Last updated on April 14th, 2023
The U.S. House of Representatives recently examined the issue of credit reporting in the United States. The hearing sought to explore the expert testimony of a National Consumer Law Center attorney who believes the current private credit reporting system is broken and biased against millions of Americans. Here is what you need to know about the House hearing – and the potential for a new public credit reporting agency.
House Hearing Into Private Credit Reporting Bureaus
The U.S. House heard testimony regarding concerns about the current state of credit reporting in the United States. The hearing sought to understand better the issues millions of Americans face when checking their credit scores and the highly influential role the three major credit bureaus – Experian, Equifax, and TransUnion) play in our everyday lives.
“Good credit is a gateway to wealth,” said Maxine Waters (D-Calif), the chair of the House Committee on Financial Services. “Yet, for far too long, our credit reporting system has kept people of color and low-income persons from access to capital to start a small business; access to mortgage loans to become homeowners, and access to credit to meet financial emergencies.”
Waters highlighted the case of an Arizona man who sued TransUnion when the bureau reported him as being on a terrorist watchlist when attempting to purchase a car. The U.S. Supreme Court recently ruled that the man’s suit could go forward in a narrow decision.
That case, Waters argues, highlights the potential harm credit mistakes can make, with more common errors leading to high interest rates and fees, mortgage denials, and other financial issues. Mistakes can also keep renters from securing apartments, insurance denials, and more.
A New Public Credit Reporting Bureau Proposed
So, what is the solution for the confusing (and frustrating) credit reporting system in the United States? According to one consumer protection expert, it is a new public credit bureau.
The hearing saw testimony from Chi Chi Wu, staff attorney of the National Consumer Law Center in Boston, MA. Wu, a consumer protection advocate, believes replacing the current credit scoring and reporting system with a public credit registry is the best option for Americans.
In his testimony, Wu argued that the for-profit nature of the three major credit bureaus creates economic disparity. “The fact that these are private, profit-seeking companies explains why the credit bureaus are constantly expanding their products into uses, such as employment, insurance, and tenant screening, that ultimately harm Americans and contribute to the massive inequality in our nation” he said.
A public credit reporting bureau, overseen by the Consumer Finance Protection Bureau (CFPB), could help protect consumers from the profiteering of the private credit bureaus. “They (a new public credit bureau) would be responsive to public pressure and government oversight,” Wu added. “They could also be charged with developing credit scoring models to reduce the yawning racial and economic inequality in this country.”
Wu also proposed several other potential changes to credit reporting during his testimony. These proposals include:
- No longer allowing employers to check the credit score of potential hires.
- Reducing the impact of missed payments on credit scores from seven years to four years.
- Limit the reporting of medical debt for one year to give consumers more time resolve issues with hospitals and other medical practitioners.
- A moratorium on the reporting of negative credit information during the coronavirus pandemic and other future disasters.
How Likely Are Changes to U.S. Credit Reporting?
The likelihood of major changes to U.S. credit reporting is unlikely – at least soon. The for-profit nature of the major credit bureaus means they will fight any changes tooth and nail with expensive lobbying campaigns and potential legal action.
In the meantime, consumers should follow best practices to ensure any negative damage to their credit score is limited. Reports last year indicated that many Americans lack basic knowledge of what impacts their credit scores. Fortunately, there are practical steps you can take to boost your credit knowledge and protect your credit score.
Credit Score Resources
Here are some useful resources regarding credit scores, credit repair, and credit protections that can help:
- Credit Score Basics: What You Need to Know
- Credit Report Basics: What You Need to Know
- Does Credit Card Forbearance Hurt Your Credit Score?
- Can Not Paying Your Taxes Hurt Your Credit Score?
- How to Negotiate a Lower Credit Card Interest Rate
- Can You Lose Your House Because of Credit Card Debt?