[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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \6\Consumer Financial Protection Bureau, Data Point: Credit 
Invisibles (2015), available at https://files.consumerfinance.gov/f/
201505_cfpb_data-point-credit-invisibles.pdf.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

                      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--
                                                             -------------------------------------------------------------------------------------------
                                                               2020   2021   2022   2023   2024   2025   2026   2027   2028   2029  2020-2024  2020-2029
--------------------------------------------------------------------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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.

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