; (iii)enhance educational content on CRAs’ websites to improve consumers’ understanding of the dispute process and to make it easier for all consumers to initiate claims, including by providing these disclosures in other languages besides English; and (iv)create a new consumer right to appeal reviews by CRAs and furnishers of the initial disputes. (3)

Injunctive relief

(A)Despite the fact that the FCRA currently provides implicit authority for injunctive relief, consumers have been prevented from exercising this right. Legislation explicitly clarifying this right is intended to underscore congressional intent that injunctive relief should be viewed as a remedy available to consumers. (B)Myriad findings by the courts, regulators, consumers, and consumer advocates make clear that CRAs have failed to establish adequate standards for the accuracy and completeness of consumer reports, yet the nationwide CRAs have demonstrated little willingness to retool their policies and procedures to fix the problems. (C)Providing courts with explicit authority to issue injunctive relief, by telling the CRAs to remedy unlawful practices and procedures, would further CRAs’ mandate under the FCRA to assure the maximum possible accuracy and completeness of credit reports. (D)Absent explicit authority to issue injunctions, history suggests that the nationwide CRAs are likely to continue conducting business as usual; dismissing any monetary settlements with individual consumers and State attorneys general as the cost of doing business. (4)

Use of credit reports for employment purposes

(A)The use of credit reports as a factor in making hiring decisions has been found to be prevalent in a diverse array of occupations and is not limited to high-level positions. (B)According to the California Labor Federation, only 25 percent of employers researched the credit history of job applicants in 1998. However, this practice had increased to 43 percent by 2006 and to 60 percent by 2011. (C)A study entitled, Do Job Applicant Credit Histories Predict Job Performance Appraisal Ratings or Termination Decisions? published in 2012 found that, while credit history might conceptually measure a person’s level of responsibility, ability to meet deadlines, dependability, or integrity, it does not, in practice, actually predict an employee’s performance or turnover because credit reports contain many inaccuracies and credit history can be contaminated by events outside a person’s control, such as the effects of divorce, death, and accidents on a person’s finances and ability to meet deadlines, past youthful naivety, and economic shocks. The study found that there is no benefit from using credit history to predict job performance or turnover. (D)Despite the absence of data showing a correlation between job performance and credit worthiness, employers continue to use credit checks as a proxy for assessing character and integrity. According to a 2012 Society for Human Resource Management survey, organizations indicated that they used credit checks on job candidates primarily to reduce or prevent theft and embezzlement and to minimize legal liability for negligent hiring. (E)The use of credit checks for employment purposes creates a true catch-22 for unemployed people with impaired credit. For example, the financial hardship caused by losing a job may cause some unemployed individuals to make late or partial payments on their bills, but their poor credit standing caused by this negative information on their consumer report can impede their chances of obtaining a new job to end the financial distress. (F)A September 2014 report by the New York City Council’s Committee on Civil Rights noted that, for those who have been unemployed for an extended period of time and whose credit has suffered as they fell behind on bills, the use of credit reports in the hiring process can exacerbate and perpetuate an already precarious situation. (G)A March 2013 Demos report titled Discredited: How Employment Credit Checks Keep Out Qualified Workers Out of a Job found that one in four survey participants who were unemployed said that a potential employer had requested to check their credit report as part of a job application. Among job applicants with blemished credit histories, one in seven had been advised that they were not being hired because of their credit history. (H)While job applicants must give prior approval for a current or prospective employer to pull their credit reports under the FCRA, as a practical matter, this authorization does not constitute an effective consumer protection because an employer may reject any job applicant who refuses a credit check. (I)Credit reports generally do not reflect the uncontrollable circumstances that may have contributed to or caused a person’s debts or late payments, such as the loss of a job, a medical crisis, or a divorce. (J)In October 2011, FICO noted that from 2008 to 2009, approximately 50 million people experienced a 20-point drop in their credit scores and about 21 million saw their scores decline by more than 50 points. While the Great Recession reduced many consumers’ credit scores due to foreclosures and other financial hardships, the financial crisis had a particularly harsh impact on Latinos and African-Americans, as racial and ethnic minorities and communities of color were frequently targeted by predatory mortgage lenders who steered them into high-cost, subprime loans even when these borrowers would have qualified for prime credit. (K)A May 2006 Brookings Institution report titled Credit Scores, Reports, and Getting Ahead in America found that counties with a relatively higher proportion of racial and ethnic minorities in the United States tended to have lower credit scores as compared with counties that had a lower concentration of communities of color. (L)Because Latino and African-American households tend, on average, to have lower credit scores than White households, credit checks may disproportionately screen minorities out of jobs, leading to discriminatory hiring practices, and further exacerbating the trend where unemployment for Latino and African-American communities is elevated well above the rate of Whites. (M)A 2012 Demos survey found that 65 percent of White respondents reported having good or excellent credit scores, while over half of African-American households reported having fair or bad credit. (5)

Private education loans

(A)The Bureau’s October 2014 report titled Annual Report of the CFPB Student Loan Ombudsman noted many private education loan borrowers who sought to negotiate a modified repayment plan when they were experiencing a period of financial distress were unable to get such assistance from their loan holders, often resulting in them defaulting on their loans. This pattern closely resembles the difficulty that a significant number of mortgage loan borrowers experienced when they sought to take responsible steps to work with their mortgage servicer to avoid foreclosure during the Great Recession. (B)Although private student loan holders may allow a borrower to postpone payments while enrolled in school full-time, many limit this option to a certain time period, usually 48 to 66 months. This limited time period may not be sufficient for those who need additional time to obtain their degree or who want to continue their education by pursing a graduate or professional degree. The Bureau found that borrowers who were unable to make payments often defaulted or had their accounts sent to collections before they were able to graduate. (6)

Deceptive practices at certain proprietary education institutions and career education programs

(A)The for-profit college sector has come under heavy State and Federal scrutiny after the closure and bankruptcy of Corinthian Colleges, which was found to have deceived students by steering them into high-interest student loans based on graduation rates and employment data. Even after its closure, Corinthian students remain saddled with debt, worthless degrees, and few prospects for employment. (B)Attending a two-year, for-profit college costs, on average, four times as much as attending a community college. Students at for-profit colleges represent only about 11 percent of the total higher education population but a startling 44 percent of all Federal student loan defaults, according to the United States Department of Education (DOE). (C)As highlighted in a press release titled, Obama Administration Announces Final Rules to Protect Students from Poor-Performing Career College Programs that was issued by the DOE on October 30, 2014, [t]oo often, students at career colleges—including thousands of veterans—are charged excessive costs, but don’t get the education they paid for. Instead, students in such programs are provided with poor quality training, often for low-wage jobs or in occupations where there are simply no job opportunities. They find themselves with large amounts of debt and, too often, end up in default. In many cases, students are drawn into these programs with confusing or misleading information.. (7)

Medical debt

(A)The Bureau’s research on credit reporting and credit scoring has found that the inclusion of medical debt collection information on consumer reports has unfairly reduced consumers’ credit scores. (B)The Bureau’s review of 5 million anonymized credit files from September 2011 to September 2013 found that credit scores may underestimate a person’s creditworthiness by up to 10 points for those who owe medical debt, and may underestimate a person’s creditworthiness by up to 22 points after the medical debt has been paid. For consumers with lower credit scores, especially those on the brink of what is considered subprime, a 10 to 22 point decrease in their credit scores can have a significant impact on their lives, including by affecting whether they are able to qualify for credit and, if so, the terms and conditions under which it is extended to them. The differences in peoples’ credit scores because of medical debt could unfairly cost them tens of thousands of dollars on large loans such as mortgages. (C)The Bureau found that half of all collections tradelines that appear on consumer reports are related to medical bills claimed to be owed to hospitals and other medical providers. These tradelines affect the credit reports of nearly 1⁄5 of all consumers in the credit reporting system. (D)The Bureau concluded that there are no objective or enforceable standards that determine when a debt can or should be reported as a collection tradeline. 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 a delinquency, and when or whether a collection tradeline appears on a consumer’s credit report. (E)Medical patients may be uncertain about what they owe, to whom, when, or for what, causing some consumers who ordinarily pay their bills on time to delay or withhold payments on medical debts. In many instances, consumers’ uncertainty about medical bills can result in medical debt collections appearing on their consumer reports. In a December 2014 report titled Consumer Credit Reports: A Study of Medical and Non-Medical Collections, the Bureau found that a large portion of consumers with medical debts in collections show no other evidence of financial distress and are consumers who ordinarily pay their other financial obligations on time. Unlike credit cards, installment loans, utilities, or wireless or cable services that have contractual account disclosures describing terms and conditions of use, most consumers are not told what their out-of-pocket medical costs will be in advance. Consumers needing urgent or emergency care rarely know, or are provided, the cost of a treatment or procedure before the service is rendered. (F)The Bureau concluded that the presence of medical collections is less predictive of future defaults or serious delinquencies than the presence of a nonmedical collection in a study titled Data Point: Medical Debt and Credit Scores issued in May 2014. (G)In March 2013, VantageScore released a new credit scoring model (VantageScore 3.0) that excludes all paid collections. In April 2014, FICO announced that its new credit scoring model (FICO '09) excludes any record of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency and also gives less weight to unpaid medical bills that are with a collection agency. Many Americans, therefore, could see significant improvements in their credit scores if creditors and lenders used the latest versions of credit scoring models that treat medical debt differently. (8)

Financial abuse by known persons

(A)Financial abuse is frequently associated with domestic violence. Financial abuse in a relationship may result in fraudulent charges to a credit card, or having fraudulent loans taken out or accounts created by the abuser in the survivor’s name. Financial abuse may also result in the survivor’s inability to make valid payments because of lost income when the abuser steals from or coerces the survivor to relinquish their paychecks. (B)By racking up substantial debts in the survivor’s name, abusers are able to exercise control and make it harder for the survivor, whose credit is often destroyed in the process, to escape. (C)Domestic abuse survivors with tarnished credit reports are likely to face significant obstacles in establishing financial independence from their abusers. This is because credit reports often determine a consumer’s ability to obtain a checking account, housing, insurance, utilities, employment, and even a security clearance as required for certain jobs. (D)While in many cases, identity thieves are individuals who are actually known to the survivor, providing documentation of identity theft in order to dispute information on one’s consumer report can be particularly challenging for those who know their financial abuser. (E)While it is easier for consumers who obtain a police report to remove fraudulent information from their consumer report and prevent it from reappearing in the future, according to the Empire Justice Center, safety and other noncredit concerns may prevent a survivor of financial abuse involving a known person from involving the police. (F)According to domestic violence advocates at the Legal Aid Society in New York, domestic abuse survivors seeking to remove adverse information stemming from financial abuse by contacting their creditors directly are likely to face skepticism about claims of identity theft perpetrated by a spouse because of an assumption that the individual was aware of and may have been complicit in the activity which the survivor alleges stems from financial abuse. (9)

GSE’s impact on the use of updated versions or additional credit scoring models by mortgage lenders

(A)Despite innovation in understanding consumer behavior and credit scoring analytics, many creditors and lenders, particularly mortgage lenders, continue to use older versions of credit scoring models and algorithms. (B)Lenders that originate residential mortgage loans generally adhere to the underwriting guidelines set by Fannie Mae and Freddie Mac, which reference the 2004 FICO credit scoring model (developed more than a decade ago), not the most recent version developed in 2009 (that was released in 2014). (C)Despite changes in recent years to credit scoring models offered by major credit scoring developers VantageScore and FICO to reflect current research about consumer behavior and creditworthiness, it is likely that paid collections (medical or otherwise) will continue to be factored into the risk level of each consumer shopping for credit because only a small percentage of creditors may actually be using the latest models. (10)

Consumers’ confusion about consumer reports and credit scores

(A)A July 2011 Bureau report titled The Impact of Differences between Consumer- and Creditor-Purchased Credit Scores found that the credit scores made available to and purchased by consumers are unlikely to be the same credit scores used by creditors and lenders. (B)That report found that the scarcity of public educational tools to inform consumers of the differences among credit scores, the large combined market share and brand recognition of FICO credit scores, and the marketing practices of some credit score sellers may perpetuate consumers’ confusion about credit scores. Consumers may be purchasing an educational credit score or subscribing to a credit monitoring service sold by CRAs without realizing the limitations and usefulness of these products and services. (C)A September 2012 Bureau report titled Analysis of Differences between Consumer- and Creditor-Purchased Credit Scores found different types of scores, such as those provided by FICO, VantageScore, or other educational scores, vary greatly. The report noted that consumers do not know before they purchase a score from a CRA whether this score will closely track or vary significantly from the score sold to creditors or lenders. Due to this lack of transparency and the resulting consumer confusion, the Bureau recommended that companies selling scores to consumers inform them that the scores that they are purchasing can vary, sometimes substantially, from the scores that are sold to and used by creditors and lenders. Absent increased transparency a substantial number of consumers will continue to hold misleading and inaccurate views of their own creditworthiness that may impact how and whether they shop for credit. (D)In February 2011, a Consumer Federation of America and VantageScore study also found that the general public lacks a clear understanding of what credit scores represent. The report found that half of the consumers surveyed did not know that a credit score is designed to indicate the risk of not repaying a loan. Consumers also did not know who makes credit scores available, what numerical range constitutes excellent credit standing, or the financial implications of having a low credit score. (E)Many consumers do not realize that they have more than just one credit score. Because the submission of credit information to CRAs is voluntary and not all furnishers submit information to every CRA, the information contained in a consumer’s credit report also varies among CRAs. As a result, the credit score generated by each CRA is likely to vary, resulting in potentially different credit decisions based on an evaluation of different credit reports obtained from different CRAs. (F)A February 2015 Bureau report titled Consumer Voices on Credit Reports and Scores found that consumers had questions about what actions to take to improve their scores once they had seen them, suggesting that additional disclosures and educational content is necessary. The Bureau found that consumers were confused by conflicting advice on how to improve their scores. (G)That report noted that consumers found the process for obtaining consumer reports and credit scores confusing. Consumers also were uncertain whether and under what circumstances they could obtain a consumer report for free. (11)

Deceptive and misleading marketing practices

(A)The Bureau’s February 2015 report titled Consumer Voices on Credit Reports and Scores found that some consumers did not check their consumer report because of concerns about security or being trapped into purchasing unwanted products like an additional report or a credit monitoring service. (B)CRAs frequently lure consumers into purchasing products and services that they may not want or need by offering such products or services free of charge for an introductory trial period before such products automatically convert into an ongoing subscription service at the regular price until the offer is cancelled. (C)Given the ubiquitous use of consumer reports in consumers’ lives and the fact that consumers’ participation in the credit reporting system is involuntary, CRAs should prioritize providing consumers with the effective means to safeguard their personal and financial information and improve their credit standing, rather than seeking to exploit consumers’ concerns for their companies’ financial gain. (D)Vulnerable consumers, who have legitimate concerns about the security of their personal and financial information, deserve clear, accurate, and transparent information about the credit reporting tools that may be available to them, such as fraud alerts and audit freezes. (12)

Loan comparison shopping

(A)The Bureau’s February 2015 report titled Consumer Voices on Credit Reports and Scores found that while consumers stand to benefit when they shop for credit, some consumers are reluctant to shop for loans and other types of consumer credit products out of fear that in doing so they will harm their credit scores. (B)The Bureau found that one of the most common barriers for people in reviewing their own consumer reports and shopping for the best credit terms was a lack of understanding of the differences between soft and hard inquiries and whether requesting a copy of their own consumer report adversely impacts their credit. (C)The Bureau revealed that a consumer with an accurate perception of his or her credit standing may be better equipped to shop for favorable credit terms. (13)

Protections for consumers’ credit information

(A)Despite heightened awareness, incidents of identity theft continue to rise. In February 2015 the FTC reported that identity theft was the top consumer complaint that it received for the 15th consecutive year. As these incidents continue to rise, consumers experience significant financial loss and emotional distress from the inability to safeguard effectively and inexpensively their credit information from bad actors. (B)According to Javelin Strategy & Research’s 2015 Identity Fraud study, $16 billion was stolen by fraudsters from 12.7 million American consumers in 2014. Similarly, the United States Department of Justice found an estimated 7 percent of all United States residents age 16 or older (about 17.6 million persons) were victims of one or more incidents of ID theft in 2014, and the number of elderly victims age 65 or older (about 86 percent) increased from 2.1 million in 2012 to 2.6 million in 2014. (C)Consumers report that they are extremely worried about the security of their financial information. According to a 2015 MasterCard survey, a majority of consumers (77 percent) are anxious about their financial information and Social Security numbers being stolen or compromised, with about 55 percent of consumers indicating that they would rather have naked pictures of themselves leaked online than have their financial information stolen. (D)The 2015 MasterCard survey revealed that consumers’ concerns about the online security of their financial information even outweighed consumers’ worries about other physical security dangers such as having their houses robbed (59 percent) or being pickpocketed (46 percent). (E)Despite the increasing risks consumers face, there is no Federal requirement that ensures victims, the elderly and other vulnerable consumers have access to credit freezes, the best tool for protecting against new account fraud, free of charge. Nor is there a Federal requirement to ensure that consumers regardless of where they live can proactively place a credit freeze on their consumer report to guard against the risk of identity theft and fraud for a fair and reasonable fee. (F)As a result of varying State laws, many consumers may be unable to quickly lift a credit freeze they place on their consumer report, either for a specific creditor or category of creditors, when the time comes for the consumer to obtain credit. Indeed, many consumers may not be taking advantage of existing credit freeze rights provided at the State level if they perceive the benefits of this protection to be outweighed by the burden associated with using it. (G)According to Consumer Reports, roughly 50 million American consumers spent about 3.5 billion in 2010 to purchase products aimed at protecting their identity, with the annual cost of the services ranging from $120 to $300. As risks to consumers’ personal and financial information continue to grow, consumers need additional protections to ensure that they have fair and reasonable access to the full suite of identity theft and fraud prevention measures that may be right for them.

4.

Effective date

Except as otherwise specified, the amendments made by this Act shall take effect 2 years after the date of the enactment of this Act.