[House Report 116-307]
[From the U.S. Government Publishing Office]
116th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 116-307
======================================================================
CLARITY IN CREDIT SCORE FORMATION ACT OF 2019
_______
November 21, 2019.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Ms. Waters, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 3629]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 3629) to amend the Fair Credit Reporting Act to
establish clear Federal oversight of the development of credit
scoring models by the Bureau of Consumer Financial Protection,
and for other purposes, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 3
Background and Need for Legislation.............................. 4
Section-by-Section Analysis...................................... 6
Hearings......................................................... 6
Committee Consideration.......................................... 7
Committee Votes.................................................. 7
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 9
Statement of Performance Goals and Objectives.................... 9
New Budget Authority and CBO Cost Estimate....................... 9
Committee Cost Estimate.......................................... 11
Unfunded Mandate Statement....................................... 11
Advisory Committee............................................... 11
Application of Law to the Legislative Branch..................... 11
Earmark Statement................................................ 11
Duplication of Federal Programs.................................. 12
Changes to Existing Law.......................................... 12
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Clarity in Credit Score Formation Act
of 2019''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) The February 2015 report of the Bureau of Consumer
Financial Protection titled ``Consumer Voices on Credit Reports
and Scores'' found that some consumers are reluctant to
comparison shop for loans and other types of consumer credit
products out of fear that they will lower their credit scores
by doing so.
(2) The Bureau of Consumer Financial Protection found that
one of the most common barriers for people in reviewing their
own credit reports and shopping for the best credit terms was a
lack of understanding of the differences between ``soft'' and
``hard'' inquiries and whether requesting a copy of their own
report would adversely impact their credit standing.
(3) The Bureau of Consumer Financial Protection revealed that
consumers with accurate perceptions of their creditworthiness
may be better equipped to shop for favorable credit terms.
SEC. 3. CONSUMER BUREAU OVERSIGHT OF CREDIT SCORING MODELS.
The Fair Credit Reporting Act (15 U.S.C. 1681 et seq.) is amended--
(1) by adding at the end the following new section:
``Sec. 630. Credit scoring models
``(a) Validated Credit Scoring Models.--Not later than 1 year after
the date of the enactment of this section, the Bureau shall (in
consultation with the Board of Governors of the Federal Reserve System,
the Comptroller of the Currency, the Board of Directors of the Federal
Deposit Insurance Corporation, and the National Credit Union
Administration Board) issue final regulations applicable to any person
that creates, maintains, utilizes, or purchases credit scoring models
used in making credit decisions to establish standards for validating
the accuracy and predictive value of all such credit scoring models,
both before release for initial use and at regular intervals
thereafter, for as long as such credit scoring models are made
available for purchase or use by such person.
``(b) Prohibition.--At least once every 2 years, the Bureau shall
conduct a review of credit scoring models to determine whether the use
of any particular factors, or the weight or consideration given to
certain factors by credit scoring models, is inappropriate, including
if such factors do not enhance or contribute to the accuracy and
predictive value of the models. Upon the conclusion of its review, the
Bureau may prohibit a person described in subsection (a) from weighing,
considering, or including certain factors in, or making available for
purchase or use, certain credit scoring models or versions, as the
Bureau determines appropriate.''; and
(2) in the table of contents for such Act, by adding at the
end the following new item:
``630. Credit scoring models.''.
SEC. 4. CONSUMER BUREAU STUDY AND REPORT TO CONGRESS ON THE IMPACT OF
NON-TRADITIONAL DATA.
(a) Study.--The Bureau of Consumer Financial Protection shall carry
out a study to assess the impact (including the availability and
affordability of credit and other noncredit decisions, the potential
positive and negative impacts on consumer credit scores, and any
unintended consequences) of using traditional modeling techniques or
alternative modeling techniques to analyze non-traditional data from a
consumer report and of including non-traditional data on consumer
reports on the following:
(1) Consumers with no or minimal traditional credit history.
(2) Traditionally underserved communities and populations.
(3) Consumers residing in rural areas.
(4) Consumers residing in urban areas.
(5) Racial and ethnic minorities and women.
(6) Consumers across various income strata, particularly
consumers earning less than 120 percent of the area median
income (as defined by the Secretary of Housing and Urban
Development).
(7) Immigrants, refugees, and non-permanent residents.
(8) Minority financial institutions (as defined under section
308(b) of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (12 U.S.C. 1463 note)) and community
financial institutions.
(9) Consumers residing in federally assisted housing,
including consumers receiving Federal rental subsidies.
(b) Additional Considerations.--In assessing impacts under subsection
(a), the Bureau of Consumer Financial Protection shall also consider
impacts on--
(1) the privacy, security, and confidentiality of the
financial, medical, and personally identifiable information of
consumers;
(2) the control of consumers over how such information may or
will be used or considered;
(3) the understanding of consumers of how such information
may be used or considered and the ease with which a consumer
may decide to restrict or prohibit such use or consideration of
such information;
(4) potential discriminatory effects; and
(5) disparate outcomes the use or consideration of such
information may cause.
(c) Consideration of Recent Government Studies.--In assessing impacts
under subsection (a), the Bureau of Consumer Financial Protection shall
also consider recent Government studies on alternative data,
including--
(1) the report of the Bureau of Consumer Financial Protection
titled ``CFPB Data Point: Becoming Credit Visible'' (published
June 2017); and
(2) the report of the Comptroller General of the United
States titled ``Financial Technology: Agencies Should Provide
Clarification on Lenders' Use of Alternative Data'' (published
December 2018).
(d) Report.--Not later than 1 year after the date of the enactment of
this Act, the Bureau of Consumer Financial Protection shall issue a
report to the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and Urban
Affairs of the Senate containing all findings and determinations,
including any recommendations for any legislative or regulatory
changes, made in carrying out the study required under subsection (a).
(e) Definitions.--In this section:
(1) Alternative modeling techniques.--The term ``alternative
modeling techniques'' means statistical and mathematical
techniques that are not traditional modeling techniques,
including decision trees, random forests, artificial neutral
networks, nearest neighbor, genetic programming, and boosting
algorithms.
(2) Consumer report.--The term ``consumer report'' has the
meaning given such term in section 603 of the Fair Credit
Reporting Act (15 U.S.C. 1681a).
(3) Non-traditional data.--The term ``non-traditional data''
means data related to telecommunications, utility payments,
rent payments, remittances, wire transfers, data not otherwise
regularly included in consumer reports issued by consumer
reporting agencies described under section 603(p), and such
other items as the Bureau of Consumer Financial Protection
deems appropriate.
(4) Traditional modeling techniques.--The term ``traditional
modeling techniques'' means statistical and mathematical
techniques (including models, algorithms, linear and logistic
regression methods, and their outputs) that are traditionally
used in automated underwriting processes.
Purpose and Summary
On July 9, 2019, Representative Stephen Lynch introduced
H.R. 3629, the ``Clarity in Credit Score Formation Act of
2019,'' which establishes clear Federal oversight of the
development of credit scoring models by directing the Consumer
Financial Protection Bureau (CFPB) to set standards for
validating the accuracy and predictive value of credit scoring
models, both before their initial use by creditors and at
regular intervals thereafter, for as long as those models are
available for purchase. The bill gives the CFPB explicit
authority to prohibit credit scoring developers from weighing,
considering, or including certain factors or making available
for purchase or using certain outdated credit scoring models or
versions that may create misleading and false determinations of
consumers' creditworthiness.
The bill would also require the CFPB to study the impact of
having more non-traditional data on consumer reports and the
use of alternative data in credit scoring models on consumers'
access to, and the affordability of, credit products and
services and other matters, including a review of the impact on
consumers with limited or no traditional credit histories,
racial and ethnic minorities, women, and consumers residing in
Federally-assisted rental housing.
Background and Need for Legislation
Our nation's credit reporting system is broken yet has an
impact on almost every American. Credit scores and credit
reports are increasingly relied upon by creditors, employers,
insurers, and even law enforcement. Yet it has been more than
15 years since Congress enacted comprehensive reform of the
consumer reporting system,\1\ and there have been numerous
shortcomings with the current system identified during that
time that need to be addressed. For example, the Federal Trade
Commission (FTC) study found in 2012 that one out of every five
consumers have a verified error on their consumer reports and 5
percent had errors serious enough to result in them being
denied credit or paying more for mortgages, auto loans,
insurance policies, and other financial obligations.\2\ An
analysis of the CFPB consumer complaint database revealed that
in 2018, credit reports were the most complained about
financial product, and the three major credit bureaus--Equifax,
Experian and TransUnion--were the most-complained about
financial companies.\3\ It is critical that Congress act
swiftly to address these critical flaws and modernize the Fair
Credit Reporting Act to ensure the credit reporting system
works better for all Americans.
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\1\The Fair and Accurate Credit Transactions Act of 2003 (FACT Act;
P.L. 108-159), among other things, allows consumers to request and
obtain a free credit report once a year from each of the three
nationwide consumer reporting agencies.
\2\https://www.ftc.gov/sites/default/files/documents/reports/
section-319-fair-and-accurate-credit-transactions-act-2003-fifth-
interim-federal-trade-commission/130211factareport.pdf.
\3\https://uspirg.org/news/usp/youre-not-alone-cfpb-complaints-
rise.
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Although Federal prudential regulators review the
performance of the use of credit scoring models by lenders as
part of safety and soundness reviews, and the CFPB has some
general supervision of credit score developers through its
larger participant rule,\4\ there is no clearly defined
supervisory framework that focuses on the development or
initial and ongoing validation of credit scoring models. The
Government Accountability Office recently urged regulators to
clarify for lenders the appropriate use of alternative data in
the underwriting process.\5\
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\4\https://www.consumerfinance.gov/policy-compliance/rulemaking/
final-rules/defining-larger-participants-consumer-reporting-market/.
\5\Government Accountability Office, Financial Technology: Agencies
Should Provide Clarification on Lenders' Use of Alternative Data
(2018), available at https://www.gao.gov/assets/700/696149.pdf.
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Consumers with minimal or no traditional credit history may
have difficulty accessing affordable credit or be unable to
secure rental housing because they do not have sufficient
credit information to generate a score. This has an impact
especially on communities of color and creditworthy low-income
households that could with the appropriate underwriting, safely
participate in the prime lending market.\6\
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\6\Consumer Financial Protection Bureau, Data Point: Credit
Invisibles (2015), available at https://files.consumerfinance.gov/f/
201505_cfpb_data-point-credit-invisibles.pdf.
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This legislation is supported by more than 80 consumer,
civil rights, labor, and community organizations.\7\ The
National Association of Realtors also support this
legislation.\8\
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\7\Supporting organizations include Americans for Financial Reform,
A2Z Real Estate Consultants, African American Health Alliance, Alaska
Public Interest Research Group, Allied Progress, Arkansas Community
Organizations, BREAD Organization, CAFE Montgomery MD, Center for
Digital Democracy, Cleveland Jobs with Justice, Community Action Human
Resources Agency (CAHRA), Congregation of Our Lady of the Good
Shepherd, US Provinces, Connecticut, Fair Housing Center, Consumer
Action, Consumer Federation of America, Consumer Federation of
California, Consumer Reports, CWA Local 1081, Delaware Community
Reinvestment Action Council, Inc., Demos, Denver Area Labor Federation,
East Bay Community Law Center, FAITH IN TEXAS, Famicos Foundation,
FLARA, Florida Alliance for Consumer Protection, Greater Longview
United Way, Groundcover News, Habitat for Humanity of Camp Co, TX,
Hawaiian Community Assets, Housing Action Illinois, Housing and Family
Services of Greater New York, Inc., Mary House, Inc., Maryland Consumer
Rights Coalition, Miami Valley Fair Housing Center, Inc., Mobilization
for Justice Inc., Montana Organizing Project, Multi-Cultural Real
Estate Alliance For Urban Change, National Advocacy Center of the
Sisters of the Good Shepherd, National Association of Consumer
Advocates, National Association of Social Workers, National Association
of Social Workers West Virginia Chapter, National Center for Law and
Economic Justice, National Consumer Law Center (on behalf of its low-
income clients), National Fair Housing Alliance, National Housing Law
Project, National Housing Resource Center, National Rural Social Work
Caucus, New Economics for Women, New Jersey Citizen Action, New Jersey
Tenants Organization, New York Legal Assistance Group, North Carolina
Council of Churches, Partners In Community Building, Inc., PathWays PA,
Pennsylvania Council of Churches, People Demanding Action, Progressive
Leadership Alliance of Nevada, Project IRENE, Prosperity Now, Public
Citizen, Public Justice Center, Public Law Center, Public Utility Law
Project of New York, Rocky Mountain Peace and Justice Center, SC
Appleseed Legal Justice Center, Sisters of Mercy South Central
Community, Society of St. Vincent de Paul, St. Paul UMC, Tennessee
Citizen Action, The Center for Survivor Agency and Justice, The
Disaster Law Project, The Greenlining Institute, The Leadership
Conference on Civil and Human Rights, THE ONE LESS FOUNDATION, Tzedek
DC, U.S. PIRG, Urban Asset Builders, Inc., Virginia Citizens Consumer
Council, Virginia Poverty Law Center, West Virginia Center on Budget
and Policy, Wildfire, Woodstock Institute, and WV Citizen Action Group.
See http://ourfinancialsecurity.org/2019/07/news-release-afr-statement-
financial-services-committee-markup-credit-reporting/.
\8\National Association of Realtors letter, available at https://
narfocus.com/billdatabase/clientfiles/172/2/3417.pdf.
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Some stakeholders point to the benefits of using
alternative payment data, such as utility, rental and
telecommunications payment histories, to improve creditors'
ability to differentiate between high- and low-risk profiles of
consumers with no or thin credit files, which, presumably,
would also expand access to credit for ``credit
invisibles.''\9\ Other stakeholders, however, have warned that
the consideration of certain non-traditional data, such as
utility, rental, and telecommunications data, to evaluate
consumers' creditworthiness may cause more harm than good for
some consumers. These stakeholders recommend evaluating the
unique benefits and disadvantages of increasing the reporting
of alternative data to the nationwide CRAs and as factors in
scoring models.\10\
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\9\Michael Turner and Patrick Walker, Predicting Financial Account
Delinquencies with Utility and Telecom Payment Data (2015), available
at http://www.perc.net/wp-content/uploads/2015/05/Alt-Data-and-
Traditional-Accounts.pdf.
\10\Chi Chi Wu, Proceed with Caution on Credit Scoring with
Alternative Data (2015), available at https://www.americanbanker.com/
opinion/proceed-with-caution-on-credit-scoring-with-alternative-data.
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This bill is substantially similar to Title V of the
discussion draft of the ``Comprehensive Consumer Credit
Reporting Reform Act of 2019'' considered at a full committee
hearing on February 26, 2019 and was introduced in previous
congresses.\11\
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\11\Financial Services Committee Hearing: Who's Keeping Score?
Holding Credit Bureaus Accountable and Repairing a Broken System
(2019). Hearing information available at https://
financialservices.house.gov/calendar/eventsingle.aspx?EventID=402343.
Also see H.R. 5282 (114th Congress), the Comprehensive Consumer Credit
Reporting Reform Act of 2016, introduced by Rep. Waters on May 19,
2016, and H.R. 3755 (115th Congress), the Comprehensive Consumer Credit
Reporting Reform Act of 2017, introduced by Rep. Waters on September
13, 2017, available with additional materials at https://
financialservices.house.gov/news/documentsingle.aspx?DocumentID=400788.
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Section-by-Section Analysis
Section 1. Short title
This section provides that H.R. 3629 may be cited as the
``Clarity in Credit Score Formation Act of 2019.''
Section 2. Findings
This section highlights Consumer Financial Protection
Bureau findings that consumers have difficulties in
understanding how credit scores are made and formed, and also
have difficulty understanding how to improve their credit
reports and scores. Consumers need more clear and accurate
understandings of their scores, and how they can improve them
and seek better credit opportunities.
Section 3. Consumer Bureau oversight of credit scoring models
This section adds a new section, 630 to the Fair Credit
Reporting Act.
The new section 630 directs the Consumer Financial
Protection Bureau to issue final regulations and standards to
validate the accuracy and predictive value of credit scoring
models no later than 1 year after the enactment of this
section. This section also encourages the Consumer Financial
Protection Bureau to conduct a review of such credit scoring
models at least once every two years to determine if the
factors used are effective and grants the Bureau authority to
prohibit a person or agency from weighing, considering, or
including certain factors in their credit scoring models.
Section 4. CFPB Consumer Bureau study and report to congress on the
impact of non-traditional data
This section requires the Consumer Financial Protection
Bureau to study and assess the impact of nontraditional data on
the availability and affordability of credit, consumer credit
scores, and any unintended consequences. This section also
requires the Bureau to provide a report highlighting findings
of such study and provide recommendations for any legislative
or regulatory changes.
Hearings
For the purposes of section 103(i) of H. Res. 6 for the
116th Congress--
(1) The Committee on Financial Services held a hearing,
entitled ``Who's Keeping Score? Holding Credit Bureaus
Accountable and Repairing a Broken System'' to consider the
``Comprehensive Consumer Credit Reporting Reform Act of 2019''
(Title V of the discussion draft is substantially similar to
H.R. 3629) on February 26, 2019. The two-panel hearing
consisted of first the three CEOs of the three largest Credit
Reporting Agencies: Equifax, TransUnion, and Experian.
Witnesses on the second panel included representatives from the
National Fair Housing Alliance, the National Consumer Law
Center, UnidosUS, U.S. Public Interest Research Group (PIRG),
and a Paul Hastings partner and attorney. The hearing allowed
Members of the Financial Services Committee to hear from
witnesses about the continuing challenges modernizing the Fair
Credit Reporting Act to better protect consumers and their
data, as well as other legislation to help overcome those
challenges.
(2) The Committee on Financial Services' taskforce on
Financial Technology held a hearing, entitled ``Examining the
Use of Alternative Data in Underwriting and Credit Scoring to
Expand Access to Credit'' on July 25, 2019 to discuss emerging
technologies and how they impact access to credit, and their
impact across communities. The panel consisted of
representatives from the National Consumer Law Center, Tulane
University Law School, The Government Accountability Office
(GAO), Upstart, and Upturn.
(3) In addition, during the 115th Congress, the Financial
Services Committee held a two-part hearing on the Equifax data
breach and related credit reporting and consumer data
protection issues. The first part of the hearing entitled
``Examining the Equifax Data Breach'' took place on October 5,
2017 and featured the former Chairman and CEO to Equifax. The
Committee also held a Minority Day hearing, which was a
continuation of the hearing entitled, ``Examining the Equifax
Data Breach'' and took place on October 25, 2017. Witnesses
included representatives from the Consumer Financial Protection
Bureau, the National Consumer Law Center, Georgetown University
Law Center, and the Office of the New York State Attorney
General.
Committee Consideration
The Committee on Financial Services met in open session on
July 16, 2019, and ordered H.R. 3629 to be reported favorably
to the House with an amendment in the nature of a substitute by
a vote of 32 yeas and 26 nays, a quorum being present.
Committee Votes and Roll Call Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
following roll call votes occurred during the Committee's
consideration of H.R. 3629:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee's oversight findings and recommendations are
reflected in the descriptive portions of this report.
Statement of Performance Goals and Objectives
Pursuant to clause (3)(c) of rule XIII of the Rules of the
House of Representatives, the goals of H.R. 3629 are to
increase clarity in credit score formation and explore
alternative data as a means to increase access to credit.
New Budget Authority and CBO Estimate
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives and section 308(a) of the
Congressional Budget Act of 1974, and pursuant to clause
3(c)(3) of rule XIII of the Rules of the House of
Representatives and section 402 of the Congressional Budget Act
of 1974, the Committee has received the following estimate for
H.R. 3629 from the Director of the Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 7, 2019.
Hon. Maxine Waters,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Madam Chairwoman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3629, the Clarity
in Credit Score Formation Act of 2019.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is David Hughes.
Sincerely,
Phillip L. Swagel,
Director.
Enclosure.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Under H.R. 3629, the Consumer Financial Protection Bureau
(CFPB) would establish standards for validating the accuracy
and predictive value of credit scoring models. The bill would
require the CFPB to conduct a biannual review of credit scoring
models and would authorize the agency to prohibit the use of
certain of those models. H.R. 3629 also would require the CFPB
to study and report to the Congress about the effects of using
traditional versus alternative modeling techniques to analyze
nontraditional consumer report data as defined in the bill.
Finally the bill would require the CFPB to assess the effects
of including nontraditional data in consumer reports.
Using information from the CFPB, CBO estimates that
enacting H.R. 3629 would increase direct spending by $10
million over the 2020-2029 period. The cost of the legislation,
detailed in Table 1, falls within budget function 370
(advancement of commerce).
TABLE 1.--ESTIMATED INCREASES IN DIRECT SPENDING UNDER H.R. 3629
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, millions of dollars--
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2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2020-2024 2020-2029
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Estimated Budget Authority.................................. 2 1 0 1 0 2 0 2 0 2 5 10
Estimated Outlays........................................... 2 1 0 1 0 2 0 2 0 2 5 10
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CFPB is permanently authorized to request and receive
funding from the Federal Reserve in an amount necessary to
carry out its operations and can spend those amounts without
further appropriation. CBO estimates that the CFPB would need
about a dozen employees in 2020 to complete a final rule on
credit scoring models and to carry out the study. CBO expects
that biannual reviews would begin in 2021 and would require six
employees for each review. CBO estimates that the cost for each
additional CFPB employee would be $200,000 in 2020.
H.R. 3629 would impose private-sector mandates as defined
in the Unfunded Mandates Reform Act (UMRA) by:
Requiring developers of credit scoring
models to comply with new standards for validating the
accuracy and predictive value of their models, and
Prohibiting, in some circumstances,
developers from considering or including factors that
the agency deems inappropriate in a credit scoring
model.
Regulations established by the CFPB to implement those
provisions would apply to any person creating, maintaining,
using, or purchasing credit scoring models.
The mandates' costs would be the expenses incurred to
comply with the new CFPB regulations. Because the agency has
not yet issued those regulations, CBO cannot determine whether
the cost of the mandates would exceed the private-sector
threshold established in UMRA ($164 million in 2019, adjusted
annually for inflation).
H.R. 3629 contains no intergovernmental mandates as defined
in UMRA.
The CBO staff contacts for this estimate are David Hughes
(for federal costs) and Rachel Austin (for mandates). The
estimate was reviewed by H. Samuel Papenfuss, Deputy Assistant
Director for Budget Analysis.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 3629.
However, clause 3(d)(2)(B) of that rule provides that this
requirement does not apply when the committee has included in
its report a timely submitted cost estimate of the bill
prepared by the Director of the Congressional Budget Office
under section 402 of the Congressional Budget Act.
Unfunded Mandate Statement
Pursuant to Section 423 of the Congressional Budget and
Impoundment Control Act (as amended by Section 101(a)(2) of the
Unfunded Mandates Reform Act, Pub. L. 104-4), the Committee
adopts as its own the estimate of federal mandates regarding
H.R 3629, as amended, prepared by the Director of the
Congressional Budget Office.
Advisory Committee
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Application of Law to the Legislative Branch
H.R. 3629 does not apply to terms and conditions of
employment or to access to public services or accommodations
within the legislative branch.
Earmark Statement
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 3629 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as described in clauses 9(e), 9(f), and 9(g) of rule
XXI.
Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of H.R. 3629 establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
federal program, a program that was included in any report from
the Government Accountability Office to Congress pursuant to
section 21 of Public Law 111-139, or a program related to a
program identified in the most recent Catalog of Federal
Domestic Assistance.
Changes in Existing Law Made by the Bill as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, H.R. 3629, as reported, are shown as follows:
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
FAIR CREDIT REPORTING ACT
TITLE VI--CONSUMER CREDIT REPORTING
Sec.
601. Short title.
* * * * * * *
630. Credit scoring models.
* * * * * * *
Sec. 630. Credit scoring models
(a) Validated Credit Scoring Models.--Not later than 1 year
after the date of the enactment of this section, the Bureau
shall (in consultation with the Board of Governors of the
Federal Reserve System, the Comptroller of the Currency, the
Board of Directors of the Federal Deposit Insurance
Corporation, and the National Credit Union Administration
Board) issue final regulations applicable to any person that
creates, maintains, utilizes, or purchases credit scoring
models used in making credit decisions to establish standards
for validating the accuracy and predictive value of all such
credit scoring models, both before release for initial use and
at regular intervals thereafter, for as long as such credit
scoring models are made available for purchase or use by such
person.
(b) Prohibition.--At least once every 2 years, the Bureau
shall conduct a review of credit scoring models to determine
whether the use of any particular factors, or the weight or
consideration given to certain factors by credit scoring
models, is inappropriate, including if such factors do not
enhance or contribute to the accuracy and predictive value of
the models. Upon the conclusion of its review, the Bureau may
prohibit a person described in subsection (a) from weighing,
considering, or including certain factors in, or making
available for purchase or use, certain credit scoring models or
versions, as the Bureau determines appropriate.
* * * * * * *
MINORITY VIEWS
H.R. 3629, the Clarity in Credit Score Formation Act of
2019, is an unnecessary expansion of federal authority that
will ultimately undermine consumer access to credit by turning
underwriting standards over to the federal government. The
result will undoubtedly limit access to credit offered by
financial institutions. In turn, financial institutions would
no longer have access to a comprehensive analysis of a
customer's ability to repay.
H.R. 3629 would transfer control of credit scoring model
development to the Consumer Financial Protection Bureau (CFPB).
Credit scores are proprietary tools developed by private
companies that rely on sophisticated algorithms and predictive
scoring data. Moreover, the CFPB already possesses the
authority to conduct oversight of credit scoring through its
2015 Larger Participant Rule.
Committee Republicans are concerned by the CFPB's authority
over the specific factors comprising credit scoring. Despite
comments made by the bill's proponents during the July 18, 2019
markup, H.R. 3629 clearly directs the CFPB to ``At least once
every 2 years . . . conduct a review of credit scoring models
to determine whether the use of any particular factors, or the
weight of consideration given to certain factors by credit
scoring models, is inappropriate, including if such factors do
not enhance or contribute to the accuracy and predictive value
of the models (emphasis added).'' The bill further allows the
CFPB to prohibit certain factors to be weighed, considered, or
included in credit scoring models. Committee Republicans are
concerned that such broad authority would not only have the
effect of limiting access to credit and pose underwriting risks
but could also stifle credit score innovation.
Republicans support the provision that would direct the
CFPB to evaluate and conduct a study on the use of non-
traditional data. Congressman Barr offered an amendment during
the markup that would authorize the study language found in
H.R. 3629. The amendment was defeated in Committee on a party
line vote of 25-33.
On the whole, Republicans believe this legislation is a
solution in search of a problem. Committee Republicans believe
this legislation will be detrimental to consumers by limiting
information available to the private sector. The result will
not be increased access to credit; rather, impaired
underwriting will likely result in financial institutions
reverting to more conservative lending practices.
David Kustoff.
Tom Emmer.
William R. Timmons IV.
Ted Budd.
Roger Williams.
J. French Hill.
John W. Rose.
Anthony Gonzalez.
Andy Barr.
Lee M. Zeldin.
Blaine Luetkemeyer.
Bill Huizenga.
Bill Posey.
Barry Loudermilk.
Lance Gooden.
Scott R. Tipton.
Peter T. King.
Trey Hollingsworth.
Bryan Steil.
Warren Davidson.
Denver Riggleman.
Alexander X. Mooney.
Frank D. Lucas.
Ann Wagner.
Steve Stivers.
Patrick T. McHenry.
[all]