Ex­panded Re­port­ing for ‘Credit In­vis­i­bles’ Could Do More Harm

Sup­port­ers say pend­ing leg­is­la­tion would help con­sumers with lit­tle or no credit his­tory, but it would in­stead roll back key con­sumer pro­tec­tions.

National Mortgage News - - Voices - By Pa­trick Cicero Pa­trick Cicero is the ex­ec­u­tive di­rec­tor of the Pennsylvania Util­ity Law Project.

Re­cently, the CEO of Ex­pe­rian urged the Se­nate to take up the Credit Ac­cess and In­clu­sion Act to help the tens of mil­lions of so- called credit in­vis­i­bles get af­ford­able loans.

Sim­i­larly, the spon­sors of the House ver­sion of this bill have touted it as a way to help con­sumers with lit­tle or no credit his­tory, some­times called “no files” or “thin files.”

This is a well-in­ten­tioned goal, but there is a mas­sive prob­lem: The bill tries to achieve it by nul­li­fy­ing state and fed­eral pri­vacy pro­tec­tions when it comes to re­port­ing util­i­ties or rental hous­ing pay­ment in­for­ma­tion. What­ever its os­ten­si­ble pur­pose, the ac­tual lan­guage of the bill has one ob­jec­tive — to pre­empt state and fed­eral laws that pro­tect con­sumers.

Some states, for in­stance, re­quire con­sumers’ con­sent when elec­tric or gas util­ity com­pa­nies, tele­phone com­pa­nies and pub­lic hous­ing au­thor­i­ties want to send their pay­ment in­for­ma­tion to the credit bureaus. This kind of pay­ment in­for­ma­tion can al­ready be re­ported un­der the Fair Credit Re­port­ing Act, but it is the in­di­vid­ual’s choice in sev­eral states.

Of course, Ex­pe­rian’s CEO, Craig Boundy, fails to men­tion that his com­pany, as well as Equifax and Tran­sUnion, will ben­e­fit greatly from this bill. All three credit bureaus would be happy to vac­uum up more data with­out hav­ing to com­ply with state laws that pre­vent cer­tain gas, elec­tric or tele­phone com­pa­nies from shar­ing cus­tomer data with­out the cus­tomer’s per­mis­sion. The credit bureaus would also be happy to over­ride fed­eral pri­vacy pro­tec­tions for sub­si­dized hous­ing ten­ants that re­quire sim­i­lar con­sumer con­sent.

Lim­ited-in­come fam­i­lies strug­gle to make ends meet. It is far from clear that more credit re­port­ing will as­sist vul­ner­a­ble house­holds ob­tain credit. In par­tic­u­lar, gas and elec­tric com­pa­nies re­port­ing pay­ments may re­sult in neg­a­tive marks for mil­lions of fam­i­lies — dis­pro­por­tion­ately fam­i­lies of color — who strug­gle to pay huge win­ter heat­ing or sum­mer cooling bills, but catch up on their debts in sub­se­quent months.

At present, gas and elec­tric util­ity com­pa­nies typ­i­cally only re­port ac­counts that are se­ri­ously late, such as those that are writ­ten off or sent to col­lec­tion agen­cies. These ac­counts are a small frac­tion of the to­tal num­ber of ac­counts with late pay­ments.

Sup­port­ers of the bill claim monthly re­port­ing of util­ity pay­ments will help im­prove credit re­ports and have a neg­a­tive im­pact on very few con­sumers. But their claims can­not be rec­on­ciled with data ac­tu­ally re­ported by util­ity com­pa­nies.

Thus, con­sumers who get scores from util­ity com­pa­nies re­port­ing pay­ment data may, in fact, get neg­a­tive credit scores. For many low-in­come con­sumers who al­ready have a credit score, util­ity re­port­ing could harm their ex­ist­ing credit his­to­ries.

Very sel­dom do low-to-moder­ate in­come fam­i­lies ben­e­fit when the credit in­dus­try de­sires to have more in­for­ma­tion about their fi­nan­cial lives. We should all be skep­ti­cal when one of the big­gest in­dus­try ben­e­fi­cia­ries touts the bill in the name of help­ing those who have the most at stake.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.