Proposed Credit Reporting Changes Pass House With Mixed Reviews
Consumer advocacy groups are questioning the purported benefits of H.R. 435 the “Credit Access and Inclusion Act of 2017,” a bill that passed with bipartisan support in the House of Representatives in June, and is currently under consideration by the Senate. The new law would amend the Fair Credit Reporting Act (“FCRA”) to allow landlords (including the Department of Housing and Urban Development), utility companies, and telecommunications providers to provide consumer credit information to consumer credit reporting agencies. According to the House Report about the bill, utility and telecommunications providers today only report negative information, if they report anything at all, due to regulatory uncertainty at the state level. The House Report states that some state regulators have told utility and telecommunications providers that they could not share consumer payment information with consumer reporting agencies. The bill does not purport to expressly preempt any state laws, however.
The bill’s purpose is to provide additional avenues for consumers to build positive credit histories by allowing the reporting of information about lease and utilities payments. Representative Keith Ellison, the sponsor of the bill, explained that “[s]imply by changing how Americans’ financial information is reported to credit rating agencies, this bill will help millions more Americans access credit” including lower lending costs and lower rents.
Whether the law will achieve its intended effects is unclear, however. First, reporting of individual consumer histories would not be mandatory, and thus landlords, utility companies, and telecommunications providers could choose to maintain the status quo and report nothing at all. It seems unlikely that individual landlords and smaller utility companies would find that the benefits of furnishing accurate information to consumer reporting agencies outweigh the costs and risks associated with FCRA compliance. Second, reporting consumer credit information is a double-edged sword; both positive and negative information could be reported, which would hurt some consumers’ credit scores. As reported by the American Banker, some consumer advocacy groups such as the National Consumer Law Center contend that it is better for consumers to have no credit history rather than a negative history. If enacted, some consumers with poor payment histories for housing, utilities, and telecommunication services would undoubtedly be negatively affected by the change.
Companies in sectors potentially affected by these changes to the FCRA, such as housing providers, utilities services, and telecommunications providers, as well as consumer reporting agencies, should pay careful attention as the bill makes its way through the Senate. A version of the bill has already passed the Senate with bipartisan support as part of a larger legislative package in S.488, so chances are good that some version of these changes to the FCRA will be enacted. Hopefully, the bill will be amended to add language expressly preempting state law which would otherwise prohibit utility and telecommunications providers from reporting consumer information to consumer reporting agencies.