[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                        A BIASED, BROKEN SYSTEM:
                    EXAMINING PROPOSALS TO OVERHAUL
                    CREDIT REPORTING TO ACHIEVE EQUITY

=======================================================================

                             HYBRID HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 29, 2021

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-33
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
45-358 PDF                 WASHINGTON : 2021                     
          
-----------------------------------------------------------------------------------   

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           PETE SESSIONS, Texas
DAVID SCOTT, Georgia                 BILL POSEY, Florida
AL GREEN, Texas                      BLAINE LUETKEMEYER, Missouri
EMANUEL CLEAVER, Missouri            BILL HUIZENGA, Michigan
ED PERLMUTTER, Colorado              ANN WAGNER, Missouri
JIM A. HIMES, Connecticut            ANDY BARR, Kentucky
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio                   FRENCH HILL, Arkansas
JUAN VARGAS, California              TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey          LEE M. ZELDIN, New York
VICENTE GONZALEZ, Texas              BARRY LOUDERMILK, Georgia
AL LAWSON, Florida                   ALEXANDER X. MOONEY, West Virginia
MICHAEL SAN NICOLAS, Guam            WARREN DAVIDSON, Ohio
CINDY AXNE, Iowa                     TED BUDD, North Carolina
SEAN CASTEN, Illinois                DAVID KUSTOFF, Tennessee
AYANNA PRESSLEY, Massachusetts       TREY HOLLINGSWORTH, Indiana
RITCHIE TORRES, New York             ANTHONY GONZALEZ, Ohio
STEPHEN F. LYNCH, Massachusetts      JOHN ROSE, Tennessee
ALMA ADAMS, North Carolina           BRYAN STEIL, Wisconsin
RASHIDA TLAIB, Michigan              LANCE GOODEN, Texas
MADELEINE DEAN, Pennsylvania         WILLIAM TIMMONS, South Carolina
ALEXANDRIA OCASIO-CORTEZ, New York   VAN TAYLOR, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 29, 2021................................................     1
Appendix:
    June 29, 2021................................................    63

                               WITNESSES
                         Tuesday, June 29, 2021

Ejaz, Syed, Financial Policy Analyst, Consumer Reports...........     5
Greer, Jeremie, Co-Founder and Co-Executive Director, Liberation 
  in a Generation................................................     7
Quan, Daniel J., Adjunct Scholar, Cato Institute Center for 
  Monetary and Financial Alternatives............................    11
Traub, Amy M., Associate Director, Policy and Research, Demos....     8
Wu, Chi Chi, Staff Attorney, National Consumer Law Center (NCLC).    10

                                APPENDIX

Prepared statements:
    Ejaz, Syed...................................................    64
    Greer, Jeremie...............................................    93
    Quan, Dan....................................................   100
    Traub, Amy...................................................   109
    Wu, Chi Chi..................................................   116

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of the National Association of Federally-
      Insured Credit Unions......................................   139
    Written statement of the National Urban League...............   142
    Written statement of UnidosUS................................   144
McHenry, Hon. Patrick:
    Written statement of the Consumer Data Industry Association..   150
    Written statement of the Credit Union National Association...   153
    Written statement of the National Taxpayers Union............   155
Wu, Chi Chi:
    Written responses to questions for the record from 
      Representative William Timmons.............................   159
    Written responses to questions for the record from 
      Representative Nikema Williams.............................   207

 
                        A BIASED, BROKEN SYSTEM:
                         EXAMINING PROPOSALS TO
                       OVERHAUL CREDIT REPORTING
                           TO ACHIEVE EQUITY

                              ----------                              


                         Tuesday, June 29, 2021

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Velazquez, 
Sherman, Scott, Green, Cleaver, Perlmutter, Foster, Beatty, 
Vargas, Gottheimer, Lawson, San Nicolas, Axne, Pressley, 
Torres, Lynch, Adams, Tlaib, Dean, Garcia of Illinois, Garcia 
of Texas, Williams of Georgia, Auchincloss; McHenry, Lucas, 
Posey, Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, 
Hill, Emmer, Loudermilk, Mooney, Davidson, Budd, Kustoff, 
Hollingsworth, Gonzalez of Ohio, Steil, Gooden, Timmons, and 
Taylor.
    Chairwoman Waters. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Before I begin, I want to welcome Members to our first Full 
Committee hearing this Congress that has been held in a hybrid 
format. As I mentioned at last week's markup, I appreciate all 
of the Members' patience these past months, and I am proud of 
the work we have been able to achieve as a committee in the 
midst of this pandemic.
    Members will note that today we are joined in person by 
three witnesses, while two of our witnesses will be testifying 
virtually. The screen showing the virtual platform in the 
hearing room has been formatted to ensure that the witnesses 
participating virtually appear at the top of the screen. I 
appreciate Members' flexibility, and I look forward to being 
fully in person in the coming weeks.
    As a reminder, I ask all Members participating remotely to 
keep themselves muted when they are not being recognized by the 
Chair. The staff has been instructed not to mute Members, 
except when a Member is not being recognized by the Chair and 
there is inadvertent background noise.
    Members are also reminded that they may only participate in 
one remote proceeding at a time. If you are participating 
remotely today, please keep your camera on, and if you choose 
to attend a different remote proceeding, please turn your 
camera off.
    Today, this committee convenes for a hearing entitled, ``A 
Biased, Broken System: Examining Proposals to Overhaul Credit 
Reporting to Achieve Equity.''
    I now recognize myself for 5 minutes to give an opening 
statement.
    As the title of this hearing indicates, our current credit 
reporting system is broken. Good credit is a gateway to wealth, 
yet for far too long, our credit reporting system has kept 
people of color and low-income persons from access to capital 
to start a small business, access to mortgage loans to become 
homeowners, and access to credit to meet financial emergencies. 
That is why, even before the pandemic, the House passed two 
bills out of this committee, the Comprehensive CREDIT Act, and 
the Protecting Your Credit Score Act, that provide long-overdue 
reforms to our credit reporting system. We are considering 
those bills again with this hearing, but allow me to also 
explain how the pandemic has exposed just how broken our credit 
reporting system is.
    Last week, I received a letter from a gentleman in Ohio. In 
this letter, he explained how he had lost his job because of 
the pandemic. Without his salary, and with no help from any of 
his creditors, he couldn't afford to cover all of his bills. 
Although he had never before missed a credit card payment, his 
credit score has suffered so badly, he wrote that, ``I couldn't 
get credit now if I paid someone to give me credit.'' He closed 
his letter by asking what this committee was doing to protect 
consumers like him.
    As Chair of the Financial Services Committee, it is indeed 
a priority of mine to protect consumers like him who are 
unfairly penalized in their credit reports, and it is precisely 
why we are holding this hearing today to ensure greater 
transparency, accountability, and protections for customers and 
consumers across the country.
    We saw this coming. That is why Democrats worked to include 
strong credit reporting protections in the Health and Economic 
Recovery Omnibus Emergency Solutions (HEROES) Act and other 
COVID legislation that Republicans rejected. This issue is not 
a matter of personal failings. This is about a failed system. 
This is a system that fails people with perfect credit who may 
be victims of identity theft, this is a system that fails 
people who get caught in a debt trap because of predatory 
lending, and this is a system that fails people who don't have 
the means to dispute errors that reporting agencies make.
    As further proof of the need for reforms, in a ruling 
issued last Friday the Supreme Court denied relief for 
thousands of consumers whom TransUnion wrongly matched with the 
names of those on a terrorist watch list. The credit bureaus 
can now label Americans as terrorists with impunity.
    The Consumer Financial Protection Bureau's (CFPB's) 
complaints about credit reporting surged 50 percent in 2020, 
receiving nearly 50,000 complaints in December alone. During 
his campaign, President Biden supported a proposal for a public 
credit reporting agency, and I directed staff to prepare the 
discussion draft we are discussing today.
    As some of today's witnesses will attest, creating a public 
consumer credit reporting agency would be a major upgrade over 
today's broken, biased credit reporting system. We need big, 
bold legislative solutions to transform this broken system.
    So, I encourage my colleagues to join me in reevaluating 
how we determine creditworthiness, and in learning how we can 
harness new technologies to build a more fair and equitable 
credit system.
    I yield back the remainder of my time, and I now recognize 
the ranking member of the committee, the gentleman from North 
Carolina, Mr. McHenry, for 4 minutes.
    Mr. McHenry. Thank you, Madam Chairwoman. We can all agree 
that the credit reporting industry is in need of reform. While 
there are thousands of companies across the country that 
operate within the credit reporting system, there are only 
three nationwide credit reporting agencies. It is clear that it 
is an oligopoly. That means there is less consumer choice and 
competition to provide the best product. Reforms are certainly 
needed to improve this system for all participants.
    For example, we should be working together to eliminate 
barriers to entry in this industry. We should be thinking 
through ways to encourage more companies to compete with the 
three credit reporting agencies. But instead of creating more 
competition in the private sector, my colleagues on the left go 
to the same playbook: a government-run bureau, based on 
anecdotal evidence and faulty data, including slanted surveys. 
This is part of their broader goal to dismantle the financial 
system as we know it. If the idea of a government-run credit 
reporting agency isn't bad enough, the Democrats want to house 
it at the Consumer Financial Protection Bureau. This would be 
disastrous. We should be promoting competition to create better 
opportunities for consumers, not allowing a single government 
entity to run the credit reporting process for all Americans.
    We know that government-run programs are the least-
effective entities to deliver services. Can you imagine the 
IRS, the Post Office, or the DMV compiling and maintaining your 
credit report? It may not be great now, but, holy cow, that 
would be awful.
    Additionally, we know cyberattacks are on the rise. 
Personal financial data is some of the most coveted information 
by criminals. Add this to the fact that Democrats consistently 
want consumers to use their full Social Security number to 
identify themselves, it is a recipe for disaster, and more 
identity theft. A massive new government-run database of 
consumers' personal financial information would be a sitting 
duck for bad actors.
    Finally, a government-run credit bureau raises privacy 
concerns. The government should not be the central repository 
for all financial data available on its citizens. That is a 
very dangerous precedent.
    As my fellow Gastonian from North Carolina--a nice small 
town in Western North Carolina--Thomas Sowell, who grew up in 
my hometown, stated, ``It is hard to imagine a more stupid or 
more dangerous way of making decisions than by putting those 
decisions in the hands of people who pay no price for being 
wrong.'' I agree. It is a terrible idea to give the government 
the power to make credit allocation decisions potentially based 
on political favorability. We have seen the IRS target 
conservative groups. We have seen Federal regulators pressure 
financial institutions that invest in whole industries. Why 
would we take the risk with individual consumers' information?
    Our free market system is the envy of the world. Our 
choices are better than anywhere else on the globe. It 
encourages competition that benefits consumers by yielding 
solutions that better serve them. There is room for 
improvement. Yes, that is indeed the case, but not with 
government takeovers like what my Democrat colleagues are 
pushing today.
    And with that, I would ask unanimous consent to insert two 
letters into the record expressing concern and opposition to 
the bills attached to this hearing today, including one from 
the Consumer Bankers Association and another from ACA 
expressing concerns with attempts to alter the credit reporting 
market, including a government-run bureau.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. McHenry. I yield back.
    Chairwoman Waters. The gentleman yields back. Thank you, 
Ranking Member McHenry. I now recognize the gentleman from 
Missouri, Mr. Luetkemeyer, for 1 minute.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman. This hearing 
marks yet another step taken by the Majority to move toward a 
socialist financial services industry. Attached to this hearing 
is legislation that would create a government-run credit bureau 
within the CFPB. This proposal would mean the government is in 
charge of determining if someone is creditworthy in the United 
States, a terrifying thought. This proposal comes only weeks 
after a hearing on the FinTech Task Force regarding central 
bank digital currencies, where the Majority proposed numerous 
ideas of public Fed accounts and postal banking. This is what 
the slippery slope of socialism looks like, ladies and 
gentlemen.
    It is clear that the Majority is pushing for a world where 
the Federal Government not only decides if you can get a loan, 
but they are the ones who, in fact, lend you the money. I urge 
my colleagues to go back to their districts and ask their 
constituents if that is what they want for the American 
financial system. My guess is they would be terrified that this 
proposal would receive serious consideration before this 
committee. With that, Madam Chairwoman, I yield back.
    Chairwoman Waters. I now want to recognize today's 
distinguished witnesses to the committee: Mr. Syed Ejaz, a 
financial policy analyst with Consumer Reports; Mr. Jeremie 
Greer, the co-founder and co-executive director of Liberation 
in a Generation; Ms. Amy Traub, the associate director of 
policy and research at Demos; Ms. Chi Chi Wu, a staff attorney 
with the National Consumer Law Center; and Mr. Dan Quan, an 
adjunct scholar with the Cato Institute's Center for Monetary 
and Financial Alternatives.
    Each of you will have 5 minutes to summarize your 
testimony. You should be able to see a timer on your screen or 
on the desk in front of you that will indicate how much time 
you have left. When you have 1 minute remaining, a yellow light 
will appear. I will ask you to be mindful of the time and, when 
the red light appears, to quickly wrap up your testimony so 
that we can be respectful of both the other witnesses' and the 
committee members' time. And without objection, your written 
statements will be made a part of the record.
    Mr. Ejaz, you are now recognized for 5 minutes to present 
your oral testimony.

  STATEMENT OF SYED EJAZ, FINANCIAL POLICY ANALYST, CONSUMER 
                            REPORTS

    Mr. Ejaz. Thank you. Chairwoman Waters, Ranking Member 
McHenry, and members of the committee, thank you for inviting 
Consumer Reports to testify regarding Americans' experiences 
with credit reporting and paths towards a better credit 
reporting system for consumers.
    The existing credit reporting system does not work for 
consumers. Too frequently, consumers struggle to access their 
credit reports, and when they do, too often, they find that 
errors can limit their financial opportunities and can be 
difficult to correct. Inaccuracies on credit reports are not a 
new issue. In 2012, the Federal Trade Commission conducted a 
study on credit reports in which 21 percent of participants 
found one verified error on their credit report, and 5 percent 
had errors so significant that they were put in a different 
credit risk tier. Complaints to the Consumer Financial 
Protection Bureau regarding credit reporting errors remain 
among the most frequent submissions to their database and have 
more than doubled since 2019.
    In February of 2020, in Consumer Reports' own American 
Experiences Survey, a nationally-representative survey 
addressing a wide variety of consumer issues, 14 percent of 
participants who said they had checked their credit reports, 
also said that they had found errors. This is unacceptable. 
Credit reporting agencies hold information that can be used to 
make consequential lending, employment, and, in some States, 
underwriting decisions about us. Credit report errors that 
damage credit scores can keep people from affordable interest 
rates as well as employment, and, again, in some States, auto 
insurance.
    During February and March of this year, Consumer Reports 
asked volunteers to check their credit report and let us know 
about their experiences in a project we called Credit Checkup. 
Nearly 6,000 people responded to our survey and shared their 
stories: 34 percent of participants who checked their credit 
report told us that they found at least one error on their 
report; 29 percent said they found an error relating to their 
personal information, such as wrong name or address; and 11 
percent found errors relating to account information, such as 
mistakes about their account payment history.
    One participant, Victoria Ross, shared her story, which 
captures how much the credit reporting system can impact 
consumers. Her TransUnion credit report mistakenly showed a 
PayPal account balance of around $1,200 that she had paid off, 
an error which led her to face unaffordably high interest rates 
when trying to find a car loan. Victoria filed multiple 
disputes, but was unable to get her credit report fixed until 
after Consumer Reports contacted TransUnion. Victoria's story 
is one of many that show how an inaccurate, unresponsive credit 
reporting system can cause problems for consumers.
    One in 10 consumers who took our survey found accessing 
their credit reports to be difficult or very difficult. Many 
consumers shared stories of being locked out of their credit 
reports because of identity verification questions that they 
simply couldn't answer, because those questions were based off 
of inaccurate information.
    Some consumers told us that while they were checking their 
free credit report, they were pushed towards products and 
services that they would have to pay for. Multiple people said 
that they were asked for credit card information before seeing 
their reports, and later were charged. One told us, 
``TransUnion ran me through an exhausting series of questions, 
sales offers, and ridiculous permutations until I was able to 
get a credit report and score displayed. Then, I found that 
they had signed me up for a monthly service and charged my 
credit card $27-and-change for the first month, to be charged 
monthly. I immediately canceled the subscription and had to 
call the helpline to get this charge removed from my card.''
    These stories highlight just some of the problems that 
consumers encounter with the deeply-flawed credit reporting 
system and are a fraction of the thousands of stories that 
Consumer Reports has collected.
    Consumers need a credit reporting system that works for 
them, one where their reports are accessible and accurate, and 
errors are easy to correct. The good news is that legislation 
that is discussed here today can help address some of the most 
glaring problems. For example, the Protecting Your Credit Score 
Act requires all credit reporting agencies and data furnishers 
to match first name, last name, date of birth, and all nine 
digits of a consumer's Social Security number when placing 
their information on the reports. This bill also creates a 
secure portal where consumers can freeze their credit, file 
disputes, and check their reports, for free, an unlimited 
number of times.
    The House can also pass the Comprehensive CREDIT Act once 
more. This bill gives consumers the right to appeal the results 
of disputed investigations, restrict the use of credit reports 
for employment, and implements many other commonsense reforms 
to the credit reporting system.
    Credit reports play a central role in the lives of 
consumers, and the industry should focus on the needs of 
consumers first. A consumer-centric credit reporting system 
would put consumers in control of their own credit information, 
make it easy to access reports and scores for free, strengthen 
standards to ensure reports are accurate, and simplify the 
process for correcting errors. Congress can put consumers first 
by passing the Comprehensive CREDIT Act, and the Protecting 
Your Credit Score Act. Thank you.
    [The prepared statement of Mr. Ejaz can be found on page 64 
of the appendix.]
    Chairwoman Waters. Thank you very much. Next, we will go to 
Mr. Greer. You are now recognized for 5 minutes to present your 
oral testimony.

    STATEMENT OF JEREMIE GREER, CO-FOUNDER AND CO-EXECUTIVE 
              DIRECTOR, LIBERATION IN A GENERATION

    Mr. Greer. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, thank you for giving us the 
opportunity to talk about racial bias and flaws in the current 
credit reporting system. My name is Jeremie Greer, and I am the 
co-founder and co-executive director of Liberation in a 
Generation, which is a national racial justice movement support 
organization working to dismantle what we call the, 
``oppression economy,'' and looking to build a liberation 
economy in its place.
    Within the oppression economy, credit reporting agencies 
such as Experian, TransUnion, and others have anointed 
themselves as the gatekeepers with the power to determine who 
can and cannot access financial products, services, and the 
capital necessary to navigate the economy. They are the 
gatekeepers to a dual financial system that, on one hand, 
builds the wealth of households through products and services 
like affordable mortgages and low-cost credit cards, but, on 
the other hand, preys upon the financially-insecure through 
products such as subprime mortgages, payday loans, auto title 
loans, and predatory credit-building products and services.
    Our current credit reporting system both reinforces and 
exacerbates the dual financial system. Far too many people of 
color find themselves on the wrong side of this system because 
they are credit invisible. According to the Consumer Financial 
Protection Bureau (CFPB), 15 percent of Black and Latinx 
consumers are considered credit invisible, meaning that they 
have no credit record at all, while about 13 percent are deemed 
to have thin or unscorable credit files.
    Also, other racial and economic disparities such as income 
and neighborhood segregation have a huge impact on someone's 
credit score. For example, take income. Black and Latinx median 
income is about $40,000, and the median White income is about 
$70,000. A study by Experian and WalletHub shows that these 
levels of income mean that Black and Latinx households would 
have an average credit score of 643 and 681, respectively, 
which is deemed a bad or risky credit score, while the average 
White household would have an average credit score of 700 or 
737, which is considered a good credit score.
    So, what creates these disparities? A major contributor is 
the biased data that goes into calculating the score, for 
example, on-time payments, which favors things like mortgages 
and credit cards, but often completely disregards other forms 
of payments like a cellphone, rental payments, or utility 
payments that are more likely to be made by low-income 
consumers of color.
    Another example is credit history. In this case, you need 
credit to get credit, and historic barriers towards Black and 
Latinx communities have held back credit from those communities 
for a long time and made them unable to access credit. For 
example, think of a child going to college, where a parent is 
able to open a credit card account for their child. That 
creates credit for the child. Many Black and Latinx households 
are not able to do that. They are not able to pay off their 
child's student loan debt. They are not able to co-sign an auto 
loan because of the lack of access to credit in Black and Brown 
communities.
    Sadly, research from the CFPB shows that the reality of 
being credit invisible or having an unscorable account at an 
early age makes people suffer for both a long time and in the 
near term. To end this dual financial system, we must reform 
these credit reporting agencies, and efforts like the bills 
that passed out of this committee that Chairwoman Waters 
referenced, including a public agency responsible for 
protecting consumers, having accountability and transparency in 
the system is also critically important.
    We look forward to efforts that improve our credit scoring 
system, and we look forward to working with the committee to 
create those. Thank you for allowing me the time to address 
you.
    [The prepared statement of Mr. Greer can be found on page 
93 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Greer. Ms. Traub, you are 
now recognized for 5 minutes to present your oral testimony.

  STATEMENT OF AMY M. TRAUB, ASSOCIATE DIRECTOR OF POLICY AND 
                        RESEARCH, DEMOS

    Ms. Traub. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and members of the committee. My name is Amy Traub, 
and I am associate director of policy and research at Demos. 
Demos is a dynamic think tank that powers the movement for a 
just, inclusive, multiracial democracy and economy. One of our 
core principles is economic democracy, the idea that we the 
people must be able to exercise real power over the economic 
decisions that shape our lives. We focus on Black and Brown 
communities, that have been largely excluded from economic 
decision-making.
    In my testimony this morning, I will make the case that 
credit reporting is part of our nation's financial 
infrastructure, and is necessary for full economic 
participation and thriving. I will share evidence of systemic 
racial inequity in credit reporting and will show that the many 
failures of the system arise from the structure of the 
industry, and, thus, require structural change. Finally, I will 
argue that publicly-controlled credit reporting offers the best 
opportunity to rebuild the system and ensure that it operates 
in the public interest and promotes racial equity.
    Demos welcomes the introduction of the National Credit 
Reporting Agency Act, which would shift power to consumers by 
enabling them, for the first time, to opt out of the flawed 
private credit reporting system and choose a fair public 
option. We look forward to continuing to work with the 
committee to further strengthen this bill. We also support the 
Comprehensive CREDIT Act, which would directly reform private 
credit reporting, and I urge Congress to enact this 
legislation.
    Credit reports and scores play a large role in determining 
Americans' access to economic security and opportunity, 
including access to housing, transportation, employment, and 
entrepreneurship. The credit reporting system is the gatekeeper 
to such a broad range of economic opportunities, that it forms 
a core part of our nation's financial infrastructure.
    Yet, this privately-controlled infrastructure is failing 
consumers. My fellow witnesses described the outrageous 
inaccuracy of credit reports, the nightmare process of getting 
errors corrected, and numerous other failings of the system.
    The most devastating failure is the way that credit 
reporting reproduces and spreads racial inequality. Although 
credit scores never formally take race into account, they draw 
on data about personal borrowing and payment history that is 
shaped by generations of discriminatory public policies and 
corporate practices that limit access to wealth for Black and 
Latinx families. Discrimination in employment, lending, 
housing, and education has produced significant racial 
disparities in credit history, so that today, credit scores 
disproportionately represent Black and Latinx consumers as 
riskier than White consumers. As a result of this disparity, 
whenever credit data is used in decision-making, it multiplies 
inequality.
    Transforming credit reporting is very far from the only 
step needed to address racial economic inequality, but it is a 
powerful tool to disrupt that cycle of disadvantage. Although 
the vast majority of American consumers rely on credit 
reporting to access economic opportunity of all kinds, the 
credit reports of more than 200 million Americans are 
controlled by just three private companies: Equifax; Experian; 
and TransUnion. As private corporations, the aim of the credit 
reporting agencies is to generate profit, which they do by 
extracting packaging and selling data about consumers' personal 
borrowing and payment activity.
    Since consumers are not the customers of the private credit 
reporting agencies, they have no market mechanism to demand 
accountability or fairness. Consumers cannot opt out of the 
system or choose to work with a competing company. In effect, 
by controlling credit data, the three credit reporting agencies 
have consumers at their mercy. They have arbitrary, 
unaccountable power over all of our financial destinies. The 
oligopolistic structure of the credit reporting industry is the 
reason that it is failing American consumers.
    The many problems we are discussing today all stem from the 
fact that credit reporting is a part of our public 
infrastructure that is under a private stranglehold by three 
companies. Congress can and should continue to regulate the 
industry, yet without tackling the flawed structure of the 
industry itself, Congress and the regulatory agencies will 
always be playing a game of catch-up with a private industry 
that has no built-in incentives for accountability to the 
consumers whose financial fates it shapes.
    This is why Demos has proposed a public credit registry 
designed to be responsive to consumer needs and equity concerns 
rather than the corporate bottom line. My written testimony 
describes why a public credit registry is needed to serve the 
public interest and how it will develop algorithms that 
diminish the impact of past discrimination, deliver transparent 
credit scoring, improve accuracy, and offer a publicly-
accountable way to address disputes. Thank you.
    [The prepared statement of Ms. Traub can be found on page 
109 of the appendix.]
    Chairwoman Waters. Thank you, Ms. Traub. Ms. Wu, you are 
now recognized for 5 minutes to present your oral testimony.

STATEMENT OF CHI CHI WU, STAFF ATTORNEY, NATIONAL CONSUMER LAW 
                         CENTER (NCLC)

    Ms. Wu. Thank you. Madam Chairwoman, Ranking Member 
McHenry, and members of the committee, thank you for inviting 
me to testify today. I am testifying on behalf of the low-
income clients of the National Consumer Law Center.
    Members of the committee, the Fair Credit Reporting Act 
(FCRA) is 50-years-old, half-a-century, and in those 50 years, 
the credit reporting system has been broken and biased. It 
remains broken despite multiple enforcement attempts by the 
Federal Trade Commission (FTC), nearly 10 years' of supervision 
by the CFPB, and two multi-State settlements by State attorneys 
general. It remains broken after 50 years of private litigation 
with tens of thousands of lawsuits by injured consumers, 
including several eye-popping multi-million dollar jury 
verdicts. It remains broken after two rewrites of the FCRA in 
1996 and 2003 to attempt to address credit reporting abuses. It 
has consistently favored the interests of creditors, debt 
collectors, and the like over the rights and interests of 
consumers.
    The result has been unacceptable levels of errors, a 
biased, Kafka-esque system that automatically rules in favor of 
industry during disputes, and stark racial disparities that 
perpetuate systemic racism. We can see how broken it is from 
the over 300,000 complaints to the CFPB in 2020 about consumer 
credit reporting. That is a lot of complaints, twice as many as 
2019, and nearly two-thirds of the total complaints to the CFPB 
last year.
    And, of course, you have the FTC's 2012 study which shows 
that 20 percent of consumers have a credit report with a 
confirmed error, with 5 percent having a serious error. That is 
10 million Americans who have errors so serious on their credit 
reports that it could deny them credit, a job, or an apartment, 
literally a roof over their heads. And without firm action by 
Congress, it is only going to get worse.
    Just this past Friday, the Supreme Court issued a ruling in 
a case called, Ramirez v. TransUnion that will make it even 
harder for consumers to vindicate their rights under the FCRA. 
The Supreme Court held that a credit bureau can wrongfully 
accuse a consumer of being a terrorist, a drug dealer, or 
worse, and the consumer can't even bring a lawsuit because that 
alone doesn't constitute concrete harm. Imagine that. They have 
to first have a creditor, landlord, or employer see the 
falsehood and suffer having their reputation besmirched and 
ruined in the eyes of a complete stranger before the courthouse 
doors will open.
    As Justice Clarence Thomas said in a fiery dissent: ``If 
this sort of confusing and frustrating communication is 
insufficient to establish a real industry, one wonders what 
could rise to that level. If, instead of falsely identifying 
Ramirez as a potential drug trafficker or terrorist, TransUnion 
had flagged him as a potential child molester, would that alone 
be insufficient to open the courthouse doors? What about 
falsely labeling someone a racist, including a slur on the 
report? What about openly reducing a person's credit score by 
several points because of his race? If none of these 
constitutes an injury, how can that possibly square with our 
past cases?''
    So, Congress needs to act. Only Congress can fix this, and 
Congress must fix this because it hasn't gotten better in 50 
years, and it is only going to get worse. Make no mistake: The 
Supreme Court's Ramirez decision will most certainly embolden 
the credit bureaus to act with even more impunity, favoring the 
interests of banks and debt collectors even more and be even 
more blithe about abusing and mistreating consumers, knowing 
that there are even fewer checks on their behavior. We need a 
public credit registry now so the financial reputations of 
consumers aren't held hostage to the profit-making interests of 
Equifax, Experian, and TransUnion, to fatten their bottom line. 
Thus, we support the proposal in the National Credit Reporting 
Agency Act to establish a public option credit registry so that 
consumers have a choice.
    A key reason for the abuses of the credit bureaus is that 
consumers can't walk with their feet. We are captives. A public 
credit registry should and would allow us to walk with our 
feet, walk away if we are unhappy with the credit bureaus. And 
if the credit bureaus are allowed to continue, we need 
wholesale reform. We need laws, like the Comprehensive CREDIT 
Act, and the Protecting Your Credit Score Act.
    To address the awful Ramirez opinion, we need injunctive 
relief under the FCRA, which the majority opinion in Ramirez 
specifically noted could reopen the courthouse doors. But a 
number of courts have held that the FCRA doesn't provide for 
injunctive relief, the ability to simply ask a court to order a 
credit bureau to fix that report.
    Fifty years of abuse is enough. We need a public credit 
registry and wholesale reform now. Thank you for the 
opportunity to testify, and I look forward to your questions.
    [The prepared statement of Ms. Wu can be found on page 116 
of the appendix.]
    Chairwoman Waters. Thank you very much, Ms. Wu. As a 
reminder, all witnesses who are participating virtually should 
keep their cameras on for the duration of the hearing, even 
when they are not speaking.
    With that, we will go to our next witness. Mr. Quan, you 
are now recognized for 5 minutes to present your oral 
testimony.

 STATEMENT OF DANIEL J. QUAN, ADJUNCT SCHOLAR, CATO INSTITUTE 
         CENTER FOR MONETARY AND FINANCIAL ALTERNATIVES

    Mr. Quan. Thank you. Chairwoman Waters, Ranking Member 
McHenry, and distinguished committee members, my name is Dan 
Quan, and I am an adjunct scholar at the Cato Institute Center 
for Monetary and Financial Alternatives. I am also a venture 
capitalist and an adviser to Fintech startups. I am honored to 
be here today. It is not just my titles or expertise that makes 
my testimony unique. It is also because, as a new immigrant to 
this land of opportunity, I know personally what it is like to 
be credit invisible, to build credit from scratch, and to 
dispute an error. I also know how empowering access to credit 
can be. My wife and I once had to choose between groceries and 
prescriptions. Thanks to access to credit scores, we were able 
to get low-cost loans to overcome those tough times.
    My testimony will focus on the public credit bureau 
proposal. Before I begin, we should acknowledge that our 
consumer credit market, the largest and the most competitive in 
the world, depends on a functioning credit reporting industry. 
The other witnesses have correctly pointed out that the credit 
reporting industry has many issues, but the industry is not 
fundamentally broken. What it needs is appropriate policy 
interventions and more private-sector innovations to improve 
credit access, and also improve accuracy, security, 
transparency, and accountability.
    There has been a sea change in the credit reporting 
industry in the last 10 years. Credit bureaus have been subject 
to CFPB supervision since 2012, and improving accuracy has been 
a top priority for them. The industry is also evolving as 
technology advances. New credit score models, such as Experian 
Boost and UltraFICO, allow consumers to use their on-time bill 
payment history to increase their FICO scores. Some lenders are 
also using cash-flow data to expand access to credit. Ten years 
ago, consumers could only obtain one copy of a free credit 
report every 12 months. Today, consumers who have an internet 
connection or a smartphone can get free credit reports and free 
credit scores easily. All of the policy goals outlined in the 
public credit bureau proposal can be adequately and effectively 
achieved by improving the existing system.
    In addition, I am also very concerned about the negative 
consequences of such a government-run credit bureau. First, the 
public credit bureau may pose a significant threat to 
consumers' privacy. The Federal Government will score everyone 
and maintain a huge database that monitors every aspect of our 
financial lives: how much we owe; from whom we can borrow; how 
much we pay; where we live; and for whom we work. Putting so 
much sensitive personal information in the hands of the 
government, especially when consumers have no way of opting 
out, should be a concern big enough to override any potential 
merits.
    Second, the cost of setting up and running the public 
credit bureau needs to be seriously considered. The CFPB has a 
workforce of about 1,500 employees and an annual budget of 
around $600 million. The smallest national credit bureau 
employs over 8,000 people and has an annual operating cost of 
more than $2 billion. Those are not apples-to-apples 
comparisons, but they give us a sense of how much the Federal 
Government needs to be expanded to run the public credit 
bureau.
    Finally, the public credit bureau will crowd out private 
investment and ultimately monopolize credit reporting. 
Competition will be reduced to zero, and innovation in 
expanding access to credit will cease to exist.
    I have the following recommendations. First, refresh the 
FTC Accuracy Study. The landmark FTC Accuracy Study was done 
over 10 years ago. Much has changed, and a new study is long 
overdue.
    Second, impose Federal supervision of data security. Credit 
bureaus should be held to the same standard as financial 
institutions when it comes to data security. Congress needs to 
act quickly.
    Third, reform the dispute process. The dispute process 
should be made easy for consumers. Consumers should have the 
right to dispute directly with furnishers.
    Finally, protect consumers' data rights under the Dodd-
Frank Act, Section 1033. Consumer-permission data access is key 
to reducing racial disparities in credit. Unfortunately, many 
large financial institutions have too often illegally created 
obstacles to data access. It is imperative for the CFPB to 
write a pro-consumer, pro-competition, and pro-innovation rule.
    Thank you for the opportunity to provide this information, 
and I welcome any questions that you may have.
    [The prepared statement of Mr. Quan can be found on page 
100 of the appendix.]
    Chairwoman Waters. Thank you very much. Ms. Wu, I am deeply 
concerned about the effects of this devastating pandemic on 
homeowners and other consumers, especially those who are not 
able to dispute inaccuracies and errors on their credit 
reports. In my opening statement, I discussed the letter I 
received from a man in Ohio who lost his job, couldn't keep 
paying his bills, and, as a result, saw his credit score drop.
    But it is not just him. Let me give two more examples from 
consumers from my home State of California, who recently 
submitted complaints to the CFPB about these issues. The first 
is a homeowner whose mortgage showed up on credit reports as, 
``deferred,'' because of COVID. The consumer said they did not 
sign up for payment assistance, and their bank confirmed that 
the account was current.
    Another person complained about the lack of response from 
the credit reporting agency, saying, ``I have been filing 
disputes with all of the credit bureaus, and I am getting 
nowhere. With COVID going on, I understand that things are 
taking longer, but this is not right. I am trying to clean up 
my credit, and I am getting the runaround from the bureau.''
    Ms. Wu, in your experience, how do these types of errors 
and inaccuracies affect a consumer's ability to access credit?
    Ms. Wu. Thank you, Madam Chairwoman. These types of errors 
you describe can be devastating to a consumer's ability to 
access credit. They can cost thousands, if not deny them the 
ability to get credit or even a job or an apartment. There are 
a lot of them. The reason I think you see a doubling of 
complaints about credit reporting to the CFPB is because of 
these very issues caused by the pandemic--consumers getting 
forbearances, but being wrongfully reported or not even getting 
them and being reported for a forbearance.
    That is why we had advocated for a moratorium on negative 
reporting during the pandemic, just recognizing the devastating 
economic consequences. The House passed that in the HEROES Act, 
but unfortunately, the Senate didn't. On a long-term basis, we 
need the ability for consumers to dispute errors, and then, if 
they can't get them fixed because the credit bureaus 
automatically defer to the information providers, the 
furnishers, we need a right of appeal or an ombuds function and 
a right of injunctive relief to fix those credit reports.
    Chairwoman Waters. Thank you. Mr. Greer, in your testimony, 
you describe the current credit reporting system as a tool for 
social gatekeeping, used not only as the basis for credit and 
lending decisions, but a system that also is used by companies 
making employment decisions, landlords considering prospective 
tenants, and insurance companies practicing their policies, 
while individuals are held to account every time they miss a 
payment, and even see their credit score drop when they shop 
for credit.
    The big credit reporting agencies have skirted 
responsibility time and time again for their misdeeds, as 
recently shown by increasing complaints to the Consumer 
Financial Protection Bureau in litigation during the pandemic.
    Mr. Greer, given the system's impact, do you think Congress 
really needs to consider bold reforms, such as creating a 
public credit reporting agency that consumers could choose to 
use as an alternative to the private credit bureaus who profit 
off the use of their data? You heard what the opposite side was 
saying about how the government should not be in this business 
at all. Tell me what you think?
    Mr. Greer. Thank you, Chairwoman Waters. I think the credit 
score and our credit record has become much more than a tool to 
use to determine whether you can purchase a mortgage or whether 
you can get a credit card. It has become a tool that is used to 
decide whether to offer employment, or to rent a car, or 
whether you can get a cellphone. If you are a domestic violence 
victim, could you get a cellphone to protect yourself from your 
batterer? It has taken a huge, important, and central piece of 
our daily lives. And because of that, entrusting it in the 
hands of private-sector people who are responsible to their 
shareholders and to their customers, and the customers are not 
us--e are not the customers; we are the product. The data that 
we provide is the product that they sell, and they sell it to 
financial institutions, which is why it is so important that we 
have a customer-centric institution.
    And I think the idea around putting it in the Federal 
Government's hands is a good one to protect consumers, and to 
protect us so that we can operate within society, in the credit 
markets, in the employment markets, and in the rental markets. 
So, I think that this is critically important. Thank you.
    Chairwoman Waters. Thank you very much. A few more seconds 
are left here. I think one of the most egregious problems with 
this is deciding whether or not someone is employable, and who 
is impacted by that?
    Mr. Greer. It is Black and Brown communities. It is 
communities of color. It exacerbates the barriers that 
communities of color already face in the employment market, 
whether it is criminal history backgrounds, whether it is the 
neighborhoods they live in, ability to get transportation to 
work, but then you add this on top of it. And with all of the 
disparities that Ms. Wu and Ms. Traub have talked about, it 
really drives those disparities.
    Chairwoman Waters. Thank you so very much. The gentleman 
from North Carolina, Mr. McHenry, who is the ranking member of 
the committee, is now recognized for 5 minutes.
    Mr. McHenry. Well, let's go fix the problem. Let's not 
create a new problem. Mr. Quan, my question for you is, this is 
all about creating a government-run credit reporting bureau. 
That is exactly what this hearing is about. You want a 
government-run agency. Instead of seeing three large credit 
information furnishers operating as an oligopoly, you are going 
have a monopoly with a government agency. And rather than 
having three different sets to compare, as imperfect and in 
need of reform as it is, the idea that you are going to say, we 
have a problem because we have three different credit reporting 
agencies, and now we are going to have one, and it is going to 
be the government, who are you going to sue when the government 
puts the screws to you? Good luck with that, right? I see this 
as a problem, not that the challenges outlined by this panel 
aren't, in fact, the things that we need to address.
    I think addressing it by just shoving it into a government 
agency is going to make things worse, not better, for my 
constituents and for my colleagues' constituents, regardless of 
what you look like. A credit score if you are poor is a bad 
thing across-the-board, so we need to get at the root causes of 
this, and we need better data provided. We have heard from the 
panel, and they said, let's use alternative data. I agree. We 
can do that in a bipartisan way. We can, in fact, make it law.
    But instead, if you want this to be a government takeover, 
and that is what the whole debate is about, and you are not 
going to have any discussion about what Republicans have 
offered as a solution, then we are going to have a standstill 
here. Nothing got done last Congress on this. Nothing is going 
to get done this Congress on it because there is no willingness 
to have a bipartisan conversation about the things that are 
achievable in a bipartisan way.
    Mr. Quan, your written testimony outlines major flaws in 
the concept of a government bureau being the arbiter of credit. 
Highlight your primary concern with that, if you would?
    Mr. Quan. Thank you, Congressman. As I have outlined in my 
written testimony, all of the notable policy goals in the 
public credit bureau proposal can be effectively achieved by 
reforming the industry today. We have the most competitive 
credit market in the world, and this industry is not broken. It 
has many issues. And in addition to failing to achieve these 
goals or, to put it another way, by more effectively achieving 
these goals by reforming the existing industry, I think the 
public credit bureau proposal has the following major problems.
    First, intrusion of privacy. So, we now have a government 
that can really monitor every aspect of our financial lives. 
That is a huge concern. And if we think the government already 
knows too much or enough about us, I think this bureau is going 
to make things even worse.
    When we talk about the cost and the potential waste of 
spending--I already mentioned some big numbers in my oral 
statement. Let me give you a few more numbers. According to a 
research firm, Standish Group, they found out between 2003 and 
the end of 2012, only 6.4 percent of the large Federal IT 
projects succeeded. Fifty-two percent were over budget, 
delayed, or didn't meet expectations. The other 41.4 percent 
were complete failures. And we have learned enough from the 
recent rollout of the vaccine appointment system, which the 
Federal Government spent $44 million on, and it never even 
worked, not to mention the continuously poor quality in Federal 
student loan servicing, and more than 10 years ago, the botched 
rollout of Healthcare.gov.
    Mr. McHenry. Okay. Mr. Quan, to that point, cyberattacks 
are also a major issue with Federal databases. We have seen 
this as Federal employees, and former government employees who 
may be on the panel, or employees of Executive Branch agencies 
have had their data stolen. So, the idea that a government 
agency doing this will be a better steward of our data is quite 
questionable given the track record the Federal Government. 
Additionally, I think we all can agree the procurement process 
for IT and technology for the Federal Government needs reform 
as well.
    So, we have a whole set of issues that are quite 
challenging to create a database like this before you even talk 
about the question of its level of security, before you talk 
about the cost. And I think there are enough questions here 
that--what I would offer to my Democrat colleagues is what I 
offered last Congress. Let's try to do the work that is 
bipartisan, that we can achieve in this sphere and make things 
better. Even if you still have your goal of a public credit 
registry, which I completely disagree with, let's do the things 
that are a modest improvement or a significant improvement for 
our constituents, that are achievable today. And I think we 
have some ideas put forward to the panel and I would love to 
have that bipartisan cooperation here in this committee.
    And with that, I yield back.
    Chairwoman Waters. Thank you very much. The gentlewoman 
from New York, Ms. Velazquez, who is also the Chair of the 
House Committee on Small Business, is now recognized for 5 
minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman. Ms. Wu, the 
CFPB began handling consumer complaints about the credit 
reporting agencies (CRAs) in 2012. Since that time, complaints 
about the CRAs continue to be one of the largest categories of 
complaints handled by the CFPB. For example, in 2020, the CFPB 
handled about 532,000 complaints, approximately 58 percent of 
which were regarding the CRAs, which was the largest category 
of complaints reviewed by the CFPB. What do you think such a 
consistently high number of complaints, year over year, says 
about the state of this industry?
    Ms. Wu. Thank you, Congresswoman. I think it says exactly 
what the title of this hearing says, which is that the credit 
reporting system is broken, and it is biased, and it needs 
fundamental reform. I think that is why we need a public credit 
registry option. The bill discussion draft makes it an option 
so that consumers have true, meaningful choices. If they don't 
like the credit bureaus because they commit so many errors and 
have for decades, they have the choice of a public option.
    To address some of the points before about cybersecurity, 
are we forgetting about the Equifax data breach 4 years ago, 
how one of these credit bureaus lost or let hackers take the 
personal information of half of the American adult population? 
In terms of privacy, our data is with three private 
corporations that monetize and exploit it and don't do a very 
good job of making sure it is accurate, as seen by all of those 
complaints.
    Ms. Velazquez. Thank you. I have other questions.
    Ms. Wu. Okay. Sorry.
    Ms. Velazquez. Ms. Wu and Ms. Traub, one of my biggest 
frustrations with the CRAs is that they have developed a system 
where the consumer has little to no control. Consumers never 
directly sign up as a customer. They have no control over 
whether a furnisher provides their information to a CRA, and 
they cannot stop doing business with the CRA if they are 
dissatisfied or simply choose to opt out. Both of your 
organizations have supported the idea of a public CRA. Can each 
of you explain why you favor such a proposal and how a public 
CRA will provide more accountability and transparency, and 
provide the customer with a fairer and more beneficial system?
    Ms. Traub. Thank you, Congresswoman. It is absolutely true 
that the private system is failing us, and Demos has proposed a 
public credit registry. Since consumers are not the customers 
of the private credit reporting agencies, we have no way to 
demand fairness or accountability through the market. Consumers 
can't opt out of the system. So, the three private credit 
reporting agencies really have consumers at their mercy. They 
have this arbitrary, unaccountable power over our financial 
destinies. A public credit registry, why we support it, is 
because it is a way to take that power for consumers, and make 
sure the credit reporting operates in the public interest with 
a lot of mechanisms for public accountability, not government 
control.
    A transparent process for credit scoring is one important 
element of that. That doesn't mean everyone knows your credit 
score. It means everyone knows how credit scores are 
determined, a dispute resolution process that actually enables 
consumers to present evidence and see the evidence on the other 
side, and, as a last resort, the right to take the public 
registry to court over errors, as well as enhanced 
accountability from companies that furnish the data to the 
public credit registry.
    Ms. Velazquez. Thank you. Ms. Traub, as you know, many low- 
or moderate-income (LMI) communities and communities of color 
access credit from alternative financial servic providers. 
Unfortunately, however, many alternative financial services 
providers do not report positive credit payments to the credit 
reporting agencies. Can you explain how consumers who access 
credit from these markets fail to gain the benefit of making 
positive payments, and how this can hurt them in the long run?
    Ms. Traub. Absolutely. Thank you, Congresswoman. Right now, 
many types of alternative credit sources do not report, and, 
therefore, when people are paying their cellphone bill on time, 
or a payday loan on time, that doesn't turn into positive 
credit in the way that paying a mortgage on time would. Our 
proposal for a public credit registry allows consumers to opt 
into other types of reporting, other types of payment history. 
We think it is important that consumers be able to opt in 
because there are cases when--
    Mr. Perlmutter. [presiding]. The gentlewoman's time has 
expired. We will let you either answer that in writing or 
somebody else will let you finish your answer.
    Ms. Traub. Thank you.
    Mr. Perlmutter. The Chair will now recognize the 
gentlewoman from Missouri, Mrs. Wagner.
    Mrs. Wagner. I thank the Chair.
    Mr. Quan, what would happen to the availability and the 
cost of credit if we eliminated entire categories of debt from 
credit scores?
    Mr. Quan. Thank you, Congresswoman. That is an excellent 
question.
    The way and the reason we have the most competitive 
consumer credit market is because the lenders have as much 
information, as accurate as possible, about the consumer. If we 
eliminate accurate information--while some information may be 
negative, may be detrimental to individual consumers, depending 
on the circumstances, but regardless, it is accurate--lenders 
would not be able to make the best lending decisions. As a 
result, the cost of credit will increase for everybody, and 
availability of credit will decrease for everyone.
    Mrs. Wagner. Thank you. Should the goal of reform be to 
increase the number of qualified borrowers or to lower the bar 
so low that it jeopardizes the system for others?
    Mr. Quan. Of course, it has to be the former, not the 
latter.
    Mrs. Wagner. Generally speaking, do you believe that 
competition creates better products and generates better 
outcomes for consumers?
    Mr. Quan. Of course. Without competition, lenders will have 
no interest in improving their products or lowering the cost. 
With competition, we have more expanded access to credit. More 
consumers can qualify for credit.
    Mrs. Wagner. Now, knowing that competition benefits the 
consumer, which is what is very important to my constituents in 
the Second District--again, cost and access--tell me, how does 
a one-size-fits-all, government-run credit bureau benefit the 
credit system or the consumer?
    Mr. Quan. Since we are talking about competition, we have 
heard the words, ``opt in,'' right? So, if the consumer doesn't 
like how they are treated by the private credit bureau, they 
can opt into the government's credit bureau, which supposedly 
is better.
    But here's the thing: A government credit bureau is backed 
by unlimited taxpayers' money, revenue. Private bureaus have to 
answer to shareholders. They don't have unlimited financial 
resources. So, at the end of the day, this is not an opt-in 
system.
    If we are not happy with the current situation of the three 
major national credit bureaus dominating the credit reporting 
industry, and we have a government-run bureau, at the end of 
the day, there will be only one bureau, which is a public 
bureau, and there will be no competition whatsoever.
    Mrs. Wagner. I agree wholeheartedly. What would you 
recommend as an alternative to the bills being proposed today, 
that would improve cybersecurity, reduce data errors, and bring 
about a more inclusive credit system?
    Mr. Quan. I do think regarding accuracy--we have heard all 
these stories from consumer groups and from the industry. And 
frankly, the most authoritative study on accuracy was done over 
10 years ago. Many things have changed.
    It is imperative that we have another study be done, either 
by the CFPB or by the FTC. Without evidence, we cannot make the 
policy. So, that is number one.
    Number two, I think we should increase competition. I 
mentioned that technology innovation can help. I mentioned that 
in my last recommendation, which is that the CFPB should write 
a pro-consumer 1033 rule. That rule will open up the 
opportunity for consumers to furnish their own payments data, 
which is not allowed currently in most cases in credit bureau 
furnishing. So, if that data can be used in credit 
underwriting, we will see more consumers potentially qualify 
for credit and for affordable credit.
    Mrs. Wagner. Thank you, Mr. Quan, for your very specific 
analysis and the alternatives that you have offered here today. 
I agree that if the government takes this over, we will have 
just a one-size-fits-all, government-run system. Competition is 
needed in this space, and I thank you very much for your input 
here today.
    And I yield back. Thank you.
    Mr. Quan. Thank you.
    Mr. Perlmutter. The gentlelady yields back. The gentleman 
from Georgia, Mr. Scott, who is also the Chair of the House 
Agriculture Committee, is now recognized for 5 minutes.
    Mr. Scott. Thank you very much.
    Perhaps the most paralyzing issue in this that we can 
address quickly, coming up with some answers, deals with 
student loan debt. And Mr. Greer, I have looked at recent data 
from the Student Borrower Protection Center. You may be 
familiar with that. It shows a widening gap between private 
student loan usage and outcomes between Black and White 
borrowers.
    Black students, it says, are 4 times as likely to struggle 
with repayment of private student debt in comparison to their 
White peers, despite being less than half as likely to take out 
a private student loan. That is why I say the student loan 
issue is one--and I might just refer to some of the comments 
from the other side--but this is a very serious racial issue. 
The impact this has on a young borrower's credit score can--and 
does--have long-term consequences, such as making it more 
difficult to get a job, buy a car, or own a home. This is a 
paralyzing issue.
    Mr. Greer, I found it interesting in your testimony--here 
is what you said. You said that the current system overlooks 
many in our community because their monthly expenses do not go 
toward a more traditional credit product like a home or a 
credit card. They don't have them. And it penalizes consumers 
for holding less traditional credit products or bad debt, such 
as unpaid student loan debt.
    So, Mr. Greer, can you explain why unpaid student loans, 
particularly private student loan debt, even when a borrower is 
current on that loan, is viewed by creditors as bad, and 
continues to be used as a driving factor in limiting 
creditworthiness, especially for Black borrowers?
    Mr. Greer. Thank you, Mr. Scott, for that question. It is 
such an important issue, and I do want to acknowledge the work 
that Demos has done on student loan debt and raising up those 
racial disparities that you talked about, Mr. Scott. It all 
comes down to, the credit bureaus treat student loan debt, 
because it can't be offloaded through bankruptcy in the worst 
case, as more harmful in their algorithms.
    And I will give you a little anecdote of my own. My wife 
and I wanted to buy our first home, and this was about 15 years 
ago. We were working with our mortgage lender, and they said, 
``I could get you a better rate if you make a huge payment on 
your student loans.''
    Well, we didn't have a lot of money. That came out of our 
savings. We had to pull that money out of our savings. And so, 
we had to make a choice between pulling money out of savings 
that would have went into the home equity of the house versus 
making a payment to a student loan company in order to get a 
better interest rate.
    Those are the types of difficult decisions that these 
credit bureaus place on consumers, that actually cut at the 
wealth of people who are in the housing market or people who 
are looking to start a business or many of the other wealth-
building activities for which people need access to credit.
    So, thank you very much, Mr. Scott, for raising this 
because it is such a critical issue and a huge problem within 
the system.
    Mr. Scott. Thank you very much.
    Mr. Perlmutter. The gentleman yields back. The gentleman 
from Florida, Mr. Posey, is now recognized for 5 minutes.
    Mr. Posey. Thank you very much, Mr. Chairman.
    Mr. Quan, can you please explain why the information 
provided by credit reporting agencies is essential to the 
efficient functioning of lending markets?
    Mr. Quan. Thank you, Congressman Posey, for the question.
    Lenders need information to underwrite consumers. The 
information housed in the three credit bureaus, in any credit 
bureau, is essential for lenders to make the right decision. 
All of these decisions are based on the risks that they 
perceive. Or in other words, they have to project the 
likelihood of the consumer's ability or willingness to pay the 
debt once they loan the money.
    So, the information is essential. That is why it is 
important to have accurate information in the database, and it 
is also as important to have complete information in those 
databases. And when I say, ``accurate,'' it means both positive 
and negative. Negative information is bad for the consumer in 
terms of getting credit or getting an affordable interest rate. 
But for the entire system, negative information, if it is 
accurate, is very important.
    Mr. Posey. Thank you. Mr. Quan, the title of this hearing 
is, ``A Biased, Broken System: Examining Proposals to Overhaul 
Credit Reporting to Achieve Equity.'' Does this make sense as a 
policy criteria for objectives for regulating the credit 
reporting system? What should the objectives be?
    Mr. Quan. I think both the Democrats and the Republicans 
have the same objective, which is, we want to make sure we have 
a fair system for everybody, regardless of your gender, your 
color, or your religion. Everyone, if they can qualify for 
credit, should be able to get credit.
    But obviously, we are taking different approaches here. We 
believe, and I believe, the current system is flawed, but it is 
not broken. And it will be far more effective and more cost-
effective to improve, to reform the current system than to tear 
it down and build a new one.
    Mr. Posey. Thank you. Last year, you wrote an article 
commenting on the President's proposal to create a public 
option at the Consumer Financial Protection Bureau for credit 
reporting. Would you share your views on that topic with us, 
please?
    Mr. Quan. Yes. As I have already shared in my written 
testimony, as well as in my oral statement, I think that is a 
proposal that is going to be very, very costly to taxpayers, 
and more importantly, it is not going to effectively fix the 
problems.
    And frankly, this is not an opinion of more market-driven 
people like me. Even Georgetown Professor Adam Levitin, who is 
a very well-known scholar in the legal field on consumer 
finance issues, wrote a blog post earlier this year questioning 
the viability of a public credit bureau. All of the problems we 
have today will not be fixed by a public credit bureau.
    Mr. Posey. Thank you. Do you think the current credit 
reporting system operates with intentional bias to exclude 
certain groups from accessing credit?
    Mr. Quan. I would not say they have this intention to 
exclude people of color. We do have a problem, which is that 45 
million Americans, many of them probably disproportionately 
Blacks and Hispanics and people of color, don't have access to 
credit because they don't even have a file in these databases.
    That is why it is important for all of us to have a very 
conducive environment to promote and to facilitate innovation. 
And innovation is already happening. In my written statement, I 
already mentioned UltraFICO and Experian Boost. They are 
allowing consumers to furnish their payments data from utility 
bills and streaming subscriptions to credit bureaus to be 
factored into their FICO scores. And we have seen from Experian 
Boost that 69 million points have been boosted.
    Mr. Posey. You have advocated for innovation in financial 
markets, including Federal reporting, especially the 
incorporation into credit files of new data sources to help 
the, ``credit invisibles,'' get access to credit. Could you 
please tell us how the private sector is responding to this 
challenge and what could be done to encourage even greater 
innovation?
    Mr. Quan. Sure, yes. I just mentioned there is UltraFICO. 
There is Experian Boost. And this innovation would not take 
place if we didn't have open banking or open finance in the 
United States. Or more specifically, consumers must have the 
right to permit third parties to have access to the bank 
account data, such that the data can be used in a credit 
scoring system.
    And we have seen other innovations here. I can give you two 
more examples--
    Mr. Posey. I am going to thank you. My time has run out, 
Mr. Quan. Thank you very much.
    Mr. Quan. Yes, thank you.
    Mr. Perlmutter. Mr. Posey's time has expired. The gentleman 
from Texas, Mr. Green, who is also the Chair of our 
Subcommittee on Oversight and Investigations, is recognized for 
5 minutes.
    Mr. Green. Thank you very much, Mr. Chairman. I greatly 
appreciate the opportunity to be heard, and I greatly 
appreciate the staff for what they have done to assist with 
what I am about to bring to the attention of our committee.
    H.R. 123, the Alternative Data for Additional Credit FHA 
Pilot Program Reauthorization Act, is something with which we 
were successful. It became Section 2124 of the Housing and 
Economic Recovery Act of 2008. It did not get funded, and as a 
result, we are bringing this back, because we believe this is 
something that should be funded, and it will be of great 
benefit.
    And I am appealing to all of my Republican friends across 
the aisle from me, all of them, I am willing to work with all 
or anyone who would like to work with me on this. I am very 
much interested in being bipartisan, very much interested in 
working with people, regardless of who they are. So if someone 
would like to work with me on this project, I would greatly 
appreciate your making yourself known to me.
    More specifically, we know that in this country, depending 
on who is counting and how you count, we have about 45 million 
people who are credit invisible or unscorable. And as a result, 
they don't get the opportunity to make the purchases that many 
of us take for granted.
    This piece of legislation would allow your utilities--light 
bill, gas bill, water bill, phone bill, cable bill--to be 
scored. Mr. Greer, you have spoken of this, of these utilities 
being scored. This bill allows you to opt in and score these 
utilities. And if they benefit you, then you can take advantage 
of that benefit and have the credit that most of us take for 
granted.
    Mr. Greer, H.R. 123, give me your thoughts on what I am 
sharing with you at this time in terms of doing this, making 
this change such that we can do this with HUD. HUD would have 
the pilot program, and we would use a commercially-available 
credit reporting model. Your thoughts, Mr. Greer?
    Mr. Greer. Thank you, Mr. Green, for raising that, and for 
your work on this important issue.
    I say, one, you emphasize the importance of opting in. I 
think that is a big, important point and that consumers should 
have the choice around what data is being used to assess their 
credit score. The second point I would like to make is that 
this conversation about alternative data is already a part of 
the system. It is just that the negative stuff is what is being 
reported. If you don't pay your utility bill, it gets reported. 
If you don't pay your cell phone bill, it gets reported.
    What I would like to see is if we are going to use 
alternative data, let's make sure that we are bringing in the 
positive payments. Because if I miss a payment on my utility 
bill, my utility gets cut off, I am going to get dinged for 
that. But what is not going to show up is the many months 
beforehand that I paid my utility bill on time.
    And I think that it is important that we opt in and that we 
make sure that we are reporting the positive activity that is 
happening with people, in addition to the negative activity 
that is already being reported.
    Mr. Green. And let me add something. We would also want to 
make sure that people understand that this is additional 
credit, not just alternative, meaning we will take this in lieu 
of other things. This is additional credit that can be added to 
your credit score to help you.
    Ms. Traub, would you comment on this as well, because you 
did bring up the need for this type of credit score?
    Ms. Traub. Yes, I think it is important that consumers be 
able to opt in to using alternative types of data, as Mr. Greer 
said. I also think that a public credit registry could look 
into which types of data it is inappropriate to include.
    For example, medical debt has been shown--and we should do 
more studies to show this more conclusively--not to be 
predictive of people's ability to pay other types of debt. When 
someone takes on a mortgage or a credit card, they have a 
chance to think about, what are the terms, do I want to take on 
this debt?
    When you are sick or your child is sick and needs medical 
care, needs to go into the hospital, you don't how much it is 
going to cost. You may not care how much it is going to cost at 
that point; you just want your loved one to get the care they 
need and be okay. And then, you are saddled with hundreds, 
thousands, maybe even millions of dollars in medical debt. 
Should that go on your credit report?
    Mr. Green. My time is about to expire, ma'am. Let me just 
ask you, without question, reservation, or hesitation, do you 
agree that additional credit scoring is important, what you 
call an alternative credit scoring?
    Ms. Traub. Yes. I think we need to look at different things 
that should be included and excluded from credit scores to make 
them more fair and predictive.
    Mr. Green. Okay. Thank you very much.
    I yield back the balance of my time. I believe my time is 
over.
    Mr. Perlmutter. The gentleman's time has expired, and he 
yields back. The gentleman from Missouri, Mr. Luetkemeyer, is 
now recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    It is interesting that we believe that the government can 
do something better than the private sector. I heard several of 
the witnesses today talk about all of the errors that are made 
by the private sector credit bureaus, and I am not defending 
them. They are not perfect. They are human. They make errors.
    But if you believe the government is going to make less 
errors than the private sector, which has to be responsible for 
being able to have good information and can be sued for it, 
which the government cannot, you are either naive or 
misinformed or worse. And I can tell you right now, as the 
ranking member on the House Small Business Committee, the 
Paycheck Protection Program (PPP), which was administered 
through the banks, had huge, huge advantages over the Economic 
Injury Disaster Loan (EIDL) program. With the EIDL program, 
which is completely administered by the SBA, almost a third, a 
third of the loans are fraudulent.
    If you expect the government to be able to put together a 
program that is going to be error-free, you are on the wrong 
planet. Along that line, the government is going to have more 
errors, I believe.
    Mr. Quan, I have a question for you on this. Listen very 
carefully. I believe the information you are going to get is 
very poor information because it is not going to be complete. 
Government delays everything. Think IRS. Do they do anything in 
a timely fashion? No.
    This is another agency that is going to be rife with fraud, 
rife with delays, with incompetent and incomplete information, 
old data, delays in getting it fixed. And what does that mean? 
That means if you are a lender, are you going to rely on this 
information? I don't think so.
    If you are a lender, if you rely on just this agency alone, 
because it is poor information, I would think you are going to 
increase the cost of the loans you make on this information and 
probably have less access to credit.
    Mr. Quan, am I wrong?
    Mr. Quan. You are absolutely right, Congressman.
    Mr. Luetkemeyer. Thank you for that.
    Along the lines of, why would anybody want to do this, why 
would we want the government to get into having more 
information like this, Ms. Traub gave us the answer. She said 
it is about control. Control of what? Control of information. 
Control of who gets loans, who gets financed.
    Guess what? Again, think IRS. You are using and weaponizing 
another agency here against people whom they disagree with 
either politically or for any other reason.
    Think Operation Choke Point. Here we go again. The 
government is picking winners and losers and picking out people 
who may be doing nothing wrong. They have a legal business, 
have a legal right to access to credit, and yet the government 
is getting in the middle of this and scoring them in a way that 
is detrimental to their ability to get loans and whatever.
    Am I wrong on that, Mr. Quan?
    Mr. Quan. You are also absolutely right.
    Mr. Luetkemeyer. Thank you very much for that.
    The other thing I want to talk about here a little bit is 
lenders. We are talking about credit scores this morning. Why? 
Because people need access to credit. The lenders need this 
information to be able to judge accordingly whether somebody is 
worthy of loaning money, be it for a home, a car, a business, 
or whatever. They assess risk. The interest rate is always 
reflective of risk. And the more information they have, the 
better they can assess the risk.
    If the lenders have an incomplete amount of information, 
this is why you see the private sector credit bureaus trying to 
find more ways right now, even though they are not required to 
take some of these different things like rent payments, utility 
payments, telecom payments, service streaming payments. Those 
are all being used right now by a lot of the different private-
sector folks to assess risk, to be able to assess an 
individual's ability to get credit.
    Those are important things. I support those. We had a bill 
out of here not too long ago, a year or two ago, that actually 
increased that. I supported that. I think it is a good idea. 
The more information you have, the better the lenders can look 
at an individual and assess that risk and give people more 
access to credit. It is very important.
    So, at the end of the day, it is behooving to the lenders 
to be able to get as much information as possible, and it is 
behooving to the private sector folks because they are in 
competition against each other--believe it or not, they are in 
competition because lenders pick and choose which one of these 
they want--to be able to get as much information as possible, 
and who can be more predictive about the ability of somebody to 
pay back that loan.
    That is a really, really important thing, and I think we 
are missing the point when we are sitting here looking at the 
individual. The reason the individual wants this information 
out there is so they have access to credit, and we have 
forgotten all about that.
    When you give that information to the government to allow 
them to oversee all this, you have just opened a whole other 
can of worms, and I think you really have denigrated the 
individual's ability to get access to credit.
    With that, I see my time is up, so I yield back.
    Mr. Perlmutter. The gentleman yields back. The gentleman 
from California, Mr. Sherman, who is also the Chair of our 
Subcommittee on Investor Protection, Entrepreneurship, and 
Capital Markets, is now recognized for 5 minutes.
    Mr. Sherman. Thank you, Mr. Chairman.
    I join with Mr. Luetkemeyer at least in being a bit 
concerned about a Federal credit reporting agency. That concern 
is borne in part by my former chairmanship of the Asia 
Subcommittee, where we see the Communist government of China 
creating a social credit score based on politics. As much as I 
fear and I am concerned about what the credit rating agencies 
can do to consumers, I am even more concerned about what the 
government can do. I am also concerned about any bill that 
would take a system where the banks pay and instead provide the 
service for free or at the cost of taxpayers.
    We in Congress and the Federal Government have had an 
eviction moratorium, so people who couldn't pay their rent 
didn't, and thank God, they are not homeless.
    Mr. Ejaz, are these people going to have terrible credit 
reports because landlords are reporting their failure to pay 
rent in a way that hurts their credit score?
    Mr. Ejaz. Thank you so much for your question.
    For part of my answer, I will defer to Chi Chi Wu, but we 
at Consumer Reports are concerned that when the relief that was 
passed with the Coronavirus Aid, Relief, and Economic Security 
(CARES) Act and all of the policies that were passed in order 
to address consumer concerns during COVID-19, when those 
expire, consumers' credit reports may be affected 
significantly.
    Ms. Wu actually--and I will pass it to her--called this 
the, ``pandemic paradox,'' where scores have somewhat stayed 
afloat throughout COVID-19, but once relief expires for folks, 
we will start seeing the impact on folks' credit reports, and 
it is best to get as ahead of that as we can.
    Mr. Sherman. I have put forward proposed revisions that we 
have not passed to say that those who couldn't pay because of 
COVID should not have their credit scores reduced, and I think 
that we do need to revisit that if--but I want to go on to 
another question.
    And that is, we have this recent lawsuit against TransUnion 
for inaccurately reporting that certain individuals are on the 
Office of Foreign Assets Control's (OFAC's) Specially 
Designated Nationals and Blocked Persons List. It is usually 
called the, ``terrorist watchlist.''
    Now, it is one thing when a credit rating agency says that 
someone didn't pay a medical bill. Okay, they may get confused. 
They may make a mistake. Things happen. But when you 
incorrectly report that they are on the terrorist watchlist, 
that is a much bigger deal.
    Unfortunately, the court, throughout the lawsuit, claimed 
that only plaintiffs concretely harmed by the defendant's 
statutory violation have Article III standing. And of course, 
many in the class did have that concrete harm, but many others 
that were in the class did not.
    Ms. Wu, did TransUnion violate the Fair Credit Reporting 
Act by stating that Mr. Ramirez was on the terrorist watchlist?
    Ms. Wu. Absolutely, TransUnion did. They failed to use 
reasonable procedures by tagging an innocent man as a potential 
terrorist. But the Supreme Court said that even though 
TransUnion violated the Fair Credit Reporting Act, those 
consumers for whom the information wasn't shown to a third 
party, couldn't even get through the courthouse doors, and this 
was a California lawsuit. That is why we think Congress needs 
to provide for injunctive relief, ecause the court did say if 
there is injunctive relief, that might be a way to get through 
the courthouse doors.
    Mr. Sherman. So, the court said that if they had added 
something erroneous to your report, but nobody had seen it, 
then, you couldn't have a day in court?
    Ms. Wu. That is correct. You could get it, and you could 
panic, and say, ``Oh, my God. They think I am a terrorist.''
    Mr. Sherman. Right.
    Ms. Wu. But there was no remedy.
    Mr. Sherman. No remedy for the psychological harm unless 
there is, in fact, defamation communicated to a third party?
    Ms. Wu. That is correct.
    Mr. Sherman. Again, if this was accusing people of not 
paying a medical bill, that is one thing. With the terrorist 
list, you have to be a lot more careful. And I should point out 
that people of certain ethnic and religious groups are the ones 
who are going to have the names that are going to be on the 
list. So, this did not affect people randomly in our society. 
This affected anybody who has a name that is similar to another 
name.
    Mr. Perlmutter. The gentleman's time has expired.
    Mr. Sherman. I yield back.
    Mr. Perlmutter. The gentleman yields back. The gentleman 
from Michigan, Mr. Huizenga, is recognized for 5 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman. I appreciate it.
    Mr. Quan, I am just wondering, can you give us a sense of 
the overall trend of credit scores, especially during the 
pandemic?
    Mr. Quan. Thank you, Congressman.
    Overall, I think that Experian has reported that during the 
pandemic, because of the CARES Act interventions, consumers' 
credit scores actually have increased slightly by, I think 7 
points.
    Mr. Huizenga. Okay. So, we didn't see them erode. We 
actually potentially saw them increase a bit, correct?
    Mr. Quan. Correct. And also, we are seeing some kind of 
deleveraging, especially in credit card debt. So, people are 
paying off their debt because of the government assistance.
    Mr. Huizenga. And somewhat, it may be argued and pointed 
out, limited opportunities to go out and actually spend money 
on anything. I think a lot of us were a little frustrated with 
that as well.
    So, obviously, there are lots of calls for a government-run 
credit reporting bureau that somehow would increase competition 
and accountability. What is your take on that? Does it actually 
increase accountability and increase competition? I think that 
is one of the more bizarre claims.
    Mr. Quan. No. In terms of competition, no. There is not 
going to be an increase in competition, and it is actually more 
likely that competition will be reduced to zero. Again, as I 
said in my written testimony and also in my oral statement, the 
private sector has problems, of course, but they actually have 
this profit motive so that if they don't treat customers 
better, someone else may do a better job. The customers will go 
somewhere else.
    And lenders need accurate information. So, it is not in 
anyone's interest to have inaccurate information. When you have 
a government bureau, there will be no competition, because they 
are backed by unlimited tax revenue, and the private sector 
cannot compete.
    Mr. Huizenga. Yes, and obviously, nobody wants inaccurate 
information. I find it fascinating, my predecessor's 
questioning about the no-fly list and the terrorist watchlist. 
Apparently, those on the other side had no qualms about having 
people on that when it was time to, oh, go purchase a weapon, 
for example. That seemed to go out the window. But as long as 
it was dealing with credit, now suddenly, they are very 
interested about who is falsely getting on that watchlist.
    But, Mr. Quan, predictive data assists lenders in providing 
borrowers with access to affordable credit, and I am curious if 
you had discussed the consequences to consumers if a risk-based 
pricing system was rejected?
    Mr. Quan. Oh, there will be a disastrous outcome for every 
consumer, not just the low-income consumers who have difficulty 
in accessing credit. Risk-based pricing, basically what it 
means is the lenders allocate or make decisions on credit based 
on the risks they perceive. And this is how the private sector 
works. If you have a higher risk, that means you probably have 
a lower chance of paying me back. That is why as an investor, 
as a lender, I am going to have to charge you a higher rate to 
compensate for the risk I am taking.
    And if we get rid of risk-based pricing, what is going to 
happen is lenders will have no incentive or interest in 
treating anyone who has more means to pay back or more 
willingness to pay back, and everyone will get charged the same 
price. At the end of the day, what we see is low availability 
of credit and higher cost of credit for everybody.
    Mr. Huizenga. And let's take it one more step, okay? What 
about the regulators who go in to those lenders and have to 
look at the quality of their lending to determine whether they 
are in compliance or not? Has anybody looked at the effects 
that might have?
    Mr. Quan. That is a great point. I look at student loan 
lending, and the Federal Government hands out loans to anyone 
without even questioning whether they will have the ability to 
pay it back. So, the Federal Government essentially is the 
biggest subprime lender in this country.
    If the Federal Government was supervised by the OCC or the 
FDIC or the Fed, it would fail the safety and soundness exam.
    Mr. Huizenga. In my last 30 seconds here, do you have any 
confidence that the Federal Government is going to be able to 
keep all of this data secure? We saw that the Securities and 
Exchange Commission had a breach. They are now building the 
consolidated audit trail, which is going to hold all of our 
personally identifiable information.
    There are a lot of people on both the left and the right, 
who have previously expressed doubt about the security of this 
information all being in one spot, basically one giant vault, 
which becomes a target. So, do you have any confidence about 
that?
    Mr. Quan. You said it very well. I have no confidence 
whatsoever.
    Mr. Huizenga. Okay. My time has expired, and I yield back.
    Mr. Perlmutter. The gentleman yields back. The gentleman 
from Missouri, Mr. Cleaver, who is also the Chair of our 
Subcommittee on Housing, Community Development, and Insurance, 
is now recognized for 5 minutes.
    Mr. Cleaver. Thank you very much, Mr. Chairman.
    Mr. Ejaz, if given the choice, would you choose the 
University of Kansas (KU), or the University of Missouri (MU)?
    Mr. Ejaz. Excellent question. I would choose MU any day.
    Mr. Cleaver. I know it is a difficult question, but I had 
to ask it.
    Mr. Ejaz. Thank you.
    Mr. Cleaver. There are a lot of scoring models that use 
statistical analysis to assign a score to a person. One 
particular company used 50 versions, 50 versions of a score for 
a person that can be sent to lenders.
    Does that make any sense at all, 50 different versions?
    Mr. Ejaz. Thank you for your question.
    It is true. There are so many different credit scores that 
any one person can have. The reason for this is because lending 
product categories can differ, and the private sector believes 
that different scores should be applied for different types of 
products. But it is true that the ``credit score'' that I think 
is in most people's head is more of an approximation of what 
the variety of your credit scores say, as opposed to being your 
true credit score.
    Mr. Cleaver. So what is the logical reason--this is to any 
of you--that we don't have a uniform system of 
creditworthiness?
    Ms. Wu. That is a great question, if I may, Congressman? It 
for sure confuses consumers that there are so many different 
kinds of scores out there. You have FICO. You have Vantage. You 
have different generations, different product types.
    One thing a public credit registry option could do is give 
a standard score so that consumers know where they stand. And 
it gets even worse because the credit bureaus also sell these, 
``Fake-O scores,'' that no lenders use, and people get 
confused. They think they have one score, they go to buy a car, 
and their car loan rate is different.
    So, certainly something a public credit registry could do 
is to standardize it so there is more clarity.
    Mr. Cleaver. Anybody else?
    [No response.]
    Mr. Cleaver. Okay. That's fine. I wanted to move over to 
the credit invisibility to find out if there is anything that 
you would recommend to this committee that we need to do to 
help bring credit-invisible individuals into the scoring 
system, although it is messed up, too. But what would you 
recommend? Does anyone have any recommendations?
    Mr. Quan. Congressman Cleaver--
    Ms. Wu. If I may, Congressman? I think the thing that has 
been hammered on is consumer choice. One of the most important 
things about credit invisibility is consumers should have the 
choice to be able to supply their rental, cell phone payments, 
and bank account histories because the system for too long has 
stripped consumers of the ability to make the decision. The 
consumer should have the choice.
    Alternative data can be helpful, but it can also be 
harmful. We have to proceed with caution. Some of the most 
promising data--and here is where, for example, Mr. Quan and I 
agree--is bank transaction data, because it can show ability-
to-repay. It has a shorter timeframe, so you are not locked 
into that 7 years for bad credit information.
    And one important thing is to give consumers control and 
the ability to share that when they want to, but turn it off 
when they don't.
    Mr. Quan. Congressman Cleaver, if I may jump in here, I, 
100 percent, agree with Chi Chi on this issue. I think it is 
really about consumers' control. That is why I think it is very 
important that we have a functional open banking system in the 
United States, where consumers are in the center of the data 
flow, so they can consent, they can permit any third party that 
wants to have access to their data. So, they know exactly who 
is using their data, how long it is going to be there, and for 
what purposes.
    All of the innovations in the private sector regarding 
using cash-flow data, using bank transaction data, is already 
happening. But the key thing is really about having a good rule 
of the road, which, again, I am mentioning the CFPB here, but 
you have them write a pro-consumer, pro-innovation, open access 
1033 rule.
    Thank you.
    Mr. Cleaver. Thank you. I yield back, Mr. Chairman.
    Mr. Perlmutter. The gentleman's time has expired. The 
gentleman from Kentucky, Mr. Barr, is now recognized for 5 
minutes.
    Mr. Barr. Thank you, Mr. Chairman.
    Mr. Quan, I think you stated it well that the impact of 
eliminating risk-based pricing would have a very negative 
impact on low- and middle-income borrowers. It would eliminate 
access to credit and drive up the cost of credit. A recent 
study from the United States Chamber of Commerce corroborates 
your testimony and found that eliminating risk-based pricing 
and replacing it with a uniform pricing model would raise 
prices on consumers and limit the availability of credit and 
other financial services, especially to low- and middle-income 
borrowers.
    And that makes sense, right? If lenders can't accurately 
predict a borrower's ability to repay, they need to raise 
prices or limit options to account for the increased 
uncertainty. A prohibition on using predictive data would not 
make the system more equitable but would instead dramatically 
exacerbate inequalities that the authors of these bills say 
that they want to fix.
    Speaking of inequalities, Mr. Quan, are you aware of any of 
the three major private credit reporting bureaus using race-
conscious criteria?
    Mr. Quan. No, I am not aware of that.
    Mr. Barr. To your knowledge, is there any evidence to the 
contrary that these credit reporting bureaus use only race-
neutral criteria, payment history and the like?
    Mr. Quan. That is my understanding, sir.
    Mr. Barr. And yet, one of the Majority's witnesses says 
that the current system of private credit reporting bureaus is 
plagued with, ``systemic racial inequity.''
    Let me ask you this question, Mr. Quan. How would excluding 
certain predictive credit data from credit reports harm a low-
income, but financially responsible, African-American consumer 
with a high credit score?
    Mr. Quan. You really touch on a very important point. And I 
think I will also give the credit to the other witnesses, who 
are really highlighting the important fact that a lot of 
Americans, especially people of color, have challenges getting 
into the mainstream credit system. That is because you have to 
have credit in order to build credit. So, if you don't have 
credit, how can you build credit?
    That is why it is important to have this new source of 
data, payment data, alternative data--rent payments, utility 
payments--for the lenders, available to lenders to use to bring 
access of credit to these people.
    Mr. Barr. My point is that whether you are White, Black, or 
Hispanic, whatever your racial minority is, if these credit 
bureaus are using race-neutral criteria, and maybe you are a 
low-income individual, but if you pay your bills, and you have 
a positive credit score, a positive credit history, your credit 
score is going to be higher. And if you eliminate the risk-
based pricing, the cost of credit is going to go up, and that 
is going to harm that borrower regardless of their racial 
profile. Isn't that correct?
    Mr. Quan. That is absolutely correct. It doesn't really 
matter what color your skin is, or what religion you believe 
in, if you can pay back the loans, your score will go up, if 
you pay back the loans on time.
    Mr. Barr. Thank you, Mr. Quan. Let me ask you about this 
national credit bureau idea. We have talked about it ad nauseam 
here. But what incentives does a private credit reporting 
agency have in competition with other private credit reporting 
agencies to get credit data accurate and get it right?
    Mr. Quan. If the credit bureau cannot provide accurate data 
to lenders, lenders will stop using their services, period. 
Because what lenders want is really accurate data for them to 
make better lending decisions. So, there is a natural 
competition among the three bureaus to make sure the data is 
accurate.
    Mr. Barr. And Mr. Quan, what incentives would a single 
government bureaucracy have to fix errors?
    Mr. Quan. I wouldn't even call it an incentive. It is just 
their ability. I am not a technologist here. So, whatever best 
method is available to the private sector, the government can 
use that, too. There is no reason for me to believe the 
government is able to do a better job in improving accuracy 
while the--if we believe accuracy is a big issue today.
    Mr. Barr. And just one final question on this alternative 
data issue. Obviously, utilization of alternative data by these 
private credit reporting agencies is helping Americans gain 
access to credit. But I think I heard one of the other 
witnesses say that positive data should be reported, but not 
negative data reported. How would that impact the cost of 
credit if the data was only selected in that way?
    Mr. Quan. If we believe accuracy is important, accuracy 
means complete data, whether it is positive or negative. If you 
specifically ignore negative data, that is not accurate. So, we 
have to make sure we have accurate and complete data available 
for lenders.
    Mr. Barr. Thank you. I yield back.
    Mr. Perlmutter. The gentleman's time has expired. The 
gentlewoman from Ohio, Mrs. Beatty, who is also the Chair of 
our Subcommittee on Diversity and Inclusion, is recognized for 
5 minutes. I think she just exited. We will go to Mrs. Beatty 
in a few minutes.
    The gentleman from Illinois, Mr. Foster, is now recognized 
for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman.
    Your credit score is often one of the most important 
metrics affecting how you interact with the financial services 
industry. Particularly with respect to housing, which is a 
basic human need, your credit score affects your ability to 
rent or own a home. It determines whether or not you can 
finance a car or a home, and it is even examined by the State 
bar associations when law school graduates apply to become 
attorneys.
    So despite the obvious great importance of your credit 
scores, a Consumer Reports survey indicates that 34 percent of 
Americans report finding errors in their credit profile. The 
Consumer Data Industry Association (CDIA), however, claims that 
figure to be false and boasts a 98 percent accuracy rate.
    However, the studies cited by the CDIA, conducted by the 
FTC, and the Policy and Economic Research Council (PERC), seem 
to indicate t23.9 percent, and 19.1 percent error rates, 
respectively. And so, there are some significant disagreements 
over these accuracy figures. And I was wondering if anyone 
could speak on what really is the best knowledge on that?
    Mr. Ejaz. I am happy to take that. I can start with it. And 
thank you for your question.
    The PERC study was done in 2011. As well, the FTC study 
that we cited today, or the panel cited today, was done in 
2012. And I absolutely join Mr. Quan in asking the FTC to take 
another look at this.
    At Consumer Reports, we put out a survey that volunteers 
could fill out. And yes, 34 percent found at least one type of 
error. I still think that despite those other two studies being 
done almost 10 years ago, that there is still an indication of 
many, many problems, and I am sure Chi Chi can say more.
    Ms. Wu. Yes, if I could just make two points about these 
accuracy studies? Number one, whether it be 2 percent or 20 
percent, when you talk about 200 million files, that is 
millions of people affected, so, even 2 percent would be 4 
million people. The FTC found 5 percent, or 10 million people.
    I agree that another study done by the FTC would be 
helpful, but we need reform now. The FTC study actually took 
almost 10 years because it was so complicated, and they wanted 
to do it right and systematically and rigorously. We can't wait 
10 years for reform. American consumers can't spend the next 10 
years continuing to be abused by the credit bureaus.
    Mr. Foster. Thank you.
    And now, when you look over the different types of errors 
that happen, one of the most common seems to be simply identity 
errors, where you are getting the wrong information about the--
or the right information about the wrong person. For example, 
the Equifax website has a FAQ page called, ``What can I do if I 
believe my credit file is mixed up with someone else's?'' That 
leads me to believe, as well as hearing from my constituents, 
that there are identity errors.
    Now, some States are rolling out something that many people 
feel will be transformative to eliminating not only identity 
errors, but also identify fraud, which is these mobile IDs, 
mobile driver's licenses sometimes, which allow you to download 
the information on your REAL ID-compliant driver's license onto 
your cell phone, and authenticate yourself online for any 
transaction.
    And if we had a high-quality way of authenticating yourself 
when you enter into a contract, when you successfully pay, when 
you start a bank account, what fraction of the errors would go 
away if we had a high-quality digital ID in this country? Does 
anyone have a feeling for that?
    Ms. Wu. The issue with the credit bureaus and mixed files 
isn't just about what kind of identity. It is matching. It is 
how you make sure A matches to B. And the problem with the 
credit bureaus is that their matching criteria is overly loose. 
Social Security numbers are unique identifier numbers, but the 
credit bureaus use only 7 out of 9 digits, and they use a 
partial match of a name and a partial match of address.
    So, that is how they have any two different people mixed 
up. You can have the most rigorous identification, but if you 
make your criteria too loose, you are going to mix people up. 
And they make the criteria too loose deliberately, because that 
is what lenders want. They would rather have false positives 
than false negatives. It is all about the incentives, and that 
is why it is important to have reform and a public credit 
registry option.
    Mr. Foster. Yes. I think that what you really want here is 
accuracy. And if you look at countries like Estonia that have a 
high-quality, secure, privacy-preserving digital ID, these 
problems largely disappear. And I think that we should join the 
States that are rolling out these advanced identity products 
which were also rolled out recently by Apple and Google Android 
as something that they will support, and this could be 
transformative at least in eliminating this class of identity 
errors from messing up a person's credit rating.
    I hear the gavel, so I yield back.
    Mr. Perlmutter. The gentleman's time has expired.
    The gentleman from Texas, Mr. Williams, is recognized for 5 
minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman.
    I have bad news for everybody in here. I am a car dealer, I 
am a borrower, and I am also a lender. And I use risk-based 
pricing every single day. Making sure that we have a complete 
and accurate picture of an individual credit history allows us 
to offer the best rates possible to our customers.
    If we begin to hide information, like we are talking about 
today, lenders like myself will be forced to price in this 
additional uncertainty that we might not get a return on 
capital, and the price of credit will go up for everybody.
    The bottom line is, if you pay your bills, you have a good 
credit rating. If you don't pay your bills, you don't have a 
good credit rating.
    I listened to Ms. Wu. She said that people have been abused 
for 50 years. I have been in business for 51 years, and I have 
never abused anybody.
    I thank everybody for coming here today. Now, the response 
of my Democratic colleagues to problems within the big three 
credit reporting bureaus is to centralize power and to create a 
public option within the CFPB.
    This belief that the Federal Government can somehow run a 
credit reporting agency more effectively and efficiently than 
the private sector is garbage. It is ridiculous. It is the Post 
Office. It is Amtrak. It is the Small Business Administration 
(SBA).
    Not only will you force consumers to hand over all their 
data to the Federal Government, but it will also remove all 
incentives for the private sector to innovate and come up with 
new models that will better predict the creditworthiness of 
borrowers.
    So Mr. Quan, quickly, can you discuss how the incentive 
structure we talked about today to compete and innovate would 
change for the private credit bureaus if a public option is 
created?
    Mr. Quan. Thank you, Congressman Williams. You are 
absolutely right. When the government takes over, there will be 
no incentive whatsoever for the private sector to compete with 
the government. They cannot compete and come up with better 
ways, and more innovations, because the government, again, 
would monopolize credit reporting, and there would be no 
competition. There would be no innovation whatsoever.
    Mr. Williams of Texas. And with no competition, the 
consumer is--
    Mr. Quan. Worse off.
    Mr. Williams of Texas. --put in a bad position.
    If making it harder for the private sector to compete 
wasn't bad enough, placing this new public credit reporting 
agency within the CFPB is also extremely problematic, and it is 
just a ridiculous idea. Since its inception, my Republican 
colleagues and I have been pushing to reform this rogue agency 
and make it more accountable, whether by creating a bipartisan 
board so the CFPB is not run by a single director, providing 
greater clarity to their enforcement capabilities so that 
businesses are not penalized for practices that were never 
previously identified as illegal, or bringing the agency under 
the normal appropriations process.
    All of these reforms have been blocked by the Democrats, 
which ensures that this agency will operate on a partisan basis 
for the foreseeable future. If the Democrats' proposal were to 
be signed into law and public options created within the CFPB, 
I am concerned that the new agency would be hijacked for 
partisan political objectives, such as removing all student 
loan information or unpaid medical debt from credit reports.
    You borrow the money, so shouldn't you pay it back, for 
crying out loud? You tell the person, I am going to pay you 
back, but you don't want to pay it back.
    So, Mr. Quan, given the discretion that the CFPB currently 
operates under, how would it be possible to ensure that this 
new public option would not be used for political purposes 
rather than working to ensure that lenders are provided with 
the best information available as they attempt to accurately 
price risk and give the customer the best price?
    Mr. Quan. Thank you, Congressman, for the question. I think 
it is best in the current system that lenders make the choice, 
make the decision of who they want to lend money to and at what 
cost, assuming, of course, that they follow the Equal Credit 
Opportunity Act (ECOA).
    If we let the government dictate whom they should lend to, 
at best, the criteria for underwriting will be influenced by 
the Administration, whether it is Republican or Democrat. And 
at worst, the Federal Government will be deciding who is 
creditworthy.
    I think this is the worst outcome. We have government 
decide who is worth credit, and the private market is the best 
way to advocate credit, not the government.
    Thank you.
    Mr. Williams of Texas. In the end, the private sector will 
get it done better. The government will pick winners and 
losers. They do every single day, and it will trickle down into 
less product, higher prices for the consumer, and it will also 
go to less employees, and, again, the government control will 
be putting a stick in the economy. So, the private sector is 
much better.
    I yield back. Thank you.
    Chairwoman Waters. Thank you.
    The gentlewoman from Ohio, Mrs. Beatty, who is also the 
Chair of our Subcommittee on Diversity and Inclusion, is now 
recognized for 5 minutes.
    Mrs. Beatty. Thank you, Madam Chairwoman, and thank you to 
the witnesses and to my colleagues.
    We have heard a lot today about credit unions and who is 
affected by credit reports and the data that is collected. The 
Consumer Financial Protection Bureau issued a report in 2014 
entitled, ``Consumer credit reports: A study of medical and 
non-medical collections.''
    In that report, the CFPB found that over 50 percent of 
credit reports that had collections were related to medical 
collections. We have also heard that most of those dollar 
amounts were somewhere around $200, and the highest were all 
under $490.
    We also noticed that a company called NerdWallet compiled 
data from all of the Medicare compliance reviews of U.S. 
hospitals conducted by the Office of the Inspector General.
    We found that almost 50 percent of Medicare medical claims 
contained medical errors that resulted in an overpayment of 
something like 26 to 27 percent. We have also heard that some 
individuals have said those numbers were closer to 70 or 80 
percent.
    So, Ms. Wu, with a system with error rates for medical debt 
so high, could the argument be made that it is not beneficial 
to include these debts at all in credit scores?
    Ms. Wu. Thank you for the question, Congresswoman, and 
absolutely, yes. The argument could be made that medical debt 
for medically-necessary services should not mess up anyone's 
credit report. People get sick. It is not under their control. 
It is bad enough that we have a health care system where people 
go into unmanageable debt just to stay alive and stay healthy. 
For it to mess up their credit reports is unconscionable.
    Mrs. Beatty. Thank you. I am also Chair of the Subcommittee 
on Diversity and Inclusion, and I spent the last 2 years 
advocating for companies to diversify their workforces and 
their senior leadership.
    When I look at the three credit reporting agencies, they 
are a perfect example of why this work is so important.
    So, Mr. Greer and Ms. Traub, I am going to ask you this 
question. When I look at TransUnion, only 9 percent of their 
senior leaders and 10 percent of their board are 
underrepresented minorities, and 30 percent are women, and we 
can keep going with Equifax and Experian, all the same. Even 
with Experian, astonishingly, they have virtually no racial 
diversity on their boards or in their senior leadership.
    Several of our witnesses have discussed the inherent 
inequities that exist in the current credit reporting system. 
Do you believe that the makeup of the leaders of these 
companies has a direct effect on the inherent inequities in the 
credit reporting system?
    Mr. Greer?
    Mr. Greer. Yes. Thank you, Congresswoman Beatty.
    I absolutely do. All of this conversation about 
accountability has been, who is more accountable to whom? I 
will say this, and I have been called naive many times; my wife 
and my son call me naive all the time.
    But I would rather have this body hold some institution 
accountable, the folks on this dais up here, because the folks 
on this dais more accurately reflect the population of the 
people who are consumers in our marketplace than the 
shareholders and the people who run these companies. Nearly 90 
percent of shareholders across our economy are White. And I 
haven't looked at Equifax, TransUnion, and Experian's 
shareholders but my guess is that it reflects that number.
    Like I said, when we talk about accountability, the folks 
in this room are more accountable to the consumers who are 
impacted by these companies than the companies are themselves.
    Mrs. Beatty. Thank you. I think I only have 30 seconds 
left. Ms. Wu, can you explain to this committee why it is 
important to include a credit score with the annual credit 
report?
    Ms. Wu. Yes. Consumers should have access to free annual 
credit scores so they can see their standing, so that if they 
want to get a credit card, buy a car, get a mortgage, or even 
rent an apartment, because landlords use them, they know where 
they stand.
    Mrs. Beatty. Thank you. I have introduced a free credit 
score and consumer act. It is also in this comprehensive 
credit. So thank you, and I yield back.
    Chairwoman Waters. Thank you very much.
    The gentleman from Arkansas, Mr. Hill, is now recognized 
for 5 minutes.
    Mr. Hill. Thank you, Chairwoman Waters. Thanks for 
convening this hearing. And thank you for our panel's 
participation, both in person--and I'm delighted to be here in 
person--and online as well, and thanks for talking about the 
importance of the credit system and how that has enabled 
millions and millions of Americans over the past several 
decades to have more access to credit, and more opportunity to 
fulfill their lives with a home or a car or something that they 
need to benefit themselves.
    So, our credit system is fundamental to our households 
having access to the credit they need for their future.
    Mr. Quan, have credit reports helped more families have 
access to credit?
    Mr. Quan. The answer is, yes.
    Mr. Hill. Have credit reports helped community banks avoid 
credit losses by adding them into their underwriting process?
    Mr. Quan. The answer is, absolutely, yes.
    Mr. Hill. Do you support the concept of consumers offering 
additional data? I don't ever use the words--I am like Mr. 
Green of Texas--``alternative data.'' I like the words, 
``additional data.''
    So, Mr. Quan, do you support the concept of consumers 
offering additional data in order to strengthen their credit 
report, say, their telecommunications or cable or rent or 
utility bills?
    Mr. Quan. Absolutely, yes.
    Mr. Hill. In the past two Congresses, Keith Ellison--now 
the great consumer advocate and attorney general for Minnesota, 
and a former member of this committee--and I had that exact 
bill for Congress. It was a bipartisan bill that was called the 
Credit Access and Inclusion Act, and I still promote it. I 
still introduce it. I still support it. It has no bipartisan 
support like it did in previous Congresses.
    In fact, it passed on the House Floor, I think, on the 
suspension calendar, and it allows a consumer to add their 
utility payments or rental payments as a way to boost their 
credit score.
    Have you had a chance to look at that bill in the past, Mr. 
Quan?
    Mr. Quan. Yes, I have.
    Mr. Hill. Is that headed in the right direction?
    Mr. Quan. I think from a policies perspective, the answer 
is, yes.
    However, Congressman Hill, I also want to remind you that 
the private sector is already innovating. Some lenders, mostly 
venture-backed, are incorporating on-time payments, streaming 
services, rent, et cetera, into their underwriting systems so 
that more consumers can qualify for better rates.
    Mr. Hill. So, you are saying the private sector is 
innovating and actually offering that as a way for people to 
have higher credit scores and more credit availability?
    Mr. Quan. That is correct.
    Mr. Hill. Gosh, that is good to hear. Well, I think it is a 
good idea. It was a bipartisan idea, and I hope it will be a 
bipartisan idea in this Congress as we proceed.
    The flip side of this is, some of my friends on the other 
side of the aisle in this Congress, while they like the idea of 
additional data helping consumers, they have argued quite 
vociferously what I think is an economically illiterate 
concept, that actually, the government should prohibit negative 
history on credit reports. Should the government say that CRAs 
cannot give us negative credit information, Mr. Quan?
    Mr. Quan. Maybe, I will answer your question another way. 
We have all heard of this term GPA inflation, right, so, if 
everybody gets a 4.0 in their GPA, and everybody gets a perfect 
honors SAT score, how will schools decide whom they should 
admit?
    And it is the same thing here. If we suppress all of the 
negative information in consumer reports, and everybody gets an 
850 FICO score, the FICO score will be useless. No lender will 
use the information whatsoever.
    Mr. Hill. In the long run, it strikes me that that would 
mean lenders would make mistakes and lend money to people who 
possibly couldn't pay it back, and then they would have a 
credit default, and their credit score would go down if people 
had misleading credit scores. Isn't that a possibility?
    Mr. Quan. Absolutely. You are absolutely right.
    Mr. Hill. So in the long run, I think an idea like that 
really hurts consumers and households. It reduces access to 
credit, and possibly raises the cost of credit.
    Could it also harm community banks that don't have fancy 
upscale consumer underwriting systems like JPMorgan Chase? 
Could that hurt the banks if they had a false reading on a 
credit score when they offer consumers credit?
    Mr. Quan. Not only for consumers, but also this is going to 
have safety and soundness concerns. The banks cannot really 
issue or loan out high-quality loans. Then the OCC, the 
prudential regulator, will have concerns.
    Mr. Hill. Thank you. I appreciate your time. We are for 
safety and soundness of our banks on this committee. I yield 
back.
    Chairwoman Waters. Thank you.
    The gentleman from California, Mr. Vargas, is now 
recognized for 5 minutes.
    Mr. Vargas. Thank you very much, Madam Chairwoman. I really 
appreciate you bringing this issue before us. I especially 
appreciate all of the witnesses today.
    Consumers have to have more control over their data because 
consumers are not the customers. As been said here today, the 
interests are not really aligned with the credit reporting 
industry.
    Mr. Quan said that you need to treat the customers better, 
or they are going to go elsewhere. The problem is that the 
consumers are not the customers of the credit reporting 
agencies. That is not the case here. That is why these 
interests are not aligned.
    Now, I wish we could get to a bipartisan solution. I do 
think that this begs for a bipartisan solution. It has been 
very difficult, I think, because so many of my colleagues and 
friends on the other side have really been radicalized over 
these last few years.
    They attack the government and they point out every wrong 
thing that the government does. And of course, everyone makes 
mistakes. The government does, too. But they attack it 
vociferously and anxiously and, really, sometimes heartlessly.
    But it is interesting, the Social Security Administration 
has all of our Social Security numbers. In fact, it has had 
mine since birth. And to my understanding, they have never had 
a breach, and they have held it very securely for years.
    Now, I could be wrong about that, and there has been a 
breach, but I don't think there has been, not that I am aware 
of.
    So it is sad that we can't get to a bipartisan solution, 
and I do think that this begs for it. But again, the 
radicalization that I see on the other side--they keep calling 
everything socialism, communism, or whatever.
    In fact, recently, one of the saddest things I have seen in 
politics was, we had a very well-decorated military officer, 
the Chairman of the Joint Chiefs of Staff, General Milley, 
called, by the leading political commentator on the right, ``a 
pig,'' and, ``stupid,'' just because he is an intellectual.
    And what do I hear from my friends on the other side about 
this? Nothing. Silence. This would have never happened 10 years 
ago, and it certainly wouldn't have happened when Ronald Reagan 
was in office, I can tell you. That is why it is harder and 
harder to get to bipartisan. They think we are radicalized. We 
are not. They are, and they have to change, and I hope they do.
    Now, they also seem to overlook some of the data breaches. 
I looked up--with just a very quick Google search, the biggest 
data breaches of the 21st Century: Zynga, 218 million users' 
accounts were breached; Yahoo, over 3 billion; NetEase, 235 
million user accounts; MySpace, 360 million; My FitnessPal, 150 
million; Marriott International, 500 million; LinkedIn, 165 
million; Heartland Payment Systems, 134 million; Dubsmash, 162 
million; and, of course, Equifax, 147 million customers.
    You seem to overlook that and say the Federal Government is 
terrible. They can't do this. They overlook the facts of all 
these breaches.
    So I wish, again, that we could get to a bipartisan 
solution. Maybe we can. It shouldn't be so radicalized.
    Mr. Greer, you previously stated that according to the 
Consumer Financial Protection Bureau, about 15 percent of Black 
and Latino customers are considered credit invisible, with no 
trackable credit record.
    So what additional information or alternative data or 
additional data should be collected for these individuals to 
have a more ample report, a better report, that really treats 
them holistically?
    Mr. Greer?
    Mr. Greer. Thank you for that, Congressman Vargas.
    Yes, and some of it I talked about in the testimony were 
things that are painting the fuller picture of their financial 
lives, things that they pay bills on regularly. And we are not 
talking about taking data out. We are talking about adding data 
like cell phone payments, utility payments, rental payments, 
and again, the ability to opt in to doing that.
    The other thing is I think we need to recognize that people 
of color, Black and Latino, particularly immigrant populations, 
cannot access credit markets, and if the credit bureaus 
continue to weight current credit held as something that drives 
credit decisions, the Black and Brown communities are always 
going to be behind because we have been systematically held out 
of accessing credit, which this committee has dealt with for a 
long time and continues to deal with.
    Mr. Vargas. Thank you. And again, I hope we do get to a 
bipartisan solution. But the fever has to break on the other 
side, and I hope it happens soon.
    I yield back.
    Chairwoman Waters. Thank you.
    The gentleman from Georgia, Mr. Loudermilk, is now 
recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman. I appreciate 
everybody on the panel being here for this discussion. It seems 
that this is a discussion that we quite often have, and it is 
something for which I think we do need a bipartisan solution.
    What my good friend, Representative Hill, proposed in the 
past, I think, is a good starting point, if we could get some 
buy-in from some of the members on the other side of the aisle 
here as we once did.
    One of the bills included for discussion in this hearing, 
to me, is incredibly troubling, and it is the one that has been 
discussed here of creating another government entity, one that 
would be a government-run credit bureau.
    The problem is I think this is based on the false 
assumption that the government would do a better job of 
handling consumer data and credit reports than the private 
sector does.
    We are in a period right now where the approval and trust 
of government is at an all-time low. The American people do not 
trust their government. They do not think the government 
operates in their best interest and, in fact, a record number 
of people believe that the government already has too much 
control over their lives.
    Now, adding another entity of government with even more 
control over their lives would be counterproductive, in my 
opinion, and in the opinion of many Americans.
    If you think the consumers are frustrated with credit 
bureaus now, I can only imagine what would happen if every 
American had to deal with a bureaucracy equivalent to the IRS, 
which has the lowest approval rating of all government. In 
fact, if you remember, the IRS, while it does have some 
accountability, supposedly, to this Chamber, to Congress, 
engaged in targeting a certain group of people with audits just 
a few years ago.
    So, clearly, government doesn't always operate in this 
vacuum where it doesn't consider politics. In fact, politics 
becomes a very important part of government.
    Every time someone would need to borrow money, apply for a 
job, or rent an apartment, they would have to wait on the 
Federal Government to respond. If you think that is a good 
solution, look at the Veterans Administration right now and how 
well they service our veterans with the backlog that they have.
    I think this is a ridiculous solution to a problem. I think 
that it has been brought up with the cybersecurity issues and, 
yes, virtually every Federal agency has experienced a 
significant data breach.
    If you look at how much of our data is spread out across 
various government agencies, we don't even have Federal 
standards for data privacy. But yet, we want to expand the 
operation of government. I think that is a bad situation.
    Mr. Quan, can you elaborate on why the private sector, 
while not perfect, is so much better-equipped to handle and 
improve consumer credit reports than the government is?
    Mr. Quan. Thank you, Congressman, for the question. As I 
mentioned before, the best way to achieve equity in credit 
access is through innovation and also a conducive environment 
where innovation can flourish.
    The private sector is already coming up with solutions to 
address the problem. The public credit bureau doesn't add any 
value to it because everything in the proposal about allowing 
consumers to use more data in the credit scoring system is 
already happening. We do not need the government to do the job 
that the private sector is already doing. The private sector is 
already innovating to allow more consumers to get access to 
credit.
    Mr. Loudermilk. I am going to ask another question that has 
been asked in a different way. But, Mr. Quan, would removing 
negative but accurate information from consumer credit reports 
increase costs and reduce access to credit across-the-board?
    Mr. Quan. That is absolutely right, because at the end of 
the day, what we want is accurate and complete information. 
``Accurate'' means that if it is positive, it should be there, 
and if it is negative, it should also be there.
    When we have that kind of information it is best for the 
lenders to make the right decisions. And at the end of the day, 
the cost of credit won't go down and the availability of credit 
will go up.
    Mr. Loudermilk. Mr. Quan, I do think that some improvements 
should be made to the system such as adopting alternative data 
and updating credit files more promptly. Can you comment on 
those proposals?
    Mr. Quan. Absolutely. I think sometimes consumers see an 
error in a report where they already paid off the debt but it 
has not been reflected in their credit score or credit report. 
That is because furnishers are not sending out their real-time 
information as frequently as they should be. So, again, I will 
say that innovation can play a role here. If furnishers can 
more frequently report the data, then the information for the 
consumer can be more real-time, or as close to real-time as 
possible.
    Mr. Loudermilk. Thank you. I yield back.
    Chairwoman Waters. The gentleman from Florida, Mr. Lawson, 
is now recognized for 5 minutes.
    Mr. Lawson. Thank you, Madam Chairwoman, and I would like 
to welcome everyone who is testifying here on the committee.
    This is a very important subject that we are discussing, 
especially in dealing with consumer credit and how it affects 
people who apply for jobs for their--in order for them to get a 
job.
    Ms. Traub, in your testimony before the Colorado Senate 
Judiciary Committee in 2012, you stated that 6 out of every 10 
American employers now look at job application credit reports 
when hiring for some or all positions.
    Employment credit checks have become commonplace among 
employers who are looking for ways to predict if a candidate is 
honest, if they have the ability to manage money responsibly, 
and if they are likely to steal.
    In your research, have you found any evidence of the 
validity of this practice before the prevalence of using credit 
reports in a hiring decision? If not, what is the harm in the 
continued use of credit checks in employment?
    Ms. Traub. Thank you, Congressman. I am aware of no proven 
link between personal credit reports and either someone's 
performance of a specific job or criminal behavior.
    In fact, a spokesperson from TransUnion admitted, ``We 
don't have any research to show any statistical correlation 
between what is in somebody's credit report and their job 
performance or their likelihood to commit fraud.'' And yet, we 
still see a lot of employers, many employers across the 
country, using credit checks as part of their hiring screening 
process.
    To answer your question about the harm of this practice, 
the harm is that job applicants can be rejected for jobs that 
they are very highly qualified for, and this is a loss for 
employers who might be missing out on really excellent 
employees because they are screening for a factor that is 
irrelevant, and also, a huge loss for job seekers who might be 
able to pay off their bills if, in fact, they were able to 
secure work.
    In the study you referenced that I conducted for Demos, we 
found that one in 10 survey respondents who were unemployed had 
been informed they would not be hired for a job because of 
information in their credit report.
    And we know that as a result of discriminatory policy, 
Black and Latinx consumers are more likely to have poor credit, 
as we have been discussing, than White consumers. So, checking 
credit history can become just another covert, and perhaps 
unintentional, means of racial discrimination in hiring, 
compounding discrimination that happens in lending.
    There is also harm, actually, when employers sometimes will 
say, ``Oh, well, we ask people to explain the source of the bad 
credit. We let them explain that.''
    Medical debt is a major cause of flawed credit, as we have 
heard today. No one should have to explain the details of their 
cancer treatment or their child's struggle with drug abuse to 
get a job. That is not relevant.
    Similarly, divorce and domestic abuse are closely connected 
with flawed credit. These are also matters that job seekers 
shouldn't have to expose to a potential employer just to get a 
job.
    Mr. Lawson. It is very interesting, and the bill that I 
filed deals with these restrictions and, really, I think it is 
a bipartisan bill, because what you just said is not beneficial 
to determine whether it is going to affect a person's job 
performance.
    As a little bit of follow-up, this restricting credit check 
for employment decision, as a part of Ms. Pressley's 
comprehensive package, the bill simply cracks down on a company 
using credit reports when they hire a new employee. There are 
two exemptions for national security purposes in instances 
where credit checks are required by local, State, and Federal 
law.
    Bad credit does not always correlate, as you say in your 
statement, to proof of job performance. We have all made a poor 
financial decision. I know I have before, and we need to stop 
punishing people and start helping people move forward.
    And I really think that this is a great thing to do, and I 
represent a community in which a lot of students get out of 
school and try to get jobs and so forth, and run into these 
types of situation, and it really keeps them from doing what 
is--well, my time is running out, so I yield back.
    Mr. Auchincloss. [presiding]. The gentleman from Ohio, Mr. 
Davidson, is now recognized for 5 minutes.
    Mr. Davidson. I thank the chairman. And I thank our 
witnesses. I appreciate your attention to this matter, and 
frankly, I appreciate the Majority for calling attention to the 
power that credit reporting agencies have over our lives, and, 
I think, rightly recognize that there are problems when a 
credit reporting agency can effectively block people from 
access to banking, access to credit, all kinds of things.
    And I think that is really why we should be especially 
cautious about giving even more power to the Federal 
Government. The Federal Government has not been a trustworthy 
wielder of its power.
    Historically, the government has used its power to engage 
in practices that are abusive, things like redlining, where 
bank regulators have done that. Most recently, Operation Choke 
Point was kind of a different version of that.
    But, sadly, there is a long history in our country of 
somebody saying, effectively, you are not going to bank those 
people, are you?
    Now, who those people are has changed over time, but we 
should be using the power of government to stop that, not 
enable it, and that is, I think, what would happen here.
    In fact, that is the goal of China's effort to use their 
power of their government to decide who gets credit, and in the 
opinion of their government, they are just making sure the 
right people get credit.
    But the reality is that they are using it as a means of 
control. They are using their whole financial system as a means 
of control, particularly with what they are doing to Uighur 
populations.
    But they are doing it to anyone who would speak ill of the 
government or any of their leaders, or who wouldn't comply with 
other norms.
    In fact, if they cross China's version of their woke heresy 
code, they are, effectively, canceled. And we read this in all 
sorts of dystopian futures where people who are on the wrong 
side of the power structure are denied access to the financial 
sector.
    And, thankfully, Fintech is offering alternatives to more 
power for more government. Fintech is truly creating this with 
payment systems, with crypto currencies, and with distributed 
ledger technology, in particular. It is also more secure.
    Ms. Traub, in your testimony, you lay out the case for a 
public credit registry. You break your argument down into seven 
supposed benefits this social system would bring.
    One of them, you claim, is that the government would offer 
enhanced data security. You go on to state that, ``Americans 
already trust their government with extensive personal 
financial information through the Internal Revenue System, 
which has a strong record of data security.''
    First of all, Americans don't really trust the IRS. I think 
that is a gross mischaracterization. In fact, if you don't 
trust them, you go to jail. So, that is a bad system. And 
second, they have also been breached.
    So Mr. Vargas, yes, they have been breached, most recently 
for 720,000 taxpayers who had their Social Security numbers 
stolen by hackers. And that is without accounting for what has 
been compromised but hasn't even yet been measured by the 
SolarWinds hack.
    What we know is that true blockchain enables a much more 
secure architecture. We know that our current cybersecurity 
systems are broken at the government level, and at the private-
sector level, and reinforcing the same failed systems with more 
power for those that keep implementing them is inherently 
flawed.
    Mr. Quan, I am curious if you could comment on the dangers 
of this consolidation of reporting, maybe with respect to what 
China seeks to do and how Fintech today offers alternatives?
    And before you answer, could you also comment on how the 
current system, in a way, is rightly criticized because we have 
privatized profits and have socialized risks, so some of the 
reforms on liability are important?
    Mr. Quan. Thank you, Congressman.
    I think you are absolutely right in your statement that 
when we have a government-run credit bureau, consumers will 
surrender their rights to the government to decide who is 
creditworthy, who can get access to credit.
    So, this is another bad situation for anyone. The best way 
is, as flawed as we think the credit system is today, it is 
still best handled by the private sector.
    And I also want to mention that our system is not 
fundamentally broken. Otherwise, we would not have the most 
competitive and the largest credit market in the world. So, 
let's reform the system.
    Mr. Davidson. Good points. My time has expired. I think 
that your point is well-taken, and I yield back.
    Mr. Auchincloss. The gentlewoman from North Carolina, Ms. 
Adams, is now recognized for 5 minutes.
    Ms. Adams. Thank you, Mr. Chairman, and to Chairwoman 
Waters and the ranking member, thank you for hosting the 
hearing. Thank you to the witnesses as well.
    One of the common themes that we heard today is the 
incredible damage that inaccurate information can wreak on an 
individual's life and that is why the TransUnion case that we 
heard so much about is so disconcerting.
    Mr. Ejaz, according to the study that you conducted for 
Consumer Reports, 34 percent of volunteers identified at least 
one error on their credit report, and per the CFPB, of the 
nearly 300,000 credit reporting complaints they received in 
2020, over two-thirds involved incorrect information on their 
credit report.
    So, Mr. Ejaz, and then Mr. Greer, can each of you briefly 
describe the impact of inaccurate information on consumers' 
credit reports?
    Mr. Ejaz. Sure thing, and thank you for your question. 
Inaccurate information on credit reports can do a variety of 
things for consumers. First, if it is inaccurate personal 
information, while it may or may not impact their credit score, 
it can make it difficult for consumers to verify their identity 
with credit reports.
    And in our survey, this is actually what we found. Around 
10 percent of folks who filled out our survey said they found 
it to be difficult or very difficult to access their credit 
report and that is because when you go to check your credit 
report, you have to verify your identity with the credit 
bureaus. And if the bureaus' design security verification 
questions based off of the information that is on your report, 
and if that information is inaccurate, those questions can be 
unanswerable, and that is what some folks had found.
    But even more serious than that are the 11 percent of 
folks, of volunteers who filled out our survey, who found 
account-related errors. These are errors that can impact your 
credit score.
    And as we have discussed at length today at the hearing, a 
low credit score can keep you not just from affordable credit 
but also access to employment, affordable homeowners and auto 
insurance rates in some States, and housing. And I am sure Mr. 
Greer can follow up.
    Ms. Adams. Mr. Greer, do you want to add to that?
    Mr. Greer. Sure. Before I do, I want to mention that I do 
want to thank Congressman Davidson for acknowledging the harms 
that the Federal Government has done to Black and Brown 
communities. He referenced redlining.
    But what I do want to note, and it is a difficult thing 
that we cope with, but what the government also did was it 
passed the Fair Housing Act, because it has a role in 
protecting the rights of people. And I think the conversation 
today about the bureau is a perspective that people have on the 
government's role in also protecting people's rights.
    As it relates to inaccurate information, I agree. I don't 
have a lot more to add to what the other witnesses said, other 
than that when these--one thing I think it is important to note 
is that communities of color often have fewer resources 
available to them to fight back against powerful corporations 
when it comes to setting the record straight on what is in 
their credit report.
    I just want to acknowledge that, and that if we are talking 
about a system that is truly equitable, we are addressing the 
capacity challenges that communities of color face compared to 
others when disputing inaccurate information.
    Ms. Adams. Okay. Thank you. I thank both of you. And that 
is why I proudly introduced H.R. 4113, the Improving Credit 
Reporting for All Consumers Act. I think it would really, 
really help.
    So, Mr. Greer, what do you think should be done to ensure 
that consumers receive a resolution to errors or inaccuracies 
that they dispute?
    Mr. Greer. I am not going to spend a lot of time on this, 
because I think Chi Chi has some really good ideas, and Amy as 
well. But I do think that some accountability for a real 
answer--it was referenced how long people might have to wait if 
the government were in charge.
    Well, people are waiting today, a long time, to get 
resolution on their credit disputes. So, I will just leave it 
at that, and leave it to other witnesses who may want to weigh 
in on that.
    Ms. Adams. Okay. Ms. Wu?
    Ms. Wu. Thank you, Congresswoman. Thank you for the 
question. The credit reporting dispute system is broken. It is 
biased. It automatically rules in favor of creditors and debt 
collectors when there is a dispute.
    Consumers need a right of appeal. They need a higher power 
to go to when they can't get relief for errors. What your bill 
does would be a wonderful idea of creating a right of appeal 
within the credit bureaus, an independent unit so that 
consumers, when they are not satisfied, it also provides for 
injunctive relief, as I said earlier. That would allow them to 
go through the courthouse doors and ask a judge to please order 
the credit bureau to fix their report.
    Ms. Adams. Thank you very much. And, Mr. Chairman, I am 
going to yield back about 10 seconds, and I will just pass that 
on to the next person. Thank you.
    Mr. Auchincloss. The gentleman from West Virginia, Mr. 
Mooney, is now recognized for 5 minutes.
    Mr. Mooney. Thank you, Mr. Chairman.
    Mr. Quan, I would like to address the proposal from the 
Democrats to create this government-run consumer credit agency 
under the Consumer Financial Protection Bureau (CFPB), an 
organization which has many challenges of its own including its 
very existence.
    I have a long list of concerns with a government-run 
consumer credit agency. If this proposal were enacted, the 
Federal Government would be responsible for keeping records of 
billions of consumer transactions. That is an enormous 
responsibility.
    So, Mr. Quan, you outlined concerns with putting so much 
sensitive personal information in the hands of one government 
entity in your testimony. Can you talk about the risk of cyber 
attacks associated with having one sole public credit reporting 
agency?
    Mr. Quan. Thank you, Congressman, for the question.
    You are absolutely right. TransUnion has about 3.1 billion 
tradelines in their database, and the other two agencies 
probably have a similar number of tradelines. So, this new 
government agency will house all of these tradelines, trillions 
of bits of information, and they are inviting cyber attacks.
    If consumers are not convinced that the private sector is 
doing a good job in protecting their data, there is no reason 
for us to believe the government is going to do a better job of 
protecting their data.
    Mr. Mooney. Okay. Thank you, Mr. Quan.
    A centralized credit reporting agency would be a target for 
cyber attacks that could jeopardize sensitive information for 
our constituents.
    Additionally, hackers and criminals will use any 
technological advantage they can to steal sensitive 
information. There is no way that a government agency would be 
better equipped than the free market to use the latest 
technology and stay ahead of cyber incursions.
    Furthermore, putting consumer credit reporting solely in 
the hands of the Federal Government has far-reaching 
implications. Credit reports contain sensitive personal 
information, and credit scores have tangible power over our 
lives as consumers.
    I am very concerned that creating a public consumer credit 
bureau would be an enormous concentration of power in the hands 
of the Federal Government.
    That kind of power could be mismanaged by a reactionary 
bureaucracy, whereas free market competition incentivizes 
looking forward, anticipating the needs for consumers in 
advance.
    So, I agree with Ranking Member McHenry in his earlier 
comments where he mentioned that competition and choice for all 
consumers offers the best path forward. We do not need another 
government takeover of an industry.
    That is reminiscent of a socialist-run country, not 
America. I know that is an agenda for many on the other side of 
the aisle to socialize this country. That does not work well. 
That has been shown.
    Rather, I would actually quote Ronald Reagan, who once 
said, ``Government is not the solution to our problems. 
Government is the problem.''
    And with that, I yield back.
    Mr. Auchincloss. The gentleman from New Jersey, Mr. 
Gottheimer, is now recognized for 5 minutes.
    Mr. Gottheimer. Thank you, Mr. Chairman, and thank you to 
our witnesses for being here today.
    Each year, 15.4 million Americans are victims of credit 
card fraud, around 42,000 people every day. The FTC has found 
that one in five consumers have verified errors in their credit 
reports, and one in 20 consumers have errors so serious they 
will be denied credit or forced to pay higher interest rates.
    That adds up to 42 million Americans with errors in their 
credit, and another 10 million with errors that can be life-
altering. As the nation continues our economic recovery, and 
Americans get back to work, and our lives return to normal, I 
think we can all agree that it is more important than ever that 
all Americans have access to credit. Crucial to this access is 
accuracy in credit reporting.
    Ms. Wu, one of the most common errors in credit reporting 
is data being mixed up between consumers. What do you believe 
drives these errors and what steps should credit bureaus be 
taking to lower them?
    Ms. Wu. Thank you for the question, Congressman.
    The problem with mixed files stems from matching criteria--
how you match a consumer to a file at a credit bureau. A lot of 
people have the same names--John Smith, Jane Doe.
    The unique identifier is the Social Security number, but 
the credit bureaus match based on seven out of nine digits or 
they do partial name matches, or, in the case of Ramirez v. 
TransUnion that we have been talking about today, they used 
name only. They matched based on name, and you can imagine that 
a lot of people have the same name, especially minority 
consumers.
    So, what you want to do is tighten up that criteria. Match 
based on all nine digits of the Social Security number. Make 
sure you match on something like Social Security number and 
date of birth, and that is what you need to do and that is what 
your bill does.
    Mr. Gottheimer. Thank you, Ms. Wu.
    I believe that fixing these errors is less about someone 
with an incorrect report receiving a monetary reward and more 
about actually fixing the reputation and whether the financial 
system views them as trustworthy or not. However, the FCRA does 
not give consumers the right to injunctive relief to fix errors 
to their credit reports.
    Ms. Wu, do you believe that consumers should have access to 
injunctive relief to remedy errors in their credit reporting 
file to increase accuracy? And how might we convince more 
stakeholders to support access to injunctive relief so 
consumers can fix these errors?
    Ms. Wu. Absolutely, Congressman. That is an important 
insight. Injunctive relief is critical. Because at the end of 
the day, what consumers want is they want their credit reports 
fixed and they want it done right, and because of the Ramirez 
v. TransUnion decision, they can't even get through the 
courthouse door unless the information is hanging out there and 
complete strangers see it.
    But injunctive relief could get them the right to go 
through a courthouse door and ask the judge, to ask the credit 
bureau to, ``Fix my credit report, please.'' Because basically, 
at the end of the day, that is what they want.
    Mr. Gottheimer. Thank you. One year ago today, as you 
brought up, in the last Congress, the House passed bipartisan 
legislation, the Protecting Your Credit Score Act.
    This legislation would create an online portal to provide 
consumers with unlimited free access to their credit reports 
and credit scores, the ability to freeze their credit, the 
ability to easily dispute errors and fraud, and the ability to 
secure and track their data, all to boost transparency and to 
help Americans secure their financial health.
    This legislation was needed then and it is clear it is 
still needed now.
    I just want to thank all of the witnesses for being here 
today. I appreciate your work. I yield back.
    Mr. Auchincloss. The gentleman from Tennessee, Mr. Kustoff, 
is now recognized for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman, and thank you to the 
witnesses for appearing today.
    Mr. Quan, I ask this in part because my district is partly 
rural. In 2018, the CFPB published a report entitled, ``The 
geography of credit invisibility.'' It examined the 
relationship between geographic location and credit 
invisibility.
    I am summarizing but, essentially, the report found that 
rural areas had the highest proportional rate of credit 
invisibility compared to other geographic areas.
    Could you give me your opinion, Mr. Quan, on what are the 
primary reasons for the high level of credit invisibility in 
rural areas?
    Mr. Quan. Thank you, Congressman.
    I think you are absolutely right about these findings. I 
think it is very unfortunate that people living in rural areas 
have challenges accessing mainstream credit as a result, and 
this is really a catch-22. You have to have credit in order to 
build credit. If you don't have credit, you cannot build 
credit.
    So, how do you start? One way the private sector comes up 
with is a system or a new algorithm that allows lenders to use 
nontraditional data sources such as rent payments, utility 
payments, and teleco payments.
    If that information can be used, we have seen some early 
evidence that consumers' credit scores can get a boost from the 
addition of this new information. So if more lenders are using 
this new source of data, I believe this problem will be--I am 
not sure it will be 100-percent addressed, but it will be 
addressed.
    Mr. Greer. Mr. Kustoff, could I address that question?
    Mr. Kustoff. Let me follow my train of thought. If I could, 
Mr. Quan, and maybe you just said this, but in your written 
testimony, you talked about the potential of new algorithms, 
also known as alternative data, and how that could benefit 
customers. Do you think that the use of that alternative data 
can help increase credit visibility in, specifically, rural 
communities?
    Mr. Quan. The answer is absolutely, yes. We have seen some 
early evidence that the newer scoring algorithm, whether it is 
from Experian Boost or UltraFICO, is exactly doing what you are 
hoping these new algorithms are doing.
    But also lenders, especially those venture-backed lenders, 
are using cash-flow data without even going through FICO scores 
to really factor into these new data sources to help increase 
the chances of consumers to qualify for credit.
    Mr. Kustoff. Thank you, Mr. Quan.
    Mr. Ejaz, first of all, I want to tell you that I rely on 
Consumer Reports often for my product reviews for cars, and I 
cite it often. So, I appreciate the work that you all do at 
Consumer Reports.
    As a general rule, under the current system, does Consumer 
Reports recommend credit freezes for individuals?
    Mr. Ejaz. We recommend that consumers take advantage of 
credit freezes when they fear that their identity may have been 
stolen.
    Mr. Kustoff. Would you recommend it or does Consumer 
Reports recommend it as a general rule to people?
    Mr. Ejaz. Yes. They should take advantage of credit 
freezes.
    Mr. Kustoff. And if I can maybe follow up and take it one 
step further, does Consumer Reports have a position about 
credit freezes for minors, in other words, those under the age 
of 18 who may or may not have credit files? I suppose they have 
some profile with the credit reporting agencies.
    Mr. Ejaz. I can get back to you in writing about 
specifically that part. We do recommend that consumers, 
especially after the Equifax hack, check their credit report 
and also assess their financial life, and if they fear that 
their identity has been stolen and, people have been opening 
credit accounts in their name, to take advantage of security 
freezes.
    Mr. Kustoff. And taking that one step further, and this may 
be something else you need to get back to me on, is whether 
Consumer Reports has any thoughts, under the current system if 
somebody 18 years or older wanted to get a credit freeze, is 
there a process through the three credit agencies, their 
websites, where they can enact a credit freeze online.
    That is not true for those who are minors. There are 
additional steps, and I would be interested whether--again, 
under the current system, whether Consumer Reports has any 
guidance or any recommendations for parents of minors who want 
to try to get credit freezes. Is there an easier way to do it, 
or should there be an easier way to do it with the three 
agencies?
    And with that, I will yield back. Thank you.
    Mr. Ejaz. Thank you.
    Mr. Auchincloss. The gentlewoman from Massachusetts, Ms. 
Pressley, is now recognized for 5 minutes.
    Ms. Pressley. Thank you very much, Mr. Chairman, and thank 
you to all of our witnesses for sharing your expertise today.
    In this country, our credit reports are our reputations. 
They determine where you can live, where you can work, and how 
much it will cost you to finance everything from a car to a 
college degree.
    But our credit reporting systems are fundamentally flawed. 
They are rife with inequities and disparities which stifle the 
upward mobility of millions of workers and families. The 
pandemic and the economic hurt it has wrought has only further 
shed light on the ways in which our credit reporting systems 
are a flawed measure of financial health.
    In fact, despite the devastating financial hardship that 
families and communities have faced over the past year-and-a-
half, national credit score averages have increased to record 
highs.
    Ms. Wu, can you speak to this paradox, and why it 
underscores the need for Congress to extend payment pauses and 
other financial protections established throughout the course 
of this pandemic?
    Ms. Wu. Thank you, Congresswoman, for the question. It has 
been an interesting paradox. Despite the economic devastation 
of COVID-19, credit scores have not plunged, and there are 
several reasons for that.
    Number one, of course, is the stimulus and Federal 
unemployment benefits. You give people money, they are able to 
pay their bills. Their credit scores stay high, which shows 
that credit scores are really about economics, and not moral 
responsibility, as some may put it.
    Another reason credit scores have held up is the 
protections in the CARES Act for things like forbearances, 
student loan pauses, and credit reporting protections when 
creditors do agree to accommodations.
    Again, these are very important, but they are about to 
expire. Like the eviction moratorium, they are about to expire, 
and millions of consumers will no longer have their 
protections.
    And so, it is really important for consumers to come out--
coming out of forbearance is to have the right to have loan 
modifications so that this doesn't hurt their credit profile 
and put them at risk of foreclosure.
    Student loan protections are about to expire. Millions and 
millions of consumers are going to have to start paying that 
again. It is going to be a problem and a struggle, which is why 
student loan forgiveness is so important.
    Ms. Pressley. Thank you, Ms. Wu.
    So, how much financial damage would you say we avoided 
because of these protections?
    Ms. Wu. I think we avoided a great deal of financial 
disaster, especially for low- and moderate-income persons. This 
has been a K-shaped recovery. The folks here have done okay. It 
is the folks there that we need to protect.
    We need to protect renters because they still owe the back 
rent. The moratorium kept them from being evicted, but they owe 
the back rent, and eventually that will show up in the form of 
debt collection items.
    Ms. Pressley. Thank you. There is no doubt that these 
protections did help prevent many from being pushed further 
towards the brink. So we must act to extend these protections 
to ensure an equitable and just economic recovery.
    But we also have to work to advance bold, sweeping, and 
systemic reforms to our credit reporting system. Reforming our 
credit system is, I think, an issue of both racial and economic 
justice, which is why I was so proud to reintroduce the 
Comprehensive CREDIT Act, a package of reforms that will 
overhaul the credit reporting system and provide much-needed 
relief to workers and families across our country.
    This bill would restrict the use of credit scores for most 
hiring decisions. It would ban the reporting of any debt as a 
result of medically-necessary procedures, and establish a 
credit rehabilitation process for private student loan 
borrowers facing hardship.
    Ms. Wu, in light of the ongoing economic challenges facing 
our families as a result of the pandemic, why are these reforms 
particularly timely?
    Ms. Wu. Thank you, Congresswoman, and thank you for 
reintroducing the Comprehensive CREDIT Act. It is bsolutely 
critical and important, and the COVID-19 pandemic shows that 
because it is average credit scores that have stayed afloat, 
but there are going to be people in that downward slope of the 
K who have had their credit profiles hurt, and those folks 
should not be shut out of jobs because of this credit damage.
    The time limits for this negative information should be 
shortened from 7 years to 4 years, which is something else your 
bill does. And for people who got COVID and are left with these 
huge medical bills--the New York Times has documented all of 
these patients with huge medical bills. Those medical bills 
should not impair their credit reports and hurt them 
economically for years to come.
    Ms. Pressley. It is absolutely clear that our workers and 
our families can no longer afford inaction with our broken 
credit reporting system.
    Thank you, and I yield back.
    Mr. Auchincloss. The gentleman from Indiana, Mr. 
Hollingsworth, is now recognized for 5 minutes.
    Mr. Hollingsworth. Good afternoon. I appreciate all of our 
witnesses being here. We have a lot to get through, so I hope 
everybody can keep their answers relatively short.
    Ms. Wu, I have certainly appreciated many of your 
responses. Your passion for these issues can be seen even by a 
casual observer.
    You mentioned in your written testimony that we should, and 
I think I am quoting here, ``restrict the use of credit 
reporting information in rental housing and ban it for 
insurance.'' I wondered if you might expand on that. I know 
that is not the main point of your testimony, but certainly, 
that sentence stuck out to me.
    Do you think that credit report information for insurance 
is not predictive or why would we want to ban that?
    Ms. Wu. Thank you for the question.
    The use of credit scores in insurance is just simply 
illogical. What does your credit record have to do with your 
driving record? There is really just no causation.
    Now, there is a correlation, but correlation does not make 
causation. And we also know, as the other witnesses have 
pointed out, that there are massive racial disparities in 
credit scores. So, the use of credit scores in insurance also 
results in Black and Brown drivers having to pay a lot more for 
insurance.
    Mr. Hollingsworth. Ms. Wu, is it your assertion that credit 
reporting has no predictive power and is simply a proxy for 
race, because an abundance of research indicates the exact 
opposite of that. And I would imagine these insurance companies 
are interested in getting the most predictive power possible 
for the risks that they are taking, but not including these, 
just by virtue of being proxies for race, but instead, because 
they are valuable indicators in potential risk, going forward.
    Ms. Wu. Again, it is about correlation. People with 
impaired credit, for example, their finances may be more 
constrained, so they may be filing claims more often. People 
with more resources, maybe if they get into a fender-bender, 
they don't put in a claim, because they can pay a few hundred 
dollars out-of-pocket. But people with more constraints on 
their finances, who may have lower credit scores, may need to 
file a claim, because they can't afford to do that. It is 
correlation.
    Mr. Hollingsworth. Ms. Wu, I guess just to summarize there, 
because I was trying to understand the argument, your statement 
is that they may cost the insurance company more, but the 
insurance company should be prohibited from underwriting the 
potential risks that they are going to have higher payouts on 
account of writing that policy?
    Ms. Wu. The way insurance works is that consumers should be 
able to file claims when they have an accident.
    Mr. Hollingsworth. For sure. No one doubts that.
    Ms. Wu. And so, they shouldn't be penalized for that, and 
there is also this idea that credit is supposed to be some 
measure of moral responsibility.
    Mr. Hollingsworth. No one talked about that.
    Ms. Wu. We know from the pandemic that is not true.
    Mr. Hollingsworth. Ms. Wu, I did not say that. I have never 
said that.
    Just for clarity, I absolutely agree with you that people 
should be able to file claims. But I disagree with the notion 
that somehow the potential loss for the writ insurer should not 
be a part of the risk that they are underwriting in doing that 
policy, correct or incorrect?
    If there are going to be higher claims in the future for 
whatever motive or reason there may be, they should be able to 
charge more for the premium for writing that particular 
insurance; that is how insurance works.
    Ms. Wu. But these are folks who haven't filed a claim yet. 
By that logic, insurance should be rated on income, because 
people who have less income might be more likely to file 
claims.
    Mr. Hollingsworth. For clarity, that is why it has 
predictive power, because they are trying to predict what their 
potential losses might be and, thus, match the risk with the 
price that they are charging. The FTC and Georgetown University 
have done their own research into this and found that credit 
scores actually are predictive, and not a proxy for race, as I 
mentioned.
    I know that this hearing and other hearings have mentioned 
the University of Michigan study, which is entitled, ``Auto 
Insurance and Economic Mobility in Michigan: A Cycle of 
Poverty,'' and have used that as a rationale for banning credit 
score data in auto insurance underwriting. Frequently, what is 
referred to is Detroit being at a much higher cost to insure 
cars than other States, however, all of the other States that 
are compared also use credit scoring. So, there is nothing 
unique about the use of credit scores in Michigan versus other 
States that would lead us to believe that is the problem in 
Michigan, where insurance costs are much higher.
    Instead, what study after study has found is that it is 
predictive in the potential loss for insurance, and insurance 
companies are charging for the risks that they are taking, and 
in taking more risks, they have to charge more.
    And with that, I will yield back my time.
    Mr. Auchincloss. The gentleman from New York, Mr. Torres, 
is now recognized for 5 minutes.
    Mr. Torres. Thank you, Mr. Chairman.
    In TransUnion v. Ramirez, the Supreme Court, in an act of 
judicial usurpation, held that the courts, rather than 
Congress, ought to decide which legal rights are enforceable in 
Federal court and which harms are concrete enough to establish 
Article III standing.
    My first question is for Ms. Wu. To what extent does the 
Court's recent decision in TransUnion v. Ramirez undermine the 
enforceability of the Fair Credit Reporting Act?
    Ms. Wu. Thank you for that question, Congressman.
    The Supreme Court's decision in TransUnion v. Ramirez 
really undermines the ability of consumers to seek redress in a 
court for credit reporting errors. It basically says that the 
fact that there is an error, no matter how bad--and being 
accused of being a terrorist is a pretty bad error--you can't 
go to court unless a creditor, or an employer, or someone else 
has actually seen it, and your reputation has already been 
besmirched by the error.
    Mr. Torres. And what can and should Congress do to 
strengthen the Fair Credit Reporting Act in light of the 
Supreme Court's decision weakening it?
    Ms. Wu. Congress can and should act to address Ramirez by 
passing the right to seek injunctive relief under the Fair 
Credit Reporting Act. Even though the Ramirez decision rested 
on constitutional grounds, it left open the possibility that if 
you are asking a court for injunctive relief, you may be able 
to show standing, because you are trying to prevent the risk of 
harm of having a credit report with this terrible error in it 
being shown to third parties.
    Mr. Torres. I am one of four Representatives of the Bronx, 
where 30 percent of residents have no credit history. I have 
constituents who have been paying their bills in full and on 
time for decades, constituents who have shown themselves to be 
objectively creditworthy, but none of that is captured in 
traditional credit scoring models.
    If we had credit scoring models that consistently captured 
alternative data, do we have a sense of how much more of the 
population would have a credit history and a credit score?
    Mr. Ejaz?
    Mr. Ejaz. I am not aware of what that difference would be. 
I am happy to look into it and follow-up in writing. But it is 
definitely a significant issue.
    Mr. Torres. And Ms. Wu, I know the National Consumer Law 
Center has concerns that alternative data, if applied 
improperly, can do more harm than good. Can you share your 
thoughts on how to harness the power of alternative data to 
produce greater access to credit, without doing more harm than 
good?
    Ms. Wu. Yes. Thank you, Congressman.
    It depends on what data you are using and how it is used. 
Rental data, as you pointed out, can be helpful, can be 
promising, as long as there is consumer choice; again, consumer 
choice is key, because there are 10 million Americans who are 
behind on their rent, and they may not want their rental 
information put into the system. But tenants who have been 
paying regularly on time and don't have that concern should be 
able to opt-in.
    We do have concerns about gas and electric, utility-payment 
data, because I am from Massachusetts, and you are from the 
Bronx, and those winter bills can get pretty high and people 
can get 30 or 60 days behind, so that could hurt them. But, 
again, consumers can have the choice if they want to opt-in, 
because if they don't have those negative marks, they should be 
able to opt-in to the system.
    So, it is always about consumer choice, as well as having 
alternative scores that are sort of second chance, instead of 
feeding the information into the credit bureaus wholesale, 
where it might hurt some people.
    Mr. Torres. And in addition to an opt-in requirement, could 
there be a requirement that only favorable alternative data be 
reported, because obviously, a bad credit history would be 
worse than none at all.
    Ms. Wu. Yes. Positive data certainly would be helpful. And 
as some of the other speakers, witnesses have pointed out, the 
negative data shows up in the form of debt-collection items 
already. So, mandating the positive data would be helpful and 
would balance that out.
    Mr. Torres. And what do you think is the single, most-
important thing we can do in Congress to ensure that everyone 
has a credit score and a credit history?
    Ms. Wu. I think giving consumers the choice to have it 
included would be the single, most-important thing.
    Mr. Torres. I see my time has expired. Thank you.
    Mr. Auchincloss. Does the gentleman yield back?
    Mr. Torres. I yield back. I surrender.
    [laughter]
    Mr. Auchincloss. The gentleman from Ohio, Mr. Gonzalez, is 
now recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Mr. Chairman, and thank 
you to the witnesses for their testimony.
    First off, let me start by saying I think we do need to, 
more critically, look throughout our committee about how to 
expand access to credit and banking services; without each, it 
is difficult for low-income Americans to achieve financial 
success. I have said that, I think, since one of our first 
hearings last Congress, when we had the agencies here.
    And I do think that we need more innovation, and we need 
more competition, and we need a healthier credit space, for 
sure. That said, the bill that we are being asked to consider, 
I am hard-pressed to find a worse idea, frankly, than to 
federalize and, ultimately, socialize credit reporting in this 
country.
    Unfortunately, it is sort of part and parcel for our 
friends on the other side of the aisle who like to solve a lot 
of pressing issues, which is, if you don't like what is 
happening, just have the Federal Government take it over and 
see what happens. We know that typically doesn't work very 
well. It is less secure, with far less innovation, and 
ultimately, I would argue, lead to worse outcomes economically.
    But I will ask Mr. Quan for his thoughts on some of those 
things. Mr. Quan, what sort of impact do you believe creating a 
Federal reporting agency would have on innovation and 
investments into new technology by the private sector to 
promote access to credit?
    Mr. Quan. Thank you, Congressman, for the question.
    You already hit the nail on the head. When the government 
gets involved, the new credit bureau, backed by the government, 
will be backed by unlimited taxpayer revenue. So, the private 
sector cannot compete; as a result, innovation will disappear 
naturally.
    And as we all know--this is Economics 101--government 
involvement will crowd out private investment and all of the 
innovations we are seeing today, the innovations I have 
mentioned, whether it is the UltraFICO score or Experian Boost 
or the cash flow based on underwriting, will disappear. And 
there is no evidence the government is doing a better job or 
can do a better job in adopting or developing new technologies 
to improve access to credit.
    Mr. Gonzalez of Ohio. Thank you. I couldn't agree more.
    Based on the conversations that I have had with my 
constituents, customer service across the different Federal 
agencies isn't necessarily a strong suit of the Federal 
Government. I think today, right now, for example, those who 
are waiting for passports are completely out of luck because of 
the backlog. We have been solving passport issues for a long 
time and this is the worst that our office has ever seen it. 
That is just passports.
    But what is your assessment of the ability of the Federal 
Government to operate a credit reporting agency and the likely 
customer service implications for such a project?
    Mr. Ejaz. Again, you have already given a very good 
example, using passports. The CFPB's customer complaints 
portal, I think the witnesses have mentioned, is in the range 
of 300,000 to 400,000 customer complaints related to credit 
reporting. But in reality, the CRA is receiving far more than 
that; they are receiving millions, not just complaints, but 
disputes.
    And there is no reason for me to believe the government, 
which has no expertise or any kind of experience to handle that 
kind of complaints volume, what we are going to end up having 
is a system that is probably going to be worse than what we 
already have now.
    Mr. Gonzalez of Ohio. So, less innovation, less 
competition, worse service. Sounds great, guys. I am really, 
really excited about this bill.
    Final question, in your testimony, you mentioned concern 
over future data breaches at the credit reporting bureaus. I 
agree, we have seen that in a lot of different sectors of the 
economy. And there is no reason to believe that this isn't 
going to continue, unfortunately.
    In your estimation, what more should Congress be doing to 
prevent another significant breach of a credit bureau?
    Mr. Ejaz. I believe that credit bureaus should be held to 
the same standard as financial institutions. For example, if 
you are a critical service provider to financial institutions, 
you are examined by the credential agencies under the Bank 
Service Company Act. We should have a similar regime that 
applies to the credit bureaus.
    I am not saying having Federal supervision will permanently 
fix the cybersecurity issue; the cyber risks will always be 
there. But without appropriate Federal supervision, I am just 
not confident that consumers will feel confident that their 
data is secure with private sector bureaus.
    Mr. Gonzalez of Ohio. Thank you.
    I see my time is up, and I yield back.
    Mr. Auchincloss. The gentlewoman from Pennsylvania, Ms. 
Dean, is now recognized for 5 minutes.
    Ms. Dean. Thank you, Mr. Chairman, and I thank our 
witnesses for your important information today.
    I would like to follow up on Mr. Scott's questioning 
earlier during this hearing about student loan debt, 
particularly, private student loan debt. Many borrowers remain 
trapped in abusive or predatory lending arrangements and credit 
agencies still view this as bad debt, hurting the future 
economic horizons for those borrowers. I am a former professor, 
so I care an awful lot about student debt.
    Ms. Wu, in your testimony, you speak about consumers being 
unfairly penalized in their credit reports when they are 
victims of student loan abuses. Can you describe that situation 
more specifically to us, and provide us with an example of how 
that has long-term consequences?
    Ms. Wu. Thank you for the question, Congresswoman.
    Yes. So, private student loan debt is certainly a problem 
and it is a problem that affects Black and Brown borrowers 
disproportionately. Unfortunately, it is also tied to the issue 
of for-profit schools and other institutions that take 
advantage of Black and Brown students, promise them the sun and 
the moon, give them substandard educations, and then saddle 
them with private student loan debt, which ends up on their 
credit reports, maybe as defaults and delinquencies or just a 
lot of unmanageable debt. And, unfortunately, the student loan 
pause from the CARES Act also didn't help private student loan 
borrowers.
    The Comprehensive CREDIT Act does have some provisions to 
help with private student loan debt in terms of rehabilitating 
those, but certainly, the credit reporting consequences are 
only one part of that.
    Ms. Dean. That is what I was going to follow up with, Ms. 
Wu. We know that during COVID-19, the pandemic, many private 
student loan borrowers did not get any relief. So, I do lift up 
Ms. Pressley's Comprehensive CREDIT Act.
    Could you describe how the lack of that economic relief has 
impacted private student loan borrowers?
    Ms. Wu. Unlike borrowers for Federal student loans, private 
student loan borrowers have had to keep paying those loans. 
Federal student loan borrowers have had a pause and suspension 
of their obligations. So, those private student loan borrowers 
who have suffered economically during the COVID-19 pandemic, 
either still have to pay their loans or have negative items on 
their credit report from not being able to pay because of the 
economic fallout of COVID-19. And this could follow them for 
another 7 years.
    Ms. Dean. Exactly. It is such an obvious inequity. We treat 
one set of student borrowers one way and another set, in an 
economic collapse, another way.
    Ms. Traub, I am going to try to fit in a question, if I 
may, with you. I appreciate your testimony that credit 
reporting is part of infrastructure. It is a resource needed to 
fully participate in society.
    And while credit reporting does not take race into account, 
can you describe how systemic racial inequities fail to allow 
equitable access in this essential infrastructure? Can you give 
us a little more on that topic that you offered us in your 
testimony?
    Ms. Traub. Thank you, Congresswoman.
    We can look at where credit discrimination comes from, 
because you are right that credit scores and credit reports 
never, explicitly and directly, take race into account. But we 
know for decades we had economic policies in this country that 
enabled White families to build wealth but excluded Black and 
Brown families.
    Wealth is passed down over generations, and access to that 
generational wealth shapes our behavior. It shapes people's 
borrowing and payment behavior today. And so, people without 
access to generational wealth need to borrow more to go to 
college, to buy a home, sometimes, just to make ends meet. And 
then, there is also ongoing discrimination. So, it is not a 
surprise, really, that we see racial disparities turn up in 
credit reports.
    And I want to be clear that we need to fix a lot more than 
credit reporting to achieve racial equity, but fixing credit 
reporting, I believe, would improve one system that spreads 
inequality every time that it is used.
    Ms. Dean. I appreciate that.
    Would anybody else like to speak to that issue of systemic 
racism in the credit reporting system, as we say, not 
explicitly, but implicitly?
    Mr. Greer. Yes. Thanks for that.
    I would just like to emphasize the point that she made that 
there are systemic and historical barriers that have been baked 
into our current lending systems and our lending structures. 
And it was referenced earlier, things like redlining that have 
held credit away from Black and Brown communities.
    And we would be, and I guess this is another term we have 
been using a lot today, naive to believe that is not making its 
way into our credit reporting system.
    Mr. Auchincloss. The gentlewoman's time has expired.
    Ms. Dean. Thank you. I yield back.
    Mr. Auchincloss. The gentleman from Wisconsin, Mr. Steil, 
is now recognized for 5 minutes.
    Mr. Steil. Thank you very much, Mr. Chairman.
    Some of my colleagues today have argued for the removal of 
predictive information from credit reports. I see this really 
as an attack on risk-based pricing, in which lenders attempt to 
assess the creditworthiness of a prospective borrower and 
adjust prices to compensate for that risk. Risk-based pricing 
is a foundational concept in our financial system and 
undermining the practice will increase the level of risk across 
the financial system and reduce credit access.
    Mr. Quan, would you agree that making it harder for lenders 
to assess risk will effectively socialize that risk, and then, 
how would that impact lower-income and marginal borrowers, 
specifically?
    Mr. Quan. Thank you, Congressman, for the question.
    I have repeatedly said that we need accurate and complete 
information in customers' credit files. ``Accurate'' means that 
whether the information is positive or negative, the 
information should be there.
    So, if we remove or if we intentionally suppress negative 
information--our service helps consumers who have negative 
information, but by and large, lenders who do not have the best 
information available when they make decisions to credit--
    Mr. Steil. Let me dive in, because I think we have hit the 
point a handful of times here today. But let me shift gears 
ever so slightly for you, Mr. Quan, if I can.
    People with low credit scores, thin credit files, young 
people, recent immigrants, members of underserved communities 
can all benefit from improved access to credit. And, 
unfortunately, I think much of today's hearing is focused on 
ways to weaken the credit scores and obscure the risk, when, to 
me, these ideas would increase costs and reduce access, 
especially for today's underserved borrowers.
    Hollowing out credit reports won't help a single mom in 
Janesville, Wisconsin, get a mortgage. It won't help a family 
business in Racine, Wisconsin, get a small business loan.
    So, instead of excluding data from credit reports, should 
we look at ways to include more predictive data that may help 
bring more Americans into the financial services system?
    Mr. Quan, let me put a pin on it here. My colleagues on the 
other side of the aisle have argued that we need to get a 
government-run credit bureau to come up with new algorithms to 
address credit access.
    Do you agree with that assertion, or is the private sector 
unwilling or unable to specifically innovate in this area? 
Could you comment on that?
    Mr. Quan. Congressman, you are absolutely right. The 
private sector has already come up with new algorithms, and 
they are so-called new. There is nothing new there; it has been 
around for a number of years now, and, frankly, those 
innovations are happening mainly because of: number one, there 
are mission-driven companies that are trying to solve the 
problem; and number two, and more importantly, this is a 
capitalistic society and there is a profit motive behind it. 
This is a market that is unaddressed and now it is being 
addressed by innovation. And lenders can make money and now, 
also, they can fulfill their social mission. So, the 
government--
    Mr. Steil. Mr. Quan, these hybrid hearings are challenging. 
I look forward to all of us being together in person, but I 
appreciate you being here. I think you hit the nail on the 
head. The private sector is looking at this.
    Let's do some concrete examples. Experian Boost, UltraFICO, 
some of these opt-in alternatives, if these models and 
businesses expanded, would it improve credit access for 
individuals, in particular, some of those who are currently 
underserved?
    Mr. Quan. The answer is absolutely, yes.
    We are still in the very early stages. Experian Boost has 
boosted 69 million points in FICO, and this is not 
VantageScore, this is the FICO Score, this is especially in 
FICO 8.0, which is the score that most vendors use today. So, 
there is a clear evidence that this innovation is driving 
access to credit, to expand access to credit.
    The low-income consumers, new immigrants, people like me 
who wouldn't be able to get access to credit early in my days 
in the United States, now, we have a chance to get credit.
    Mr. Steil. I appreciate that.
    Let me just sum it up like this. One of my takeaways from 
today's hearing is that credit reporting can easily be 
politicized, and with that in mind, I am concerned about 
proposals to centralize credit reporting in a government-run 
agency.
    I am not sure my colleagues have fully considered the 
implications of providing a government agency with even more of 
our personal financial information, and then granting that 
agency the power to effectively withhold access to credit. A 
government-run system raises the prospect of politicized 
credit-access decisions, a loss of financial privacy, and 
heightened cybersecurity risks. Many Americans don't want the 
government to exercise this power, especially if it is based on 
what they buy and which bills they prioritize.
    Our credit reporting agencies are not perfect, but American 
consumers stand to benefit far more if we improve our existing, 
competitive, private-sector system, than if we centralize the 
financial data at a government bureaucracy.
    I urge my colleagues to reject the proposal, and I yield 
back.
    Mr. Auchincloss. The gentlewoman from Michigan, Ms. Tlaib, 
is now recognized for 5 minutes.
    Ms. Tlaib. Thank you so much, Mr. Chairman.
    I so appreciate this hearing because credit scoring has 
been something that impacts my community directly, as the 
third-poorest congressional district in the country.
    Mr. Greer, would you agree that racism is profitable?
    Mr. Greer. Yes.
    Ms. Tlaib. Thank you. I would like to submit for the 
record, Mr. Chairman, a great op-ed from Rashad Robinson, 
``Corporations profit off of racism.''
    Mr. Auchincloss. Without objection, it is so ordered.
    Ms. Tlaib. Thank you.
    Mr. Greer, you talk about oppression economy in your 
testimony, and I think that is really powerful, because what we 
are hearing are words that corporations use: risk-based 
pricing; assessments. We all continue to hear these kinds of 
really interesting terminologies, but I can tell you, 
personally, with auto insurance, for example, rates in my State 
are the highest in the nation. People will say it is all of 
these different factors, but credit scores are actually used to 
calculate whether or not a person is a safe driver: Credit 
scores.
    So, when we talk about structural racism and we talk about 
this hearing, we have to really talk about the human impacts of 
what this means. They are selling our data, the credit scoring 
agencies, for profit, to auto insurance agencies which are 
using non-driving factors as proxies: marriage, whether or not 
you are married; your education level. All of these things, 
again, have nothing to do whether or not you are a safe driver. 
But they use words like risk-based pricing or assessments.
    Mr. Greer, when you think about those kinds of measures of 
using these as proxies, and I am talking specifically about the 
auto insurance industry, the use of credit scores, how has that 
really impacted communities of color?
    Mr. Greer. Right. I am really thankful for all of the work 
that you do, Ms. Tlaib. Not just for the people in your 
district, but for the people of color across the country.
    But this idea is to create a class of people who can be 
exploited, who can have their auto insurance be much larger 
than it would be in another part of the country, or if they 
were another type of person. So, the reason why, and I think 
this has been documented, that auto insurance is higher in your 
community is because it is largely Black, Latino, and Arab-
American people who are living in your community, and because 
our economy has been built on a system that exploits racism as 
a way to draw profits, this is how that plays out in that 
sector.
    Ms. Tlaib. Mr. Ejaz, do you know what credit scoring has to 
do with driving records?
    Mr. Ejaz. It has nothing to do with driving records. Credit 
scores and reports, in my view, should only be used to assess 
creditworthiness and, as a general rule, should not be expanded 
beyond that.
    Ms. Tlaib. Ms. Traub, it is interesting, when somebody's 
credit score is lower and they use it towards calculating their 
auto insurance. Do you know that auto insurance rates actually 
go higher, so if you are poor, you are paying higher rates, 
even though you are a safer driver.
    Did you know, Ms. Traub, that if you had a DUI, but a 
better credit score, you are paying less in auto insurance than 
somebody who has no DUI record, but a lower credit score, did 
you know that?
    Ms. Traub. That is correct, Congresswoman, and it is 
terribly unfair.
    Ms. Tlaib. That is a form of structural racism. If you look 
at who is impacted, it is low-income communities.
    So, I want to get to your next thing, which is medical 
debt. Ms. Wu, you know how passionate I am about this. I don't 
want medical debt to be used similar to, if you buy a car and 
you miss a payment. Medical debt is basically, you are sick, 
you have to get treatment, and this is medically-necessary 
debt, and it ends up on your credit report for years.
    Given the credit reporting agencies' poor track record, 
what kinds of things is your organization doing to expose the 
fact that medical debt in our credit reports actually impacts 
or expands economic disparities in communities like mine?
    Ms. Wu. Thank you, Congresswoman, and thank you for your 
passion on this particular topic.
    The proposal you had that medically necessary debt should 
not show up on credit reports is one of the most important 
aspects of the Comprehensive CREDIT Act. The CFPB has found 
that over half--it is up to 58 percent--of debt-collection 
items, third-party debt-collection items on credit reports are 
for medical debt. It is a massive amount.
    And COVID-19 really exposes how not only this is just a 
terrible, unjust problem, but it also runs along racial lines, 
because we know that Black and Brown Americans have suffered 
more under COVID-19. And The New York Times has documented how 
COVID-19 has resulted in these huge medical bills for some of 
the patients, and then this stuff ends up on their credit 
reports.
    It is just wrong.
    Ms. Tlaib. Yes. Mr. Chairman, if I may?
    We are pushing for legislation, hopefully, and you all can 
take a look at it, of reducing markings on credit reports from 
7 to 4 years. I know it is a good compromise. I, of course, 
don't want the credit reports being used, but I think moving it 
from 7 to 4 years can directly, dramatically, help our 
communities.
    But right now, I think this hearing was critically 
important to expose at least--
    Mr. Auchincloss. The gentlewoman's time has expired.
    Ms. Tlaib. Thank you.
    Mr. Auchincloss. The gentleman from South Carolina, Mr. 
Timmons, is recognized for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman.
    I am opposed to the bill to create a public credit 
registry, and I believe it is a big government solution in 
search of a problem.
    Mr. Quan, picking up where my friend from Wisconsin, Mr. 
Steil, just left off, risk-based pricing helps to make credit 
affordable for all. As our economy is recovering from the 
pandemic, do you believe transitioning away from risk-based 
pricing would help consumers?
    Mr. Quan. Think about what happened 10 years ago, the last 
financial crisis this country experienced. Lenders took more 
risks. They lent money to people who couldn't afford to pay it 
back. That is because of the lack of risk-based pricing that 
caused the last financial crisis. So, risk-based pricing is 
very critical to have today as we recover from this pandemic.
    Mr. Timmons. Sir, thank you for that.
    As a follow-up, could you discuss the impact that 
suppressing or keeping negative information out of credit 
reports has on the safety and soundness of our financial 
system?
    Mr. Quan. Lenders need accurate and complete information to 
make lending decisions. If we intentionally suppress accurate, 
but negative, information from customers' credit files, lenders 
will not be able to make the best decision they can; as a 
result, there will be an increase in defaults and we will have 
an unsafe and unsecure financial system.
    Mr. Timmons. And that would likely result in everyone's 
premiums going up for the insurance they are currently paying 
for; is that correct?
    Mr. Quan. Absolutely. Everyone's price will go up, as a 
result.
    Mr. Timmons. Okay. Thank you.
    Moving on, I know cybersecurity has been a popular topic of 
conversation today, but I would be remiss if I did not chime in 
as well, especially, given that today we received news of 
another mass breach, this time at LinkedIn.
    We have seen several government agencies hacked in the 
past, putting Americans' data in the hands of cyber criminals 
as well. Creating a one-stop shop of consumer credit 
information and a brand new Federal agency that has no 
experience in this particular area is just asking for trouble. 
Congress has always had challenges, as well.
    Mr. Quan, what level of risk to the average consumer would 
the public credit rating agency, as proposed by the Majority, 
pose to the American people?
    Mr. Quan. The risk would be unthinkable, because all of a 
sudden, all of the information would be concentrated, 
centralized by one government agency which has no experience 
and no expertise in safeguarding that information. And as you 
mentioned, there are so many government agency breaches.
    My data, when I was working for the government, was 
breached because of the OPM data breach. So, there is no 
evidence that the government is able to do a better job than 
the private sector in safeguarding our information.
    Mr. Timmons. Sure. But I would imagine suing the Federal 
Government and getting a few trillion dollars for the breached, 
the parties that had their data breached, would be a good 
solution.
    Mr. Quan. That would be--
    Mr. Timmons. So much money to give away.
    Mr. Quan. Congressman, absolutely, I agree with you. Look 
at the Equifax settlement, $575 million, up to $700 million. 
But who is going to pay for it? Shareholders.
    So, if you are investing in Equifax, bad luck. But if the 
government was responsible for that $700 million--that is how 
much the Troubled Asset Relief Program (TARP) was originally 
for. So, of course, today we are handing out trillions of 
dollars--$700 million may be something like a drop in the 
bucket, but still, that is taxpayers' money.
    Mr. Timmons. I have a feeling that the government would 
settle for far more than the Equifax breach. So, it's a bad 
idea. Thank you.
    Mr. Chairman, I yield back.
    Mr. Auchincloss. This committee is going to adjourn in 
order to make votes; unfortunately, that means we will have to 
curtail questions.
    I would like to thank our distinguished witnesses for their 
testimony today.
    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.
    This hearing is now adjourned.
    [Whereupon, at 1:32 p.m. the hearing was adjourned.]

                            A P P E N D I X


                             June 29, 2021
                             
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