H.R. 435, The Credit Access and Inclusion Act of 2017

Floor Situation

On Monday, June 25, 2018, the House will consider H.R. 435, the Credit Access and Inclusion Act of 2017, under suspension of the rules. This bill was introduced on January 11, 2017 by Rep. Keith Ellison (D-MN) and was referred to the House Committee on Financial Services, which ordered the bill reported, as amended, by a vote of 60-0, on December 13, 2017.

Summary

H.R. 435 amends the Fair Credit Reporting Act (FCRA) to authorize a person or the Department of Housing and Urban Development (HUD) to furnish to consumer reporting agencies, information relating to the performance of a consumer in making payments: (1) under a lease agreement for a dwelling, including a lease in which HUD provides subsidized payments; or (2) pursuant to a contract for a utility or telecommunications service.

Background

Consumer reporting agencies--commonly called credit bureaus--compile and maintain credit reports from data voluntarily supplied to them by credit card issuers, mortgage lenders, debt collectors, and other creditors. These credit reports summarize a consumer's credit history, and provides data about the consumer's credit card accounts, mortgages, auto loans, student loans, and other credit accounts. Consumer credit reports typically include information such as the terms on which the consumer obtained credit, how much the consumer owes, and the consumer's payment history. Consumer reporting agencies also generate credit scores, which are numerical ratings of a person's creditworthiness, calculated from the information in credit reports.

Lenders, insurers, employers, and others request credit reports and credit scores to assess how consumers manage their financial responsibilities. Lenders use credit reports and credit scores in determining whether a consumer gets a loan and on what terms; insurance companies may use them to decide whether a consumer receives coverage; employers may use them to make hiring decisions; and telephone and utility companies may use the score to decide whether to provide services to a consumer.[1]

Furnishers are entities that provide information about their customers to consumer reporting agencies, including information about customers' payments on their accounts. Examples of furnishers include banks, thrifts, credit unions, savings and loan institutions, mortgage lenders, credit card issuers, collection agencies, retail installment lenders, and auto finance lenders. The Fair Credit Reporting Act (FCRA)--which governs the collection, assembly, and use of consumer credit information and provides the statutory framework for the credit reporting system--does not require furnishers to report to consumer reporting agencies, but if they do report, they must comply with certain provisions of the statute. Furnishers typically report full account payment information, both positive, such as an on-time payment in full, and negative, such as a missed or delayed payment. However, some types of accounts are reported only when the payment history turns negative, such as when the debt is transferred to a debt collector.[2]

Owing primarily to regulatory uncertainty at the state level, utility and telecom companies only report negative information, such as late payments, if they report on a consumer's payment activity at all. While there are no federal statutory prohibitions, some state regulators have told inquiring energy utility and telecommunications firms that they are not permitted to share customer payment data with consumer reporting agencies. A consumer may make dozens or more on-time payments in full, but the reporting mechanism under federal law, the consumer will receive no benefit from those ``good'' payments to utilities and telecommunications companies. Credit reporting is crucial to the efficient functioning of the economy. In order to lend, creditors must be able to calculate the risk a borrower presents to an institution. The more likely the borrower is deemed to repay the loan in-full, the borrower is likely to receive more favorable loan terms. At the same time, inaccurate, incomplete, misleading or unreliable information in their credit histories may penalize a borrower's ability to receive credit and according to some observers, the financial mainstream may often exclude consumers whose credit histories lack enough information to calculate a credit score.[3]

To resolve these concerns, H.R. 435 will establish a furnishing and reporting environment that provides more information about a borrower and should create a more thorough credit profile and as a result, a more accurate credit score. H.R. 435, as amended, also requires the GAO to study the impact of furnishing on-time payment data to consumer reporting agencies. When a lender is able to accurately assess exposure and risk when it extends credit to a consumer, it is able to make additional loans it may not otherwise make because of incomplete risk-assessment information. For consumers, more positive information furnished to consumer reporting agencies mean increased access to stable and more affordable credit.[4]

Cost

The Congressional Budget Office (CBO) estimates that implementing H.R. 435 would cost less than $500,000 over the 2018-2022 period, subject to the availability of appropriated funds.

Staff Contact

For questions or further information please contact Ryan Hofmann with the House Republican Policy Committee by email or at 2-6674.