[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]

                           AN OVERVIEW OF THE

                        CREDIT REPORTING SYSTEM



                               BEFORE THE

                          AND CONSUMER CREDIT

                                 OF THE


                     U.S. HOUSE OF REPRESENTATIVES


                             SECOND SESSION


                           SEPTEMBER 10, 2014


       Printed for the use of the Committee on Financial Services

                           Serial No. 113-97


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                    JEB HENSARLING, Texas, Chairman

GARY G. MILLER, California, Vice     MAXINE WATERS, California, Ranking 
    Chairman                             Member
SPENCER BACHUS, Alabama, Chairman    CAROLYN B. MALONEY, New York
    Emeritus                         NYDIA M. VELAAZQUEZ, New York
PETER T. KING, New York              BRAD SHERMAN, California
EDWARD R. ROYCE, California          GREGORY W. MEEKS, New York
FRANK D. LUCAS, Oklahoma             MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   STEPHEN F. LYNCH, Massachusetts
JOHN CAMPBELL, California            DAVID SCOTT, Georgia
MICHELE BACHMANN, Minnesota          AL GREEN, Texas
KEVIN McCARTHY, California           EMANUEL CLEAVER, Missouri
STEVAN PEARCE, New Mexico            GWEN MOORE, Wisconsin
BILL POSEY, Florida                  KEITH ELLISON, Minnesota
    Pennsylvania                     JAMES A. HIMES, Connecticut
LYNN A. WESTMORELAND, Georgia        GARY C. PETERS, Michigan
BLAINE LUETKEMEYER, Missouri         JOHN C. CARNEY, Jr., Delaware
BILL HUIZENGA, Michigan              TERRI A. SEWELL, Alabama
SEAN P. DUFFY, Wisconsin             BILL FOSTER, Illinois
ROBERT HURT, Virginia                DANIEL T. KILDEE, Michigan
STEVE STIVERS, Ohio                  PATRICK MURPHY, Florida
STEPHEN LEE FINCHER, Tennessee       JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana          KYRSTEN SINEMA, Arizona
MICK MULVANEY, South Carolina        JOYCE BEATTY, Ohio
RANDY HULTGREN, Illinois             DENNY HECK, Washington
DENNIS A. ROSS, Florida              STEVEN HORSFORD, Nevada
ANN WAGNER, Missouri
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
       Subcommittee on Financial Institutions and Consumer Credit

             SHELLEY MOORE CAPITO, West Virginia, Chairman

SEAN P. DUFFY, Wisconsin, Vice       GREGORY W. MEEKS, New York, 
    Chairman                             Ranking Member
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
GARY G. MILLER, California           RUBEEN HINOJOSA, Texas
JOHN CAMPBELL, California            DAVID SCOTT, Georgia
KEVIN McCARTHY, California           AL GREEN, Texas
STEVAN PEARCE, New Mexico            KEITH ELLISON, Minnesota
BILL POSEY, Florida                  NYDIA M. VELAAZQUEZ, New York
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     ED PERLMUTTER, Colorado
LYNN A. WESTMORELAND, Georgia        MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri         JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana          DENNY HECK, Washington
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania

                            C O N T E N T S

Hearing held on:
    September 10, 2014...........................................     1
    September 10, 2014...........................................    29

                     Wednesday, September 10, 2014

Beales, J. Howard III, Professor, Strategic Management and Public 
  Policy, The George Washington School of Business, The George 
  Washington University..........................................     8
Ikard, John, President and Chief Executive Officer, FirstBank, 
  Lakewood, Colorado, on behalf of the American Bankers 
  Association (ABA)..............................................    10
Pratt, Stuart K., President and Chief Executive Officer, Consumer 
  Data Industry Association (CDIA)...............................     6
Wu, Chi Chi, Staff Attorney, National Consumer Law Center (NCLC).    12


Prepared statements:
    Ellison, Hon. Keith..........................................    30
    Beales, J. Howard III........................................    33
    Ikard, John..................................................    42
    Pratt, Stuart K..............................................    52
    Wu, Chi Chi..................................................    77

              Additional Material Submitted for the Record

Duffy, Hon. Sean:
    Letter to Thomas Oscherwitz, Office of Supervision Policy, 
      Consumer Financial Protection Bureau, from Paul Zurawski, 
      Senior Vice President, Government Relations & Regulatory 
      Management, Equifax, dated January 14, 2014................   135
Ellison, Hon. Keith:
    Letter from Buddy Flake, NCTUE Board President, and Michael 
      Gardner, Senior Vice President, Equifax, dated September 9, 
      2013.......................................................   137
    Report of the Policy & Economic Research Council (PERC) 
      entitled, ``The Credit Impacts on Low-Income Americans from 
      Reporting Moderately Late Utility Payments,'' dated August 
      2012.......................................................   139
Meeks, Hon. Gregory:
    Written statement of Representative Ruben Hinojosa...........   159
Waters, Hon. Maxine:
    Written statement of the Consumers Union, including a report 
      entitled, ``ERRORS AND GOTCHAS: How Credit Report Errors 
      and Unreliable Credit Scores Hurt Consumers,'' dated April 
      9, 2014....................................................   162
    Written statement of Demos...................................   201
    Written statement of the National Consumer Reporting 
      Association................................................   205
    Written statement of the National Patient Advocate Foundation   214
    New York Times article entitled, ``Discrepancies on Medical 
      Bills Can Leave a Credit Stain,'' dated May 4, 2012........   220
    Written statement of Rodney Anderson, Executive Director, 
      Supreme Lending, Plano, Texas..............................   224
Westmoreland, Hon. Lynn:
    Letter from Buddy Flake, NCTUE Board President, and Michael 
      Gardner, Senior Vice President, Equifax, dated September 9, 
      2013.......................................................   228

                           AN OVERVIEW OF THE
                        CREDIT REPORTING SYSTEM

                     Wednesday, September 10, 2014

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:05 p.m., in 
room 2128, Rayburn House Office Building, Hon. Shelley Moore 
Capito [chairwoman of the subcommittee] presiding.
    Members present: Representatives Capito, Duffy, Pearce, 
Posey, Fitzpatrick, Westmoreland, Luetkemeyer, Stutzman, 
Pittenger, Barr, Cotton, Rothfus; Meeks, Hinojosa, McCarthy of 
New York, Green, Ellison, Perlmutter, and Sinema.
    Ex officio present: Representatives Hensarling and Waters.
    Chairwoman Capito. The Subcommittee on Financial 
Institutions and Consumer Credit will come to order. Without 
objection, the Chair is authorized to declare a recess of the 
subcommittee at any time.
    I now recognize myself for 5 minutes for the purpose of 
making an opening statement.
    Since the passage of the Fair Credit Reporting Act (FCRA) 
in 1970, our Nation's consumer credit markets have relied on 
the data compiled in a consumer's credit report. These reports 
serve as a comprehensive historical view of a consumer's 
financial decisions and actions. Depending on their credit 
history, a consumer's credit report can have a very real impact 
on their ability to access credit. One of the foundations of 
the Fair Credit Reporting Act is ensuring the accuracy of the 
data that appears on a consumer credit report. I think all of 
us have had experiences with our own consumer credit report. 
Many consumers diligently monitor their credit reports to 
ensure that inaccurate data is not on their report.
    Since 2003, consumers have had the right to access a free 
credit report from each of the three main credit reporting 
bureaus. This access to free credit reports is a critical tool 
for consumers, especially in the wake of major data breaches 
that have occurred in the United States in the past year. 
According to the Federal Trade Commission (FTC), nearly 20 
percent of Americans have errors on their credit report. 
Furthermore, 5 percent of Americans have errors that could 
expose them to higher interest rates or could cause them to 
lose access to consumer credit through no fault of their own. 
If the consumer does identify errors on their report, they 
should have those errors removed as quickly as possible.
    Last year, an investigation by 60 Minutes raised 
significant concerns about the ability of consumers to have 
their errors removed. In one case, it took 6 years for a 
consumer to rectify inaccuracies on her credit report. Today, 
we will learn more about the systems that credit bureaus have 
in place to resolve discrepancies on a consumer credit report. 
We must work together to ensure that if consumers have 
legitimate discrepancies on their credit report, they can have 
them removed as quickly as possible.
    Another area of concern--and I am very interested in this--
is the impact that student loan debt has on young consumers 
just entering the workforce. It is estimated that the average 
student loan burden for the class of 2014 is approximately 
$33,000. While paying off this debt on time can certainly help 
improve a student's credit profile, going into default can have 
a lasting negative impact on their credit profile. We must find 
ways to help students find better paying jobs, but we must also 
provide them with the skills necessary to better understand the 
economic impact and risks associated with taking on large 
amounts of student loan debt.
    I would like to thank our witnesses for joining us here 
today and for providing their perspectives on these issues. I 
will now yield time to the ranking member of the subcommittee, 
Mr. Meeks, for the purpose of making an opening statement.
    Mr. Meeks. Thank you, Madam Chairwoman, for conducting this 
important hearing on credit reporting. This hearing is 
especially important because credit reporting is an issue that 
affects most American consumers. The strength and resilience of 
our economy resides in consumer spending which has been 
sustained by the most effective consumer credit system of any 
    However, as we note the progress of our credit reporting 
system in facilitating access to credit and enabling risk-based 
pricing which overall lowers the cost of credit for most 
Americans, we must also vigorously pursue reforms to address 
errors and inappropriate use of credit information which, in 
the most pervasive cases, results in denial of opportunities in 
jobs to a large segment of Americans. Therefore, there is no 
question that our credit reporting system needs to be reformed.
    Our nationwide consumer reporting agencies receive close to 
38 million disputed items for consumers every year. Millions 
more experience high frustration with the difficulty of getting 
errors removed. In 2013, a congressionally mandated FTC report 
noted that 40 million Americans have errors in their credit 
reports and that 26 million have lower scores as a result of 
such errors. And research conducted by the California Labor 
Federation revealed that only 25 percent of employers 
researched the credit history of job applicants in 1998. This 
practice had increased to 60 percent by 2011, and there is no 
scientific evidence which supports the notion that credit 
information can predict job performance or risk performance in 
the workplace.
    Exacerbating this troubling trend are the lingering effects 
of the Great Recession. The foreclosure crisis and the ensuing 
job crisis resulted in millions of Americans having their 
credit history impaired, many through no fault of their own. 
Latino and African-American households were particularly 
targeted and steered into high-cost mortgages, leading to the 
highest foreclosure rates and then unemployment rates.
    And the problems don't stop there. Americans who have 
fallen sick, even those who have fully paid their medical debt, 
are being plainly being discriminated against because of their 
medical debt history. I therefore applaud Ranking Member Waters 
for her leadership on this issue and for coming forward with 
proposals to address these many shortcomings.
    And lastly, I am also troubled by the growing student loan 
burden, as you mentioned, that young Americans are facing. The 
Fed, in a 2013 survey of consumer finances, revealed that the 
amount that families with student debt have incurred has nearly 
doubled since 2001, so we must pass some legislation that would 
ensure that private education loan borrowers get the same 
chance to rehabilitate their credit as Federal student 
borrowers. Thank you. I yield back.
    Chairwoman Capito. Thank you, Mr. Meeks. I now recognize 
Mr. Fitzpatrick for 2 minutes.
    Mr. Fitzpatrick. Thank you, Madam Chairwoman, and I 
appreciate you holding this hearing today. Congressman Ellison 
and I introduced the Credit Access and Inclusion Act last year 
to help those who are termed ``credit-invisibles.'' These are 
individuals who have little or no traditional credit history 
and are therefore unscorable. Our bill would help nearly 100 
million Americans establish a credit score or raise their 
existing score by removing barriers, including payment history.
    While credit-invisibles have all manner of demographic and 
socioeconomic backgrounds, there is a particular impact on 
those who are young and those with lower incomes. Laws on the 
books already allow energy, utility, and telecom services to 
report payment data to credit bureaus, but those that do 
report, primarily report negative payment data, so right now, 
customers' credit scores are being punished for poor behavior 
but not recognized for their good behavior. The purpose of this 
hearing is to explore credit reporting and its impact on 
consumers and those that use credit scores. We are going to be 
hearing testimony about the importance of credit scores in the 
economy and how it can affect quality of life.
    I look forward to that testimony, and I appreciate the 
opportunity to discuss the issues and to perhaps learn how 
Congress can help improve the lives of American families. 
Again, I appreciate the hearing, and with that, I yield back, 
Madam Chairwoman.
    Chairwoman Capito. The gentleman yields back. Mr. 
Perlmutter for 1 minute.
    Mr. Perlmutter. Thanks, Madam Chairwoman. I want to welcome 
my friend John Ikard to the Financial Services Committee today. 
He is a well-respected businessman and leader in the Denver 
area and throughout Colorado, and under his leadership, 
FirstBank, his bank has grown steadily and now has over $13 
billion in assets in over 115 locations in Colorado, Arizona, 
and California.
    FirstBank has grown because of its financial stability and 
its strong commitment to convenience, friendly and intelligent 
customer service, and loyalty to its employees. John has been 
with FirstBank for over 28 years and has been a great steward 
of the bank. John now serves as the chairman of the American 
Bankers Association, and he sits on the boards of the 
Children's Hospital Colorado Foundation, the Denver Foundation, 
and the Federal Reserve Bank of Kansas City. And I thank him 
for being here today. I guess my only concern as it applies to 
reporting, credit reporting, is it is incumbent on anybody to 
get it right because this is the kind of situation where you 
are guilty until proven innocent, and given that situation, you 
have to get the reporting right the first time. With that, I 
yield back.
    Chairwoman Capito. Thank you. Mr. Duffy for 2 minutes.
    Mr. Duffy. Thank you, Chairwoman Capito, for holding this 
important hearing. Credit reports are valuable tools to both 
consumer and lending institutions that can also be used to 
determine job placement and rental agreements. As America 
continues to move away from the community model where everyone 
knows each other, like when you buy your first car from the 
dealership that your best friend's dad owns or you get your 
first loan from your aunt who is a mortgage broker, and if you 
miss your payment, your mom will wring your neck, to a more 
standardized means of extending credit, these credit reports 
become your character assessment. That is why it is essential 
that they contain factual, accurate information and that they 
cannot be manipulated.
    My bigger concern, however, is whether the proper 
protections are in place for consumers' data that is being 
collected. I am happy that we haven't heard of a data breach 
yet at one of our credit reporting agencies, but we also didn't 
hear of a data breach at Target until it actually happened, so 
I look forward to hearing from the witnesses today on how they 
are protecting consumers in their data collecting practices and 
credit reporting efforts, and I appreciate all of your time 
today. With that, Madam Chairwoman, I yield back.
    Chairwoman Capito. Thank you. Mr. Green for 1 minute.
    Mr. Green. Thank you, Madam Chairwoman. I thank you and the 
ranking member for this hearing. I am also grateful to the 
ranking member of the full Financial Services Committee, Ms. 
Waters, for the outstanding job that she has done in addressing 
this issue. It is indeed imperative that we look at this 
situation with student loans. We have a good many persons who 
unfortunately have loans at a time when they cannot acquire 
jobs, and those who do have jobs cannot make necessary 
payments. I think it is a good thing to look at the student 
loans. I am also pleased that we are going to look into the 
question of jobs being predicated upon a credit score. I, too, 
have difficulty making the connection between the job and the 
credit score.
    And finally, we have language that passed the House to 
allow HUD to develop an alternative credit scoring system. I 
want to talk more about that at a later time. Thank you, Madam 
Chairwoman, and I will yield back.
    Chairwoman Capito. Thank you. Mr. Pittenger for 2 minutes.
    Mr. Pittenger. Thank you, Madam Chairwoman, for having this 
hearing and allowing me to make an opening statement. We are 
here today to examine the credit reporting system and gain a 
better understanding of how this system impacts lenders, 
consumers, and the reporting agencies themselves. With recent 
changes made in the Dodd-Frank Act, it is important that we 
hear from those who participate directly within the system and 
understand the challenges that they face facilitating access to 
credit. Given the amount of authority that the Consumer 
Financial Protection Bureau now has over our credit reporting 
system, I am interested to hear from our panel today on how 
this layer of regulation has affected reporting agencies and 
all of those who participate in this system.
    As credit reports gain an increasingly significant role in 
the lives of the consumers, we must ensure that there are 
systems that provide accurate and effective reporting on their 
behalf. I do thank the panel for their participation and their 
duty today, and I yield back my time. Thank you.
    Chairwoman Capito. Thank you. Mr. Ellison for 1\1/2\ 
    Mr. Ellison. Thank you, Madam Chairwoman. I appreciate the 
time, and I will be quick. For those who are looking to improve 
our financial security in our country for our families and help 
small businesses start up and expand and help grow our economy, 
today's topic of credit reporting is vitally important. Dr. 
Beales, I think, said it well when he said, ``Well-functioning 
credit markets are the essential component of economic 
prosperity.'' I quite agree, and I am eager to see this 
Congress take action to improve our system by making it more 
    More than 50 million Americans have no credit score, are 
just credit-invisible. Another 50 million have scores that are 
lower than they should be because they do not have enough lines 
of debt to generate a score. The solution is simple. Mr. 
Fitzpatrick and I, in a bipartisan way, have a bill called the 
Credit Access and Inclusion Act, and this bill clarifies that 
current law does not prohibit utility and telecom firms from 
reporting their customers' on-time payments. The bill has 12 
cosponsors, and we are looking for more, including a lot of 
people on this committee. Including alternative data such as 
utility, telecom, and rent helps consumers, lenders, and small 
businesses and the economy, and it is time for us to make this 
no-cost change to provide greater access to affordable credit 
for millions of Americans. I yield back. Thank you.
    Chairwoman Capito. The gentleman yields back. I would now 
like to recognize the ranking member of the full Financial 
Services Committee, Ms. Waters, for 2\1/2\ minutes for an 
opening statement.
    Ms. Waters. Thank you very much, Chairwoman Capito. I would 
like to thank you and Chairman Hensarling for granting my 
request for this important meeting. Our Nation's credit 
reporting system impacts almost all Americans and their 
families. No longer are credit reports used exclusively by 
lenders in making credit decisions. Increasingly, they are used 
to determine whether a consumer is qualified to get a job, rent 
a home, buy a car, or obtain auto or homeowners insurance, but 
despite their growing significance, credit reports continue to 
contain inaccurate information. Some estimate serious errors 
affect up to 25 percent of reports. The Federal Trade 
Commission estimates 1 in 5, or roughly 40 million consumers 
have had an error on one of their credit reports, with 10 
million facing increased costs as a result.
    Sadly, the burden is too often placed on the consumers to 
prove information on their reports as false rather than on the 
consumer reporting agencies and furnishers. Errors on credit 
reports are very difficult for consumers to dispute, and it is 
even harder to have these inaccuracies actually removed from 
reports, causing heartache and pain for millions across the 
country. It is time to change that paradigm and ensure that a 
bad credit score will no longer haunt a consumer for years on 
    That is why this morning I released a draft proposal that 
makes comprehensive and long overdue reforms that will protect 
consumers and bring much-needed accountability to the credit 
reporting system. My proposal would provide relief to millions 
of borrowers who were victimized by predatory mortgage lenders 
and servicers by removing adverse information about residential 
loans that are found to be unfair, deceptive, abusive, 
fraudulent, or illegal. It stops punishing consumers who pay 
off their debts by removing paid or settled debt from credit 
reports. It ends the unreasonably long time period that most 
adverse information can remain on credit reports by shortening 
such periods by 3 years.
    It provides credit rehabilitation to distressed private 
education loan borrowers by giving them a chance to repair 
their credit, and it gives consumers the tools to truly verify 
the accuracy and completeness of their credit reports by 
requiring furnishers to maintain records for as long as the 
information remains on a person's credit report.
    Finally, the draft proposal also restricts the use of 
credit reports for employment purposes. My proposal attempts to 
meet our obligations to ensure that consumers who have fallen 
victim or fallen on hard times are not deprived of the chance 
to achieve their American dream. I look forward to hearing 
feedback from my colleagues and advocates on this measure. 
Thank you, Madam Chairwoman. I yield back the balance of my 
    Chairwoman Capito. Thank you. I would like to thank the 
ranking member, and we are now ready to hear from our 
panelists. I do want to make Members and our witnesses aware 
that we are expecting two series of votes. It is my intent to 
finish this hearing before the second series would begin, so we 
may have to take a timeout here. I appreciate everybody's 
    We welcome our panel of distinguished witnesses. Each of 
you will be recognized for 5 minutes to give an oral 
presentation of your testimony. And without objection, each of 
your written statements will be made a part of the record.
    We will begin with Mr. Stuart Pratt, who is president and 
chief executive officer of the Consumer Data Industry 
Association. Welcome. And I would remind the witnesses that you 
need to pull the microphones close to your mouth so we can hear 
you. Some have had trouble picking up the sound. Thank you.


    Mr. Pratt. Chairwoman Capito, Ranking Member Meeks, thank 
you for this opportunity to appear before you today. I am 
Stuart Pratt with the Consumer Data Industry Association. So, 
today, let me just summarize some key points that are drawn 
from our written testimony. Thank you for including our full 
testimony in the record. And first of all, just maybe some 
basics about the industry.
    A competitive private sector full-file nationwide credit 
reporting industry empowers economic opportunity for consumers 
and for the Nation as a whole. I think it was described very 
well that a credit report really serves as an advocate. It is a 
mechanism for a lender who doesn't know you to know you. It is 
a mechanism for that lender to approve a loan and to approve it 
at a price that is affordable and that makes sense for you as 
the consumer and makes sense for them as the lending 
    Our members are the leading--decision sciences companies 
around the world, we are the leading world's best credit 
reporting system around the world, 200 million credit reports 
per database, 3 billion updates a month. 98 percent of the 
credit reports do not contain serious errors and yet our 
members are working to build on that success to push that 
percentage down even further. 95 percent of consumers that we 
have polled express satisfaction with the consumer relations 
process. That leaves us with 5 percent, and that is our 
homework, to continue to push that number down as we go 
    Being best in class, however, hasn't caused our members to 
rest on their laurels. CDIA members are consistently proactive. 
They are ahead of the curve and ahead of law. For example, 
standards established even as far back as the 1960s, and again 
in the 1990s, preceded law, preceded amendments to law, and in 
fact, framed new laws and regulations which regulate our 
industry even today.
    Data standards which materially contribute to the quality 
of data were pioneered by our members, rolled out voluntarily 
to more than 10,000 data furnishers, and it is a success story, 
and it is a story that shows our partnership with the lending 
community in terms of ensuring that consumer information is 
accurate, precise, and complete in credit reports.
    Online dispute exchanges were stood up by our members as 
well. Fraud alerts and fraud alert exchanges were stood up as 
well. All of this with the intention of protecting consumers, 
serving consumers, simplifying the process for consumers, and 
ensuring that the credit reporting industry is accessible to 
    There is more work to be done. There are some actions which 
we think Congress could take to help consumers and in some 
cases help us help consumers as well. Let me just walk through 
a couple of those, and then we have provided additional detail 
in our testimony. First of all, we urge Congress to exempt 
financial literacy products which help consumers learn about 
and protect their credit standing from the Credit Repair 
Organizations Act, often know as CROA. The Act wasn't intended 
to cover these products because they didn't even exist at the 
time of the enactment of CROA, which ironically was Title 2 of 
the 1996 amendments to the Fair Credit Reporting Act. No State 
AT has attempted to apply CROA to our members products, nor has 
the Federal Trade Commission. It is unfair to consumers that 
they cannot have access to an even more robust set of products 
in the marketplace because of the risks posed by class action 
lawsuits and opportunistic private attorneys. We urge action on 
CROA reform, and we are happy to talk about that subsequent to 
this hearing.
    Class actions are threatening our small and medium-sized 
enterprise members. Some are losing their errors and omissions 
insurance coverage completely. For them, it is almost an 
existential risk. E&O providers are stepping back from 
providing coverage even through trade associations. Our own E&O 
program for small businesses, though 95 percent of our members 
in that program have not had a claim in the last 2 years, 80 
percent in the last 4 years, they are going to pay 50 percent 
higher premiums next year as a result of litigation risks as 
perceived by the insurance industry.
    We think reform in this area is important. We also urge 
Congress to act now. You don't even have to vote. Urge the 
financial housing finance authority to work with their GSEs and 
open the door for consumers through the use of automated 
alternative data sets and to credit score competition. There is 
no reason for secondary markets to impede the choices of the 
primary market when it comes to which score is best or which 
combination of predicted data should be used.
    Ultimately, consumers who are new immigrants, unbanked and 
underbanked, are the beneficiaries. Even consumers who may have 
adjusted their use of credit due to the Great Recession could 
benefit from the use of the bills that they pay in everyday 
life and the assets they own. We really believe this is now the 
time to act. Let's push forward. Let's open that door today.
    Finally, we believe that providing our members with access 
to the SSA's database would allow us to do additional cross-
matching, validating of identifying information, and ensuring 
that the right information gets into the right file at the 
right time. We share those goals with all of you. We look 
forward to our dialogue today. Thank you for this opportunity 
to testify.
    [The prepared statement of Mr. Pratt can be found on page 
52 of the appendix.]
    Chairwoman Capito. Thank you.
    Our next witness is Mr. J. Howard Beales, professor of 
strategic management and public policy at George Washington 
University. Welcome.


    Mr. Beales. Chairwoman Capito, Ranking Member Meeks, and 
members of the subcommittee, thank you very much for the 
opportunity to be here today. I want to make five key points. 
First, credit reporting is vital. The widespread credit 
availability that lubricates consumer spending and powers the 
American economy depends on an efficient system for credit 
reporting. Lenders can't economically make loans without 
understanding the risks they face, and credit reporting is an 
essential tool for objective risk assessments.
    Efficient credit reporting makes possible the miracle of 
instant credit which enables the consumer to visit a car dealer 
and arrange financing for the transaction probably in less time 
than it takes to negotiate the price. Such arrangements offer 
significant benefits to both consumers and sellers, and they 
facilitate economic activity.
    Our credit reporting system also facilitates competition 
among lenders to the benefit of consumers. Lenders can readily 
identify consumers who deserve a better deal and offer credit 
on terms that lenders find profitable and consumers find more 
attractive. One study described credit report data as the jet 
fuel for an acceleration in competition that led to declines in 
annual fees and interest rates on credit cards as well as the 
introduction of new card features such as rewards.
    Efficient credit reporting is also important to small 
businesses that are important job creators. The adoption of 
commercial scoring systems based on credit report data for 
evaluating small business loans led to an expanded volume of 
loans and a net increase in lending to relatively risky 
    Second, risk-based pricing benefits consumers. A 
fundamental principle of economic efficiency requires that 
those who create cost must pay them. If not, they will create 
excessive cost. That is why it is both equitable and efficient 
that teenage males pay higher auto insurance premiums than 
teenage females or older men. They are higher-risk drivers. 
They should and do pay higher insurance premiums. The same 
principles apply in credit markets. There is no reason that 
good credit risk should be expected to subsidize the choices 
made by those who are less likely to repay their debts. Loans 
made based on objective risk assessments reduce the risk of 
default by 20 to 30 percent in some studies compared to using 
judgment to decide which consumers deserve a loan. Moreover, 
such judgmental decisions often rely on stereotypes about which 
borrowers are most likely to repay. They are, in short, 
    Risk-based pricing based on credit scores offers two 
important benefits. First, responsible borrowers, undoubtedly 
the vast majority, pay less for credit, as much as 8 percentage 
points less. Second, risk-based pricing substantially expanded 
credit availability. In the one-size-fits-all world of 
standardized plain vanilla credit products, the lender's only 
choice was yes or no. For marginal borrowers, the answer was 
often no.
    In 1970, only 2 percent of the lowest income quintile had 
any credit cards. By 1998, after the introduction of risk-based 
pricing, the percentage had increased to 28 percent.
    Third, more information in this system leads to better 
performance. Information in the credit reporting system is 
provided voluntarily by some 30,000 data furnishers in return 
for access to the credit report information. Indeed, an 
important dimension of competition for business among consumer 
reporting agencies is the breadth and robustness of the 
information about consumers in their database. Some 30 to 50 
million Americans do not have sufficient credit information in 
their files to qualify for affordable mainstream credit. 
Instead, they are left to rely on high-cost credit sources such 
as overdraft protections, short-term loans, or pawn shops. 
Studies have shown that adding positive payment information 
from utilities and telecommunications providers in addition to 
the negative information that many now report can improve the 
credit scores of those within files that otherwise do not have 
sufficient information to support a reliable credit score. Such 
additional information can help to further reduce the 
differences in the accessibility of credit on reasonable terms.
    Fourth, accuracy and completeness are both important. 
Credit reporting agencies face a difficult task of matching 
incoming information to the right file when identifying 
information is incomplete, as it often is. It is obviously a 
mistake to include information in my file if it is not in fact 
about me, but it is also an error to leave out information that 
should be in my file, simply because there is some ambiguity 
about the match. Such errors of omission reduce the value of 
credit reports to lenders because a report that does not 
include all of the relevant information is less likely to be 
predictive of future behavior.
    To be sure, ongoing efforts to improve accuracy and 
completeness are essential, and there are significant 
competitive pressures on consumer reporting agencies to do so, 
but all such efforts must recognize the voluntary nature of the 
reporting system. Regulatory requirements that require 
participation by furnishers may well be worse than the disease 
they are trying to cure.
    Finally, different risks are different. The best prediction 
of risk depends on the particular risk involved. Different 
information may be especially valuable for certain kinds of 
risks. That is why there are specialized agencies that 
specialize, for example, in small dollar products, otherwise 
known as payday loans, because different information is 
predictive, different populations lead to different risk 
analytics. There are some real gains to specialization in the 
particular risks that have happened in the market. Thank you 
again for the opportunity to testify today, and I look forward 
to your questions.
    [The prepared statement of Mr. Beales can be found on page 
33 of the appendix.]
    Chairwoman Capito. Thank you.
    Our next witness is Mr. John A. Ikard, president and chief 
executive officer, FirstBank, on behalf of the American Bankers 
Association. Welcome.

                   BANKERS ASSOCIATION (ABA)

    Mr. Ikard. Chairwoman Capito, Ranking Member Meeks, and 
members of the subcommittee, my name is John Ikard, and I am 
president and CEO of FirstBank. We are based in Lakewood, 
Colorado. I am also the chair-elect of the American Bankers 
Association. I appreciate the opportunity to be here to 
represent the ABA and discuss the importance of accurate credit 
reporting and the banking industry's commitment to it. The 
availability of consistent accurate credit reports provides 
tremendous value to consumers and banks alike.
    For consumers, credit reports provide a history of the 
performance on obligations which enables them to shop around 
for credit from any lender. Without these reports, consumers 
would have to provide extensive documentation, lender by 
lender, in order to receive credit. The credit report opened up 
options for consumers and ensures that they can shop around for 
the best loan or account that serves their needs. The greater 
efficiency in competition means better deals and lower prices 
for consumers.
    For lenders, credit reports allow them to evaluate a 
borrower's creditworthiness even if they have not previously 
dealt with the customer. Banks benefit because an accurate 
understanding of a credit applicant's history means they are 
better able to predict who is likely to repay a loan. This 
allows banks to make a better decision in order to grant credit 
and at what price.
    Accuracy within the credit reports is critical, of course, 
to ensure that customers are evaluated based on their history 
of their individual performance. Inaccurate reports undermine 
the value of the system and could prevent a qualified borrower 
from getting the credit they deserve. A report that is missing 
negative information also makes a borrower eligible for credit 
that they are ill-prepared to handle. Thus, accurate credit 
reports ensure that credit is extended to deserving borrowers.
    Because banks have a vested interest in ensuring that 
accurate credit histories are available, they invest heavily in 
systems and processes to ensure they can provide accurate 
credit data. Although the reporting system is very accurate, 
there is still the possibility of errors. That is why it is 
important to have a clear process for consumers to dispute 
their credit reports if they feel there are inaccuracies. There 
are multiple avenues consumers can use to dispute their credit 
reports. This dispute process is quick and effective with the 
average dispute resolved in about 14 days, at a satisfaction 
rate of over 95 percent.
    Congress should be aware that this dispute process can be 
taken advantage of in an attempt to eliminate accurate but 
negative marks on an individual's credit history. For example, 
credit report scams often charge a large up-front fee and 
mislead the consumer into believing that accurate but negative 
information can easily be removed. These services operate by 
repeatedly sending disputes alleging the same issues in the 
hope that the data supplier will drop the ball and fail to 
respond within the mandated window, thereby triggering the 
expungement of the contested data.
    To give you an example, at my bank, our main dispute 
handler handles about 100 to 150 disputes a month, many of 
which are repeated claims. Of the disputes we receive, less 
than 1 percent call for any type of corrective action. While 
amendments to the Fair Credit Reporting Act took a step forward 
in stopping this kind of abuse, that law should go further to 
allow the ability to truncate repetitive unfunded disputes. 
This would do nothing to prevent customers from pursuing 
legitimate claims and would save money from being wasted on 
these false claims.
    In summary, credit reports are a public good, providing 
real tangible benefits to consumers and lenders alike. Banks 
invest in consumer resources to ensure that credit reporting is 
consistent and is accurate. When disputes arise, banks 
investigate them promptly and thoroughly. The dispute process, 
while effective, is susceptible to abuses by those who want to 
misrepresent past consumer credit experiences. Such abuses 
undermine the value provided by credit reports and hurt all 
borrowers. Thank you.
    [The prepared statement of Mr. Ikard can be found on page 
42 of the appendix.]
    Chairwoman Capito. Thank you.
    And our final witness is Ms. Chi Chi Wu, staff attorney at 
the National Consumer Law Center. Welcome.

                         CENTER (NCLC)

    Ms. Wu. Thank you. Chairwoman Capito, Ranking Member Meeks, 
and members of the subcommittee, thank you for inviting me here 
today and for holding this hearing on the American credit 
reporting system. Credit reports play a critical role in the 
economic lives of Americans. They are the gatekeeper for 
affordable credit for insurance, an apartment, and sometimes, 
unfortunately, even a job. As Congress stated when it passed 
the Fair Credit Reporting Act (FCRA), the banking system is 
dependent upon fair and accurate credit reporting. Yet, the 
credit reporting system in this country is neither fair nor 
completely accurate.
    One of the most outrageous flaws is the negative marks from 
medical debts on the credit reports of millions of Americans. 
This is a huge issue. Medical debt makes up over half of the 
items on credit reports for debt collection, and one study 
estimated up to 41 million Americans could be suffering from 
this type of credit damage. Such negative marks are unfair 
because medical debt is often the result of insurance disputes 
or billing errors. A May 2014 study by the Consumer Financial 
Protection Bureau (CFPB) found that medical debt unfairly 
penalizes a credit score by up to 10 points, and for paid-off 
medical debt up to 22 points.
    Now, there have been some changes. Last month, FICO 
announced that it would no longer consider paid collection 
items, both medical and non-medical, and VantageScore already 
had made a similar change last year. In addition, FICO has said 
it will give less weight to unpaid medical debts, potentially 
helping consumers up to 25 points. However, these changes will 
not completely eliminate the negative impact of medical debt on 
credit reports. They are voluntary, which means they can be 
reversed at any time. More importantly, they won't benefit 
mortgage applicants because the changes only affect 
VantageScore and FICO's latest scoring model, FICO 09. And 
apparently neither of these models is used by Fannie Mae or 
Freddie Mac, the mortgage giants.
    Finally, they won't help job applicants with medical debt 
because employers generally don't use credit scores to evaluate 
applicants. They review the full report and so they will see 
the medical debt collection items. Thus, legislation that would 
remove paid or settled medical debts from credit reports is the 
effective solution to this problem.
    Regarding the use of credit reports by employers, we again 
urge Congress to ban this practice. It creates a Catch-22. Job 
loss prevents workers from paying their bills, and the 
resulting damage to a credit report prevents them from getting 
a job. Yet, there is no evidence that credit history can 
predict job performance. Its use in hiring discriminates 
against African-American and Latino applicants. Despite these 
problems, about half of employers use credit reports to screen 
applicants. A Demos survey reported that 1 in 10 unemployed 
workers had been informed that they would not be hired for a 
job because of information in their credit report. Another 
survey reported that employers are examining credit reports for 
student loan debts and that two-thirds of surveyed employers 
had little to no interest in job applicants with student loan 
debts over $50,000.
    Another problem with the credit reporting system is the 
high level of errors. As you heard, the FTC found that 21 
percent of consumers had verified errors in their credit 
reports, 13 percent had errors that affected their credit 
scores, and 5 percent had errors serious enough to be denied 
credit or to be forced to pay more for credit. That 5 percent 
is unacceptable. It means 10 million Americans have seriously 
damaging errors in their credit reports. Yet, there are simple 
commonsense measures that could reduce this error rate such as 
using all of the digits in the Social Security number to match 
information from a creditor to a consumer's file.
    Now, one of the most important safeguards for accuracy is 
the dispute system under the FCRA, yet the credit bureaus 
flagrantly violate their obligations to conduct a reasonable 
investigation when there is a dispute. Instead of conducting 
real investigations, they do nothing more than forward the 
dispute to the creditor or the provider of the information and 
then blindly accept or parrot whatever the information provider 
responds with, no matter how good the consumer's evidence. Now, 
maybe in some cases, like Mr. Ikard's bank, the information 
provider does do a good job in handling the dispute, but in 
some cases, it is not true. In 30 to 40 percent of cases, the 
information provider is a debt collector whose main goal is to 
get paid, not to get it right, or it could be a subprime auto 
lender like First Investors Financial Group against which the 
CFPB took enforcement action last month for systematic 
violations that harmed thousands of consumers.
    So the credit bureau's automatic deference to debt 
collectors and creditors is outrageous. It is like a judge who 
finds in favor of the defendant in every single lawsuit. Yet, 
the industry is now saying it wants to be held less accountable 
by private enforcement under the FCRA for these errors and for 
its failure to conduct reasonable investigation.
    Beyond errors and disputes, the credit reporting systems 
need reform to help the millions of consumers who lost their 
jobs or their homes during the Great Recession. Foreclosures 
were often not due to irresponsible borrowing but abuse by 
lenders and mortgage servicers. Defaults due to job loss or bad 
luck say nothing about a consumer's responsibility in handling 
credit, yet these black marks last for 7 years, or 10 years in 
the case of bankruptcies, shutting these consumers out of 
affordable credit, insurance, jobs, and apartments. Creating a 
class of consumers that are shut out of economic necessities 
creates a drag on our Nation's economy. For these reasons and 
others, the credit reporting system in the United States is in 
need of substantial reform. The CFPB has made substantial 
progress, which is great, given it has only had authority to 
supervise this industry for about 2 years, but congressional 
action is necessary.
    I thank you for the opportunity to testify and look forward 
to your questions.
    [The prepared statement of Ms. Wu can be found on page 77 
of the appendix.]
    Chairwoman Capito. Thank you.
    I want to thank all the witnesses, and I will now recognize 
myself for 5 minutes for questions.
    All of you addressed this issue of inaccuracies in credit 
reports. I can attest to having one on mine, so I have tried to 
get that undone, and sometimes it was difficult. So I would 
like to ask you, Mr. Pratt, what steps are available to 
consumers to remove inaccurate data from their report? How long 
does it take? Mr. Ikard said 20 days, but is that what is 
actually occurring, and can you tell me what your industry is 
doing to help that?
    Mr. Pratt. Thank you for the opportunity to do that. Our 
members have done a couple of different things, even some steps 
just recently to try to ensure that the system works well for 
everyone. All of them have quality assurance processes, all of 
them are looking for monitoring and making sure that employees 
are well-trained. In fact, I will tell you that the CDIA has 
launched in partnership with our largest corporate members an 
entirely new training platform that will be used and that 
matches up with some of the examination experience that we are 
getting out of the CFPB as well, so that is a commitment we 
have made to further the training of employee bases to make 
sure that they are well-prepared to handle the needs that 
consumers have.
    Mr. Ikard mentions the e-OSCAR system. The e-OSCAR system 
does allow us to resolve disputes. Going a long way back, 
everything was processed by mail. I am old enough to remember 
that. Not everybody is these days, but I am, and consumers 
would have to dispute credit bureau by credit bureau. The e-
OSCAR system solved that problem. It is a one-stop shop. You 
dispute one time, it is distributed to the lender, the lender 
responds not just simply to the credit bureau that received the 
dispute but it responds to other credit bureaus and the data is 
corrected across-the-board one time, single stop. Fourteen days 
is accurate. On average, a dispute is processed in 14 days 
rather than the full 30 days that law allows. Law does--
    Chairwoman Capito. Let me stop you there.
    Mr. Pratt. Sure.
    Chairwoman Capito. Let's say that after 14 days, the 
consumer is not satisfied with the result, still believes that 
it is accurate data. There is a grievance, I am sure, a 
secondary appeal?
    Mr. Pratt. Normally a consumer will--they will normally 
call. Let's say they went online. They submitted their dispute 
online, ground one, and by the way, that was another step that 
the companies took voluntarily, drop-down menus, mechanisms so 
that you could look at your credit report online, dispute 
online, click on the dispute, submit it and get a return, but 
let's say you are happy with two out of the three results but 
not the third. You get another disclosure that tells you these 
are the results, this is what you--and this is by law. This is 
what you have, this is what we think is correct, call the toll-
free number if you have a question, and this is where the 
consumer will then end up with a customer service person to 
then work through in more detail what is it that you think is 
wrong with this other report.
    Chairwoman Capito. Out of the grievances that are filed, do 
you have the data for how many have to go to the secondary, to 
the toll-free line and all that, what percent is it?
    Mr. Pratt. It has been awhile, but between 15 and--around 
15 percent, I think, was the number that I had quite a while 
ago, so most are being resolved the first time through.
    One of the challenges is that when consumers call again, it 
doesn't mean that they are--they may have all the right 
intentions in the world, but they may have misunderstood 
something. An example would be in divorce. We will have 
consumers call and say, the judge made my ex-spouse pay for 
that loan. That is her responsibility or his responsibility. 
Actually, judges in divorce courts can't do that. They can't 
abrogate a loan and sever the contract between a joint loan. 
So, in other words, the lender still has a claim against both 
of those consumers, and so the consumer's credit report will 
still reflect that.
    So that is just a matter of law, but that is the kind of 
confusion. The consumer may not recognize that a retailer with 
whom they chose to do business and open up a credit card 
relationship, that there was a bank behind that relationship, 
and on the credit report, it may be the bank that is listed, 
not the name of the retailer, and so the consumer says, I don't 
think I ever opened up that account, that is wrong. On the 
phone, that is normally where that kind of thing is resolved. 
``Did you open up an account recently with a retailer?'' ``Yes, 
I did.'' ``Well, this is the bank that works for that 
retailer.'' ``Ah. Okay.''
    Chairwoman Capito. I am going to stop you here because I 
want to get into the student loan issue with Mr. Beales. A 
student loan--I talked about it in my report. Obviously, there 
is a lot of national concern about increasing student debt and 
then what kind of impact that is going to have on the long life 
of a student, in the positive or negative. If you pay off a 
student loan, does it come off your credit report? What kinds 
of things are positive or negative about a student loan? I only 
have 25 seconds left, so it is kind of a quick question.
    Mr. Beales. Like any loan, a student loan is an opportunity 
to build a history of responsible use of credit. If you make 
payments on time, that experience, like any other credit 
account, potentially increases your score and increases your 
attractiveness to lenders. People who have too much debt, 
whether it is student loan debt or any other kind of debt, and 
can't pay it, that is obviously going to be bad for your score. 
Students have had--certainly the amount of debt has increased, 
and to the extent that it is more than students can handle, 
that reduces their scores.
    Chairwoman Capito. Right. I am going to stop you here 
because I am sure we are going to have more student loan 
discussion. I have exceeded my time, so I am going to yield to 
Mr. Meeks.
    Mr. Meeks. Thank you, Madam Chairwoman. Let me just start 
with Ms. Wu. Ms. Wu, you wrote in a report that to solve the 
credit conundrum, we need a system that can distinguish between 
consumers who are truly irresponsible and those who simply fell 
on hard times.
    What recommendations do you have to ensure that our credit 
reporting system makes this distinction, and to what extent is 
it possible to do so?
    Ms. Wu. Thank you for the question, Congressman Meeks. I 
think one of the simplest measures in terms of trying to 
address this problem is the proposal in Congresswoman Waters' 
bill to shorten the amount of time that negative information 
stays on a credit report from 7 years to 4 years. There is 
nothing magic about the 7-year time limit in the Fair Credit 
Reporting Act. There are other countries with much shorter time 
periods. In Sweden, it is 3 years. In Germany, it is 4 years, 
and the last I heard, the German economy is doing fairly well. 
So, one thing that could help consumers is just to shorten this 
time period.
    Another thing is to exclude information such as medical 
debts and foreclosures as a result of abuse by lenders and 
servicers which Congresswoman Waters' bill also does.
    Mr. Meeks. Mr. Pratt, do you have any objection to reducing 
the time from 7 years to 4 years? Is there a magic formula for 
you with that 7 years?
    Mr. Pratt. Thank you. We do, and for some reasons that I--
and this is the beginning, probably not the end of a dialogue, 
and it will extend beyond the borders of this hearing today, 
but just a little bit of background: 82 percent of credit 
reporting systems around the world retain data for a period of 
time longer than the proposal to reduce the current 7 years to 
4 years, so systems around the world are generally designed for 
more data, not less.
    Systems around the world are also actually expanding data, 
not reducing data. For example, Australia and Brazil went to 
full-file positive systems within the last few years to adopt a 
system that looks very similar to ours. So, our system is often 
viewed as the best-in-class system that should be emulated by 
others. By the way, in Germany, if you don't pay your bill, 
that stays on your credit report forever, so in other words, it 
is not--
    Mr. Meeks. I am just wondering, why is 7 years--
    Mr. Pratt. I can't go back to 1970 and go into Bill 
Proxmire's head and wonder how he came up with the 7 years at 
that time, but I can tell you that at this point, here is what 
I think is most important. We need data before the Great 
Recession, we need data coming out of the Great Recession, and 
we need data now extending from the Great Recession so that if 
we are going to build risk management tools, we see the same 
data cross all those tranches. If we change it now, we are 
erasing data that is really important to how we manage risk and 
how we make better lending decisions in the future.
    Mr. Meeks. Let me take my time back, because I don't see a 
magic 7-year formula or 4 years, especially with helping 
consumers. But let me ask Mr. Ikard a question.
    Mr. Ikard. Yes, sir.
    Mr. Meeks. Really quick, going back to what Ms. Wu was 
talking about, that we need to distinguish between consumers 
who are truly irresponsible and those who simply fell on hard 
times, I understand that--and sometimes we have--when we were 
talking about, especially with small banks, that they say, and 
I think you found that they found that credit officers who know 
of an individual's personal circumstances provide more accurate 
and detailed information for credit reporting purposes. And 
that is why I am told by some members, especially small banks, 
they say, well, we don't want to be restricted in this sphere. 
We want some flexibility so we can make a determination as to 
whether a person truly will pay this back. Do you find that to 
be true?
    Mr. Ikard. Absolutely. I think the credit report is just 
one part of the underwriting process. The key is to sit down 
with the customer and hear their story. Some customers may have 
bad credit because it has been a lifelong pattern of just 
acting irresponsibly. Some might have had a catastrophic event 
at some point in their life, and I think it is up to us, 
incumbent on us to say, okay, let's look at this person in 
totality, what is their income potential, what has been their 
past behavior. If this is one catastrophic event that is out of 
the ordinary, I think you should have an obligation to set that 
aside; this person is still a good credit risk.
    So I think that as a banker, all bankers, we have the 
obligation to sit down with our customers and get the complete 
story, not just run somebody out the door because of a bad 
credit report. You have an obligation to sit down and talk to 
them about their complete financial situation.
    Mr. Meeks. Now, is there a way, do you think--and I will 
direct this to Mr. Ikard or Ms. Wu--that we could have a system 
where you can truly determine whether someone is just not 
paying, they are a bad credit risk, they just won't pay their 
debt, as opposed to someone who has fallen on hard 
circumstances, they were paying all of their debt, and all of a 
sudden, because of the economy or because of their loss of 
jobs, now they are not paying, so that they are not stuck for 7 
years or 10 years once they get a job again?
    Mr. Ikard. Sure. I think the way you look at that is based 
on their pattern. Just talk to the customer. If they had a 
history of making all their payments as agreed and all of a 
sudden they have one blip, that is obviously not their normal 
operating position. They have obviously had some catastrophic 
event take place. Let's take a look. Ask them what happened, 
explain it to me, tell me your story. If it makes sense, let's 
move on. It is interesting, we have banks down in Arizona, and 
Arizona had--
    Mr. Duffy. Mr. Ikard, if I could just--
    Mr. Ikard. --a huge problem with real estate, and what 
happened was is that we--
    Mr. Duffy [presiding]. Mr. Ikard, I am going to cut you 
off. The gentleman's time has expired. I am sure you will get 
more questions on that and have further opportunity to answer 
those questions. The Chair now recognizes himself for 5 
    The Fair Credit Reporting Act requires consumer reporting 
agencies to provide credit reports to child support agencies to 
ascertain the ability of a father or mother's ability to pay 
child support, and it is required to give 10 days notice to 
that mother or father before their credit report is pulled. Mr. 
Pratt, do you believe that there are any issues with that 10-
day notice requirement?
    Mr. Pratt. That is probably a better question on the side 
of the child support enforcement agencies themselves. My 
understanding is some of them have concerns with that 10-day 
period because it might be the heads-up that some noncustodial 
parent needs to push and move some assets around to make sure 
that those don't show up and they either pay less or they don't 
pay child support that they might otherwise owe. I think that 
is the concern.
    That was a set of language that was pushed into the FCRA 
2003 maybe.
    Mr. Duffy. I am all about notice and making sure people 
understand when their credit is being pulled, but listen, I am 
going to look out for kids and make sure that children are 
being treated fairly, and if someone has a 10-day notice, they 
can liquidate assets, is that fair to say, or max out credit 
cords that could have an impact on their credit score?
    Mr. Pratt. Clearly, that is going to have an impact on the 
financial profile of the consumer who is being evaluated in 
terms of the ability to then make child support payments.
    Mr. Duffy. And I believe in California there was a case 
that I found where the child support enforcement process was 
considered debt settlement and that 10-day notice wasn't 
required, but that is only for California. Do you think that 
the CFPB could or should give new guidance and extend it not 
just to California, but around the rest of the country?
    Mr. Pratt. I guess first, I have to go look at the 
California law to see what that looks like. I think some 
dialogue post-hearing to figure this out, to make sure we 
understand in detail what it is that you think ought to be done 
and what it is that we think current law permits us to do would 
be a good dialogue to have.
    Mr. Duffy. I would ask for unanimous consent to insert a 
letter into the record from one of the consumer reporting 
agencies asking that the CFPB actually back this guidance 
change. Without objection, it is so ordered.
    I guess maybe I would ask the panel, what steps are taken 
to protect the millions of bits of information that are 
collected in regard to people's credit history and personal 
    Mr. Pratt. I probably should start since we are the 
industry. CDIA's members, even before the enactment of the 
Gramm-Leach-Bliley Act, understood their obligation to secure 
the information and make sure that it was protected. Our 
members are--have the same risks posed for them that you would 
see with any U.S. business that has a valuable data set. We 
employ entire data security teams and audit processes, and I 
can tell you that the audit processes in the oversight includes 
on-site inspections of downstream users and on-site inspections 
of resellers in the process. I have had resellers sometimes 
complain about how robust those on-site inspections can be. We 
have IP address monitoring systems to make sure we understand 
when a company is in the normal cycle.
    So, for example, if we have a bank in Colorado that 
normally orders credit reports during its normal business day, 
but that bank code seems to now be tied to orders that are 
showing up at 3 a.m., and oh, by the way, it is a Russian IP 
address and it is not one that is U.S.-based, those are the 
kinds of red flags that we are going to use to shut down that 
access, go back to that bank, and talk about it and find out 
what is going on.
    I can tell you that we have gone to some very small users. 
One small financial institution had the codes for accessing the 
credit bureau's systems on a bulletin board. We suggested that 
wasn't a great idea. That is the kind of outreach we have on a 
regular basis, and we have remote learning information security 
training that we make available to customers as well as our 
    Mr. Duffy. In regard to the information that you collect, 
do you collect information on--just to get a good read on 
someone's credit history--do you collect information on their 
    Mr. Pratt. No.
    Mr. Duffy. How about the number of children they have?
    Mr. Pratt. No.
    Mr. Duffy. How about the ages of their children?
    Mr. Pratt. No.
    Mr. Duffy. How about the GPS coordinates of their home?
    Mr. Pratt. No.
    Mr. Duffy. Okay. I am just checking to make sure.
    Ms. Wu, listen, I share a concern about what happens with 
reporting of medical debt, but one concern that I have is if it 
isn't reported and maybe even weighted properly, do you have a 
concern that individuals may put that at the bottom of their 
payment list, there may be more delinquencies in regard to, or 
less incentive to pay off medical debt which rises costs for 
hospitals, clinics, and in turn, creates higher healthcare 
costs for the rest of us at a time when we are trying to reduce 
healthcare costs?
    Ms. Wu. One important thing to note about medical debt on 
credit reports is the vast majority are for small amounts. A 
2003 Federal Reserve study found something like over 80 percent 
of medical debt collection items were under $500 or $644 in 
today's dollars, so these are usually things like copays, the 
ambulance bill that--
    Mr. Duffy. I am sorry for asking you a question when my 
time had expired, so my time has expired. And with that, I now 
recognize Mrs. McCarthy for 5 minutes.
    Mrs. McCarthy of New York. Thank you, Mr. Chairman.
    Ms. Wu, I am going to let you finish the answer only 
because I am curious about it. Last year, unfortunately, I was 
ill and my medical expenses certainly were high, and then I had 
to have surgery at the beginning of this year, and had a great 
doctor. I have no complaints about the care I got, but I have 
to say that my medical bills were extraordinary, where I took 
money out of my savings account, and from my retirement to pay 
the bills, so they are way over $500, believe me.
    What we are seeing with the, now looking at how we are 
going to be handling those who are in debt from medical bills 
that there is going to be a certain time where they are not 
going to count that against--am I correct in the legislation--
not legislation, but the decision from FICO in August of 2014 
that they are going to look at medical debt and not put it onto 
their FICO score?
    Ms. Wu. First of all, my sympathies toward your situation, 
Congresswoman McCarthy. Medical debt shows up on credit reports 
solely as a result of debt collection. Something like 97 
percent of medical debts on credit reports are because they are 
referred to a debt collector, and often the reason it is 
referred to a debt collector is because there is an insurance 
dispute, a billing error, the provider doesn't get paid, and 
then it is automatically referred to a debt collector and they 
put it on a consumer's credit report. The CFPB's research found 
that kind of debt collection item unfairly penalized consumers' 
credit reports.
    And so I think partly as a result of that research, and 
partly as a result of complaints, VantageScore, which is the 
other scoring provider, had already stopped counting paid 
collection items. FICO also did, and so this helps consumers 
not be unfairly penalized by medical debt that has been paid 
off, or if it is the only item on their credit report. But it 
is not going to help mortgage applicants because Fannie Mae and 
Freddie Mac won't use these changes.
    Mrs. McCarthy of New York. I agree with you, because the 
surgery was in January, and I am certainly working with the 
insurance company to readjust the amount that they paid back to 
the doctor was over 4 months before it was able to be worked 
out. I was still left with a heavy bill but at least we got it 
cleared up to a certain extent, but I want to go back to Mr. 
Ikard. When someone comes to you in the bank and he is a 
customer and you know him, and you started to talk about that a 
little bit earlier, that he comes in whether it is a medical 
bill or maybe he just got laid off, and he might need a bridge 
loan, but he can't make the payments on what probably is more 
money than he has usually put down to pay off, you work with 
him, how often does that actually happen?
    Mr. Ikard. It actually happens quite a bit because we see a 
lot of these small medical charge-offs Ms. Wu was talking 
about. And if the customer has relatively clean credit, and 
there is nothing in their behavior that would lead you to 
believe they had problems paying their debt, just give us a 
reasonable explanation of what surrounds that issue. And we'll 
say fine, and move on. For us, that is not a deal breaker 
because we do see that quite a bit.
    Ms. McCarthy of New York. Do a lot of consumers do that, or 
do they even know that--most of them are usually afraid to talk 
to the bankers, not because of the bankers, but they don't want 
anybody to know that financially they might be getting a little 
bit behind.
    Mr. Ikard. I think that is a part of the process. I think a 
lot of the time, the first time they find out about it is when 
we run a credit report when they come in and ask for a mortgage 
loan. A lot of times they don't even know it is there. So we 
ask them to come in and just give us an explanation. If their 
whole credit report is bad, then we would assume that is 
probably just the way they do their business. But if they have 
clean credit and they have a good work history and they have a 
history of paying their bills, and they have this one medical 
charge-off, explain it to us, and we will document it, and we 
will move on. I think that is the reasonable way to do it.
    Ms. McCarthy of New York. I know, during the financial 
crisis, we saw an awful lot of people with their mortgages, and 
we offered to have seminars, brought in the experts. And hardly 
anybody ever showed up because they didn't want anybody to know 
that they were going under. It is very, very difficult. So I 
can understand where they might prefer going to the bank, or 
now that we have somewhere for our constituents to go to make a 
complaint and it is going to be hidden to a certain extent, but 
they can get the help they need, so I appreciate that part.
    Going back to the student loans, that is a real problem. We 
actually talked about that this morning in the Education 
Committee and how we can do financial literacy to educate our 
young students on how to use their debit card, how to use a 
credit card. I think that is important, and I hope that we can 
do that because these young people don't understand that you 
just can't do it. And I have to say I do love, even on my own 
bills, if I don't pay a certain amount, this is how long it is 
going to take for me to pay off, and it is a real eye-opener.
    Mr. Duffy. The gentlelady's time has expired.
    The Chair now recognizes the gentleman from North Carolina, 
Mr. Pittenger, for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman.
    Mr. Pratt, in light of the Dodd-Frank Act, I would just 
like to know, from your perspective, has this changed the 
credit reporting system? Are there any conflicts at all with 
that being the new governing body with the FTC? Have there been 
any differences in terms of mixed signals or different 
guidances that have been sent out or enforcement orders that 
have been in conflict? Have they worked together?
    Mr. Pratt. It is a little early to get too deep into that 
question. I can tell you that we have had members who have been 
concurrently subject to an examination process and also a FTC 
CID, and they have had to negotiate between the two agencies to 
try to decide whether they had to produce the same data or 
different data and what the costs might be relative to one 
versus the other, and there are varying degrees of cooperation 
around that sort of thing. That is really anecdotal, though.
    Overall, the CFPB has ruled out a larger participant rule. 
Many of our largest corporate members at CDIA are, in fact, 
larger participants. And they are subject to examination, and 
we are really in the middle of it, member by member, in terms 
of what these exams look like. And ultimately, the examination 
process will result in, in some cases, direction by the CFPB to 
make changes. A lot of that is still kind of forward-looking 
and not immediately in front of us, so it is hard to measure. 
So we are kind of midstream.
    Mr. Pittenger. Sure. Thank you. From your initial 
observation, do you feel like this is good prudent oversight 
and good management by the CFPB that they are providing?
    Mr. Pratt. The examiners that my members report to me have 
been professional and have been on point, and it has been a 
dialogue, so I can't tell you that it is not an issue of the 
relationship. Measuring results, that is a harder thing, and I 
can't tell you yet whether all the money that is being spent to 
match the CFPB examination requirement is necessarily going to 
get you to where you want to be. That is kind of an opportunity 
cost. It is a sunk cost that is now being built into the 
companies. It is how they will do business going forward, and I 
just can't tell you yet.
    Mr. Pittenger. The compliance and reporting costs, it is 
just another burden for these reporting institutions. Is it 
warranted? Do you feel like they are headed in the right 
direction, that this is good, prudent management?
    Mr. Pratt. If you look at our testimony, we feel like we 
were out in front on a lot of different issues without a 
regulator necessarily showing up at the door to tell us there 
was something else we ought to focus on. I don't think our 
culture has changed. We are never troubled by a dialogue about 
compliance and about getting it right, and to Chairwoman 
Capito's point, making sure the consumers are served properly. 
That is not a problem. It is really just a question of whether, 
at the end of the day, direction given by the CFPB is going to 
result in a change which just imposes more costs but very, very 
small, if any, benefits. We just don't know.
    Mr. Pittenger. Mr. Beales, you have spoken a little bit to 
this, but speak relative to the credit reporting system of the 
United States vis-a-vis other countries in the world and why 
you believe this is a better credit reporting system. Is there 
any way to improve it?
    Mr. Beales. There are some studies actually that go a long 
way towards proving it. And what they really focus on is the 
positive information that is in the U.S. credit reporting 
system, as opposed to negative-only systems in a number of 
other countries. That has been the primary focal point of the 
academic research, and it is clear you get better risk 
predictions and better credit availability out of the U.S. 
full-file system than you do out of those other countries' 
negative information systems.
    Mr. Pittenger. Sure. Mr. Ikard, in the banking industry--
and I was on a bank board for a decade, so I appreciate your 
good work--are there any existing areas of uncertainty that you 
found in attempting to comply with the Fair Credit Reporting 
Act that have become challenging?
    Mr. Ikard. I think there are always issues about how credit 
should be reported, I think some of the enhanced reporting. I 
think, for us, we want to see a very accurate, predictive 
model. In order to do that, you need to get as much information 
as possible into the system that is relevant and that can 
actually be used to help a consumer actually reflect a proper 
score. So I think sometimes, Congressman, we are not always 
sure exactly what we should report.
    The real challenge for us is bankruptcies. There are 
different stages of bankruptcies or foreclosures. At what point 
do we report? Is there a deed-in-lieu? Is there a short sale? 
Those type of things that might have an impact on a customer's 
credit score or at least allow the customer to tell a better 
story down the road. We are not exactly sure how those should 
be reported. Sometimes, we get confused on that.
    Mr. Pittenger. Thank you.
    I yield back.
    Mr. Duffy. The gentleman yields back.
    The Chair recognizes Mr. Meeks for a unanimous consent 
    Mr. Meeks. I would like to ask unanimous consent to place 
in the record the opening statement from Representative Ruben 
    Mr. Duffy. Without objection, it is so ordered.
    Mr. Duffy. The Chair now recognizes the gentleman from 
Texas, Mr. Green, for 5 minutes.
    Mr. Green. Thank you so much, Mr. Chairman. It is good to 
be in your company again, and you are doing quite a job today. 
And I appreciate this hearing very much. I want to thank all 
the witnesses for appearing today, and I always have to give 
some credit to the staff for the outstanding work that they do 
in compiling intelligence for us.
    I have information indicating that approximately 32 million 
people have files that are too thin to score, and 22 million 
people have no credit at all to be scored. I am concerned about 
persons who pay their light bills, their gas bills, their water 
bills, their phone bills, cable bills, tuition, and insurance, 
but they don't get scored, generally speaking. Perhaps they are 
scored sometimes when someone will make a special request and 
someone would bother to look.
    And I know that there is the argument being made to be 
careful with this, because if a person fails to pay a utility 
payment timely for a couple of months but still maintains the 
lights, gas, water, and then continues to pay, that could be 
harmful. I understand that argument. But that argument aside, 
why would we not allow these portions of a person's credit 
history to become a part of the scoring process so that persons 
who don't have other opportunities will at least have the 
opportunity to be scored based upon this part of their credit 
history? Who would like to be the first to respond?
    Ms. Wu, I know you have something to say on the topic, so I 
will start with you.
    Ms. Wu. Thank you, Congressman Green.
    Yes, this is an issue on which we have testified before, 
before this very subcommittee. We do have concerns about 
promoting the practice of what is called full-file utility 
credit reporting. It is because of the unique nature of utility 
bills, for example, in Massachusetts, it kind of gets cold very 
often. We just came through the polar vortex, and so people had 
really high heating bills, but they catch up. They catch up in 
May. That is why, in Massachusetts, there is a winter 
moratorium. You can't shut off somebody's heat if they have an 
elder or infant in the house or they are sick between the 
months of November and May. People know that, and they rely on 
that. And so, we are concerned that full-file reporting might 
undermine those protections or that it might hurt the consumers 
who are late for 1 or 2 months but then do catch up.
    Also just to make clear, there is nothing in the Fair 
Credit Reporting Act right now that prohibits a utility from 
engaging in full-file reporting. There is a bill filed, and 
some of our concerns over that bill actually have to do with 
the way it is written and the way it impacts the Fair Credit 
Reporting Act apart from utility credit reporting.
    Mr. Green. Would anyone else care to comment?
    Mr. Ikard. Congressman, one of the things that we look at 
is, our philosophy is that bad credit will hurt you, but no 
credit is neutral. So if you have no credit, we would like for 
you to sit down with one of our loan officers and just explain, 
what is going on in your life, where are you working, what 
bills have you been paying? We don't necessarily see that as a 
negative. Obviously, you can't get a credit score, but you are 
correct; that score means a lot. But in our world, bad credit 
is an obstacle, but no credit is simply an opportunity to start 
this discussion.
    Mr. Green. I appreciate your willingness to sit and have 
that conversation, but on the large scale, when we look at the 
macro, it becomes very difficult.
    Mr. Ikard. That is true.
    Mr. Green. An automated process would be a much more viable 
means of getting a person's credit properly before you. We, in 
2008, had language in the Housing and Economic Recovery Act 
that called for an automated process. HUD was to develop a 
pilot program. I think that an automated process could factor 
in some of the things that Ms. Wu has called to our attention 
and still allow persons to be scored. I just know of too many 
circumstances where persons can afford to pay rent that exceeds 
a mortgage payment, and given the opportunity to have a 
mortgage, they would become homeowners and develop equity, 
build their equity. There must be some middle ground here for 
us so that we can help people who do pay their light bills, gas 
bills, and water bills timely, and don't have the opportunity 
to be scored in an automated fashion. To do it on a case-by-
case basis probably is helpful to persons on a case-by-case 
basis but not to all of the persons we want to serve.
    Thank you, Mr. Chairman. I yield back.
    Mr. Duffy. The gentleman's time has expired.
    As we have all heard the magic bells ring, we do have a 
vote series which we do anticipate coming back after. So with 
that, the committee stands in recess subject to the call of the 
Chair, and the call of the Chair will be right after votes.
    Chairwoman Capito. The committee will come back to order.
    And I will call on Mr. Fitzpatrick for 5 minutes for 
    Mr. Fitzpatrick. I thank the Chair for calling the hearing, 
and I want to direct most of my questions to Professor Beales.
    Professor, in his opening statement Representative Ellison 
referred to a bill that he and I have co-sponsored and 
introduced together, called the Credit Access and Inclusion 
Act. The substance of the bill pretty much comports with what 
you referred to in the third section of your remarks, that more 
information in the system leads to better performance. You said 
in your statement that an estimated 30 million to 50 million 
consumers do not have sufficient credit information in their 
files to qualify for affordable mainstream credit. Are you 
familiar, Professor, with the Act that Representative Ellison 
and I have introduced?
    Mr. Beales. I know about it as a general concept. I haven't 
actually read it, but I am familiar with it in general.
    Mr. Fitzpatrick. The bills clarifies existing law under the 
Fair Credit Reporting Act to demonstrate or prevent utility and 
telecomm firms, current law prevents them, I think, from 
reporting accurate and enough information out of fear that it 
is not specifically authorized. So it specifically authorizes 
that utility payments, rent payments and the like can be 
reported without fear of being in violation of the Credit 
Reporting Act and without fear of the kind of lawsuits that 
might result. So, so-called thin file customers would have more 
robust information in their file and theoretically more access 
to credit. Would that be a good thing, in your view?
    Mr. Beales. Absolutely, that would be a good thing. That is 
what the academic research shows, is that it improves the 
predictiveness of who is a good risk and who is not, and by and 
large makes some people who look like really thin files, makes 
it clear that they are pretty responsible about managing their 
money. I think that would be a good thing. And it makes sense 
to remove anything that might be a statutory or regulatory 
barrier to letting that happen. I don't know whether the most 
efficient way for that information to get into the system is 
through the main credit reporting agencies as opposed to 
through specialized agencies that specialize in that kind of 
information and are supplemental information sources. I think 
that is something the market would pretty clearly sort out if 
it is clear to everybody that they can provide the information.
    Mr. Fitzpatrick. And there is nothing in the bill as it is 
written that would mandate the reporting of such information, 
so in other words, it would be instructive or permissive. Is 
    Mr. Beales. I think that is the right way to go is to be 
permissive rather than mandatory, because it is, the whole 
structure of credit reporting is a voluntary furnisher system, 
and I think there is a lot at stake if you try to change that.
    Mr. Fitzpatrick. Is there anything in particular you would 
like to add? What do you understand about the bill, because I 
am going to be asking--as Representative Ellison said, we have 
a good selection of co-sponsors already, but we are going to be 
asking other Members of Congress to co-sponsor this. Would you 
make any recommendations?
    Mr. Beales. Not without reading it in detail, no. I think 
the approach of removing barriers and leaving it voluntary, I 
think that is exactly the right way to go.
    Mr. Fitzpatrick. Professor, there is a graph up on the 
screens on either side of the room, and I am not sure if you 
can see it, but it is a 2012 FERC report, and it seems to 
indicate credit score along the bottom and percentage of thinly 
filed or thinly reported consumers, what their credit score 
would be. And it seems to indicate that if you have more 
reporting of the kind of reporting that Representative Ellison 
and I are suggesting would be helpful and appropriate, that 
those who are helped, it goes from about 5 percent of the so-
called credit-invisibles are able to get anything on the credit 
reporting scoring system, 2, 3, 4, maybe as much as 5 percent, 
but with more information, it goes up as high as 35 percent, 
interestingly enough, in an area of the credit graph which is 
really beneficial to some of these potential consumers. And I 
would think that these individuals who are currently credit-
invisible, who currently don't have a credit score, if they are 
getting not only a credit score, but a pretty good credit 
score, when they go out to buy their first vehicle or whatever 
their consumer purchasing may be, they are going to be getting 
better rates. They are going to be able to purchase more and, 
frankly, have a better future for themselves. So I am not sure 
if you are familiar with that graph, but in your view, is that 
graph accurate?
    Mr. Beales. It is. That graph and the work behind it are 
the basis for--and I think I cited them in the testimony--
saying more information is better. This is one of the primary 
pieces of evidence for that proposition. There is no piece of 
information that is good for everybody. We know that because 
risk assessment doesn't work like that. The idea is to better 
separate good risks from bad risks, but I think what this graph 
makes clear is that for this group of people as a whole, they 
are better off with this information in the system than not.
    Mr. Fitzpatrick. I am sure there is another view. What is 
the downside of more robust reporting? Is there anybody in the 
system who would be hurt?
    Ms. Wu. We are concerned that a lot of consumers would be 
hurt if you started reporting every single late utility 
payment. There is data showing that sometimes 20 to 30 percent 
of energy consumers, especially consumers who receive low-
income heating and energy assistance, do have 30- or 60-day 
late payments, and so you would end up adding a lot of negative 
    Mr. Fitzpatrick. I appreciate that. The question was 
actually to Professor Beales.
    Mr. Beales. And I think the question is, what is the 
predictive value of that information? It is going to be good 
information for some people. It is going to indicate problems 
for some other people, but that is why information is useful, 
is to sort between those good risks and bad risks.
    And what I think you are seeing in the graph here is a much 
better sorting and a substantial benefit to most of the people, 
not everybody, because some people's bill paying history isn't 
so good, just like some people's credit history isn't so good, 
but where that information is more positive than not for this 
group of people.
    Mr. Fitzpatrick. Thank you for the answer. I yield back.
    Chairwoman Capito. I believe we are waiting for one more 
Member, Congressman Ellison. I don't know if he has questions. 
So while we are waiting--I guess we will wait a couple of 
minutes, and if he doesn't show, we will ring it down.
    Is there anything that you all would like to add in the 
line of questioning that we have had that you think might be 
good to have on the record or any clarifications that anybody 
would like to make?
    Ms. Wu. I would like to address a couple of issues that 
came up earlier regarding data security breaches. Certainly, 
our organization is concerned about data security breaches and 
consumers' information being out there. Consumers should know 
that the good news is there are currently protections under 
Federal law when your existing credit card or bank account is 
used by a thief, and that for things like the Target data 
breach, we had said the most important thing is to monitor your 
existing bank or credit card accounts. And the thing not to do 
is to go out and buy credit monitoring products. These are 
expensive products, $15 to $20 a month, and they do nothing to 
prevent ID theft. They just detect it after it happens. For 
consumers who are actually concerned about identity theft, the 
most effective thing is the security freezes mandated by State 
    But we have great concerns about the way credit monitoring 
has been offered to consumers. And, in fact, three or four of 
CFPB's actions against credit card issues have been over the 
sale of products such as credit monitoring.
    Chairwoman Capito. Yes, Mr. Pratt?
    Mr. Pratt. I want to respond to that thought that credit 
monitoring is essentially useless, and I can't tell you how 
much we disagree with that idea. There are a whole range of 
financial literacy products that are out there today in the 
marketplace. Even the CFPB's report about the credit reporting 
ecosystem talks about the fact that not only do consumers get 
free file disclosures, which is important, through 
annualcreditreport.com. That is the free Web site. That is how 
you go and get it and exercise your right under law. But an 
additional 30 million to 40 million file disclosures are in the 
hands of 30 million to 40 million consumers as a result of 
these products. The idea that I shouldn't, that it is not 
valuable for me to have a product that may notify me when 
changes to my file take place, the idea that I shouldn't be 
able to look at changes to my credit report and understand how 
that might affect a score, the idea that learning process is 
not valuable is just ludicrous.
    So it is a significant disagreement between us and certain 
advocacy organizations, but I just want to make that point for 
the record, that this is a really important product. That is 
one of the reasons why we believe it should be exempted from 
CROA. That is why we believe that the Credit Repair 
Organizations Act, which was never written to regulate these 
products, is wrong. These products are regulated under the 
FTC's Section 5, the unfair, deceptive acts or practices. They 
are regulated under specific rules for advertising practices. 
It is a safe and sound product. Millions and millions and 
millions of consumers buy it, and they are okay with it.
    Chairwoman Capito. With that, I am going to have extended a 
couple of minutes courtesy to Mr. Ellison, who has obviously 
gotten hung up. I don't want to be rude to my witnesses here 
because you all had to have a disruption, so he can submit 
questions for the record, and we can ask for your response.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    Without objection, the hearing is adjourned, and again, I 
thank you for your patience.
    [Whereupon, at 4:21 p.m., the hearing was adjourned.]
                            A P P E N D I X

                           September 10, 2014