[Senate Hearing 118-424]
[From the U.S. Government Publishing Office]
S. Hrg. 118-424
OVERSIGHT OF THE CREDIT REPORTING
AGENCIES
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HEARING
BEFORE THE
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING THE NATION'S BIGGEST CREDIT REPORTING AGENCIES AND THE POWER
THEY HAVE IN DETERMINING THE FINANCIAL FUTURES OF EVERY AMERICAN
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APRIL 27, 2023
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Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available at: https: //www.govinfo.gov /
__________
U.S. GOVERNMENT PUBLISHING OFFICE
56-951 PDF WASHINGTON : 2025
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chair
JACK REED, Rhode Island TIM SCOTT, South Carolina
ROBERT MENENDEZ, New Jersey MIKE CRAPO, Idaho
JON TESTER, Montana MIKE ROUNDS, South Dakota
MARK R. WARNER, Virginia THOM TILLIS, North Carolina
ELIZABETH WARREN, Massachusetts JOHN KENNEDY, Louisiana
CHRIS VAN HOLLEN, Maryland BILL HAGERTY, Tennessee
CATHERINE CORTEZ MASTO, Nevada CYNTHIA M. LUMMIS, Wyoming
TINA SMITH, Minnesota J.D. VANCE, Ohio
KYRSTEN SINEMA, Arizona KATIE BOYD BRITT, Alabama
RAPHAEL G. WARNOCK, Georgia KEVIN CRAMER, North Dakota
JOHN FETTERMAN, Pennsylvania STEVE DAINES, Montana
Laura Swanson, Staff Director
Lila Nieves-Lee, Republican Staff Director
Elisha Tuku, Chief Counsel
Amber Beck, Republican Chief Counsel
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Pat Lally, Assistant Clerk
(ii)
C O N T E N T S
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THURSDAY, APRIL 27, 2023
Page
Opening statement of Chair Brown................................. 1
Prepared statement....................................... 28
Opening statements, comments, or prepared statements of:
Senator Scott................................................ 3
Prepared statement....................................... 29
WITNESSES
Mark W. Begor, CEO, Equifax Inc.................................. 5
Prepared statement........................................... 30
Responses to written questions of:
Chair Brown.............................................. 39
Senator Reed............................................. 40
Senator Cortez Masto..................................... 42
Chris A. Cartwright, President and CEO, TransUnion............... 7
Prepared statement........................................... 35
Responses to written questions of:
Chair Brown.............................................. 47
Senator Reed............................................. 50
Senator Cortez Masto..................................... 51
Senator Hagerty.......................................... 57
Brian J. Cassin, CEO, Experian................................... 8
Prepared statement........................................... 37
Responses to written questions of:
Chair Brown.............................................. 58
Senator Reed............................................. 61
Senator Cortez Masto..................................... 62
Additional Material Supplied for the Record
Letter submitted by NAFCU........................................ 69
Letter submitted by Americans for Financial Reform............... 71
Statement submitted by U.S. PIRG................................. 73
(iii)
OVERSIGHT OF THE CREDIT REPORTING AGENCIES
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THURSDAY, APRIL 27, 2023
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10 a.m., in room 538, Dirksen Senate
Office Building, Hon. Sherrod Brown, Chair of the Committee,
presiding.
OPENING STATEMENT OF CHAIR SHERROD BROWN
Chair Brown. The Senate Committee on Banking, Housing, and
Urban Affairs will come to order. Thank you to the witnesses
today for joining us.
The three witnesses today, plain and simple, determine the
financial futures of every American. Equifax, Experian, and
TransUnion are this country's biggest credit reporting
agencies. You have, as you know and as we have talked,
tremendous power over people's lives.
The information you collect and put in people's credit
reports determine whether people can get a mortgage or buy a
car; what interest rate they pay; what credit cards they can
get, at what rate; whether they will get insurance and what
they pay for it; whether they will be able to rent an
apartment; whether they will be accepted for a job. All of
that, in some sense, is in your hands.
These companies are not just keepers of consumer data. They
essentially manage--or mismanage, as the case may be--
Americans' financial reputations. When your reports matter this
much, with consequences this drastic, it is important that you
get it right. It is vital that these reports contain only
information that is useful and fair and, above all, accurate.
In 2017, when Equifax experienced a massive data breach,
the American public was, frankly, shocked to find out exactly
how much credit reporting agencies are involved in their lives.
No offense, but they do not think about you a whole lot. The
company compromised the personal information of more than 147
million consumers--including their Social Security numbers.
Millions of people were forced into a crash course on how
frustrating it can be to deal with credit reporting companies
when they make a mistake. They had to place a credit freeze,
they had to request their credit report, they were told to
constantly monitor their information for inaccuracies.
People are busy enough with their children and their jobs
and their lives. They should not have to spend that kind of
time, because some company they have never heard of screwed up.
The data breach affected millions of people at once and got
a lot of attention. But that was far from the only case of
costly mistakes by your companies.
Today, credit reports are stilled riddled with errors.
According to a FTC study, 1 in 5 consumers had errors in at
least one of their three credit reports, and 1 in 20 had errors
that affected the likelihood of receiving credit or affected
their credit rate.
More than 200 million Americans are in the Experian,
Equifax, and TransUnion credit reporting system. That means
that potentially 40 million consumers have errors on their
credit reports.
In a 2022 report, the Consumer Financial Protection Bureau
also found that Equifax, Experian, and TransUnion routinely
failed to adequately respond to consumers with errors in their
reports. After this report, the three credit reporting agencies
instituted some reforms to better respond to consumer
complaints about errors on their credit reports.
It is an important, though long overdue, first step.
But errors like mixed files, where the information of a
different consumer appears on a credit file, are still far too
common. Mixed files are such a pervasive problem that, in 2015,
30 Attorneys General settled a lawsuit with the three credit
reporting agencies--understanding you were not CEOs then--over
this problem. Among other reforms, the credit reporting
agencies were required to establish minimum standards for
matching criteria and reducing mixed files.
And it is more than just mixed-up files. Some people, still
very much alive, are declared dead. They have their idstolen.
The list goes on.
Errors are also introduced into this system by what are
called ``furnishers,'' companies supplying information to the
credit reporting agencies.
Debt collectors are some of the worst offenders when it
comes to supplying wrong information. The CFPB found that even
though debt collectors supply just 13 percent of the accounts
to credit reports, they are responsible for 40 percent of the
disputes on credit reports--13 percent, 40 percent.
Americans can be dinged on their reports for debts in some
cases they do not even owe.
It is not just errors that do not belong on credit reports.
Medical debt, in particular--and I have spoken to each of you
about that--has absolutely no place on credit reports.
In 2022, just in this country, an estimated 43 million
Americans held $88 billion of medical debt on their credit
reports.
Low-income families, Black and Hispanic households,
veterans, and older Americans are hit particularly hard. But
medical debt can happen to anyone. It does not matter if you do
everything right. Anyone can get sick. Anyone can get in a car
accident. It has nothing to do with your ability to pay your
bills--or at least it should not.
Medical debt does not correlate with credit risk. It
correlates with illness or injury. No one should have their
financial future destroyed because of a medical emergency, or a
sick family member.
That's why I am asking your companies to stop putting
medical debt, period, on your reports. And after increasing
scrutiny and pressure a year ago, you all announced they would
significantly change how medical collection debt is reported.
One of the major reforms announced is the removal of all
medical debts of $500 or below from credit reports. This is a
good step--thank you--but it is also not enough.
If you have $1,000 in medical debt, you are no less
creditworthy than someone with $500. It stems from the same
problem--someone in your family or you got sick or injured.
The CFPB found that the remaining medical debt on credit
reports will disproportionately belong to consumers living in
majority minority and lower-income neighborhoods.
Your companies also provide tenant screening services--
another way you have tremendous power over people's lives, and
another way your errors can have disastrous consequences. When
tenant screening turns up erroneous eviction filings, people
cannot find a place to live. And because tenant screening
reports are not as available as regular credit reports, renters
may cycle through rejection after rejection, without ever
knowing there is an error on the credit report.
After pressing the CFPB to address these errors, I was glad
to see they and the FTC announce a Request for Information on
how background screenings, like tenant screening reports,
affects renters' ability to obtain housing.
Just yesterday, this Committee held a hearing about the
challenges Americans face affording housing. In a highly
competitive housing market. Inaccurate data mean renters lose
out on a home, making things, of course, worse.
It is hard enough for Americans to get a foothold in the
middle class. The last thing workers should have to contend
with are careless mistakes from companies that have too much
power over some of the most important aspects of their lives.
It is vital that the reports that your companies issue be
accurate, not include medical debts, period, and that errors be
fewer and correctable.
I do not think it is a lot to ask.
Senator Scott.
OPENING STATEMENT OF SENATOR TIM SCOTT
Senator Scott. Thank you, Mr. Chairman, and thank you to
the witnesses for being here with us this morning. Such a
really important topic, one that we have worked on for the last
5 years of my time in the Senate, making sure that we have
access to the best credit we can get based on someone being
creditworthy. I think that is a really important part.
I say that because I look back at my own family's history
back to the 1920s and 1930s when my grandfather was growing up
in the Jim Crow South, where getting a loan had more to do with
your relationships, not to do with your creditworthiness. And
so when we move toward a model that allows people to access
credit based on their relationships, it can sometimes lead to
discrimination. But when we have an objective standard that is
applied to everyone fairly and consistently, the Nation is a
better place. Accessing credit, accessing the American Dream
through home ownership is more realistic based on your
creditworthiness.
My story continues in a very similar direction as my
grandfather's did. In the 1990s, when I was starting my small
business, I would say without any question I went to a bank and
had a conversation with a banker about assets versus
liabilities, and at that point, my best asset was a 1990 240SX
that had 253,000 miles on it. Not necessarily the definition of
an asset, but I tried to use it to borrow some money against
it, and the bank rightly laughed me out of the bank.
But I did develop a relationship where we had an
opportunity to look at my very light credit score. I did not
have much credit at all. And so that works against you when you
are trying to start a new small business. And if you need a
revolving line of credit, banks are less likely to loan against
no assets, the ability to come back and forth to the same
institution. So that is a challenge. But the more I worked with
a banker to appreciate building that credit score,
understanding the principles that are so important to American
prosperity, I was able to achieve my goal of opening my first
Allstate insurance agency with the help of a friend who put
some money into the business as well as a bank that finally
concluded that I was an appropriate risk.
That situation today manifests in different ways, in that
the credit score now impacts your rates and your insurance
business. And having been in the business of insurance, your
auto insurance, your home insurance, not just your loans, are
literally decided by your creditworthiness. And because of
that, I think we have to do everything in our power to make
sure that as we head toward and continue to make progress on
our risk-based method, it takes the subjective nature out of
lending that relied only on relationships, reputation, or word
of mouth, and in turn created, in my opinion, a fairer,
objective measure of creditworthiness, increasing access to
credit, and frankly, making it more inclusive as well.
This is so important because with hard work and responsible
financial decisions, anyone can develop and improve their
credit score and obtain access to credit in a manner that
represents their financial opportunity. Increasing taxpayer-
backed risk in the housing market as this Administration's
economic policies push us toward a recession is anything other
than ``equitable.''
At the same time, the CFPB has the audacity to announce it
is exploring new avenues of regulatory overreach on whole
numbers of different issues, ranging from data privacy to late
payment fees, despite the fact that the agency itself
experienced a data breach exposing the information of more than
250,000 Americans and then hiding that breach for several
weeks. It is so amazing how tirelessly this Administration
works to put dollars on the sidelines instead of in taxpayers'
pockets. I look forward to getting answers and holding Director
Chopra responsible.
At the end of the day, the data that lenders use becomes
less secure, less reliable and predictive. It will simply
result in higher rates and fewer loans made to people at the
margins of the credit box, people just like me. Yet another
example of the Biden administration's policies hurting the
people who can afford it the least.
However, there is good news. American innovation and free
market competition are creating new avenues toward prosperity.
As technology develops and lenders are able to use new or
alternative sources of data to better predict the risk of
default, ``credit invisible'' Americans will increasingly be
able to participate in our financial markets, and that is
really good news. Common sense and technological innovation has
the potential to bring an estimated 50 million Americans with
thin or no credit files into the financial system, and is a
goal I have been working on, as I said at the beginning, for
years.
My Credit Access and Inclusion Act, the Building Credit
Access for Veterans Act, and finally, the Credit Score
Competition Act, which was signed into law in 2018, are all
designed to allow for the use of new, reliable, predictive data
in our system. As we push forward with these improvements in
technology and new sources of data, which are already showing
promise at making our markets fairer and more accessible, we
should also consider what guardrails may be needed to ensure
responsible growth and consumer protection.
I look forward to hearing from the witnesses today on this
really important topic and look forward to asking you some
questions, as well.
Chair Brown. Thank you, Senator Scott.
The three witnesses joining us today, Mark Begor has served
as CEO and board member of Equifax since April 2018. From March
2016 to April 2018, he served as a member of the board of
directors at FICO.
Chris Cartwright has served as President and CEO of
TransUnion since May 2019. He joined TransUnion in August 2014.
Welcome.
Mr. Brian Cassin has served as CEO of Experian since July
2014. He was previously appointed to the board as CFO in April
2012.
Thank you all for joining us, and Mr. Begor, please begin.
STATEMENT OF MARK W. BEGOR, CEO, EQUIFAX INC.
Mr. Begor. Good morning. Chairman Brown, Ranking Member
Scott, and distinguished Members of the Committee, thank you
for the opportunity to be here today.
I am Mark Begor, the Chief Executive Officer of Equifax.
Since 2018, I have led the transformation of our company to
build a new Equifax and a culture that values and supports
consumers, customers, and communities. I recognize the
important role that Equifax plays in the financial lives of
consumers, and I take this responsibility very seriously.
Our company's purpose is to help people live their
financial best, and Equifax is committed to putting consumers
first and helping people access useful and affordable financial
products and services in a responsible and sustainable way.
We know that every financial first, whether it is a college
loan, a credit card, or a mortgage to purchase a first home,
can spur positive economic change, and we constantly look for
ways to bring greater financial opportunity to more people in
more places.
Over the past 5 years, we have invested in incremental,
more than $1.5 billion to rebuild our IT infrastructure to the
most advanced cloud technology capabilities available. This is
one of the largest cloud investments ever undertaken in our
industry, and it is changing every facet of our infrastructure
and our operations. Our new cloud capabilities are allowing us
to enhance the accuracy of data and to more effectively
leverage our alternative data to expand access to credit while
also delivering industry-leading security.
We know that one of the keys to responsibly expanding
consumer access to credit and supporting a more inclusive
economy is leveraging information that is not traditionally
included in the credit report, and we are focused on offering
innovative solutions that can bring increased visibility to
underserved consumers.
For example, we recently became the first in our industry
to provide a new mortgage credit report that combines utility
and cellphone data with traditional credit data. The majority
of American adults have at least one utility or cellphone bill
in their name, and using this additional data in a mortgage
underwriting could raise the credit scores of as many 2.4
million consumers by an average of 30 points, moving them into
a higher score band and potentially enabling them to either get
approved or to receive more favorable mortgage interest rates.
In addition to our efforts to expand access to credit,
Equifax is taking strong steps to be more consumer friendly at
every touch. We have invested over $75 million to improve the
overall experience that consumers have with Equifax. We are
ensuring that our written communications are in plain language.
We have added tools like video clips to our website to help
consumers navigate the dispute process. And we have made it
easier for consumers to both manage their disputes online and
track their disputes throughout the process.
We are committed to correcting errors on consumer reports
quickly and transparently, and we are working with our industry
colleagues to limit errors from occurring in the first place.
Another element of our focus on consumers is ensuring that
we maintain the most accurate data possible. Even one single
error on a consumer's credit report is one error too many. It
is a personal priority for me that consumers trust their credit
reports to contain accurate and complete data.
To strengthen our accuracy program at Equifax, we are
driving initiatives in three key areas. We are streamlining our
dispute processes and rewriting our consumer communications to
use more plain language. We are implementing automation to more
quickly identify errors in data before it goes on the credit
file. And we are working more closely with our furnishers to
communicate issues that we find, and correct them going
forward.
While I am proud of our progress, there is more we can and
will do. We are deeply committed to putting consumers first,
and that means ensuring that we are providing lenders with
accurate information so that consumers can get the credit that
they need. And we continue to focus on our leadership in data
security, and to
foster a culture where data security is central to our team's
DNA. We have built one of the world's most advanced and
effective cybersecurity programs, and our security capabilities
exceed all industry benchmarks. We believe that transparency,
communication, and collaboration delivers stronger security,
and we continue to actively engage with our customers,
policymakers, and other organizations regarding the challenges
and opportunities in cybersecurity on a daily basis.
While we still have more work to do, I am proud of our
progress that we have made over the last 5 years. Our resolve
to achieve our company purpose to help people live their
financial best and put consumers first has never been stronger.
Thank you again for the opportunity to share some of the
key priorities of the new Equifax and for your dedication to
your constituents and American consumers.
Chair Brown. Thank you, Mr. Begor. I appreciate you being
here.
Mr. Cartwright, you are recognized for 5 minutes.
STATEMENT OF CHRIS A. CARTWRIGHT, PRESIDENT AND CEO, TRANSUNION
Mr. Cartwright. Chairman Brown, Ranking Member Scott,
distinguished Members of the Committee, thank you for this
invitation to appear. My name is Chris Cartwright and I am
President and CEO of TransUnion (TU).
TransUnion is a global company headquartered in Chicago and
one-of-three major credit reporting agencies in the United
States. We have nearly 5,000 employees in the United States,
and over 12,000 worldwide.
TransUnion's mission is to help people and society through
information, to ensure fairness for consumers and to assist
businesses in identifying underserved communities and managing
business risks.
The credit reporting agencies are the backbone of the
modern consumer credit economy. We play a key role in the
efficient and stable functioning of the Nation's financial
system. We serve as clearinghouses and record keepers, and we
help consumers gain access to credit quickly and efficiently.
We do not make lending decisions. We provide information that
helps consumers obtain credit and helps lenders in underwriting
and establishing credit terms. Our credit reports help more
than 254 million consumers per year obtain important financial
products, allowing them to achieve their personal goals through
affordable credit.
Today's consumers expect near instant access to credit. We
help make this possible by providing an efficient and reliable
way for lenders to assess consumers' willingness and ability to
repay their loans. Ultimately, the system enhances quality of
life and strengthens the American economy.
We also play an important role for the lending community
and for preserving financial stability. We help banks and
financial institutions of all sizes more accurately manage
risk, and we have seen, in the past several months, ensuring
lending institutions have the data to understand and mitigate
risk is critical to the overall health and resilience of the
U.S. banking sector.
At the core of TransUnion's business is a commitment to
data accuracy. Data accuracy is the fundamental underpinning of
the entire credit reporting system. We must get it right. A
strong and accurate reporting system benefits consumers,
businesses, and the economy.
TransUnion has led the industry in building a system that
helps consumers quickly address any errors in their credit
reports and work directly with furnishers to expeditiously
resolve any inaccurately reported items. Through our efforts,
our turnaround time in addressing consumer disputes is now
approximately 9 days--well below what is required by law.
We understand the great responsibility we have in
stewarding data that touches the lives of nearly every
American. Financial inclusion is a key pillar of our company's
strategy. We are proud to be industry leaders in promoting
expanded credit access through alternative data. Alternative
data sources, such as rental and utility data, provides
opportunities for people to build credit profiles quickly and
accurately. We believe alternative data is really a story of
economic fairness. If this information were reported at scale,
it would substantially increase credit access for millions of
Americans.
We also know the real impact credit reports have on
consumers' lives. We are committed to getting it right every
time. Since I became CEO of the company, TransUnion has
undergone a transformation focused on improving the consumer
experience. Among other things, during this transformation we
have partnered with our peers at the outset of the pandemic to
provide consumers with free weekly credit reports.
We are continually investing in our operations to build a
best-in-class dispute-resolution infrastructure, to make sure
our data is as accurate as possible and consumers' experiences
are seamless. We recently removed all paid medical debt from
credit files, and we made changes that will remove more than 70
percent of all unpaid medical collections from credit reports.
Senators, we recognize that partnering with policymakers is
essential. We appreciate the work of this Committee, in
particular, Chairman Brown and Ranking Member Scott, for your
leadership in helping to make the credit reporting system
stronger. We want to continue to build on our successful
history, and we will continue to work with Congress and our
regulators to provide consumers with the tools they need to
realize economic opportunities.
Thank you, Senators, and I look forward to answering your
questions.
Chair Brown. Thank you very much, Mr. Cartwright.
Mr. Cassin, welcome.
STATEMENT OF BRIAN J. CASSIN, CEO, EXPERIAN
Mr. Cassin. Chairman Brown, Ranking Committee Member Scott,
and Members of the Committee, I am Brian Cassin, CEO of
Experian. I appreciate the opportunity to discuss the important
work Experian does for the benefit of consumers, lenders, and
the U.S. economy.
Let me begin by stating why credit bureaus exist, how
consumers benefit, and how our work provides underlying
stability to the entire consumer credit ecosystem.
Credit bureaus accurately compile consumers' payment
histories reported to us by individual creditors so that all
lenders can use this data to make sound underwriting decisions.
Good lending decisions mean fewer defaults. Fewer defaults
reduce the cost of credit and increase the availability of
consumer credit across the economy. Because credit bureau data
does not include demographic factors such as race, color,
religion, and gender, it also helps lenders make nonbiased
lending decisions in compliance with the Equal Credit
Opportunity Act.
Experian wholly understands its obligations, to ensure the
information we hold on consumers is secure, to make credit
reports accurate, and provide a method to correct data that is
easy for consumers to access and use.
Experian supports this Committee's goal of enhancing the
accuracy of credit reports, improving consumers' experience
through the dispute-resolution process, and making fair and
affordable credit available to all communities.
Experian has invested heavily in systems and processes to
improve data accuracy, and we continually strive to reach 100
percent accuracy. We work with approximately 10,000 lenders and
other data contributors across the spectrum of consumer
lending, including credit card, auto, mortgage, retail, and
fintech, and we and have stringent requirements and monitoring
programs in place to ensure that our furnishers are submitting
accurate information to us.
An important component of accuracy is a consumer's right to
review their own credit report and correct errors. With
millions of free reports and scores in the ecosystem monthly,
consumers have easy and free access to their report
information, including through annualcreditreport.com, which
provides free weekly reports to consumers. Experian has a free
online dispute portal, including a mobile-optimized website and
app. Consumers can also easily reach us by telephone or mail.
Mr. Chairman, studies suggest that as many as 50 million
American adults are unable to access fair and affordable
credit, either because they have a very thin credit file or
because they are completely credit invisible. We also
understand that many consumers, particularly minorities and
lower-income individuals, are often under-represented in the
credit reporting system.
This is an area where Experian has been at the forefront
with the launch of Experian Boost in early 2019. Boost allows
consumers, for the first time, to safely and easily opt-in to
having proven payment information, like utility, cellphone,
rent, and video streaming services, included directly in their
credit report, which can improve their credit score.
In January 2022, we also launched Experian Go, a ground-
breaking feature that helps consumers who are credit invisible
to establish a financial identity with Experian so they can
begin building a credit history.
Since its launch, more than 12 million consumers have come
to Experian Boost to improve their credit score, and 130,000
consumers have used Experian Go to establish a financial
identity. The results are notable. We estimate that consumers
have been able to access billions of dollars in credit post-
Boost, including credit cards, car loans, and mortgages.
Experian is also providing access to free credit monitoring,
free credit reports, free credit scores, and financial
education to more than 65 million U.S. consumers.
Mr. Chairman, I am very proud of the work our employees do
every day to help and empower consumers. We would like to
continue to work with this Committee to identify other ways we
can improve the system for consumers.
Thank you for inviting me to testify, and I look forward to
answering your questions.
Chair Brown. Thank you, Mr. Cassin.
We will begin the questions with Senator Smith, of
Minnesota.
Senator Smith. Great. Thank you, Mr. Chair and Ranking
Member, and thanks to all of you for being with us today. I
really appreciate it.
Black, Hispanic, and Native American consumers tend to have
lower credit scores than their White and Asian counterparts,
and this is not necessarily because they are less creditworthy.
It is because they are more likely to be among the 45 million
Americans that fall outside of the mainstream credit system,
those that are considered--I think I heard one of you use this
term--credit invisible or unscorable because they do not have
enough traditional credit information in their files to
generate a conventional credit score.
So Mr. Cartwright, maybe I will direct this question to
you. How can we use alternative data, such as rental history or
utilities or cellphone or internet payments, to help address
this inequity within the credit scoring system?
Mr. Cartwright. Well Senator, first thank you for the
question. It is a hugely important issue and an opportunity for
our industry to improve the manner in which we serve consumers
and the American financial system. I agree with the points that
you have made. In my mind, this falls under the umbrella of
alternative information that can be used to reliably establish
a consumer's ability and willingness to repay debt.
There are tens of millions of consumers in the United
States who have thin credit files or are credit invisible. We
know that information, such as rental payments, utility bills,
telecommunication data, et cetera, provide a strong signal and
prediction of a consumer's financial management behavior, and
we would like to gain access to this information, at scale, and
create a pathway for these traditionally underserved groups to
access the mainstream financial system.
Senator Smith. So the barrier is getting access to the
data?
Mr. Cartwright. Yes, Senator, that is correct. Each of the
bureaus has a degree of access to this information today.
However, there is no requirement that the current custodians of
this information furnish it to the credit reporting industry.
If there were regulation or legislation that required that we
would be able to get comprehensive access to this information
and accurately add that to the consumer's credit file, and
improve financial inclusion dramatically.
Again, we have a history of such innovations in our
industry, and we have seen that each time we expand the
inclusion of accurate and truthful information, tens of
millions of consumers can now engage in credit.
Senator Smith. So medical debt that has gone to collections
affects 1 in 5 Americans, a group that, again, is
disproportionately comprised of elderly folks, veterans, low-
income people, Black and Hispanic patients. So I am grateful
for the step that you have taken over the past year to minimize
the impact of medical debt on these groups of folks. However,
as you acknowledged when you announced your most recent
changes, medical debt is generally not taken on voluntarily,
right?
So based on that, patients do not always have the ability
to choose providers or to shop around for their care, and the
true cost of care might not be readily available or they might
not know what that is up front.
So Mr. Begor, maybe I will direct this question to you.
Taking all of that into consideration, what value does medical
debt really have in determining creditworthiness, and do you
think that it should be included at all?
Mr. Begor. Senator, we agree with you that the medical debt
situation is very complex. Our hospital systems, the billing
systems that they have, the insurance systems are some of the
most complex out there. You know that the industry, the three
credit bureaus, made a proactive move to, number one, exclude
all debt for a year, medical debt, to give consumers a chance
to sort that out, and then second, to exclude medical debt
below $500, which eliminated about 70 percent of the trade
line. So we thought that was a proactive step going forward.
And then we are doing more around ensuring that the medical
debt that is contributed is accurate inside of the credit file.
Senator Smith. OK. As I understand it, when you announced
that that medical debt under $500 would be exempt from credit
reports that you noted that this applies to the initial report
balance. But depending on the care that folks receive and the
providers that take care of them, you could end up with
multiple bills that exceed $500. How would you address that?
Mr. Begor. The same thing, Senator. I think it is something
we can look further into. We agree with you that the complexity
of medical debt is something that needs to be addressed, and we
thought that a move on $500 was proactive. I think there is
more we can do to look at the issue.
Senator Smith. I would encourage you to do that. Thank you.
Thank you, Mr. Chair.
Chair Brown. Thank you, Senator Smith.
Senator Scott is recognized.
Senator Scott. Thank you, Mr. Chairman, and Senator Smith,
I have something called the Credit Access and Inclusion Act
that allows for more information to be added to the system
voluntarily, and Mr. Cassin talked about, and Mr. Cartwright
has talked about, so I would love to have a conversation with
you about the legislation.
I do think there are two ways for us to actually see more
access to credit, and one way, I think, is flawed and likely
will lead ultimately, long term, to less access because you
create a less reliable scoring system. And I think we are
seeing that in part from the FHFA Director Thompson, who is
departing from risk-based pricing on individual loans purchased
by the GSEs, creating a perverse incentive structure that will
penalize borrowers who have worked really hard to improve their
credit or save for their down payment.
So when you look at ways to water down the credit score in
order to create more access, I think ultimately you destroy the
very system that I talked about, that I think needs to be
objective that needs to be based on the credit risk itself. And
there are ways for us to make sure that specifically minority
borrowers who are more often than not going to be renting a
home, not owning the home, based on the fact that 41 percent of
African Americans today own their homes, which means ultimately
59 percent do not, so if you are not including the rent
payment, if you are not including beyond credit card payments,
the utility payments, the phone bill, the mobile phone bills,
there are other ways for us to make sure. And if we are doing
those things and adding them in, we are creating a more fair
yet objective system.
Mr. Cassin, I know that you talked a little bit about Boost
in your opening comments. My question to you is, how is it
going, number one, and number two, do you find that the
accuracy of the information that is being input is consistent
with the same level of accuracy that allows you to still have a
fairly objective system?
Mr. Cassin. Well, thank you, Senator. Yes, since we
launched Boost, which was in 2019, we have had over 12 million
consumers connect and those that complete the process add
additional trade lines to their credit reports, and we do this
through a fairly simple process. We gain access to their
checking accounts--it is consumer permission, so the consumer
opts in to do this. We look for these trade lines and we add
them to the credit report, and then we immediately rescore
them.
Those who have completed the process have seen an average
increase of 13 points to their FICO score, so it has been
hugely beneficial.
We have worked with the industry to ensure that it works
and that the information is valid to be included, so the
scoring systems work. We have worked with all the scoring
companies.
So we believe this is a very effective way of actually
helping people who have thin credit files, and ultimately also
for people who have no credit history. So a very proactive
step.
We did take a further step, Senator, more recently with the
launch of a product called Experian Go, which is actually
targeted at people who have no credit history, so they can
establish an account with Experian for the first time. And
these kinds of initiatives, we think, are incredibly helpful at
addressing that large population of people who have limited or
no access to credit, Senator.
Senator Scott. Does anyone else want to comment on that
topic?
Mr. Begor. Senator, I agree with Brian as well as your
points around more data results in better decisions. We have
some large databases of nontraditional credit data. For
example, we have a database of 220 million Americans' cellphone
payment records and utility records, and we have recently taken
that data and added it to our mortgage credit file. That drives
the predictability of the consumers, particularly those at the
lower end of the credit space that have less trade lines. So if
you are adding in someone's cellphone bill that they pay every
month, it is a predictor that they are going to pay their
financial bills on time.
And from that new product we think as many 2.4 million
consumers will see a 30-point lift in their credit score by
adding those nontraditional data elements in.
We are going after rental data payment, as you suggested.
Very complex to collect, as was already pointed out, but we
have a big priority around adding nontraditional data sources
to expand access to credit.
Senator Scott. I know I am running out of time so I will
just say this. The use of objective standards is so critically
important, and I see this move across the country that somehow
we are going to make the lives, specifically of minorities,
better by eliminating objective standards in everything--in
education, in credit scores--and that, to me, is insulting as
an African American, that the only way for me to be competitive
is for you to somehow eliminate the thresholds. That is
ridiculous. I cannot think of anything more ridiculous than
that.
I would say this on this topic--there are lots of things
more ridiculous--but not on this topic. I also hope that you
all are spending a lot of time investing in financial literacy
as a path forward to helping people understand and appreciate
the necessity. What you look like on paper might become the
most important single factor in how you live your life in the
future, as it relates to being creditworthy. Thank you.
Chair Brown. Thank you, Senator Scott.
I will take my 5 minutes now.
Thank you for your response to Senator Smith. It was a
start, but inadequate, but I want to talk to you more about
medical debt. I appreciate your commitment to increasing access
to credit overall. I appreciate the $500 threshold that you are
doing, that you are not putting in the reports up to $500. I
appreciate the first year of not reporting, and I appreciate
that if the medical debt is paid it is not on the credit
report. But I want to talk a little more about that.
CFPB just released a report that found for consumers with
under $500 in medical debt, removing medical debt increased
their credit scores by 32 points, that when medical collection
is removed from credit reports the total amount of available
revolving credit increased by over $1,000.
My question, starting with you, Mr. Begor, will you commit
to removing medical debt above $500 from credit reports?
Mr. Begor. Senator, I think we made a very proactive move
with the $500 decision, that year, and we are focused on
accuracy of medical debt, and it is certainly something we will
look at in the future and collaborate with your office.
Chair Brown. You are not willing to commit right now?
Mr. Begor. We would like to collaborate with your office on
it, Senator, and look at it closely.
Chair Brown. Mr. Cartwright, same question.
Mr. Cartwright. Thank you for the question, sir, and thanks
for acknowledging the progress that the industry has made in
this difficult and sometimes controversial issue.
Senator, I would agree that we should continue to analyze
this issue and determine what is the best threshold for
including medical debt within the credit record. I think we
have to acknowledge that at some level medical debt could
become a burden for a consumer to incur even more debt. I think
the best outcomes is when all the players in the credit
reporting system, be it the bureaus, the banks, consumers, and
certainly this Committee, collaborate and analyze the
information and let the data lead us to the best outcome.
Chair Brown. So back to the question. To Mr. Begor, you are
not willing today, at this hearing, to commit to taking all
medical debt off over $500? You are not willing to commit to
that today.
Mr. Cartwright. Senator, what I am willing to commit to is
to apply considerable resources, working with this Committee,
to analyze the data and help determine what is the appropriate
balance to strike for the financial system.
Chair Brown. Mr. Cassin, the same question to you.
Mr. Cassin. Thank you, Senator. It is the same response,
Senator. I think we have taken very proactive steps. We agree
this is a really important issue. It is also a complex issue.
And I think we will commit to working very proactively with
your staff to see if we can make any further steps. It does
involve a lot of stakeholders. I think it goes beyond just any
decision that the three credit bureaus could make themselves.
Chair Brown. OK. The decision is that working with our
staff is the best way to do that, I will reiterate, is a better
answer to that question. But, I mean, you all know that--I
mean, you have essentially said that. It is not predictive. It
has no place. And you have sort of ceded that it has no place
in credit reports.
The three of you own VantageScore, as you know. In 2022,
VantageScore announced it will no longer include medical debt
as part of its credit scoring model because medical debts,
quote, ``are not predictive of a consumer's creditworthiness.''
That is why I am urging today, and will continue to urge, as
Senator Smith urged, that you take all medical debt off of
credit reports.
Let me do one other question, then I will turn it to
Senator Britt and then Senator Warren.
Tenant screening reports go beyond just credit information.
Mr. Cartwright, this question is specifically for you. They
include eviction filings, criminal histories, and just like
credit reports, these tenant screening reports can have errors.
The catch is renters cannot see these reports, as you know, so
to get an apartment you are forced to allow landlords to look
at reports on you that you cannot even see yourself.
TransUnion is the largest of the three of you. You play the
most central role in this. TransUnion is a large provider of
tenant screening reports. Should a tenant have the ability to
see a copy of their tenant screening report, actually see not
just provide consent, when a landlord is using it to decide
about renting to them?
Mr. Cartwright. Senator, TU is committed to making sure
that tenant screening data is accurate. The information that we
receive from the several sources that you referenced is
generally authoritative and it is very accurate. We have also
invested considerable sums in the algorithms and analytics that
match this information to the current consumer.
When errors are identified in the system we are proactive,
we report this information to the furnishers of that
information, and we allow the record to be corrected.
Senator, this screening information, it plays an important
role in enabling tenants to get housing opportunities. The data
is also an important tool to help property owners expand that
opportunity, but also to protect their tenant communities.
So we are committed to full and fair access to the
information as provided under Federal law, but we also take our
obligation to make sure the data is as accurate as possible
very seriously.
Chair Brown. So you are not saying every tenant should have
the ability to see a copy of this screening report?
Mr. Cartwright. Chairman Brown, consumers are able to see
the information that is reported against them, and they are
able to dispute it under the FCRA. And again, when errors are
identified we report it back to the sources of that
information.
So I agree with you that transparency in this process, just
as in financial trade lines, is hugely important.
Chair Brown. So are you saying that--I mean, you are good,
your answer. So are you saying that tenants now will see the
reports? They will be able to know if they are accurate? They
will be able to get them cleaned up when they are applying to
rent somewhere, ahead of time?
I mean, you know what has happened here, Mr. Cartwright,
that tenants get turned down. They do not really know why. They
get turned down at a second place. The potential landlord has
seen the reports. The tenant has not. How do we fix that then,
if you are not going to more directly, aggressively,
proactively get these reports in the tenants' hands, so, one,
they understand, and two, they may see errors that they can
clean up and then get an apartment that they were not able to
get?
Mr. Cartwright. Well Senator, it is certainly important
that the data is accurate. We spend a huge amount of resources
to make sure that it is. It is also important that it is
transparent under the FCRA. If a consumer is turned down for
credit or a tenant is denied a housing opportunity, they need
to know the reason, and once they are given that reason they
have an opportunity to access the----
Chair Brown. But do they know the reason now?
Mr. Cartwright. ----information and correct it.
Chair Brown. Do they know the reason, when the potential
landlord gets the credit report, sees something that is
disturbing to them, they do not rent to this potential renter?
Is that something you are going to fix so these tenants, these
prospective tenants can see that information? I understand you
are working to make them accurate. I believe all three of you,
in our meetings and now, that you are trying to do that, a very
complex world. But these tenants, I mean, person by person, is
this going to be remedied?
Mr. Cartwright. Senator, it is difficult for me to speak
for all of the practices that are out there in the market. I do
believe that landlords are responsible for communicating the
reasons for denying access to housing to applicants, and we
would----
Chair Brown. But they do not. You hope they do. You think
they are responsible, but they are not. In many cases they do
not tell the tenant. They just say no. Correct?
Mr. Cartwright. Well again, it is difficult for me to speak
comprehensively about the practices out there. What I can tell
you is that we believe that it should be a transparent process,
and we are, again, happy and willing to commit the resources to
work with you to review the rules of the road and refine
regulations as appropriate.
Chair Brown. OK. Well, I hope then the best first step you
can take is to support the provision in our bipartisan Eviction
Crisis Act to clarify that tenants should be able, in fact,
under law, to see their own tenant screening report whenever a
landlord is using that report to decide about whether or not to
rent to them. So we will come back to you about asking for your
very public support for the Eviction Crisis Act.
Senator Boyd Britt, of Alabama.
Senator Boyd Britt. Thank you, Mr. Chairman. Good morning,
and thank you to all three of you for appearing before this
Committee this morning.
I want to speak on a subject that Ranking Member Scott
brought up, about credit-invisible individuals. Both the CFPB
and many of your research--actually, Mr. Cassin, your research
team as well--indicates that there is around 26 to 28 million
Americans that are credit invisible. Actually, in Alabama, this
is personal to me. One-fifth of Alabamians, according to the
CFPB, are either credit invisible or have a thin credit file,
and for lack of credit history. Research indicates that this is
predominantly in low and rural consumers, and they are the ones
that are fitting into this category.
One of our bipartisan goals on this Committee is to
responsibly increase access to financial institutions and to
credit. I want to ask each one of you, given that many of these
individuals do not have traditional credit histories, what is
your plan to help more Americans no longer be credit invisible
or to actually develop their credit history?
And we will just go down the line, and since we are short
on time, if you can keep it as concise as possible I would
greatly appreciate it.
Mr. Begor. Thank you, Senator. We are 100 percent aligned
with your goal, and it has already come up in the hearing,
around expanding access to credit. It is a priority of Equifax,
and we have large databases that are alternative data outside
of the credit file. For example, we have records on cellphone
utility payment records for 220 million Americans, and we have
rolled out a new product, a new mortgage credit file that
includes those data elements that will expand credit scores by
including those more nontraditional elements.
Senator Boyd Britt. And are you seeing that help more
people?
Mr. Begor. For sure, and we are working to bring more data
in, rental payment data, for example, the 44 million Americans
that rent every month. That is very attractive data, very
predictive data that will improve their credit score. So adding
that data is a priority of ours.
Senator Boyd Britt. Thank you. Mr. Cartwright.
Mr. Cartwright. Thanks again for the question, Senator, and
I agree with you. It is a hugely important issue, and in my
opinion it is probably the single biggest issue that this
Committee could work on to expand financial inclusion to the
mainstream system.
One point I would like to highlight for the Committee is
that TransUnion and the credit reporting industry at large
adopted what is called ``trended'' credit information over the
past several years. And the difference is that prior to trended
credit information we took a snapshot, a point-in-time view of
a consumer's credit information to calculate a score.
Now we look back over history, as much as 3 years of data.
That allows us to include consumers who may have fallen off the
credit file. As a result, the industry can score tens of
millions of consumers that we could not previously, and score
with greater accuracy, which is important to bank safety and
soundness.
I agree with Mr. Begor that we have got to invest in
alternative data. We also, at TransUnion, have a considerable
amount of nontraditional credit information that we use in our
scoring algorithms, and it expands access to the financial
system for American consumers.
Senator Boyd Britt. Excellent. I hope you will continue to
invest in that.
Mr. Cartwright. We certainly will.
Senator Boyd Britt. Mr. Cassin.
Mr. Cassin. Thank you, Senator. This is a hugely important
issue for the industry and it is a hugely important issue for
Experian. We have been incredibly proactive on this topic.
The first thing that we did some time ago was to make
access to Experian credit reports and scores free to any
consumer, and we now have over 65 million consumers that access
those products directly from Experian, so they can go at any
time and get access to lots of products, which give a lot of
education around how reports and scores are calculated and how
people can improve those.
But we have gone further than that, Senator. We have
introduced some specific products which really go to the heart
of this issue. The first is called Experian Boost, which I
mentioned in response to Senator Scott's question, and that is
really a service which enables consumers, entirely free and
entirely optional, to actually add those additional trade lines
to the Experian credit file so that they can be included in
their credit assessments. And as I said, over 12 million people
have connected with Boost, and users who have completed the
process have seen an average increase of 13 points to their
FICO score. So we think that is a hugely positive development.
The second thing we did was introduce our newest product,
called Experian Go, which is actually aimed at those consumers
who have no information on the credit file whatsoever, so that
they can add these trade lines and establish a financial
identity for the first time. And this is a hugely important
step in trying to address this issue.
So together I think all of the actions that we have taken,
by making all of our products available to consumers for free,
by introducing these products which are specifically geared
toward
targeting this issue, I think we have been the most proactive
on this topic, and we will continue to do so to work toward
that.
Senator Boyd Britt. I would agree, you have, and I want to
commend you for the work that you have done, and I hope all
three of you will continue to make sure that you are
intentional in this effort. We have to make sure that more
Americans have better opportunities to build their credit file.
Additionally, I want to double down on what Ranking Member
Scott said about financial literacy. It is critically
important. And if each of you will report to my office what you
are doing within your community to help us promote that across
the country I would greatly appreciate that as well.
Chair Brown. Thank you, Senator Britt.
Senator Tester is recognized from his office, perhaps.
Senator Tester. ----I appreciate it very, very much.
Many Montanans have reached out to my office with
complaints about difficulties receiving much-needed loans
because their credit reports are frozen or suspended. With
little face-to-face assistance from CRAs, folks feel that they
are being held hostage by the CRAs.
So for all of you, how will you help consumers quickly lift
freezes on their credit reports?
Mr. Begor. I will go first, Senator, I guess in
alphabetical order here. We agree with your point around it is
super important to give consumers access to their credit
report. As I mentioned, Equifax has invested, over the last
number of years, $75 million to improve that access. We are
also expanding the education on our website in order to have
consumers better understand what a credit score is, and what a
credit report is, and how to improve your credit score.
Senator Tester. Before we go to the next one. But for the
freezes specifically, are you doing anything to help consumers
lift the freezes?
Mr. Begor. We are, Senator. We are making that process more
streamlined. At Equifax we have an online app that is called
Lock and Alert, where a consumer can lock their credit file and
then automatically unlock that credit file. That is a free
product. So it is definitely a priority of ours to make it
easier to lift a freeze when a consumer puts it on there.
Senator Tester. OK. Next.
Mr. Cartwright. Senator Tester, thank you for the question.
I agree, this process needs to be quick and seamless for
consumers. Today there are two flavors of the process. A
consumer can enact a credit freeze, which is a consumer's right
under the Fair Credit Reporting Act. It also takes a bit more
time to freeze and unfreeze one's credit through these
processes.
TransUnion has also invested and innovated in an app and a
credit lock product where consumers can lock and unlock access
to their credit instantaneously, and that is what we are
striving for. We are striving for a very seamless consumer
experience.
Mr. Cassin. And Senator, at Experian we make it available
free to consumers to freeze and unfreeze their credit reports.
We have actually just revamped that product. It is available
through a mobile-optimized website. We believe it is very easy
to do and should be quite intuitive for consumers to do it. And
there is assistance to consumers if they are having any
difficulty. So this should be a really easy process for
consumers to do now.
Senator Tester. I want to talk about data breaches for a
second. They occur, and they occur in all sorts of different
arenas, where folks get their identity stolen due to a data
breach.
For you, Mr. Begor, can you give me an idea on what is
being done to help folks who have had their identity stolen due
to a breach?
Mr. Begor. We have a process where a consumer that has an
identity issue, they can freeze their credit file if they have
been a victim of an identity breach. Obviously they have access
to free credit reports and can work with our team to really
manage their credit exposure if they have been a victim of a
data breach event.
Senator Tester. So I do know about you guys but I get these
cellphones, and I get phone calls at the most inopportune
times, sometimes when I am asking important people questions,
although it has not happened yet today. And they are from
telemarketers. They are from folks who want to sell me
something that I do not really give a damn if I buy it or not.
I should be contacting them. They should not be contacting me.
But nonetheless, it occupies a lot of my time and it is a real,
genuine pain in the neck, or maybe even a pain somewhere else.
So it is my understanding that folks that are trying to buy
homes in Montana have expressed some frustration with an influx
of advertisements and loan officers calling them directly after
they have pulled their credit reports. Is this being done
because you guys are selling this information to third-party
entities without their consent, or do they give consent, or are
you not selling the information at all to third parties, that
are basically in the business of trying to make money, but
contacting people that, quite frankly, we would contact them
normally, if that was the case.
It is for all of you.
Mr. Cassin. Senator, I will go first. I think the product
you are referring to is called mortgage triggers. It has been
around for quite a long time. Consumers do have the opportunity
to opt out of that. What happens is, is when consumers apply
for a mortgage they get the opportunity to receive other
offers. It was actually introduced quite a long time ago in
conjunction with people in the mortgage industry, and over a
long period of time people have actually benefited
significantly from getting better offers in the process.
Senator Tester. But they have the opportunity to opt out of
that?
Mr. Cassin. That is correct, Senator.
Senator Tester. That is perfect. Is that a big deal, or it
happens just with a phone call, or how is that done?
Mr. Cassin. No, it is very easy to do, Senator. It may not
be known by all consumers, but it is a very simple process to
do.
Senator Tester. How about the other two?
Mr. Cassin. You can go on the Experian website, and the
other bureaus as well. It is actually a relatively simple and
straightforward process.
Senator Tester. OK. Good.
Mr. Cartwright. Senator, I would like to echo Mr. Cassin's
comments. We have similar functionality, opt-out functionality
through our different digital products, and they are easy to
use. I think I should also mention that TransUnion has some
unique capabilities in this area where we can display the brand
of an incoming phone call, and we can identify whether that
phone call is a so-called ``trusted call.'' And we are rolling
these solutions out in the fall.
Senator Tester. OK. I appreciate that. Mr. Begor.
Mr. Begor. Senator, we have the same capability for a
consumer to opt out from that marketing.
Senator Tester. OK. I appreciate it, guys. Thank you very
much. Thank you, Mr. Chairman.
Chair Brown. Thank you, Senator Tester.
Senator Fetterman, of Pennsylvania, is recognized.
Senator Fetterman. Thank you, Mr. Chairman, and gentlemen,
I want to be clear that I am not putting you on the spot here.
We just had some research that my team has come up with, and
there appears to be a systematic bias in credit reporting.
About 5,000 adults, more than half of Black Americans report
having low or no credit score, Hispanics 41 percent, Whites 37
percent, and Asian Americans 18 percent. And again, is that
something that perhaps might sound accurate to you right now?
Mr. Begor. Senator, there is a large population, too large,
in the United States that have no credit score. Our math is
that about 20 million Americans are not in the formal credit
file. There are another 60 million Americans that have very few
trade lines that are generally not scorable. So it is a large
population. A big priority of ours is to use alternative data
to help them get access to credit and develop a credit score
and a credit report.
Senator Fetterman. So you do not believe that there is an
issue then?
Mr. Begor. No, Senator, I agree completely. It is one of
our priorities to focus on access to credit. We think it is a
big issue, and it is one I know the Committee is focused on,
and we are 100 percent aligned with the issue, and we are
focused on using alternative data to address it.
Senator Fetterman. OK. Well, are there any trends or
patterns that you noticed about race and credit reports at all?
Mr. Cassin. Well, Senator, perhaps I can add to that.
Credit reports are not allowed to include any information, you
know, protected characteristics, race, religion, ethnicity. So
the reports are completely blind to those factors.
I think what we are talking about here is the issue we
discussed which is one of underrepresentation across many
communities, and we do agree that is an issue. And as we have
said in answers to questions from Senator Scott, that we
believe that we have been very proactive in trying to address
this issue, and we believe there is more we can do, and we will
be very focused on making sure that we can improve access for
everybody across the United States.
Senator Fetterman. Thank you.
According to the FTC, active service members and their
families are nearly three times more frequently victims of
digital theft than other U.S. adults. You know, what are you
able to do to protect the credit for all military families,
both active duty and non-active duty, including the National
Guard and Reserve from, say, higher-than-average financial
fraud, particularly cybercrime?
Mr. Cassin. Well, Senator, perhaps I can answer on behalf
of Experian. We make our credit reports and scores free to all
active service men and women and their families. So it is
entirely accessible to them all the time.
Mr. Cartwright. Senator, TransUnion does the same, and I
think it bears repeating that at the beginning of the pandemic,
as an industry, the credit bureaus went from providing
consumers with one free credit report a year to one free credit
report per week. And I think that is critical because we want
consumers, and we certainly want active military personnel to
be able to access their credit information and to benefit from
free monitoring products.
Mr. Begor. And Senator, the same with Equifax. You know, we
have a program where the active service members have access to
that information, and it is a priority of ours to support them.
Senator Fetterman. And my last question. Transgender and
nonbinary consumers face a myriad of credit reporting problems,
if they change their names, including fragmented reports, among
other issues. These problems can have devastating consequences.
What steps have any of your agencies taken to prevent credit
reporting problems for members of this community?
Mr. Cartwright. Well, Senator, if I could start, the issue
you raise is a very serious issue, and it is why, you know, at
TransUnion, and we in the industry, we match consumers to
credit records using a wide variety of criteria. There are
often name variations. We have also got to look at Social
Security numbers and phone numbers and a variety of addresses,
and again, a broad range of criteria that ensure a high degree
of matching accuracy.
Mr. Begor. Similar, Senator. At Equifax we are focused on
making the process, when a name change needs to take place, to
make that seamless and easier for that individual to complete.
Mr. Cassin. And Senator, just to complete, it is the same
at Experian. We are doing similar processes.
Senator Fetterman. Thank you all. Thank you.
Chair Brown. Thank you, Senator Fetterman.
Senator Warren, of Massachusetts, when she sits down, is
recognized for 5 minutes.
Senator Warren. Thank you, Mr. Chairman.
So the three of you who are testifying here today are the
CEOs of the largest credit reporting bureaus in the Nation.
Your companies determine the creditworthiness of just about
every person in our country, and you make money by collecting
and selling information about an individual's past success in
repaying their debts, the amount of money that they owe, and
other factors that you claim predict the likelihood of repaying
their debts going forward.
So credit reports that you produce have big consequences
for people's lives. If someone's credit report drops by, say,
25 points, they could have a rental application turned down,
they could be charged a higher price for a car loan, they could
pay more for insurance, or they can even miss a chance at a new
job. So it is really important that the data is right.
Last year, over 100 million Americans had medical debt.
CFPB research shows that medical collections are less
predictive of consumers' future delinquency rates than
nonmedical debt collections, and research by FICO finds that
medical collections that have been paid--this one really gets
me--the ones that have been paid are even less predictive of
consumers' creditworthiness than unpaid medical collections.
So Mr. Begor, you are the CEO of Equifax. Do you agree with
the research showing that medical debt collections are not as
good at predicting the likelihood of default as other kinds of
debt like car loans, mortgages, and the like?
Mr. Begor. Medical debt is a very complex topic, Senator. A
lot of medical debt is not taken on willingly by consumers, so
we appreciate the complexity of the medical debt as a complex--
--
Senator Warren. That is not what I am asking you. I
understand that it is complex. The question I am asking is its
predictive value compared with, say, car loans, mortgages, and
paying rent.
Mr. Begor. It still has a predictive value, and the Senator
knows that we took a proactive action to exclude medical debt
under $500 as well as excluding----
Senator Warren. I understand what you have already done. I
will ask my question for a third time. Is it less predictive
than other forms of paying your bills?
Mr. Begor. It is still a predictive element in paying
bills.
Senator Warren. Is it less predictive than other forms of
paying your bills?
Mr. Begor. I do not have that information available to me.
Senator Warren. You do not have that information available?
Are you kidding me? You are the head of one of the biggest
credit reporting agencies in the country, and you do not know
the relative predictability of one of the major forms of debt
that you report on?
Mr. Begor. Senator, as I said----
Senator Warren. Really? You expect me to believe that?
Mr. Begor. Senator, as I said, we still believe it is
predictive. We are continuing to look at it.
Senator Warren. That was not the question. If you can say
that it is predictive then I am shocked that you do not know
how predictive it is compared to other forms of debt
collection.
Look, the reason that medical debt is a poor predictor of
creditworthiness is our medical system is a mess. Most
hospitals charge you one price, they charge insurance companies
another, so medical bills are often a moving target. Bills are
routinely sent to the wrong party. Often a patient cannot even
figure out what it is in terms of supplies or services that
they are being billed for.
Studies, which I assume you would have read, show that as
much as 80 percent of medical bills contain errors. The CFPB
found that, quote, ``many medical bills reported on credit
reports are disputed, inaccurate, and not owed,'' end quote.
Some debt collectors have even stopped reporting medical bills
to your companies because the data is so bad that they worry
that they may be violating Federal consumer protection laws by
reporting it.
Last year, your companies made changes in how you handle
medical debt, and those changes were good, but you fixed
roughly about half the problem. Nearly half of the roughly 38
million people with medical debt on their credit reports will
be left in the same position as if your companies had done
nothing. The CFPB has said that it will continue to assess
whether unpaid medical debt should remain on Americans' credit
reports at all.
So, Mr. Begor, let me ask you this. If the CFPB were to
conclude that data on medical debt is so full of errors that it
does not belong on credit reports, would you support all credit
reporting agencies removing it entirely?
Mr. Begor. We are certainly prepared to collaborate with
the CFPB----
Senator Warren. That is not the question I asked you. Do
you want me to repeat the question?
Mr. Begor. No, that is not necessary, Senator. We would
certainly support that.
Senator Warren. All right. Thank you. Mr. Cartwright, what
about you? If the CFPB concluded that this data was so
problematic that it does not belong on credit reports, would
TransUnion remove medical collections from consumers' reports?
Mr. Cartwright. Senator, we would work with the CFPB----
Senator Warren. That is not the question I asked. I am not
asking you whether or not you want to work. I am saying if they
conclude that the data is so problematic that it does not
belong on credit reports, would TransUnion remove those data
from consumers' reports?
Mr. Cartwright. Senator, to be clear, the CFPB is our
regulator, and if they were to direct us to remove the
remainder of information, because the actions we have taken
voluntary have removed 70 percent of consumer debt from the
record, but if they directed us to do so we, of course, would
comply.
Senator Warren. All right. But I asked you a different
question. The question I asked you is just a factual one. If
they conclude that the data are so bad that they should not be
listed on credit reports--I am not asking whether or not if
they go ahead and put an order in place. If you had that
information--Mr. Begor claims not even to know how bad medical
debt reporting is--if you had that information from the CFPB,
would TransUnion stop reporting it?
Mr. Cartwright. Senator, we are committed to accurate and
complete credit reporting of predictive----
Senator Warren. So if the Federal Consumer Protection
Agency said, ``These data are so inaccurate they should not be
on credit reports,'' would you then remove them from the credit
reports? It is a simple question, Mr. Cartwright. If you had
this information from a Federal regulator, would you use that
information in order to get rid of these data, take it off the
reports?
Mr. Cartwright. We would certainly act appropriate, and
Senator, in the circumstance that you outline----
Senator Warren. I am asking you. You are the CEO. Is it
appropriate then to just take it off?
Mr. Cartwright. Yeah, I find it difficult to believe that
the CFPB would not issue guidance on the matter if that were
indeed the results of their analysis.
Senator Warren. So you are going to wait to be ordered.
That is what you are saying? You do not do anything unless you
are ordered to do it?
Mr. Cartwright. What I am saying, Senator, is that we are a
data-driven, analytic company----
Senator Warren. Mr. Cassin, I am past my time. Let me turn
to you. Would you support removing medical collections from
Experian's credit report if the CFPB concluded that the data
were so problematic they should not be on credit reports?
Mr. Cassin. I understand the nuance of your question. I
think, the first thing point I would say is if obviously CFPB
directed it to us, of course we would comply with that. If the
CFPB concluded that it was so problematic and that the industry
also agreed that there was not an issue in removing that data
from credit reports, then we would do so, too. But I think it
is a complex issue, Senator, and I think it needs to be looked
at in the broad.
Senator Warren. You know, I apologize to the Chair for
running over, and I understand that the credit reporting
agencies are just the last link in a very problematic chain of
actors, that hospitals and health systems and insurance
companies and medical credit card issuers are all profiting
form a business model of bogus and even illegal healthcare
charges. And I would like to see those CEOs in front of us as
well.
But credit reporting agencies are the ones who turn all of
that bad data into real pain for American consumers. You are
the ones who cost them real money, more than just those bills,
in every part of their lives. And it is time to start holding
every link in this chain accountable, and that includes the
credit reporting agencies.
Thank you, Mr. Chairman.
Chair Brown. Thank you, Senator Warren.
Senator Britt is recognized for a second short round of
questions, I believe.
Senator Boyd Britt. Thank you. As you know, we had a
hearing yesterday over the challenges of our housing industry.
Many of the affordability issues in our housing industry come
from record-high inflation that is crushing American families
across the board. Rising prices have cost a typical household
here in the United States over $10,000 since President Biden
took office.
I agree with Ranking Member Scott that we must expand home
ownership to more Americans. Home ownership is especially
central to families seeking to build intergenerational wealth
and achieve their American dream.
Mr. Begor, you talked about different ways additional and
alternative data that you all were using to help in this area.
Can you talk specifically about how you are working to assist
more creditworthy families to accomplish the goal of home
ownership?
Mr. Begor. Thank you, Senator. We are very aligned with
that goal around expanding access to credit and taking the
credit invisible and moving them into the formal financial
environment through the use of our alternative data and our
technology. And one great example is a new mortgage credit
report we rolled out a few weeks ago, where we are adding
cellphone and utility payment data that will expand that credit
file and result in as many as 2.4 million subprime consumers
increasing their credit score by 30 points. So we are focusing
on using alternative data to expand access to housing, the
housing market.
Senator Boyd Britt. Excellent, and I hope that you all
continue to do that across the board.
As you know too well, there have been increasing trends of
pressuring credit reporting agencies to remove certain data
from their reports. The accuracy of data you collect is used
for fair pricing and access to credit for hundreds of millions
of people. If we continue down the path of removing all
different types of data from credit reports, I would like for
each of you to speak to some of the potential consequences that
that might create.
Mr. Cartwright, go ahead.
Mr. Cartwright. Well, Senator, if I can begin the
discussion, at the outset, Ranking Member Scott talked about an
era in financial services in this country where loan
determinations were influenced by relationships, by community
standard, by prior practices. It has been an enormous
innovation, to the benefit of consumers, to have comprehensive
and accurate and objective information reported at scale to the
reporting agencies, so now the decisions are data-driven and
they are unbiased.
I feel like having a truthful and comprehensive record at
the foundation of lending decision is critical. Nobody wins if
the data is inaccurate. Nobody wins if the data is somehow
cherry-picked or gerrymandered for a particular outcome. Our
role is to be the custodians of this information, to ensure
that it is accessible to consumers, and to ensure that they
have got a fair process to review and dispute the information
if it is inaccurate.
But more information and information transparency, it
drives better outcomes for consumers.
Senator Boyd Britt. Mr. Cassin.
Mr. Cassin. Yes, thank you, Senator. I think we touched
upon this issue, and I think a perfect example would be, for
example, Experian Boost, where we have given millions of
consumers the opportunity to add additional data to their file.
And the result of that is actually that they get access to
better credit and more affordable credit.
So really, the solution to this issue is to provide more
data, not less, more accurate reflections of how consumers have
repaid obligations on time, and to give consumers credit for
that.
I would add, Senator that we have also a lot of examples
from across the world of different systems, and systems which
have less information generally perform much, much poorer than
systems which have more information. In the United States, we
have one of the most competitive and dynamic credit economies
in the world. Lots of countries seek to emulate that. And where
we have less information it is generally worse outcomes.
Senator Boyd Britt. The more information we have, it limits
and mitigates the risk. Correct?
Mr. Cassin. Correct.
Senator Boyd Britt. OK. Mr. Begor.
Mr. Begor. Senator, I would agree. More data results in
better decisions for U.S. consumers, and complete and accurate
data is what our financial and credit ecosystem is built on.
And I would agree with your comment as well as Brian's that the
U.S. credit system is the envy of the world, with the scale of
our information, the depth of information that we have, and the
access to credit that consumers have, but there is still so
much more we can do around adding alternative data to really
help those consumers that are not in the formal environment,
and move them into it.
Senator Boyd Britt. Absolutely. Yes.
Mr. Cartwright. And Senator, if I could add one last point.
Adding rental payment to the credit files, at scale, would
materially drive home ownership in this country. If a consumer
can make their rent payments consistently, they can make their
mortgage payments, and if they qualify for a mortgage they can
start to build generational wealth, as you pointed out.
Senator Boyd Britt. Absolutely. And in conclusion, if there
are potential CFPB announcements coming down the pipe I hope
that those will be done in accordance with the notice and
comment process that is required by law, and I hope you will
all consider reliable, risk-based data, including all types of
debt. As you know, they are important to the work that you do.
The more data that we have, the more people have access to
credit.
Thank you for being here.
Chair Brown. I thank the three of you for being here today.
I appreciate your testimony, your commitment to work with this
Committee. The Committee will ensure that you all do better, as
you promised, and produce more fair and accurate credit reports
for consumers.
This is, I believe, the first time ever that the CEOs of
the three large credit reporting agencies have been in front of
this Committee, or I believe in front of Congress at all. This
has been helpful today. This will not be the last time we do
this.
We talked a lot today about financial inclusion and access
to credit. I want to reiterate that one important way to
achieve this goal is to remove all medical debt from credit
report. You heard every Senate Democrat in this room ask you
about that, with passion, about how important that is. I do not
think your answers were very direct.
I think you know that medical debt is not predictive. We
talked about a whole lot of reasons for that. I think you know
that when medical debt is removed from credit reports,
according to CFPB, the total amount of available revolving
credit increased by over $1,000. You know what that means to
low-income people. What you just said, Mr. Cartwright, about
people creating generational wealth, if medical debt is
removed, from a car accident or unexpected illness, as illness
usually is, you know this will provide more people an ability
to buy a home and build that equity and build that generational
wealth. I could see from your answers you intuitively, all
three of you, understand what that could mean.
I mean, you do not meet, personally, a whole lot of low-
income people, I assume, in the United Kingdom or Atlanta or
Chicago. CEOs rarely do. Senators rarely do, unfortunately.
That is part of the problem with this place. But you know you
will make the lives of a number of moderate- and low-income
people who are struggling, better if you remove the medical
debt. It increases credit scores by 32 points. That clearly is
significant in the lives of a lot of people.
If you want to increase financial inclusion and critical
access I again urge you, urge you, urge you, as so many up here
did, to remove medical debt from credit reports.
For Senators who wish to submit questions for the hearing
record, those questions are due 1 week from today, Thursday,
May 4th. To the witnesses, please submit your responses to
questions for the record no more than 45 days from the day that
you receive them.
With that, the hearing is adjourned. Thank you.
[Whereupon, at 11:25 a.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF CHAIR SHERROD BROWN
The three witnesses today determine the financial futures of every
American.
Equifax, Experian, and TransUnion are the biggest credit reporting
agencies. You have tremendous power over people's lives.
The information you collect and put in people's credit reports
determine whether people can get a mortgage or buy a car; what interest
rate they pay; what credit cards they can get, at what rate; whether
they'll get insurance and what they pay for it; whether they'll be able
to rent an apartment; whether they'll be accepted for a job.
These companies are not just keepers of consumer data. They
essentially manage--or mismanage, as the case may be--Americans'
financial reputations.
When your reports matter this much, with consequences this drastic,
it's important you get them right.
It is vital that these reports contain only information that's
useful and fair and, above all, accurate.
In 2017 when Equifax experienced a massive data breach, the
American public was shocked to find out exactly how much credit
reporting agencies are involved in their lives. The company compromised
the personal information of more than 147 million consumers--including
their Social Security numbers.
Millions of people were forced into a crash course on how
frustrating it can be to deal with credit reporting companies when they
make a mistake.
They had to place a credit freeze, they had to request their credit
report, they were told to constantly monitor their information for
inaccuracies.
People are busy enough with their kids and their jobs and their
lives--they shouldn't have to spend that kind of time, because some
company they've never heard of screwed up.
The data breach affected millions of people at once and got a lot
of attention. But that was far from the only case of costly mistakes by
your companies.
Today, credit reports are riddled with errors.
According to a Federal Trade Commission study, 1-in-5 consumers had
errors in at least one of their three credit reports, and 1-in-20 had
errors that affected the likelihood of receiving credit or affected the
credit rate.
More than 200 million Americans are in the Experian, Equifax, and
TransUnion credit reporting system. That means that potentially 40
million consumers have errors on their credit reports.
In a 2022 report, the Consumer Financial Protection Bureau also
found that Equifax, Experian, and TransUnion routinely failed to
adequately respond to consumers with errors in their reports.
After this report, the three credit reporting agencies instituted
some reforms to better respond to consumer complaints about errors on
their credit reports.
It's an important, though long overdue, first step.
But errors like mixed files, where the information of a different
consumer appears on a credit file, are still far too common.
Mixed files are such a pervasive problem that, in 2015, 30
Attorneys General settled a lawsuit with the three credit reporting
agencies over this problem. Among other reforms, the credit reporting
agencies were required to establish minimum standards for matching
criteria and reducing mixed files.
And it's more than just mixed-up files. Some people--still very
much alive--are declared dead. They have their identity stolen. The
list goes on.
Errors are also introduced into this system by what are called
``furnishers,'' companies supplying information to the credit reporting
agencies.
Debt collectors are some of the worst offenders when it comes to
supplying wrong information.
The CFPB found that, even though debt collectors supply just 13
percent of the accounts to credit reports, they are responsible for 40
percent of the disputes on credit reports.
Americans can be dinged on their reports for debts they do not even
owe.
It's not just errors that do not belong on credit reports.
Medical debt in particular has absolutely no place on credit
reports.
In 2022, in the United States, an estimated 43 million Americans
held $88 billion dollars of medical debt on their credit reports.
Low-income families, Black and Hispanic households, veterans, and
older Americans are hit particularly hard.
But medical debt can happen to anyone. It doesn't matter if you do
everything right.
Anyone can get sick. Anyone can get in a car accident. It has
nothing to do with your ability to pay your bills--or it shouldn't.
Medical debt does not correlate with credit risk--it correlates
with illness.
No one should have their financial future destroyed because of a
medical emergency, or a sick family member.
It's why I am asking your companies to stop putting medical debt on
these reports. And after increasing scrutiny and pressure, 1 year ago,
Equifax, Experian, and TransUnion all announced they would
significantly change how medical collection debt is reported.
One of the major reforms announced is the removal of all medical
debts of $500 or below from credit reports.
This is a positive first step, but it is not enough.
If you have $1,000 in medical debt, you're no less creditworthy
than someone with $500. It stems from the same problem--someone in your
family or you got sick.
The CFPB found that the remaining medical debt on credit reports
will disproportionately belong to consumers living in majority minority
and lower-income neighborhoods.
Your companies also provide tenant screening services--another way
you have tremendous power over people's lives . . . and another way
your errors can have disastrous consequences.
When tenant screenings turn up erroneous eviction filings, people
can't rent a home.
And because tenant screening reports aren't as available as regular
credit reports, renters may cycle through rejection after rejection,
without ever knowing there's an error.
After pressing the CFPB to address these errors in tenant screening
reports, I was glad to see the CFPB and Federal Trade Commission
announce a Request for Information on how background screenings, like
tenant screening reports, affect renters' ability to obtain housing.
Just yesterday, this Committee held a hearing about the challenges
Americans face affording housing. In a highly competitive housing
market, inaccurate data mean renters lose out on a home.
It's hard enough for Americans to get a foothold in the middle
class. The last thing workers should have to contend with are careless
mistakes from companies that have too much power over some of the most
important aspects of their lives.
It is vital that the reports that your companies issue be accurate,
not include medical debts, and that errors be fewer and correctable.
I don't think it's a lot to ask.
______
PREPARED STATEMENT OF SENATOR TIM SCOTT
Thank you to the witnesses for being here with us this morning.
Such a really important topic, one that we've worked on for the last 5
years of my time in the Senate, making sure that we have access to the
best credit we can get based on someone being creditworthy.
I say that because I look back at my own family's history back to
the 1920s and 1930s when my grandfather was growing up in the Jim Crow
South, where getting a loan had more to do with your relationships, not
to do with your credit worthiness. And so when we move towards a model
that allows people to access credit based on their relationships, it
can sometimes lead to discrimination. But when we have an objective
standard that is applied to everyone fairly and consistently, the
Nation is a better place. Accessing credit, accessing the American
Dream through home ownership is more realistic based on your
creditworthiness.
My story continues in a very similar direction as my grandfather's
did. In the 1990s when I was starting my small business, I went to a
bank and had a conversation with a banker about assets versus
liabilities, and at that point, my best asset was a 1990 [Nissan] 240SX
that had 253,000 miles on it. Not necessarily the definition of an
asset, but I tried to use it to borrow some money against it, and the
bank rightly laughed me out of the bank.
But I did develop a relationship where we had an opportunity to
look at my very light credit score. I didn't have much credit at all.
And so that works against you when you're trying to start a new small
business. And if you need a revolving line of credit, banks are less
likely to loan against no assets--the ability to come back and forth to
the same institution. So that is a challenge. But the more I worked
with a banker to appreciate building that credit score, understanding
the principles that are so important to American prosperity, I was able
to achieve my goal of opening my first Allstate insurance agency with
the help of a friend who put some money into the business as well as a
bank that finally concluded that I was an
appropriate risk.
That situation today manifests in different ways, in that the
credit score now impacts your rates and your insurance business. And
having been in the business of insurance, your auto insurance, your
home insurance--not just your loans--are literally decided by your
creditworthiness. And because of that, I think we have to do everything
in our power to make sure that as we head towards and continue to make
progress on our risk-based method, it takes the subjective nature out
of lending that relied only on relationships, reputation, or word of
mouth, and in turn created, in my opinion, a fairer, objective measure
of creditworthiness, increasing access to credit, and frankly, making
it more inclusive as well.
This is so important because with hard work and responsible
financial decisions, anyone can develop and improve their credit score
and obtain access to credit in a manner that represents their financial
opportunity. Increasing taxpayer-backed risk in the housing market as
this Administration's economic policies push us toward a recession is
anything other than ``equitable.''
At the same time, the CFPB has the audacity to announce it's
exploring new avenues of regulatory overreach on whole numbers of
different issues, ranging from data privacy to late payment fees,
despite the fact that the agency itself experienced a data breach
exposing the information of more than 250,000 Americans and then [hid]
that breach for several weeks. [It's] so amazing how tirelessly this
Administration works to put dollars on the sidelines instead of in
taxpayers' pockets. I look forward to getting answers and holding
Director Chopra responsible. At the end of the day, the data that
lenders use becomes less secure, [and] less reliable and predictive. It
will simply result in higher rates and fewer loans made to people at
the margins of the credit box, people just like me. Yet another example
of the Biden administration's policies hurting the people who can
afford it the least.
However, there is good news. American innovation and free market
competition are creating new avenues towards prosperity. As technology
develops and lenders are able to use new or alternative sources of data
to better predict the risk of default, ``credit invisible'' Americans
will increasingly be able to participate in our financial markets, and
that's really good news. Common sense and technological innovation
[have] the potential to bring an estimated 50 million Americans with
thin or no credit files into the financial system--a goal I have been
working on, as I said at the beginning, for years.
My Credit Access and Inclusion Act, the Building Credit Access for
Veterans Act, and finally, the Credit Score Competition Act, which was
signed into law in 2018, are all designed to allow for the use of new,
reliable, predictive data in our system. As we push forward with these
improvements in technology and new sources of data, which are already
showing promise at making our markets fairer and more accessible, we
should also consider what guardrails may be needed to ensure
responsible growth and consumer protection.
I look forward to hearing from the witnesses today on this really
important topic and look forward to asking you some questions, as well.
______
PREPARED STATEMENT OF MARK W. BEGOR
CEO, Equifax Inc.
April 27, 2023
Chairman Brown, Ranking Member Scott and distinguished Members of
the Committee, thank you for the opportunity to be here today. I am
Mark Begor, and since April 2018 I have served as the Chief Executive
Officer of Equifax. Over the past 5 years, my focus has been to build a
New Equifax with a corporate culture that values and supports
consumers, customers, and our communities and that is governed by a
commitment to industry-leading cybersecurity practices for the
protection of data in our stewardship. I recognize the important role
Equifax plays in the financial lives of consumers and I take this
responsibility very seriously.
Our company's purpose is to help people live their financial best,
and Equifax strives to put consumers first and support economically
healthy individuals and financially inclusive communities. Putting
consumers first and supporting financial inclusion is at our core, and
Equifax is committed to helping people and small businesses access
useful and affordable financial products and services that meet their
needs--including payments, savings, credit, insurance and Government
benefits--delivered in a responsible and sustainable way. We know that
every financial first--whether it's a first job, college education,
bank account, credit card, car loan, apartment lease, small business
loan, Government benefit or mortgage--can spur positive economic
change. To help power more of these financial firsts, Equifax has
invested billions of dollars into unique data, verification insights,
fraud reduction tools,
powerful modeling techniques and industry-leading, cloud-based
technology solutions that empower our customers to bring greater access
to financial opportunity to more people in more places.
Today, I would like to discuss our commitments in a number of
critical areas: promoting financial inclusion through Equifax
innovation and differentiated data, being consumer friendly at every
touchpoint, ensuring that our data is as accurate as possible, using
data responsibly, and keeping the data entrusted to us secure and
helping our customers innovate faster with more comprehensive insights
into the people and communities they serve.
Equifax Is Using Its Differentiated Data To Expand Access to Credit for
More Consumers
We know we play a critical role in the financial ecosystem of the
United States. Last year, we helped 13.4 million people secure a
mortgage or home equity loan, 31.1 million car buyers obtain a loan,
100.1 million people get approved for a credit or retail card, and 8.2
million students access a loan to further their education. We also
fulfilled 45 million verifications to support the administration of
Government assistance programs. While traditional credit data remains a
strong indicator of credit history and past financial reliability, we
know that one of the keys to responsibly expanding consumer access to
credit and supporting a more inclusive economy is leveraging expanded
Fair Credit Reporting Act (FCRA) compliant information that is not
traditionally included in a credit report.
We constantly look for ways to continue to expand access to
underserved consumers who may not have access to mainstream financial
services products. About 80 million U.S. consumers are either credit
invisible with no credit file or have a thin file which limits their
access to the formal financial marketplace. Our research shows that
leveraging alternative data sources could help these consumers become
scorable or obtain lower cost financial products, and we are committed
to making that happen. For example, we recently became the first in our
industry to provide telecommunications, pay TV and utilities attributes
to the mortgage industry to help streamline the mortgage underwriting
process and provide a more complete picture of consumers' financial
profiles. The majority of American adults have at least one utility or
cell phone bill in their name. Delivering these telecommunications, pay
TV and utilities attributes to mortgage lenders alongside traditional
credit reports can help create greater home ownership opportunities for
more than 191 million U.S. consumers, 80 percent of whom have
traditional credit files but who may benefit from additional insights
into their financial profile. Using this additional data could raise
the credit scores of as many as 2.4 million subprime consumers by an
average of 30 points, moving them into the near-prime score band and
potentially enabling them to receive more favorable offers or rates.
We are further promoting financially inclusive lending with the
recent launch of OneScore, a unique new consumer credit scoring model
that combines traditional credit history with telecommunications, pay
TV and utility payment data on over 191 million consumers, as well as
Equifax DataX and Teletrack specialty finance data on 80 million
consumers--including payment history from nontraditional banks and
lenders. The power of this combined data has the potential to increase
credit scores by up to 25 points and the scorable population by more
than 20 percent. Powered by advanced analytics and machine learning,
OneScore is able to score an estimated 8.8 million more credit-seeking
consumers than when compared to traditional scoring models. In
addition, approximately 15 percent--or 6.3 million--more applicants
that are considered subprime, no hit or thin file could be approved for
a near prime or prime financial product without increasing risk when
OneScore is used in combination with a traditional risk score.
We are continuing to invest in alternative data that supports
financial inclusion and expands access to credit by dedicating more
resources to the reporting of renters' on-time housing payments. Recent
studies have shown that approximately 44 million households rent their
home or apartment and that 30 percent of the median U.S. income is
required to pay the average rent, making rental payment reporting an
important but under-utilized tool in building the credit history of
credit thin or credit invisible consumers. We are partnering with the
Credit Builders Alliance, a nonprofit network that connects equity-
focused nonprofits and credit bureaus, to help housing providers
develop and implement rent reporting initiatives and we are
strengthening our partnerships with rent aggregators to enable
landlords to report rental payments, as well as exploring opportunities
to expand the inclusion of consumer-permissioned rental data in credit
files. In addition, through the Equifax Foundation, we are partnering
with organizations in Atlanta and St. Louis that provide financial
empowerment services to underserved consumers in low-to-moderate-income
communities as a means of decreasing the racial wealth gap. Equifax
understands that poverty and lack of generational wealth can adversely
affect a person's entire lifetime as well as the lives of future
generations. Building financial capability is a critical step to
establishing individual financial health and generational wealth that
can change the trajectory and livelihood of families and communities.
All of these initiatives are aligned with our purpose of helping people
live their financial best.
Equifax Is Striving To Be Consumer Friendly at Every Touch Point
In addition to our efforts to expand access to credit, Equifax is
taking strong steps to be more consumer friendly at every touch point.
Over the past 5 years, we have invested over $75 million to make it
easier for consumers to interact with us, including accessing their
credit report or credit score online and making Spanish-language credit
reports available online and by mail.
We are improving the overall experience that consumers have with
Equifax by ensuring that our written communications are in plain
language; we have added tools like video clips to our website to help
consumers navigate the dispute process; and we have made it easier for
consumers to both manage their disputes online and track their dispute
through the process. We are committed to correcting errors on consumer
credit reports quickly and transparently and are working with our
colleagues at the other nationwide consumer reporting agencies (NCRAs)
to improve our shared backend data furnishing processes to further
limit errors.
To further support the financial health of consumers, we have
improved the MyEquifax consumer portal, which offers free consumer
credit reports and free credit scores each month as well as access to
new financial offers and services, helping to simplify processes like
finding auto loans. About 17 million people have leveraged the services
offered through MyEquifax since its inception. Additionally, we have
made it a focus to strengthen our educational web material. In 2022, we
published 50 percent more articles and videos to our online Consumer
Knowledge Center, with new content published two-to-three times per
week. This Consumer Knowledge Center now contains more than 350
educational resources on topics ranging from how credit decisions
impact credit scores to identity theft.
We also work collaboratively with the other NCRAs to support
consumers. During the COVID-19 pandemic Equifax, along with Experian
and TransUnion, expanded the offering of free credit reports to
consumers each week, so that when times were uncertain and payment
plans were being offered, consumers could make sure arrangements they
negotiated were appropriately reflected in their credit reports. We
believe this helped people focus on their personal wellbeing, health,
and families throughout the pandemic. These reports remain available
free of charge through the end of 2023.
The NCRAs further collaborated on the reporting of medical
collection debt on consumer credit reports with the understanding that
most medical debt is generally not taken on voluntarily. Effective
April 2023, medical collection debt with an initial reported balance of
under $500 has been removed from U.S. consumer credit reports. With
this change nearly 70 percent of the total medical collection debt
tradelines reported to the NCRAs are now removed from consumer credit
files. This announcement follows the changes that we jointly made in
2022 to remove paid medical collection debt from U.S. consumer credit
reports and to increase the time period before unpaid medical
collection debt appears on a consumer's report from 6 months to 1 year,
\1\ giving consumers more time to work with insurance and/or healthcare
providers to address their debt before it is listed on their credit
file. All of these actions are aligned with our goal of putting
consumers first.
---------------------------------------------------------------------------
\1\ The March 2015 National Consumer Assistance Plan (NCAP)
announced after the nationwide consumer reporting agencies reached
agreement with over 30 State attorneys general required the removal of
all medical debt that had been reported but was later paid by insurance
companies. NCAP also prohibited the reporting of medical collection
debt for at least 180 days.
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Equifax Is Ensuring That Our Data Is as Accurate as Possible
Another element of our focus on consumers is ensuring that we
maintain the most accurate data possible. This effort requires strong
data stewardship. Even a single error on a consumer's credit report is
one error to many. It is a personal priority for me that consumers
trust their credit reports to contain the most accurate and complete
data possible.
The NCRAs operate under a robust regulatory environment governed by
the Fair Credit Reporting Act \2\ (FCRA) and subject to the
jurisdiction of the Federal Trade Commission, Consumer Financial
Protection Bureau, State attorneys general, and State banking
regulators. Under the FCRA, consumer reporting agencies, as well as
data furnishers and users of consumer reports such as banks, must meet
stringent requirements regarding accuracy and permissible use of the
data. If a consumer disputes the accuracy of any information in their
credit report, for example, consumer reporting agencies are required to
conduct a reasonable reinvestigation within statutory timeframes. \3\
Additionally, Equifax monitors data furnishers to ensure they are
meeting Equifax's and industry standards. If a data furnisher is not
compliant, Equifax will implement a remediation plan and ultimately
terminate the data furnisher if the issues are not corrected. We
believe our procedures meet our statutory obligations and we will
continue to strive for the highest possible levels of accuracy to
benefit consumers and the lending institutions that rely on this
information to offer fair and affordable financial products.
---------------------------------------------------------------------------
\2\ 15 U.S.C. 1681, et seq.
\3\ 15 U.S.C. 1681i.
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Consumers may submit disputes through mail, over the telephone, or
through our online channel. In the event of disputed accuracy of an
item on a credit file, Equifax conducts a reinvestigation that includes
working with the identified data furnisher if appropriate to determine
whether the disputed information is inaccurate. Communications between
Equifax and the data furnisher are conducted through an online web
service called the Online Solution for Complete and Accurate Reporting
(e-OSCAR). Once the data furnisher completes its investigation and
returns those results, Equifax will make necessary updates to the
credit file, if any, and communicate those results to the consumer.
Equifax will also send notification back to the data furnisher
confirming any credit file maintenance actions that may have occurred.
I am driving further industry-leading enhancements to our accuracy
program in the areas of automation, communication, and proactive
correction.
1. We are leveraging our Cloud investment to automate more
processes to quickly identify potential accuracy issues, including
where data submitted to us by our furnishers is illogical or
inconsistent with other data that we have received. This will allow us
to screen illogical conditions and anomalies before data is included in
consumer credit files.
2. We are establishing feedback loops to communicate the issues we
identify and work with our furnishers to ensure they identify the root
cause of inaccurate reporting and correct it going forward. We have a
team dedicated to working directly with our furnishers on these issues,
which will not only improve data accuracy at Equifax, but across the
credit reporting ecosystem.
3. We are building processes to analyze data furnished to us and
data updated as a result of disputes to identify trends and potential
errors in reporting. This will allow Equifax to proactively reach out
to our furnishers to correct reporting errors before the information in
consumer files is disputed.
While I am proud of the progress that we have made in this area,
there is more that we can and will do. We are deeply committed to
putting consumers first, and that means ensuring that we are providing
lenders accurate information so that consumers can get the credit they
need. Our accuracy obligations to consumers are also supported by our
market incentive to provide the most accurate data possible to our
customers so that they can assess risk and offer financial products and
services on the most appropriate terms.
Equifax Is Committed to Responsibly and Appropriately Using Personal
Data
In addition to a strong data accuracy program, Equifax is committed
to responsibly and appropriately using personal data. Five principles
form the foundation of our data privacy program:
1. Equifax leverages quality data to drive progress. We are
committed to maintaining and using data that is accurate,
relevant, and timely.
2. Equifax takes its data stewardship responsibilities seriously. We
are transparent about how we use and safeguard data in our
possession.
3. Equifax believes in discretion of data. We share data only for
legitimate purposes, respecting the importance of data in the
lives of individuals.
4. Equifax exercises due diligence in its partnerships when we share
or receive data. We evaluate both sources and recipients of
data for alignment with our values.
5. Equifax has taken a designing for privacy approach. We take
privacy into consideration as we grow our products, services,
and standards.
Equifax believes in being transparent about the collection, use and
storage of personal data. For example, in the United States, Equifax
publishes a single consolidated privacy statement and updates it
regularly to be transparent about how we collect, use, and share data.
Our privacy statement also details how consumers can exercise control
over their data.
In accordance with these principles of data use, Equifax offers
solutions to help our customers make data-driven decisions. These
solutions include providing data to help employers make informed
personnel decisions about potential employees and to help credentialed
property managers make more informed decisions and get rental
applicants into safe and quality housing faster. If an employer uses
background checks in making personnel decisions, the employer must
comply with the Fair Credit Reporting Act and laws that protect people
from discrimination. Employers rely on consumer reporting agencies and
others throughout the hiring process to provide them with information
they need to make informed decisions about a potential candidate,
including verification of employment history or credit information.
Equifax's employment screening reports do not contain credit scores.
Equifax's tenant screening business is predominantly driven through
resellers to whom we provide credit report information from one or more
nationwide consumer reporting agencies, credit scores from VantageScore
' or FICO ', income and employment information
from The Work Number ', or Equifax digital identity and
fraud authentication products.
Equifax Has Invested Substantially in Technology To Help Our Customers
Innovate and To Keep the Data Entrusted to Us More Secure
To enable all of these advances, Equifax has invested an
incremental more than $1.5 billion over the last 5 years to undertake a
complete technology transformation to the most advanced Cloud
capabilities available. This is one of the largest cloud technology
investments ever undertaken in our industry and is changing nearly
every facet of our infrastructure and capabilities. The Equifax Cloud
TM is expanding the depth and accuracy of our data to help
our customers innovate faster and create more effective insights into
the people and communities they serve so that they can deliver better
outcomes for consumers. Our industry-leading cloud transformation has
created an agile new foundation for the enterprise to develop solutions
that are faster, more reliable, more powerful, and more secure than
ever before. In 2022, we harvested the power of our new Equifax Cloud
TM capabilities and differentiated data to deliver more than
100 new products guided by our purpose of helping people to live their
financial best.
We are aggressively working to complete this transformation. And,
as we transform, we continue to focus on our leadership in data
security and to build a culture where data security is central to our
global team's DNA. From our employee engagement to our technology
infrastructure, data fabric and product development, security is
embedded in everything we do. Over the last 5 years, we have built one
of the world's most advanced and effective cybersecurity programs. Our
security capabilities exceed all major industry benchmarks, with
Equifax ranked in the top 1 percent of Technology companies and top 3
percent of Financial Services companies analyzed for three consecutive
years. Our migration to the Equifax Cloud TM gives us more
robust visibility into the security across our enterprise, which in
turn enables us to detect and respond to threats with more speed and
precision. In 2022, we effectively responded to 39 million cyber
threats per day while conducting more than 374,000 simulations to test
our global workforce and preparing for the future.
Transparency has been critical to the growth and strength of our
security program. We believe that more communication, more
collaboration, and more transparency, with all companies delivers
stronger security. Actively sharing the best practices we've gained as
we work to implement change is why we developed our Security Annual
Report, and why we have continued to actively engage with customers,
policymakers, and other organizations, regarding the challenges and
opportunities in cybersecurity on a daily basis.
As part of our Equifax Cloud TM transformation, we have
launched a state-of-the-art FedRAMP security environment to support our
U.S. Government programs in the Cloud. We also developed Cloud-Control,
a platform that gives our customers real-time visibility into the
security of their Equifax Cloud TM products and services. We
also are committed to industry collaboration, as further evidenced by
the appointment of our Chief Information Security Officer as a
Strategic Engagement Advisor to the Federal Bureau of Investigation
(FBI). In this role, our CISO will support the FBI's efforts to
strengthen their relationship with the private sector and will support
the Bureau in addressing the range of cyber threats facing businesses
across America.
Equifax Has a Dedicated and Diverse Workforce Committed To Helping
People Live Their Financial Best
And at the heart of delivering all of this progress is our people.
At Equifax, we value our people and recognize that our employees drive
our progress, innovation, and contributions to our communities. Equifax
employs approximately 14,000 employees in 24 countries and more than
7,000 in the United States. We believe that increasing diversity and
inclusion leads to higher levels of innovation for our customers and
consumers, strong engagement levels and ultimately better business
outcomes. We have consistently improved enterprise-wide trends around
representation and promotions for both women and employees of diverse
ethnic backgrounds, and pride ourselves on promoting and hiring highly
qualified candidates who enhance our culture, add diverse perspectives,
and deliver on our business strategy. Within our senior leadership
team, nearly 60 percent identify as female or as having a diverse
racial or ethnic background, 45 percent of the Equifax global workforce
identify as female, and 4 of our 10 Board members are female.
Consistent with our commitment to diversity, we have expanded the
requirements for diverse candidate interview slates for all
professional and management roles.
Thank you for the opportunity to share some of the key priorities
of the New Equifax. While we still have more work to do, I am proud of
the transformation we have made over the past 5 years. Equifax remains
committed to putting consumers first at every touchpoint, to promoting
financial inclusion through innovation and differentiated data, to
ensuring that our data is as accurate as possible, using data
responsibly, keeping the data entrusted to us secure and to helping our
customers innovate faster with more comprehensive insights into the
people and communities they serve. Our resolve to achieve our company
purpose to help people live their financial best has never been
stronger.
Thank you again for the opportunity to provide this testimony and
for your dedication to your constituents and American consumers.
______
PREPARED STATEMENT OF CHRIS A. CARTWRIGHT
President and CEO, TransUnion
April 27, 2023
Chairman Brown, Ranking Member Scott, and distinguished Members of
the Committee, thank you for your invitation to appear. My name is
Chris Cartwright, and it has been my great privilege to serve as
President and CEO of TransUnion for the last 4 years.
TransUnion is a global company headquartered in Chicago and best
known as one-of-three major credit reporting agencies in the United
States. We have nearly 5,000 employees in the United States, and more
than 12,000 worldwide. As a company, our mission is to help people and
society through information, to ensure fairness for consumers in the
marketplace and to assist businesses in identifying underserved
communities and managing business risks.
The Role of Credit Reporting Agencies
The credit reporting agencies are the backbone of the modern
consumer credit economy in the United States. We play an important role
in the efficient and stable functioning of the Nation's financial
system, serving as clearinghouses and record-keepers for information
and helping consumers gain access to credit quickly and efficiently. We
do not make lending decisions; rather, we provide objective information
that helps consumers obtain credit and helps lenders in underwriting
and establishing credit terms.
We also help consumers find the right products to achieve their
financial goals through available and affordable credit. Our credit
reports help more than 254 million consumers obtain credit products
each year. Prior to the advent of credit reporting agencies, lenders
relied on existing relationships and personal knowledge, which often
resulted in implicit or explicit bias in lending decisions. We serve
consumers and lenders by providing objective data to help facilitate
today's lending decisions.
Today's consumers expect near instant access to credit, which
TransUnion facilitates through high-quality credit reports: today
people can walk into a car dealership and drive away in a new car in a
matter of minutes. The Nation's credit reporting system makes this
possible by providing an efficient and reliable way for lenders to
assess consumers' willingness and ability to repay their loans. This
system enhances consumers' quality of life and strengthens the American
economy.
As a provider of credit data, our work touches the lives of nearly
every American and particularly impacts those most in need of expanding
opportunities through credit.
We play a similarly important role for the lending community--
helping banks and financial institutions of all sizes accurately
understand and manage risk. We work with small community banks and
credit unions, with community development financial institutions, and
with larger firms. Our risk analytics allow lenders of all sizes to
expand access to credit for consumers while protecting financial
stability. As we have seen in the past several weeks, ensuring lending
institutions have the data required to understand and mitigate risk is
critical to the overall health and resilience of the U.S. banking
sector and financial stability more broadly.
Commitment to Accuracy
At the core of TransUnion's business is a commitment to data
accuracy. Nobody wins when consumer data is inaccurate--not us, not
lenders, and certainly not the American consumer. We believe empowering
consumers is fundamental to data accuracy and contributes to the
overall health of the credit reporting system. TransUnion is committed
to data accuracy across all of our businesses. TransUnion has led the
industry in building a dispute-resolution system that helps consumers
quickly address any errors or inaccuracies in their credit files. We
provide tools for consumers to work with data furnishers, the lenders,
and other entities that report information concerning financial
obligations. We want consumers to be able to work with TransUnion
easily, with no friction, and at no cost to resolve any errors on their
credit reports. Through our efforts, our turnaround time in addressing
consumer disputes is now approximately 9 days, well below the 30-day
requirement of the Fair Credit Reporting Act (FCRA). When a consumer
believes a data furnisher inaccurately reports information, we
facilitate the FCRA-mandated investigatory process and, if data is
incorrect, we provide a system-wide update to the furnisher and other
CRAs. We regularly measure furnisher performance and provide insights
regarding furnisher data quality to the CFPB.
We are working closely with the CFPB to make pro-consumer changes
to our tenant and employment screening business, including improving
our matching logic, only accepting data that is refreshed every 60-days
by municipalities and vendors, and reporting only the final outcomes of
eviction proceedings. TransUnion is committed to making sure tenant
screening data is accurate; inaccurate data doesn't help anyone--not
tenants or property owners. Screening plays an important role in
enabling tenants to get housing opportunities; our data is an important
tool to help property owners expand opportunity and protect the
physical safety of their tenants. The data we receive is generally very
accurate; it is based on thousands of court records from around the
country, and we work hard to match that data correctly.
Expanding Economic Opportunities for All
Financial inclusion is another key pillar of our company strategy,
and we continuously seek ways to develop products and resources for the
credit underserved--be it Americans living in rural communities,
communities of color that have been historically disadvantaged, or
those in the lowest-income bracket. Expanding credit access is not only
good for the economy--it is the right thing to do to open up economic
opportunities for all Americans.
One of the ways TransUnion facilitates access to fair and equitable
credit is through our industry-leading alternative data solutions.
These tools provide potential lenders with the best, most accurate view
of the consumer. Alternative data sources--such as rental and utility
data--come with the added benefit of allowing people to build their
credit profiles more quickly. Alternative data also supports market
competition, allowing smaller and community-focused lenders to access
consumers who may otherwise have been beyond their underwriting reach.
Last year, TransUnion commissioned a market study of credit union
executives from across major metropolitan and rural regions of the
United States and found that ``credit unions want to be more inclusive
and take more calculated risks.'' The study noted that ``[t]he current
economic environment has also driven many financial institutions to
shift their underwriting models to include trended and alternative data
versus legacy credit modeling, which has allowed credit unions to
better serve their membership's evolving needs.'' \1\
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\1\ TransUnion, ``New Research Explores Technological and Data
Barriers to More Automated, Inclusive Credit Union Lending'',
(September 8, 2021), https://newsroom.transunion.com/new-research-
explores-technological-and-data-barriers-to-more-automated-inclusive-
credit-union-lending/.
---------------------------------------------------------------------------
We need more participants in the system to get behind this effort:
if alternative data were reported at scale, it would substantially
increase credit access and financial inclusion for all Americans.
TransUnion is committed to helping more Americans access credit and
wealth-building opportunities, which is why we are strong proponents of
legislation to increase the inclusion of alternative data on credit
reports. Consumers should get credit for the payments they are making
that are not traditionally reported to the bureaus--including rent,
utility or mobile phone payments--to help them build their credit
profiles.
We also know the real impact credit reports have on consumers'
lives. We are committed to ``getting it right every time.'' Since I
took charge of the company, TransUnion has undergone a transformation
focused on improving the consumer experience. Our goal is operational
excellence on behalf of the consumer--and it is critical to our mission
and work. We understand that we must place the consumer experience at
the center of what we do.
TransUnion has been proud to lead the way on pro-consumer changes
in the industry:
As the country plunged into the pandemic and ensuing
economic crisis, we provided consumers with free weekly credit
reports.
We led the way in encouraging lenders to use our trended
and alternative data solutions to provide a more accurate
picture of consumer creditworthiness and to bring ``credit
invisible'' Americans into the modern economy.
And we continually invest in our operational infrastructure
to build a best-in-class dispute-resolution infrastructure, to
ensure our data is as accurate as possible.
We led the way on issues related to medical debt. Last
year, along with the other major credit reporting agencies, we
removed all paid medical debt from consumers' credit files. We
also no longer include unpaid medical debt totaling $500 or
less on credit reports. Together, these changes will remove
nearly 70 percent of all medical collections from credit
reports.
Protecting Consumers' Data Privacy
TransUnion is committed to ensuring that consumers' data privacy
rights are protected and that consumers can manage their own personal
data and information. We support the passage of a strong Federal
privacy bill that both provides meaningful rights to consumers and
preempts State-by-State privacy regulation. The patchwork, State-level
approach to data privacy in the United States is confusing and
inefficient for businesses and consumers alike. Enacting a
comprehensive Federal privacy standard, modeled on the European Union's
General Data Protection Regulation, would increase U.S. competitiveness
while providing clarity to all stakeholders. TransUnion recommends
legislation that allows consumers meaningful choice in how their data
is collected and used without unilaterally proscribing data collection
and use. A Federal bill should recognize that the rules around
collection and use should be tailored to the level of risk and the
purpose of the data processing activity. A Federal bill should also
recognize the important role that data plays in our modern economy,
facilitating the instantaneous and tailored experiences that consumers
expect. Finally, we believe any Federal privacy law should recognize
the important role of consumer data in fraud prevention.
While we are proud of our voluntary efforts to improve the
experience for consumers who rely on our credit reports, we also
appreciate the opportunity to partner with policymakers to shine a
light on our industry and to work towards industry-wide improvements.
We appreciate the work of this Committee, in particular Chairman Brown
and Ranking Member Scott, for your leadership in helping to make the
credit reporting system stronger. We recognize our responsibility to
our consumers and are committed to improving the system for all
consumers. We want to continue to build on our successful history, and
we will continue to work with Congress and our regulators to provide
consumers with the tools they need to realize economic opportunities.
Thank you again for the invitation to testify today. I look forward
to answering your questions.
______
PREPARED STATEMENT OF BRIAN J. CASSIN
CEO, Experian
April 27, 2023
Chairman Brown, Ranking Committee Member Scott, and Members of the
Committee, I am Brian Cassin, CEO of Experian. I appreciate the
opportunity to discuss the important work Experian does for the benefit
of consumers, lenders, and the U.S. economy.
Let me begin by stating why credit bureaus exist, how consumers
benefit, and how our work provides underlying stability to the entire
consumer credit ecosystem.
Credit bureaus accurately compile consumers' payment histories
reported to us by individual creditors so that all lenders can use this
data to make sound underwriting decisions. Good lending decisions mean
fewer defaults. Fewer defaults reduce the cost of credit and increase
the availability of consumer credit across the economy. Because credit
bureau data does not include demographic factors such as race, color,
religion, and gender, it also helps lenders make nonbiased lending
decisions in compliance with the Equal Credit Opportunity Act.
Experian wholly understands its clear statutory obligations: ensure
the information we hold on consumers is secure; make credit reports
accurate; and provide a method to correct data that is easy for
consumers to access and use.
Experian supports this Committee's goal of enhancing the accuracy
of credit reports, improving consumers' experience through the dispute-
resolution process, and making fair and affordable credit available to
all communities.
Experian has invested heavily in systems and processes to improve
data accuracy as we continually strive to reach 100 percent accuracy.
We work with approximately 10,000 lenders and other data contributors
across the spectrum of consumer lending, including credit card, auto,
mortgage, retail, and fintech and we and have stringent requirements
and monitoring programs in place to ensure that our furnishers are
submitting accurate information to us.
An important component of accuracy is a consumer's right to review
their own credit report and correct errors. With millions of free
reports and scores in the ecosystem monthly, consumers have easy and
free access to their credit information, including through
annualcreditreport.com, which provides free weekly reports to
consumers. Experian has a free online dispute portal, including a
mobile-optimized website and app. Consumers can also easily reach us by
telephone or mail.
Mr. Chairman, studies suggest that as many as 50 million American
adults are unable to access fair and affordable credit, either because
they have a very thin credit file or because they are completely credit
invisible. We also understand that many consumers, particularly
minorities and lower-income individuals, are often under-represented in
the credit reporting system.
This is an area where Experian is at the forefront with the launch
of Experian Boost in early 2019. Boost allows consumers for the first
time to safely and easily opt-in to having proven payment information--
like utility, cell phone, rent, and video streaming services--included
directly in their credit report, which can improve their credit score.
In January 2022 we also launched Experian Go, a ground-breaking
feature that helps consumers who are credit invisible to establish a
financial identity with Experian so they can begin building a credit
history.
Since its launch, more than 12 million consumers have come to
Experian Boost to improve their credit score, and 130,000 consumers
have used Experian Go to establish a financial identity. The results
are notable: we estimate that consumers have been able to access
billions of dollars in credit post-Boost, including credit cards, car
loans, and mortgages. Experian is also providing access to free credit
monitoring, free credit reports, free credit scores, and financial
education to more than 65 million U.S. consumers.
I am proud of the work our employees do every day to help and
empower consumers. We would like to continue to work with this
Committee to identify other ways we can improve the system for
consumers.
Thank you for inviting me to testify. I look forward to answering
your questions.
RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN
FROM MARK W. BEGOR
Q.1. Congress enacted the Fair Credit Reporting Act to protect
consumers from harmful and inaccurate reporting errors--errors
which could result in consumers being declined for mortgages or
loans for which they should otherwise have qualified. Forced
arbitration has undermined these critical consumer protections.
Does your credit reporting agency use forced arbitration to
resolve consumer disputes over errors?
A.1. No, Equifax does not.
Q.2. Is your company still using outsourced vendors from other
countries to process your disputes? If so, please explain and
provide the name of the country and vendor.
A.2. Yes, our vendor service providers are Teleperformance in
India and Foundever (previously known as Sitel) in the
Philippines. We also have Equifax employees in the United
States and Costa Rica that process disputes.
Q.3. In a January 2023 report, the CFPB noted that they had
received nearly one million complaints about credit reporting
and other consumer reporting, but only forwarded 565,000. The
reduction by over 40 percent is the result of the CFPB's
efforts to monitor and safeguard its complaint process from
undisclosed third-party submitters. Is it your position that
the 565,000 complaints that the CFPB forwarded to you after the
Bureau had screened for undisclosed third-party involvement are
still the result of illegitimate credit repair?
A.3. It is not Equifax's position that all CFPB portal
complaints are a result of illegitimate credit repair. Since
May 2022, Equifax has responded to all CFPB portal complaints
with the applicable service requested by the consumer,
including initiating a dispute when appropriate. Regardless of
how a dispute is initiated (i.e., through the CFPB portal or
directly), Equifax processes legitimate disputes whether from
the consumer or from someone authorized to act on their behalf.
Q.4. According to a report from the House Select Subcommittee
on the Coronavirus Crisis, your company annually receives
disputes on about 36 to 42 million individual items of
information in the credit reports you issue. Yet, according to
the report, company employees only spend an average of 12 to 13
minutes per dispute. How are your employees able to conduct
``reasonable investigations'' as required by the Fair Credit
Reporting Act when they spend only 12 to 13 minutes
investigating each dispute?
A.4. Equifax has invested significant resources to improve the
consumer's experience when interacting with us, including
enhancing online dispute capabilities and automating processes
where practical. These investments are intended to reduce
friction for the consumer and lead to better consumer
experiences and outcomes. Because of these system improvements,
it is not possible to correlate agent time spent per case to
the quality or completeness of the resolution of the disputes
or complaints.
As noted in Equifax's response to the House Select
Subcommittee on the Coronavirus Crisis, Equifax does not track
the amount of time spent on all individual dispute cases
because not every dispute requires agent intervention.
Therefore, it is not possible to calculate the exact median or
mean for the time spent on each case. Equifax made a good faith
effort to provide the Select Subcommittee certain data related
to the length of time agents spend assisting consumers with
their phone disputes and the processing time for CFPB portal
complaints.
Q.5. Equifax's website currently includes a product sheet
detailing Equifax's Resident Screening Services, which the
website states include credit reports, InstaCriminal National
or Statewide search, national sex offender search, eviction
search, employment verification, and rental history. Does
Equifax currently offer landlords resident screening services
that include these data elements on consumers?
A.5. Equifax provides tenant services that can include these
data elements to qualified property managers who own one to
many multi-unit properties. Equifax's tenant screening business
is predominantly driven through resellers to whom we provide
credit report information from one or more nationwide consumer
reporting agencies, credit scores from VantageScore
' or FICO ', income and employment
information from The Work Number ', or Equifax
digital identity and fraud authentication products. Consumer
report information is provided for Fair Credit Reporting Act
(FCRA) purposes to entities that undergo Equifax's
credentialing process.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
FROM MARK W. BEGOR
Q.1. Please explain your company's current approach to
incorporating Buy Now, Pay Later (or BNPL) lending into a
consumer's credit file and describe the specific technological
or commercial impediments to making sure BNPL repayment history
is reported and scored in a standardized fashion.
A.1. Equifax was the first to formalize inclusion of popular
Buy Now, Pay Later (BNPL) ``pay-in-four'' loan payment
information in U.S. consumer credit reports with an industry
code that was made available to data furnishers in February
2022. We worked to formalize the inclusion of BNPL payment data
on consumer credit reports with the belief that consumers
should get credit for paying bills on time and should be able
to use their responsible BNPL behaviors as a stepping stone to
other types of credit, like auto loans or mortgages.
Equifax is making data-driven decisions on how BNPL payment
information is incorporated into consumer credit reports. We
are working closely with FICO and BNPL providers to determine
how different processes--paired with several factors, including
a consumer's starting credit score, payment history,
utilization and more--affect each individual. Based on our most
recent analysis of anonymized consumer data from a BNPL
provider reporting tradelines as revolving lines of credit, we
found that individuals who pay their BNPL loans on time could
potentially increase their Equifax Risk Score (ERS) and FICO
' Score. Typically, consumers can leverage BNPL
products early on in their credit lifecycle, even if they may
not qualify for other traditional types of credit. For
consumers beginning to build their credit--or those looking to
rebuild their credit--using BNPL products from companies
reporting presents an opportunity to demonstrate responsible
behavior and build or rebuild credit.
However, while Equifax encourages BNPL providers to report
payment data, pay-in-four loans are not being broadly reported
by providers to Equifax today. Larger dollar and longer term
BNPL loans are reported today and appear on consumer credit
reports as revolving or installment lines of credit.
Q.2. We have recently heard credible reports of consumers
receiving dozens or hundreds of unexpected and unwanted phone
calls and texts, within hours of applying for a mortgage, from
other lenders offering purportedly better financing. Do you
make money from selling these so-called ``trigger leads,''
which are used to target and spam unsuspecting customers? Do
you believe dozens or hundreds of these solicitations are a
nuisance for consumers? Do you have the ability to prevent the
information that you provide to lenders from being used to
overwhelm consumers with ads and solicitations? If so, why are
reports of spam solicitations increasing?
A.2. The products in question comply with applicable laws and
are offered under the prescreening requirements of the FCRA.
Equifax contractually restricts the use of these leads to one
call and one follow-up per lender to each consumer. A decline
in mortgage originations combined with an uncertain economic
environment may be increasing marketing activity for mortgage
professionals. Equifax does not support the misuse of mortgage
leads in a manner that results in spamming and harassing
consumers. There are benefits to mortgage leads within the
industry that provide competition amongst lenders and can
result in lower costs for consumers. Mortgage leads can help
consumers shopping for mortgage loans, by making consumers
aware of lower rates or better deals.
Q.3. What additional steps are your company taking to combat
the recent increase in fraud targeted at service members and
veterans?
A.3. Equifax appreciates the sacrifices our service members and
veterans have made for our country. For military members on
active duty or members of the National Guard, Equifax offers
free credit monitoring services, called Credit
WatchTM Gold. Credit WatchTM Gold
includes notifications of changes to the Equifax credit report,
daily access to the Equifax credit report, automatic renewal of
an initial fraud alert, and up to $25,000 of insurance coverage
to help with certain out-of-pocket expenses for victims of
identity theft. Active-duty military members or members of the
National Guard may be asked to recertify eligibility every 2
years. Members of the military on active duty may request an
active-duty alert on their credit files to minimize the risk of
fraud. The active-duty alert lasts for 1 year and the
consumer's name is removed from the prescreen list for offers
of credit or insurance for 2 years.
Equifax does not have information about a consumer's
veteran status, but service members and veterans may also
leverage other services to prevent identity theft or other
fraud, and to protect their information. These services
include:
A fraud alert is a notice that is placed on a
consumer's credit report that alerts credit card
companies and others who may extend credit that the
consumer may have been a victim of fraud, including
identity theft. Once a fraud alert is placed with one-
of-three nationwide credit reporting agencies, that
bureau will send the fraud alert request to the other
two. An initial fraud alert lasts for 1 year, and may
be renewed.
An extended fraud alert can be placed if a consumer
is a victim of fraud or identity theft. The extended
fraud alert has the same protections as a fraud alert,
but lasts for 7 years. If a consumer has an extended
fraud alert, the consumer's name is removed from the
prescreen list for offers of credit or insurance, for 5
years.
A security freeze to prevent unauthorized access to
the consumer's credit file.
A credit lock using a mobile app allows consumers
to lock and unlock their credit reports using identity
verification techniques. A credit lock generally
prevents access to a credit report to open new credit
accounts.
If a consumer believes information in their credit
file is a result of identity theft, the consumer can
request that a consumer reporting agency block that
information.
Additionally, veterans who have a medical debt on their
credit report that is being paid by the Department of Veterans
Affairs can submit documentation to have the medical debt
removed from the credit file of the veteran.
Finally, Equifax has expressed support for the
Servicemembers' Credit Monitoring Enhancement Act to provide
additional credit monitoring services for certain family
members of a member of the military.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM MARK W. BEGOR
Q.1. Can you explain why consumer complaints about credit
reporting agencies at the Consumer Financial Protection Bureau
complaint portal have skyrocketed over the past 2 years? Now,
about three of four consumer complaints are about credit scores
and credit reports.
A.1. The credit reporting industry is committed to helping
consumers resolve discrepancies on their credit reports and we
are working diligently across the financial ecosystem to make
sure data on consumer credit reports is accurate and
comprehensive. Since April 2020, the nationwide consumer
reporting agencies have offered free weekly credit reports to
consumers through the end of 2023. One potential rationale for
increased activity in the CFPB complaint portal is that
consumers have become more proactive in monitoring their credit
reports so that they are more aware of what lenders may see and
so that they can detect any inaccurate or incomplete
information provided to the credit bureaus. Economic factors,
such as rising interest rates and economic uncertainty, may
also play a role in consumers submitting complaints through the
CFPB portal. It is worth noting that the nationwide consumer
reporting agencies are in a unique position as compared to
other financial services providers. Equifax compiles
information on over 250 million U.S. consumers. The amount of
information and number of consumers served by the credit
reporting system is one reasonable explanation for the volume
of complaints mentioning credit reporting. Not only is the
number of consumers served by the nationwide consumer reporting
agencies vastly greater than virtually all other financial
services providers, but consumer reporting agencies also serve
as the intermediary between consumers and their lending
institutions. Additionally, the CFPB complaint portal combines
consumer complaints with disputes about information on credit
files. Many of the complaints in the CFPB complaint portal
appear to be disputes about data reported to Equifax by data
furnishers and not complaints about an Equifax product or
service.
Q.2. How is your firm thinking about using the new Artificial
Intelligence (AI) technologies? Does your firm use--or are you
considering using AI to communicate with consumers, in the
dispute process and/or in value-added services such as credit
scores?
A.2. As one of the first patent holders for Explainable
Artificial Intelligence (xAI) in credit-risk modeling, Equifax
has a deep legacy advancing data, analytics and technology to
ensure transparency in the use of AI. xAI is our modern
approach to predictive analytics and is embodied in our patent
portfolio centered around specific machine learning models that
generate logical and actionable reason codes to the consumer,
increasing transparency in the process. At Equifax, the primary
function of an explanation is to facilitate continued model
learning while ensuring Equifax models are logical, actionable,
and explainable. Equifax is committed to ongoing education and
research in the field of AI and recently announced the launch
of an AI Ethics Lab with Kennesaw State University to study the
use of AI in the U.S. financial services industry. The research
will establish methods to help identify how an AI-powered
process may create different outcomes than traditional models
and the potential impact of these differences.
AI is currently used in the Equifax dispute process to: (1)
sort and route disputes received by mail to specialty queues to
ensure appropriate handling; (2) send and receive referrals to
and from other nationwide consumer reporting agencies; and (3)
process CDV (consumer dispute verification) responses from the
data furnishers. Equifax also leverages Natural Language
Processing in our Interactive Voice Response system to guide
consumers to self-service options and to route them to the most
appropriate agent group for handling.
Q.3. Does your firm sell consumer information to vendors? If
so, how can people avoid having their information sold?
A.3. Equifax provides consumer information to its customers.
Equifax maintains a credentialing process for all of its
customers. To receive Equifax data, a customer must sign a
contract with Equifax and meet credentialing requirements based
on the type of data requested. Credentialing includes
verification that the prospective customer is a legitimate
business, screening against sanctions lists, public information
searches, and may include additional verifications such as
background checks or onsite inspections depending on the type
of data to be provided.
Equifax is committed to responsibly and appropriately using
consumer data. Equifax understands people want more control
over how their personal data is collected, used, shared, and
protected. Equifax is subject to numerous laws and regulations
governing the collection, protection and use of consumer credit
and other information, and imposing sanctions for the misuse of
such information or unauthorized access to data. Many of these
provisions also affect our customers' use of consumer credit or
other data we furnish. Examples of the most significant U.S.
laws include, but are not limited to, the Fair Credit Reporting
Act, Title X of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, the Federal Trade Commission Act, the Gramm-
Leach-Bliley Act, and the Credit Repair Organizations Act.
Under section 604(e)(6) of the FCRA consumers have the
right to opt-out of receiving firm offers of credit or
insurance. At www.optoutprescreen.com consumers have the choice
to opt-out from receiving firm offers for 5 years or
permanently. Under FCRA sections 605A(i) and 605A(j), consumers
also have the option to place a security freeze to prevent
access to their consumer report.
In addition to the right to opt-out from receiving firm
offers of credit, Equifax allows residents of any U.S. State to
submit requests to limit the use and disclosure of their
sensitive personal information and opt-out of the sharing and
selling of their personal information, in accordance with
applicable U.S. State Privacy Laws. Equifax maintains an online
Privacy Preference Center (https://www.equifax.com/personal/my-
privacy/) where consu-
mers can exercise control over their data.
Q.4. If a potential home buyer seeks a mortgage, are there any
limits to how many vendors can purchase their information and
how often--and through what means--they can contact the
potential borrower?
A.4. Equifax contractually restricts the use of these leads to
one call and one follow-up per lender to each consumer. The
products in question comply with applicable laws and are
offered under the prescreening requirements of the FCRA. A
decline in mortgage originations combined with an uncertain
economic environment may be increasing marketing activity for
mortgage professionals.
Q.5. How does your firm address concerns and complaints from
consumers who received unwanted solicitations or are upset with
the lender who they think sold their information to a
competitor?
A.5. Under section 604(e)(6) of the FCRA consumers have the
right to opt-out of receiving firm offers of credit or
insurance. At www.optoutprescreen.com consumers have the choice
to opt-out from receiving firm offers for 5 years or
permanently.
In addition to the right to opt-out from receiving firm
offers of credit, Equifax allows residents of any U.S. State to
submit requests to limit the use and disclosure of their
sensitive personal information and opt-out of the sharing and
selling of their personal information, in accordance with
applicable U.S. State Privacy Laws. Equifax maintains an online
Privacy Preference Center where consumers can exercise control
over their data.
Q.6. How does your company ensure consumer data is only shared
or sold to legitimate and trustworthy third-party companies?
How does your firm evaluate these third-party companies?
A.6. Equifax maintains a credentialing process for all of its
customers. To receive Equifax data, a customer must sign a
contract with Equifax and meet credentialing requirements based
on the type of data requested. Credentialing includes
verification that the prospective customer is a legitimate
business, screening against sanctions lists, public information
searches, and may include additional verifications such as
background checks or onsite inspections depending on the type
of data to be provided.
Q.7. Does your firm sell consumer credit information to
companies located outside of the United States? If so, for what
purposes?
A.7. Equifax provides consumer reports only when there is a
FCRA permissible purpose. All customers, regardless of whether
they are requesting a consumer report or another type of
consumer information must meet our credentialing requirements
and sign agreements that limit the use of the information they
receive from Equifax. Some of our customers have locations
outside of the United States, but we primarily do business with
U.S.-based companies.
Q.8. If multiple consumers complain to your bureau about
outreach they are getting from an individual company--does your
company re-evaluate your arrangement with that company?
A.8. In general, Equifax does not receive complaints from
consumers about outreach they are getting from another company.
Q.9. Have you ever declined to sell data to a company as a
result of consumer complaints? If so, please explain.
A.9. In general, Equifax does not receive complaints from
consumers about how other companies use information obtained
from Equifax.
Q.10. What measures do you take to ensure the privacy and
security of consumer personal and financial information?
A.10. Equifax has invested significant time and resources into
ensuring that consumers' information is protected. Multiple
independent ratings show that our security capabilities exceed
every major industry average. We maintain a comprehensive
security control framework, which includes multiple layers of
controls designed to ensure the privacy and security of
consumer personal and financial information. In May of 2023, we
made our security and privacy controls framework public for the
benefit of security and privacy teams at organizations of all
sizes. By enabling the larger technology ecosystem with the
tools to design, build, and maintain secure processes, Equifax
is helping empower companies to set a cybersecurity and privacy
posture that is more adaptable to evolving threats.
Equifax also complies with relevant security and privacy-
related laws, regulations, and industry standards (e.g., PCI
DSS), and maintains processes that allow consumers to exercise
their rights under State privacy laws (e.g., CCPA).
Q.11. Are any demographic data points such as race, national
origin or gender included in the data being sold?
A.11. Consumer credit reports do not contain race, gender,
marital status, national origin or other kinds of demographic
information.
Q.12. Can consumers select which data points about them that
can be sold?
A.12. Under section 604(e)(6) of the FCRA, consumers have the
right to opt-out of receiving firm offers of credit or
insurance. At www.optoutprescreen.com, consumers have the
choice to opt-out from receiving firm offers for 5 years or
permanently.
In addition to the right to opt-out from receiving firm
offers of credit, Equifax allows residents of any U.S. State to
submit requests to limit the use and disclosure of their
sensitive personal information and opt-out of the sharing and
selling of their personal information, in accordance with
applicable U.S. State Privacy Laws. Equifax maintains an online
Privacy Preference Center (https://www.equifax.com/personal/my-
privacy/) where consu-
mers can exercise control over their data.
Q.13. Does your research find that people who live in States
which have not expanded their Medicaid program have lower
credit scores due to greater prevalence of medical debt?
A.13. Equifax has not conducted research analyzing the
interaction of expanded Medicaid programs and the impact of
medical debt on credit scores.
Q.14. As your firm restricts some medical debt from being
reported, what impact do you think this will have on credit
scores for States that have not expanded Medicaid?
Will they most likely still have lower credit scores than
those States which did expand Medicaid?
A.14. Equifax has not conducted research analyzing the
interaction of expanded Medicaid programs and the impact of
medical debt on credit scores.
Q.15. When someone changes their name, is it possible for
someone to prevent their original name from appearing in their
credit report to the person or firm which requested the credit
report? This would be the bank, employer, property manager,
etc.?
A.15. Equifax recommends that consumers who legally change
names directly inform Equifax and other nationwide consumer
reporting agencies (NCRAs) of this action once it is complete.
Doing this provides the critical link needed between the
person's chosen name and their original name, which will help
to maintain the integrity of their credit file and potentially
avoid any misunderstanding with creditors or lenders. While we
do not currently suppress original names, we are working to
address the concerns of transgender and nonbinary individuals
while maintaining the accuracy of consumer data, as required by
law.
Q.16. How can transgender people benefit from having their
credit history remain after a name change without losing their
privacy?
A.16. We share transgender and nonbinary individuals' desire to
have their credit history attached to their new name. Equifax
recommends that consumers who legally change names directly
inform Equifax and other NCRAs of this action once it is
complete. This will provide critical information in order to
link the credit files containing the chosen name and the former
name. This will assist in maintaining accuracy and integrity of
credit files during transitions and help to avoid
misunderstandings with creditors or lenders. Equifax uses a
proprietary keying and linking system to match consumers with
the appropriate file and we are committed to continuously
improving this system to address the concerns of transgender
and nonbinary individuals.
Q.17. Some have recommended removing all delinquencies from
credit files after 4 years, instead of 7. How would limiting
the time that delinquencies could be listed affect credit
reports and scores?
A.17. Equifax has not conducted an analytic study on the impact
of reducing the statutory time limit from 7 to 4 years on
credit reports and scores.
Q.18. A recent research paper from the Federal Reserve of
Minneapolis found unexplained disparities in denial rates for
solo applicants compared to dual applicants. In its sample of
mortgage applications from the confidential Home Mortgage
Disclosure Act (HMDA) dataset,* 56.1 percent feature a solo
applicant. Lenders denied 3.7 percent of applications in the
sample overall; the denial rate for solo applicants is 4.3
percent compared to 3.0 percent for dual applicants. Adjusting
for differences in characteristics of solo applicants, the
denial rate for solo applicants is 4.1 percent
compared to 3.0 percent for dual applicants. The report noted
that White applicants are the least likely to apply for a
mortgage alone.
Applications submitted by at least one White applicant are
over 50 percent more likely to have a co-applicant than
applications submitted by at least one Black applicant: 31
percent of applications submitted by at least one Black
applicant have a co-applicant, compared to 48 percent of
applications submitted by at least one White applicant. In
addition, single women over 62 tend to have higher mortgage
rates.
What insights does your firm have in the credit reports,
credit scores and mortgage acceptance, and rates offered to
single borrowers, especially borrowers of color and elderly
women, compared to White and duo borrowers?
A.18. In 2022, out of 6.68M mortgage originations, about 55.70
percent included single applicants. Credit reports do not
contain race, gender, marital status, or other kinds of
demographic information. In addition, Equifax does not receive
notification when a mortgage is closed; therefore, Equifax does
not have additional information to share on acceptance and
rates offered to specific borrowers.
------
RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN
FROM CHRIS A. CARTWRIGHT
Q.1. Congress enacted the Fair Credit Reporting Act to protect
consumers from harmful and inaccurate reporting errors--errors
which could result in consumers being declined for mortgages or
loans for which they should otherwise have qualified. Forced
arbitration has undermined these critical consumer protections.
Does your credit reporting agency use forced arbitration to
resolve consumer disputes over errors?
A.1. No, TransUnion does not use forced arbitration to resolve
consumer disputes over errors.
Q.2. In a January 2023 report, the CFPB noted that they had
received nearly one million complaints about credit reporting
and other consumer reporting, but only forwarded 565,000. The
reduction by over 40 percent is the result of the CFPB's
efforts to monitor and safeguard its complaint process from
undisclosed third-party submitters. Is it your position that
the 565,000 complaints that the CFPB forwarded to you after the
Bureau had screened for undisclosed third-party involvement are
still the result of illegitimate credit repair?
A.2. We appreciate the Consumer Financial Protection Bureau's
(CFPB) recent regulatory and enforcement efforts concerning
third-party credit repair agencies and the significant
challenges they pose due to their practices. \1\ Third-party
credit repair agencies continue to present challenges to the
CRAs, with a persistently large number of complaints and
disputes clogging the system.
---------------------------------------------------------------------------
\1\ See, e.g., Consumer Financial Protection Bureau, ``CFPB To
Distribute More Than $22 million to Consumers Harmed by Burlington
Financial Group's Debt Relief and Credit Repair Scams'', (May 5, 2023)
at https://www.consumerfinance.gov/about-us/blog/cfpb-distribute-22-
million-consumers-harmed-burlington-financial-group-debt-relief-credit-
repair-scams/. See also, Consumer Financial Protection Bureau,
``Consumer Financial Protection Bureau Files Suit Against Lexington
Law, PGX Holdings, and Related Entities''. (May 2, 2019) at https://
www.consumerfinance.gov/about-us/newsroom/bureau-files-suit-against-
lexington-law-pgx-holdings-and-related-entities/.
Q.3. TransUnion touts its online dispute process as a helpful
tool for consumers. According to TU's website, consumers can
``manage or fix any inaccuracies,'' on their credit reports
through the system. In 2021, TU acquired Neustar, a data broker
that handles people's sensitive identifiable information.
Should Americans have the same ability to manage or fix
---------------------------------------------------------------------------
inaccuracies for Neustar data? Please explain.
A.3. TransUnion operates multiple consumer reporting businesses
that are subject to the Fair Credit Reporting Act (FCRA), which
regulates the way CRAs can collect, access, use, and share
consumer information. In addition, TransUnion offers products
that are not subject to the FCRA, but instead are governed by a
variety of other State and Federal laws including the Gramm-
Leach-Bliley Act and a multiplicity of privacy laws. A major
component of our non-FCRA solutions are our fraud prevention
products, including the tools formerly known as Neustar Fraud
Solutions.
We take our compliance obligations seriously and employ a
comprehensive FCRA compliance program that governs our FCRA
offerings. In addition, the Consumer Financial Protection
Bureau supervises our activities and provides regular feedback.
Data accuracy is critical in both our FCRA and non-FCRA
products. Most State privacy laws afford consumers broad rights
to access, understand, and correct information. TransUnion
supports the ability of consumers to fix incorrect data
provided by data furnishers, and we are committed to ensuring
high levels of data accuracy. This includes an extensive data
management and due-diligence process that begins when potential
data sources are initially considered.
Q.4. According to a report from the House Select Subcommittee
on the Coronavirus Crisis, each year your company received
disputes on about 36 to 38 million individual items of
information in the credit reports you issued. Yet, according to
the report, your company has only 171 staff handling disputes.
How is your company able to conduct ``reasonable
investigations'' as required by the Fair Credit Reporting Act
with only 171 employees investigating tens of millions of
disputes?
Are any of these employees contracted from outsourced
vendors? If so, please explain and provide the name of the
country and vendor.
A.4. TransUnion is committed to data accuracy across all of our
businesses. Our turnaround time in addressing consumer disputes
is now approximately 9 days, well below the 30-day requirement
of the FCRA. When a consumer believes a data furnisher
inaccurately reports information, we facilitate the FCRA-
mandated investigatory process and, if data is incorrect, we
provide a system-wide update to the furnisher and other CRAs.
We regularly measure furnisher performance and provide insights
regarding furnisher data quality to the CFPB.
During the COVID-19 pandemic, TransUnion engaged in
extraordinary efforts to help consumers and we believe we were
appropriately staffed to manage the challenges we encountered.
This included keeping our call centers open, despite logistical
challenges, and consistently monitoring staffing levels to meet
regulatory standards in responding to consumer disputes. We
have increased our staffing levels since the pandemic and our
call center wait times have returned to their pre-pandemic
levels. In addition, we led the industry initiative to provide
free weekly access to consumer credit reports throughout the
pandemic. This initiative was a natural outgrowth of our
practice of broadly offering many consumer tools available for
free, including real time credit monitoring and various
analytical and simulation features that help consumers
understand interactions with scoring companies and lenders.
TransUnion also established a dedicated consumer support COVID-
19 resources webpage that provides all Americans easy and free
access to credit support tools, guidance on how to navigate the
pandemic, and one-click access to freeze their credit files or
dispute any information on their report.
We use an India-based vendor named Teleperformance to
support some of our consumer service operations.
Q.5. In your testimony, you stated that consumers are able to
see the information that is reported against them on a tenant
screening report today, and that they are able to dispute that
information under the FCRA.
Are tenants able to see all information included as part of
a tenant screening or background report before or at the same
time as a landlord accesses that information as part of making
a determination on a tenant's rental application? If so, please
describe the process that a tenant would use to access this
information from TransUnion. If a tenant cannot see the
information before or at the same time as a landlord accesses
the report, how can a consumer request a copy of their report?
A.5. TransUnion Rental Screening Solutions, Inc. (TURSS) offers
multiple rental screening solutions tailored to the parties to
a rental agreement. TURSS's rental screening services promote
equitable housing opportunities by helping property owners find
qualified tenants, reduce fraud, and protect the safety of
tenants and property. One of our primary solution offerings
allows tenants to see their information at the same time as
landlords. The ultimate availability of this offering depends
on adoption by customers and third-party platform providers.
Further, tenants can always access the information in their
report at any time through additional means, including
requesting a consumer disclosure under the FCRA or requesting a
copy from the landlord.
TURSS is committed to providing accurate rental screening
data, and TURSS is working with the CFPB and Federal Trade
Commission (FTC) to make pro-consumer changes to modernize the
tenant screening sector, including refraining from reporting
eviction cases before there is a final outcome. The CFPB
exercises supervisory authority over TURSS's screening
solutions and TURSS regularly engages with them to align our
practices with their expectations. We are eager to engage with
the Senate Banking Committee to explore further improvements to
screening practices that could create consistency in the
market.
Q.6. How many individual tenants requested a copy of their
tenant screening report from TransUnion in 2022? How many
landlords purchased tenant screening reports from TransUnion in
2022? Waiting on final number.
A.6. In 2022, TURSS had approximately 4,565 consumer disclosure
requests in which we concluded are individual tenants
requesting a copy of their report. In 2022, approximately
746,744 landlords used SmartMove and ShareAble for Rentals to
purchase tenant screening reports.
Q.7. Under TransUnion's current terms for a landlord to access
a tenant screening report for a consumer, is the landlord
permitted to share a copy of that report with the consumer? If
not, why not?
A.7. Yes--the landlord is permitted to share a copy of the
report with the consumer.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
FROM CHRIS A. CARTWRIGHT
Q.1. Please explain your company's current approach to
incorporating Buy Now, Pay Later (or BNPL) lending into a
consumer's credit file and describe the specific technological
or commercial impediments to making sure BNPL repayment history
is reported and scored in a standardized fashion.
A.1. TransUnion is exploring ways to accept Buy Now, Pay Later
(BNPL) information as part of a consumer's credit report. We
are having regular discussions with the CFPB and other
stakeholders on the operational issues associated with BNPL
data. As traditional scores cannot yet take into account this
new form of purchase financing, underwriting models will need
plenty of time to adjust to a new product type (the industry
hasn't seen a new product type in recent history).
BNPL and other select point-of-sale tradelines and
attributes will be reported to a partitioned section of the
TransUnion core credit file built specifically for this
purpose--where they will be excluded from delivery to existing
scoring models and decisioning criteria until models have a
chance to adjust. Default delivery of the core credit file will
not include any BNPL and point-of-sale data, and current FICO
Scores and VantageScore models will see no impact until these
scoring providers choose to incorporate these data after
additional analysis.
Q.2. We have recently heard credible reports of consumers
receiving dozens or hundreds of unexpected and unwanted phone
calls and texts, within hours of applying for a mortgage, from
other lenders offering purportedly better financing. Do you
make money from selling these so-called ``trigger leads,''
which are used to target and spam unsuspecting customers? Do
you believe dozens or hundreds of these solicitations are a
nuisance for consumers? Do you have the ability to prevent the
information that you provide to lenders from being used to
overwhelm consumers with ads and solicitations? If so, why are
reports of spam solicitations increasing?
A.2. Only credentialed lenders under contract with TransUnion
or a TransUnion re-seller may access TransUnion's mortgage
inquiry prescreen service. Each lender must provide acceptable
selection criteria, certify a permissible purpose under the
FCRA, and agree to provide a firm offer of credit as defined by
the FCRA to each consumer meeting the selection criteria.
Consumers who have opted out of prescreen lists are excluded
entirely, and consumers on the do-not-call list have their
phone numbers excluded from the returned information.
Q.3. What additional steps are your company taking to combat
the recent increase in fraud targeted at service members and
veterans?
A.3. Congress has long recognized that free credit reporting
for active-duty military can help keep service members informed
about their financial health and offer some peace of mind while
they focus on their mission. That is why TransUnion is a strong
public supporter of the Servicemembers' Credit Monitoring
Enhancement Act, bipartisan legislation to provide free credit
monitoring for all service members and their families.
Currently, this free monitoring is only available to active-
duty service members and members of the National Guard.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM CHRIS A. CARTWRIGHT
Q.1. Can you explain why consumer complaints about credit
reporting agencies at the Consumer Financial Protection Bureau
complaint portal have skyrocketed over the past 2 years?
A.1. TransUnion strives for the highest possible levels of data
accuracy--no one wins when a consumer's information is
incorrect. We are constantly working with lenders, other data
furnishers, and the CFPB on consumer complaints and dispute
management. We
believe that recent volumes of complaints via the Bureau's
portal are attributable to multiple factors.
At the beginning of the pandemic, the three national
Consumer Reporting Agencies (CRAs) increased the accessibility
of credit reports through free weekly disclosures of consumers'
files to help Americans understand and manage their financial
health. More than 166 million people in the United States have
taken advantage of free access to their credit information
through TransUnion and our partners. Greater access to consumer
reports increases consumer attention to information that data
furnishers report. A significant percentage of consumer
``complaints'' received by the CRAs actually pertain to issues
between consumers and data furnishers where consumers are
seeking to ``dispute'' information on their reports as required
under the FCRA--they are rarely complaints regarding a practice
or product offered by TransUnion.
Moreover, as seen in recent CFPB enforcement actions,
credit repair companies have significantly increased their
pernicious activity over the past few years. TransUnion
analyses indicate that the majority of complaints received
through the CFPB portal come from third-party credit repair
companies promising consumers that information can be deleted
from their credit files through the submission of mass disputes
of derogatory tradelines.
We have taken a number of proactive steps around consumer
complaints, and the most recent 2023 CFPB report highlights
several positive developments for TransUnion. \1\ In January,
the CFPB acknowledged that we made significant operational
changes with respect to the handling of consumer complaints in
2022 vs. 2021. The Bureau also favorably highlighted TransUnion
spending more time working on complaints. The CFPB also
acknowledged that TransUnion demonstrated a strong commitment
to providing relief to consumers when appropriate. We take
consumer complaints very seriously and work directly with
consumers and furnishers to resolve disputes. We know how
distressing any concerns about a credit report can be for a
consumer. We are continually working to improve our process for
addressing and resolving disputes.
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\1\ See Consumer Financial Protection Bureau, ``Annual report of
credit and consumer reporting complaints'' (January 2023) at https://
files.consumerfinance.gov/f/documents/cfpb_fcra-611-e_report_2023-
01.pdf.
Q.2. How is your firm thinking about using the new Artificial
Intelligence (AI) technologies? Does your firm use--or are you
considering using AI to communicate with consumers, in the
dispute process and/or in value-added services such as credit
---------------------------------------------------------------------------
scores?
A.2. Artificial Intelligence (AI) and automated tools are
gaining popularity given recent advancements and press around
models such at ChatGPT and other AI tools or platforms. While
AI at scale can bolster a company's effectiveness, it can also
pose risks if not implemented appropriately. TransUnion is
committed to innovation and staying at the forefront of
technology advancements. As always, we will do so by stewarding
the data we hold with the utmost care and responsibility.
TransUnion has a variety of ways that a consumer can file a
dispute with us. If a consumer calls TransUnion to initiate the
dispute process, there is no AI in that channel and they can
easily speak to an agent. We do use automation to route calls
and ask the
nature of the call, but we don't limit consumers from speaking
to agents.
Q.3. Does your firm sell consumer information to vendors? If
so, how can people avoid having their information sold?
A.3. As a global information and insights company, TransUnion
recognizes the central role that data plays in the various
markets in which we operate, and we take seriously the
accompanying responsibilities to steward consumer information.
As a CRA, TransUnion's principal business is providing consumer
financial data to financial institutions under the parameters
of the FCRA. The FCRA requires financial institutions and other
businesses to have a ``permissible purpose'' to obtain this
information. \2\ TransUnion maintains appropriate policies and
procedures to help ensure consumer report information is only
shared in a manner consistent with FCRA. These policies and
procedures include, but are not limited to, certification to
TransUnion that any entity obtaining a consumer report list the
permissible purpose(s) for which the report is being obtained
and that the report will not be used for any other purpose.
---------------------------------------------------------------------------
\2\ See, e.g., 15 U.S.C. 1681b(a)(2), (a)(3)(A), (a)(3)(B),
(a)(3)(C).
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Beyond the FCRA, our operations are conducted in accordance
with a variety of State and Federal privacy standards that
afford consumers broad control over their information.
TransUnion facilitates much of our U.S. privacy compliance
through our consumer portal, which provides Americans with
broad capabilities to opt-out of the sale and certain uses of
data. For consumers residing in States with laws providing
residents with additional privacy rights, the portal also
supports consumer requests to delete, correct, and view covered
personal information maintained by TransUnion. There is also a
standalone opt-out page, linked directly from the TransUnion
homepage. If easier, consumers can also exercise their privacy
rights by calling our customer call center.
Q.4. If a potential home buyer seeks a mortgage, are there any
limits to how many vendors can purchase their information and
how often--and through what means--they can contact the
potential borrower?
A.4. Only credentialed lenders under contract with TransUnion
or a TransUnion re-seller may access TransUnion's mortgage
inquiry prescreen service. Each lender must provide acceptable
selection criteria, certify a permissible purpose under the
FCRA, and agree to provide a firm offer of credit as defined by
the FCRA to each consumer meeting the selection criteria.
Consumers who have opted out of prescreen lists are excluded
entirely, and consumers on the do-not-call list have their
phone numbers excluded from the returned information.
Q.5. How does your firm address concerns and complaints from
consumers who received unwanted solicitations or are upset with
the lender who they think sold their information to a
competitor?
A.5. TransUnion takes consumer experiences, including
experiences caused by our customers, very seriously.
TransUnion's role in the consumer credit ecosystem is to
provide risk analytics and
consumer information to lenders to help with underwriting
processes. TransUnion has a credentialing process that outlines
processes for vetting customers, and ensuring that they are
accessing data in our products according to rules and
restrictions we have set out. Under TransUnion's Credentialing
and Onboarding Policy, the Credentialing and Onboarding Team is
responsible for determining if the business has a purpose
permitted by applicable laws, rules, regulations, standards and
TransUnion business practices to use TransUnion's products and
services.
Additionally, TransUnion re-performs onboarding procedures
for existing customers in certain circumstances, including a
change in ownership of legal structure of the business, a
change in the nature or purpose of the business, a notice of
regulatory action against the entity that warrants review, or
the identification of concerns regarding data reported, use of
services, or consumer complaints. Such procedures are also re-
performed based on the time elapsed since they were last
reviewed. If we determine that a customer violated an agreement
or misused data, we take corrective action, including
termination of the relationship. TransUnion has stringent
customer auditing processes and procedures, information
security requirements, legal standards, and other controls in
place to ensure that anyone accessing consumers' personal data
through TransUnion has a legal basis to do so. TransUnion has
various policies and contract language depending on the data
and relationship.
TransUnion monitors consumer complaints and disputes as
part of an extensive Data Furnisher Monitoring Program. If
issues are found related to a data furnisher following its FCRA
obligations (including data accuracy and handling of consumer
disputes), TransUnion will take corrective action related to
that furnisher, up to and including termination, as necessary.
TransUnion has terminated customer relationships as a result of
our data furnisher monitoring activities and our data furnisher
monitoring activities include monitoring consumer disputes/
complaints related to individual furnishers and taking action
up to an including termination.
Q.6. How does your company ensure consumer data is only shared
or sold to legitimate and trustworthy third-party companies?
How does your firm evaluate these third-party companies?
A.6. Please see our answers throughout concerning the
permissible purpose requirements of the FCRA and our preceding
response to Question 5 regarding our credentialing processes.
Further, TransUnion regularly shares data with the CFPB on the
volume and types of submissions received through the dispute
and complaints process.
Q.7. Does your firm sell consumer credit information to
companies located outside of the United States? If so, for what
purposes?
A.7. We do not sell any information about U.S. consumers
outside of the United States. As a global information and
insights company, we have a presence in more than 30 countries
and territories, including the United States, Canada, Latin
America, the United Kingdom, Africa, Asia Pacific, and India.
TransUnion has put in place procedures, through our
credentialing and procurement processes, to ensure that we are
not doing business with individuals on the Office of Foreign
Assets Control's Specially Designated Nationals and Blocked
Persons list. TransUnion does not store U.S. consumer data in
China, Russia, North Korea, Cuba, Venezuela, or Iran.
Q.8. If multiple consumers complain to your bureau about
outreach they are getting from an individual company--does your
company re-evaluate your arrangement with that company?
A.8. Please see answer to Question 5.
Q.9. Have you ever declined to sell data to a company as a
result of consumer complaints? If so, please explain.
A.9. If we determine that a customer violated an agreement or
misused data, we take corrective action, including termination
of the relationship.
Q.10. What measures do you take to ensure the privacy and
security of consumer personal and financial information?
A.10. We secure and protect the information entrusted to us by
building, monitoring and defending information security
programs built on a foundation of compliance and
accountability. We proactively manage our programs and
continuously invest to secure the data we hold on behalf of
consumers and businesses. We are organized to develop,
implement and maintain a robust information security program
consistent with TransUnion's size and complexity. We employ
multiple overlapping layers of security controls to reduce risk
and eliminate single points of failure. Our program focuses on
risk identification and fostering resiliency, all to protect
TransUnion, our assets, consumers and customers.
Responsible data stewardship is fundamental to our mission.
We have developed, and continue to augment, a robust, global
privacy program to protect consumer information and our data
assets. Our program is built upon TransUnion's Global Privacy
Policy which requires compliance across the enterprise,
including all of TransUnion's business units, as well as
majority-owned company subsidiaries. Collectively, these
efforts help ensure all new products and services comply with
the most current privacy regulations around the world, and meet
or exceed consumers' evolving privacy expectations.
Q.11. Are any demographic data points such as race, national
origin or gender included in the data being sold?
A.11. The FCRA prohibits the reporting and collection of such
information on a consumer's credit report. With respect to non-
FCRA data, management of a consumer's sensitive information is
governed by a variety of State and Federal requirements noted
in previous answers.
Q.12. Can consumers select which data points about them that
can be sold?
A.12. TransUnion's consumer privacy portal offers consumers
broad opt-out rights regarding covered personal information,
including the rights to opt-out of: the sale/sharing of
personal information, use of personal information for automated
decision-making, use of personal information for cross-context
behavioral advertising/targeted advertising, and use of
sensitive personal information.
Q.13. Does your research find that people who live in States
which have not expanded their Medicaid program have lower
credit scores due to greater prevalence of medical debt?
A.13. TransUnion does not possess research that evaluates the
potential correlation between States that have not expanded
their Medicaid program and States with lower credit scores due
to greater prevalence of medical debt.
Q.14. As your firm restricts some medical debt from being
reported, what impact do you think this will have on credit
scores for States that have not expanded Medicaid? Will they
most likely still have lower credit scores than those States
which did expand Medicaid? \3\
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\3\ Andrew Van Dam, ``Analysis--Why the South Has Such Low Credit
Scores'', The Washington Post (WP Company, February 21, 2023), https://
www.washingtonpost.com/business/2023/02/17/bad-southern-credit-scores/.
A.14. Following our response to Question 13, we are unable to
make assumptions or claims regarding the impacts to scores for
States that have not expanded Medicaid. We would be happy to
collaborate with Senator Cortez Masto on exploring policy
solutions around Medicaid, medical debt collections, and credit
score-related questions to research policy solutions that
benefit all consumers.
We continue to evaluate the system to ensure reported
tradelines are reflective of a consumer's ability to repay and
we are continually in dialogue with lenders regarding the
information they believe is necessary for evaluating risk. We
would encourage cross-industry collaboration on issues related
to costs of health care, and medical collections debt.
Q.15. When someone changes their name, is it possible for
someone to prevent their original name from appearing in their
credit report to the person or firm which requested the credit
report? This would be the bank, employer, property manager,
etc.?
A.15. TransUnion is committed to helping all consumers,
including transgender individuals, to navigate the name change
process with ease. As part of this effort, consumers can change
their first and/or middle names on their credit report by
providing the appropriate documentation to the CRAs, including
TransUnion. We are also introducing a process for consumers to
ensure that their dead name is not displayed on a credit report
if they so choose. We anticipate this process will be available
later this year.
Q.16. How can transgender people benefit from having their
credit history remain after a name change without losing their
privacy?
A.16. See response to question above.
Q.17. Some have recommended removing all delinquencies from
credit files after 4 years, instead of 7. How would limiting
the time that delinquencies could be listed affect credit
reports and scores?
A.17. The suppression of data or the suspension of some data
elements that lenders rely on to extend credit to consumers
would potentially undermine the safety and soundness of
consumer credit markets. Consumer credit files that are
prepared and maintained by the CRAs make it possible for
lenders to determine whether a particular consumer is a good
credit risk, and lenders rely on credit reports and scores to
decide whether they should extend credit to consumers. Without
a comprehensive credit report with a history of good credit,
lenders would have no choice but to rely on subjective criteria
rather than objective historical data to mitigate risk of
delinquent payments. This would also make credit far harder to
obtain, so a consumer runs the risk of staying credit
invisible, or outside of the credit system.
Q.18. A recent research paper from the Federal Reserve of
Minneapolis \4\ found unexplained disparities in denial rates
for solo applicants compared to dual applicants. In its sample
of mortgage applications from the confidential Home Mortgage
Disclosure Act (HMDA) dataset,* 56.1 percent feature a solo
applicant. Lenders denied 3.7 percent of applications in the
sample overall; the denial rate for solo applicants is 4.3
percent compared to 3.0 percent for dual applicants. Adjusting
for differences in characteristics of solo applicants, the
denial rate for solo applicants is 4.1 percent compared to 3.0
percent for dual applicants. The report noted that White
applicants are the least likely to apply for a mortgage alone.
Applications submitted by at least one White applicant are over
50 percent more likely to have a co-applicant than applications
submitted by at least one Black applicant: 31 percent of
applications submitted by at least one Black applicant have a
co-applicant, compared to 48 percent of applications submitted
by at least one White applicant. In addition, single women over
62 tend to have higher mortgage rates.
---------------------------------------------------------------------------
\4\ Ben Horowitz, Kim-Eng Ky, and Libby Starling, ``Higher
Mortgage Denials for Solo Applicants Feed Racial Disparities in
Lending'', Federal Reserve Bank of Minneapolis, March 28, 2023, https:/
/www.minneapolisfed.org/article/2023/higher-mortgage-denials-for-solo-
applicants-feed-racial-disparities-in-lending.
---------------------------------------------------------------------------
What insights does your firm have in the credit reports,
credit scores and mortgage acceptance, and rates offered to
single borrowers, especially borrowers of color and elderly
women, compared to White and duo borrowers?
A.18. TransUnion does not possess specific research on this
topic, but we would be happy to have our Research and
Statistics group engage with your office to discuss these
important concerns further. As a general matter, TransUnion
cannot differentiate between when a consumer is shopping for
rates vs. when a consumer makes an application, so we cannot
give definitive numbers regarding single vs. joint application
acceptance rates.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR HAGERTY
FROM CHRIS A. CARTWRIGHT
Q.1. The CFPB's report on tenant screening, released in
November of last year, took a hostile approach to the practice,
and neglected to acknowledge the public good that such
screening services provide.
Please explain how tenant screening services help both
landlords and prospective renters, and what effect they have on
the safety of our communities.
A.1. TransUnion provides an important service to landlords to
help them make informed decisions and keep tenants safe. A full
and accurate record of a prospective tenant's credit, criminal,
and eviction history gives owners and operators the most
comprehensive picture of the applicant. This is the best way to
determine an applicant's ability to pay rent, be a positive
addition to the residential community, and prove whether a
tenant could be a risk to the safety of others, or to the
building itself. Any proposal that restricts a housing
provider's ability to conduct criminal background checks
inhibits their ability to ensure a safe, secure environment for
their residents and employees.
Q.2. Do you agree with the CFPB's view that ``Tenant background
check content for landlords has questionable relevance''?
A.2. No, tenant screening solutions are a vital tool for
keeping communities safe and for combating rising rental costs.
By identifying tenants with higher probability of nonpayment, a
landlord can avoid having to raise rent on other tenants, while
simultaneously decreasing the likelihood of future evictions.
The eviction process can take weeks or months and it can cost
as much as $10,000 in many jurisdictions--these are costs that
smaller landlords simply cannot bear. Placing smaller landlords
in the position of having insufficient insights into the
financial well-being of possible tenants is unfair to the
landlord and all of the other residents who may face higher
costs.
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RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN
FROM BRIAN J. CASSIN
Q.1. Congress enacted the Fair Credit Reporting Act to protect
consumers from harmful and inaccurate reporting errors--errors
which could result in consumers being declined for mortgages or
loans for which they should otherwise have qualified. Forced
arbitration has undermined these critical consumer protections.
Does your credit reporting agency use forced arbitration to
resolve consumer disputes over errors?
A.1. Nothing in Experian's contracts with consumers prevents
consumers from fully vindicating their rights under the FCRA or
any other applicable State or Federal law. Arbitration only
applies to customers who have agreed to arbitration by signing
up for an Experian membership, which provides a variety of
services. Of the cases brought by consumers who have signed an
arbitration agreement, only a small number of those cases ever
result in arbitration. The vast majority are resolved through
the court system.
Q.2. Is your company still using outsourced vendors from other
countries to process your disputes? If so, please explain and
provide the name of the country and vendor.
A.2. Experian does not use outsourced vendors to process
consumer disputes, we rely on our own employees all of whom
have had extensive training. Some of these employees are
located in Costa Rica and Chile.
Q.3. In a January 2023 report, the CFPB noted that they had
received nearly one million complaints about credit reporting
and other consumer reporting, but only forwarded 565,000. The
reduction by over 40 percent is the result of the CFPB's
efforts to monitor and safeguard its complaint process from
undisclosed third-party submitters. Is it your position that
the 565,000 complaints that the CFPB forwarded to you after the
Bureau had screened for undisclosed third-party involvement are
still the result of illegitimate credit repair?
A.3. It is our judgement that approximately 81 percent of the
complaints that we receive through the complaint portal are
credit repair. Additionally, the CFPB's own complaint portal
report shows that credit reporting submissions are mainly
related to disputes about information reported to us by a data
furnisher, rather than complaints about consumer
dissatisfaction about something a CRA has done. Disputes
represent a consumer's long-held right under the Fair Credit
Reporting Act to challenge the accuracy of items on their
credit report. It appears that consumers, and particularly
credit repair companies, are now using the CFPB complaint
portal as another channel to initiate disputes. In 2021, we at
Experian flagged 75 percent of complaints coming across the
portal as credit repair and that number rose to 81 percent in
2022. Overall, we have seen a 225 percent increase in disputes
coming into the complaint portal since last year. However,
every complaint we receive through the CFPB portal is taken
seriously and responded to in a timely manner.
Q.4. Experian has noted how important it is for people to
``check for accuracy in [their] credit reports,'' and correct
errors. In 2020, Experian acquired data broker and tech
platform, Tapad, explaining that the acquisition would,
``enhance Experian's digital offerings for advertisers,'' and
help position Experian ``to take advantage of expansion in the
market for digital data advertising.'' Should Americans have
the same ability to manage or fix inaccuracies over data that
is used for marketing purposes? Please explain.
A.4. Experian Marketing Solutions (EMS) provides all United
States consumers the ability to (i) access the personal data
that EMS maintains about them, (ii) opt-out from the sale or
sharing of such EMS data, use of such EMS data in targeted
advertising, or use of sensitive personal data about them by
EMS, (iii) delete such EMS data, and (iv) correct or delete any
inaccuracies in the personal data that EMS maintains about
them. These consumer options and our practices comply with, and
go beyond, what applicable State and Federal privacy laws and
industry self-regulatory guidelines require.
Q.5. According to a report from the House Select Subcommittee
on the Coronavirus Crisis, each year your company received
disputes on about 30 to 40 million individual items of
information in the credit reports you issued. Yet, according to
the report, your employees only spend an average of 7.154
minutes per dispute. How are your employees able to conduct
``reasonable investigations'' as required by the Fair Credit
Reporting Act when they only spend a little over 7 minutes
investigating each dispute?
A.5. Consumers can dispute information on their credit report
by mail, online, through the Experian app, or by telephone.
When a consumer contacts Experian to dispute information in
their credit file, we review and consider all information and
supporting documents provided by the consumer to determine if
we can update or delete the disputed information without
contacting the creditor.
If we are unable to make a change to the consumer's credit
report based on the information provided, Experian conveys the
consumer's dispute along with any relevant additional
information provided by the consumer, which may include
documentation and/or an explanation, to the data furnisher to
verify the accuracy of the disputed information. Experian has
processes in place to ensure that we provide information to
furnishers within 5 business days of receipt.
Once transmitted, the electronic dispute system, e-Oscar,
requires furnishers to open all supporting documentation
provided with the dispute. The creditor then has 30 days in
which to respond to the dispute and they must certify that
their responses are accurate. We then update the consumer's
information, if appropriate, based on the response from the
furnisher. If the furnisher fails to respond to the dispute
within 30 days, the disputed information is deleted from the
credit file until the furnisher can certify that the
information is accurately reported.
Experian does not side with either the consumer or the
lender; our process is designed to ensure that the data
provided to us by lenders is accurate and reflects the
consumers' payment history. The law prescribes that Experian
consult the furnisher because they are the holder of the
account record with the consumer and are in the best position
to determine whether the information being challenged by the
consumer is accurate or not.
If a consumer disagrees with the results of the dispute-
resolution process, we encourage the consumer to go directly to
the lender and we provide clear contact information for the
lender in the response we send to the consumer at the
conclusion of the dispute process. Consumers who are
unsatisfied with the reinvestigation also have the right to add
a statement of dispute to their credit report. In addition to
that right, a consumer who has previously disputed an item can
initiate a new dispute if they are providing additional
relevant information.
Regardless of the outcome of a consumer's dispute, we
respond to the consumer with an explanation of the outcome.
This process is clearly established, including all applicable
timeframes, by the FCRA and is completed within 30 days of our
receipt of the dispute, and often much sooner.
Q.6. Experian has a product called ConsumerView SM,
which is described as ``the largest and most comprehensive
resource for traditional and digital marketing campaigns. With
thousands of attributes on more than 300 million consumers and
126 million households, ConsumerView SM data
provides a deeper understanding of your customers, resulting in
more actionable insights across channel.'' In a brochure about
it, Experian states that ConsumerView SM includes,
``Aggregated credit information'' and ``Financial data
segments'' including the ``ConsumerView SM
Profitability Score, which ranks households most likely to pay
their debts.'' What is the origin of this ``Aggregated credit
information'' and information to create a ``Profitability
Score?'' Does it come from the main credit reporting files?
A.6. Experian Marketing Solutions provides product sets to
marketers derived from aggregated and summarized information
from Experian credit file data for the purpose of understanding
broad consumer trends. This information is completely
anonymized and merely summarizes financial information by
market areas, enables insights as to historical financial
trends, and to develop models to make more informed marketing
decisions. Clients may only use this data for marketing and
analytics purposes and not for eligibility or other permitted
uses under the FCRA.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
FROM BRIAN J. CASSIN
Q.1. Please explain your company's current approach to
incorporating Buy Now, Pay Later (or BNPL) lending into a
consumer's credit file and describe the specific technological
or commercial impediments to making sure BNPL repayment history
is reported and scored in a standardized fashion.
A.1. Experian is actively working with Buy Now Pay Later
lenders, or BNPL, to establish reporting processes using
standard industry mechanisms (Metro 2). Becoming a data
furnisher is a complicated process that requires not only the
ability to accurately provide tradelines to the credit
reporting agencies, but also handle disputes and other
potential consumer inquiries. We are working diligently to
provide the support BNPL lenders need to be part of the
ecosystem. At this juncture this is still a relatively new
initiative and few BNPL providers currently report their loans.
For the near term, loans reported to Experian will be
included in the core credit report but not reflected in
traditional credit scores until models adapt to consider BNPL
data. We are committed to working with BNPL lenders, banks, and
the CFPB to establish effective solutions for this data to be
used in the credit ecosystem in a way that is meaningful to all
types of lenders and fair to consumers. The CFPB has also
indicated that BNPL providers should participate in the credit
reporting system.
Q.2. We have recently heard credible reports of consumers
receiving dozens or hundreds of unexpected and unwanted phone
calls and texts, within hours of applying for a mortgage, from
other lenders offering purportedly better financing. Do you
make money from selling these so-called ``trigger leads,''
which are used to target and spam unsuspecting customers? Do
you believe dozens or hundreds of these solicitations are a
nuisance for consumers? Do you have the ability to prevent the
information that you provide to lenders from being used to
overwhelm consumers with ads and solicitations? If so, why are
reports of spam solicitations increasing?
A.2. Experian believes consumers deserve access to fair and
affordable credit, including mortgages. We empower lenders to
offer consumers choice in credit terms when shopping for a
mortgage by alerting them when consumers engage in the mortgage
marketplace. With a broader range of offers to consider,
consumers have more options when they need them most. This can
help consumers save thousands of dollars during the homebuying
process. In a time when interest rates and housing prices are
rising, this can in some instances help people afford the right
home for them.
We recognize that the current environment, with fewer
mortgage applications being initiated, has contributed to an
increase in the number of consumer contacts, and we are
actively looking at this process. We also recognize that some
consumers may not be interested in additional financing
options. Consumers can quickly opt-out of receiving offers by
visiting www.optoutpresceen.com or www.experian.com at any
time. Experian processes and incorporates consumer-requested
opt-outs within 48 hours of receipt.
The solutions Experian provides to the mortgage market are
done so in the best interest of consumers and in accordance
with the requirements of the Fair Credit Reporting Act. Our
clients and partners are contractually required to maintain
high levels of commitment to the responsible use of data, as
well as uphold all applicable laws.
Q.3. What additional steps are your company taking to combat
the recent increase in fraud targeted at service members and
veterans?
A.3. Service members can sign up for free credit monitoring and
credit reports at Experian IDnotifyTM for Active
Military Members (https://www.experian.com/lp/military.html).
Deployed active-duty service members can place an active-duty
alert on the credit report to prevent identity theft. More
generally, all service members and their families can freeze
their credit report with all three of the national CRAs. As
with all consumers, the sooner irregularities are detected, the
easier it is to prevent and remediate identity theft.
The Experian website also provides significant educational
resources. For example, recent blog posts specifically warned
about scams targeted at those in the military and at veterans
and offered suggestions for how military families can save
money. Experian also hosts online credit chats with partners
who serve those in the military, veterans, and their family
members.
When a military consumer disputes the accuracy of
information in the credit report because the consumer believes
that they have been the victim of fraud or identity theft,
those cases are escalated to a specialized team dedicated to
handling this type of dispute.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM BRIAN J. CASSIN
Q.1. Can you explain why consumer complaints about credit
reporting agencies at the Consumer Financial Protection Bureau
complaint portal have skyrocketed over the past 2 years? Now,
about three of four consumer complaints are about credit scores
and credit reports.
A.1. We have over 220 million consumers in our credit reporting
database, and submissions made to the CFPB portal represent .04
percent of consumers in our system. That said, every complaint
we receive through the CFPB portal is taken seriously and
resolved in a timely manner.
The CFPB's report shows that credit reporting submissions
to the portal are mostly related to disputes about information
reported to us by a data furnisher, rather than complaints
about something a CRA has done. The Fair Credit Reporting Act
gives consumers the right to dispute information with CRAs and
furnishers, but it appears that many consumers are now using
the CFPB complaint portal to initiate a dispute rather than, or
in addition to, directly coming to a CRA or furnisher.
It has also become apparent that a large portion of the
increase in submissions is related to the activities of credit
repair clinics. In 2021, we at Experian flagged 75 percent of
complaints coming across the portal as credit repair, that
number rose to 81 percent in 2022. Overall, we have seen a 225
percent increase in disputes coming into the complaint portal
since last year.
Credit repair companies charge consumers hundreds or
thousands of dollars on the promise to remove accurate, but
negative data from the consumer's credit report. These
unscrupulous companies then file multiple disputes with the
bureaus, the CFPB, and lenders, betting on the inability to
complete a reinvestigation within the statutory 30-day period
within which disputes must be resolved, causing negative
information to fall off a consumer's credit report at least
temporarily. Credit repair companies are also using the portal
to circumvent existing limitations that prevent third parties
from filing frivolous disputes with CRAs or directly with
furnishers.
The claims these credit repair organizations make to
consumers are at best misleading and often deceptive. The CFPB
has brought some enforcement actions against credit clinics for
the deceitful marketing tactics they use on consumers, but to
our knowledge has not taken action to prevent this type of
deceptive and harmful conduct from occurring on the complaint
portal. The complaint portal is not immune from these kinds of
companies, and it should not be used by bad actors to harm or
defraud consumers or cause disruption to CRAs and lenders,
taking valuable time away from consumers with legitimate
issues.
Q.2. How is your firm thinking about using the new Artificial
Intelligence (AI) technologies?
Does your firm use--or are you considering using AI to
communicate with consumers, in the dispute process and/or in
value-added services such as credit scores?
A.2. Experian is committed to using advanced data, analytics,
and innovative solutions to deliver faster and better services
to our clients and consumers. We are constantly exploring and
evaluating new technologies, including artificial intelligence.
Our commitment is substantially based on a desire to help
individuals to take control of their financial lives and access
financial resources, businesses to make smarter decisions,
lenders to lend more responsibly, and organizations to prevent
identity fraud. That said, we have implemented rigorous
standards to ensure that any use of artificial intelligence
technologies meets all of our business and legal requirements.
Regardless of the technology deployed, our services must
comply with all applicable Federal and State laws and leveraged
safely and responsibly. This includes upholding the highest
standards of data privacy, accuracy, security, and
transparency.
Q.3. Does your firm sell consumer information to vendors? If
so, how can people avoid having their information sold?
A.3. Experian sells credit report information to third-party
resellers with a permissible purpose under the FCRA. We onboard
our resellers with rigorous processes in place to verify the
uses for which third parties are obtaining reports and they
must operate in compliance with the Fair Credit Reporting Act.
Q.4. If a potential home buyer seeks a mortgage, are there any
limits to how many vendors can purchase their information and
how often--and through what means--they can contact the
potential borrower?
A.4. Experian believes that consumers deserve access to fair
and affordable credit, including mortgages. We empower lenders
to offer consumers choice in credit terms when shopping for a
mortgage by alerting them when consumers engage in the mortgage
marketplace. With a broader range of offers to consider,
consumers have more options when they need them most. This can
help consumers save thousands of dollars during the homebuying
process. In a time when interest rates and housing prices are
rising, this can in some instances help people afford the right
home.
However, we recognize that the current environment, with
fewer mortgage applications being initiated, has caused an
increase in the number of consumer contacts, and we are
actively looking at this process. We also recognize that some
consumers may not be interested in additional financing
options. Consumers can quickly opt out of receiving offers by
visiting www.optoutpresceen.com or www.experian.com at any
time. Experian processes and incorporates consumer-requested
opt-outs within 24-48 hours of receipt.
The solutions Experian provides to the mortgage market are
done so in the best interest of consumers and in accordance
with the requirements of the Fair Credit Reporting Act. Our
clients and partners are contractually required to maintain
high levels of commitment to the responsible use of data, as
well as uphold all applicable laws.
Q.5. How does your firm address concerns and complaints from
consumers who received unwanted solicitations or are upset with
the lender who they think sold their information to a
competitor?
A.5. Consumers who choose to not receive offers can simply opt-
out. Every prescreened offer that is delivered to a consumer
comes with the notice that a consumer can opt-out at any time.
This is done through: 1-888-5-OPT-OUT (1-888-567-8688),
www.optoutpre-
screen.com or at www.experian.com.
Consumers receive tremendous benefits from prescreened
offers. These benefits range from creating a very competitive
market for credit cards through perks, points, and lower
interest rates, to setting the stage for large amounts of
consumer choice in the mortgage and home equity space. The
competition fostered in the marketplace by prescreening helps
to lower the cost of credit to consumers, and to make credit
more widely available to consumers.
Q.6. How does your company ensure consumer data is only shared
or sold to legitimate and trustworthy third-party companies?
How does your firm evaluate these third-party companies?
A.6. Experian adheres to documented and thorough due diligence
processes for both the initial credentialing and
recredentialing of Experian clients that ensures the entities
and prospects are legitimate businesses and have permissible
purpose to access consumer data. All clients and resellers of
Experian data are vetted for legal and regulatory compliance
issues. Prospective users that have a history of significant
compliance issues may be permanently barred from obtaining
Experian consumer data either directly or through a reseller.
Q.7. Does your firm sell consumer credit information to
companies located outside of the United States? If so, for what
purposes?
A.7. Only on rare occasions will Experian allow its consumer
credit information to be sold outside of the United States,
such as with Nova Credit, Inc. (a U.S.-based company that, for
example, helps American ex-patriots build and obtain credit
abroad) where they have agreed to abide by all applicable laws
both foreign and domestic, and which requires consumer consent.
We also have few clients that will utilize our data within
their decisioning processes from locations outside of the
United States (e.g., offshore call centers), with the same
requirement of complying with all applicable foreign and
domestic laws. In this case, data does not leave U.S. borders
since the employees of the client will access the data through
a secure client system. All entities will undergo the same
credentialing and recredentialing process described in Question
6.
Q.8. If multiple consumers complain to your bureau about
outreach they are getting from an individual company--does your
company re-evaluate your arrangement with that company?
A.8. Experian utilizes a robust credentialing and
recredentialing process to evaluate clients to detect items
such as consumer complaints, unreputable business practices,
and regulatory violations. Any identified concerns are
considered when establishing decisions to conduct business with
the clients.
Q.9. Have you ever declined to sell data to a company as a
result of consumer complaints? If so, please explain.
A.9. Yes, Experian would and has declined to sell data to
businesses based on consumer complaints. If Experian identifies
any concerns with a business involving consumer complaints,
that information would be taken into consideration in
determining if Experian would conduct business with that
entity.
Q.10. What measures do you take to ensure the privacy and
security of consumer personal and financial information?
A.10. Data privacy is at the heart of what we do and the way we
work. We are committed to transparent and responsible data
practices and use. The Fair Credit Reporting Act, first enacted
almost 50-years ago and updated several times since then, was
the original financial privacy law on which many privacy laws
around the world have been modeled. The guiding principles of
the FCRA, including transparency, accuracy, and security,
embody how we manage and use data, build products, and conduct
our business around the world. Our aim is to balance privacy
expectations with the social and economic benefits derived from
the responsible use of data. Experian is committed to providing
consumers with notice, choice, and education about the use of
their personal information, such as what information is
collected, how the information is being used, as well as
providing choices in the use of the information.
Security comes first at Experian. We continually enhance
our security infrastructure, practices, and culture across the
business. We invest heavily in cyber security and have
specialist teams, state-of-the-art technology, and rigorous due
diligence procedures to deal with potential threats. Our
security approach has three tiers: applying tools and processes
to prevent threats from entering our environment; detecting if
a threat enters our environment; and mitigating any threats by
minimizing the potential for information to be extracted from
our environment.
Q.11. Are any demographic data points such as race, national
origin or gender included in the data being sold?
A.11. Credit reports do not contain information about gender,
race, or national origin.
Q.12. Can consumers select which data points about them that
can be sold?
A.12. Experian complies with all applicable laws governing the
sale and use of consumer data. The Fair Credit Reporting Act
strictly governs what data can be included in credit reports
and the circumstances in which consumer credit data can be
released. Consumers also have the right to opt-out of having
their data released for prescreened offers of credit and can do
so easily at www.experian.com and www.optoutprescreen.com.
Other privacy laws, including the Gramm-Leach-Bliley Act and
numerous State laws, further govern the sale and use of data
outside the context of the FCRA.
Q.13. Does your research find that people who live in States
which have not expanded their Medicaid program have lower
credit scores due to greater prevalence of medical debt?
A.13. Experian tracks credit scores on a State-by-State basis
in an annual report. We have not studied the effect of the
choices that States have made regarding Medicaid expansion. Our
most recent findings can be found at What Is the Average Credit
Score in the U.S.?--Experian: https://www.experian.com/blogs/
ask-experian/what-is-the-average-credit-score-in-the-u-s/.
Information for consumers managing medical debt can we found at
How Does Medical Debt Affect Your Credit Score?--Experian:
https://www.
experian.com/blogs/ask-experian/medical-debt-and-your-credit-
score/.
Q.14. As your firm restricts some medical debt from being
reported, what impact do you think this will have on credit
scores for States that have not expanded Medicaid? Will they
most likely still have lower credit scores than those States
which did expand Medicaid? \1\
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\1\ Andrew Van Dam, ``Analysis--Why the South Has Such Low Credit
Scores'', The Washington Post (WP Company, February 21, 2023), https://
www.washingtonpost.com/business/2023/02/17/bad-southern-credit-scores/.
A.14. Experian is committed to continue to study the impact
that medical debt has on consumers while balancing the need to
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maintain predictive data on the credit file.
Q.15. When someone changes their name, is it possible for
someone to prevent their original name from appearing in their
credit report to the person or firm which requested the credit
report? This would be the bank, employer, property manager,
etc.?
A.15. In the case of a legal name change for a transgender
individual, we can suppress the consumer's previous name on the
credit report. The individual consumer must contact the credit
bureau to initiate this process. Once we receive the consumer
request, it typically takes less than 10 days for the
information to be updated in our system. Once the name has been
changed, anyone checking the report will only see the new legal
name. In updating a name, consumers are also advised to update
their legal name with any creditors and financial institutions
that may report to Experian to ensure continuity in the
consumer's report.
Q.16. How can transgender people benefit from having their
credit history remain after a name change without losing their
privacy?
A.16. Experian is committed to ensuring that credit reports are
accurate, which includes accurately reporting a consumer's
identity. Gender designation is not part of a credit report. We
also have a process through which an individual who has made a
legal name change can provide appropriate documentation and
request their name be updated on their Experian credit report
while retaining all their credit history.
Q.17. Some have recommended removing all delinquencies from
credit files after 4 years, instead of 7. How would limiting
the time that delinquencies could be listed affect credit
reports and scores?
A.17. The Fair Credit Reporting Act prohibits consumer
reporting agencies from including in consumer reports most
adverse information that is older than 7 years. The impact of
removing negative data after 4 years has not been widely
studied. It would certainly impact scoring models and
underwriting models since they are calibrated to the current 7-
year data retention standard. Reducing the length of time that
all delinquencies may be reported to 4 years could also create
blind spots for creditors who need to adequately assess risk,
and ultimately make credit less available or extremely
expensive for most of the population. Making the determination
as to the impact of such a change would have to be studied by
Congress, lenders, and their functional regulators to get to
the right policy decision as it would broadly impact credit
underwriting and risk.
Q.18. A recent research paper from the Federal Reserve of
Minneapolis \2\ found unexplained disparities in denial rates
for solo applicants compared to dual applicants. In its sample
of mortgage applications from the confidential Home Mortgage
Disclosure Act (HMDA) dataset,* 56.1 percent feature a solo
applicant. Lenders denied 3.7 percent of applications in the
sample overall; the denial rate for solo applicants is 4.3
percent compared to 3.0 percent for dual applicants. Adjusting
for differences in characteristics of solo applicants, the
denial rate for solo applicants is 4.1 percent compared to 3.0
percent for dual applicants. The report noted that White
applicants are the least likely to apply for a mortgage alone.
Applications submitted by at least one White applicant are over
50 percent more likely to have a co-applicant than applications
submitted by at least one Black applicant: 31 percent of
applications submitted by at least one Black applicant have a
co-applicant, compared to 48 percent of applications submitted
by at least one White applicant. In addition, single women over
62 tend to have higher mortgage rates.
---------------------------------------------------------------------------
\2\ Ben Horowitz, Kim-Eng Ky, and Libby Starling, ``Higher
Mortgage Denials for Solo Applicants Feed Racial Disparities in
Lending'', Federal Reserve Bank of Minneapolis, March 28, 2023, https:/
/www.minneapolisfed.org/article/2023/higher-mortgage-denials-for-solo-
applicants-feed-racial-disparities-in-lending.
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What insights does your firm have in the credit reports,
credit scores and mortgage acceptance, and rates offered to
single borrowers, especially borrowers of color and elderly
women, compared to White and duo borrowers?
A.18. Experian does not have access to or maintain HMDA-related
data. Experian receives credit inquiries and new tradelines in
a credit report, but credit bureaus do not know if an
application was declined, for what reason, or the terms of the
loan. Credit reports and scores also do not contain data on
protected characteristics such as race, gender, marital status,
or ethnicity. Regulations such as the Equal Credit Opportunity
Act (ECOA) forbid lenders from discriminating against any
individual based on protected characteristics.
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