(AmericanProsperity.com) – If you have experienced credit problems, relief may be on the way. However, it won’t be without controversy.
On Wednesday, the House of Representatives passed major legislation that would overhaul consumer credit reporting. In addition, the bill would add new opportunities to rebuild credit and create additional protections.
The Comprehensive CREDIT (Credit Reporting Enhancement, Disclosure, Innovation, and Transparency) Act of 2020 if passed by the Senate and signed into law by President Trump would:
- Make it easier to dispute errors on a credit report and fix mistakes
- Make improvements to free annual credit reports and include credit scores to consumers
- Prevent employers from using credit reports in hiring decisions unless a job explicitly requires it
- Eliminate medical debt from credit reports which are many times not correct or predictive of someone’s ability to pay credit debts
- Shorten the timeframe delinquencies remain on a credit report from 7 years to 4 years and lower bankruptcy reported from 10 to 7 years
- Prevent credit rating agencies from including delinquent or defaulted loans on credit reports after borrowers make 9 monthly payments on time
- Require private lenders of school loans to offer repayment plans for borrowers who are facing challenging economic hardships
The bill was passed along party lines. Democrats voted in favor and Republicans opposed it arguing that the legislation could restrict access to credit and increase the cost of credit for all Americans.
Proponents Say It’s Long Overdue
Democrats say that making changes to the Fair Credit Reporting Act is long overdue.
Credit is vital to the economy as it helps increase spending, causes an increase in individual income, helps drive gross domestic product, and aids in economic growth.
The Federal Trade Commission says that 1 in 5 Americans have serious errors in their credit reports that lead to a decline in credit for things such as homes and cars. For consumers that disputed information in their credit reports they believed was wrong, 20% were modified. However, only 13% saw a change in their actual credit score.
Writers of the bill claim that the bill will create “a more equitable and transparent credit reporting process.”
Rep. Ayanna Pressley (D-MA) is a sponsor of the bill. She said:
“It is past time for Congress to affirm economic justice for hardworking Americans and create a credit reporting system that truly works for all. When credit reports determine where you can live, work and how much you will have to pay for everything from a car to a college degree, consumers deserve a system that ensures equity, transparency and accountability.”
Rep. Maxine Watters (D-CA) said that consumers are not the customers of credit reporting agencies, “they are the product.” As a result, Watters said consumers have little recourse when there are errors.
Critics Say it Creates Negative Consequences and Is a Form of Socialism
Top Republicans say the overhaul of the Fair Credit Reporting Act could have serious consequences for consumers.
Rep. Patrick McHenry (R-NC) is the top Republican on the House Financial Services Committee. During floor debate, McHenry said:
“This will, in essence, socialize credit scoring and therefore credit allocation. And, look, this is an election year. I see that. And I see that not just in the rhetoric here in the house, but in the legislation that’s before us today. This bill will weaken underwriting standards. It will make credit a riskier activity both impacting the cost and accessibility of credit for all Americans.“
The bill is not expected to be taken up by the Senate.
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