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House Debates Changes to Credit Reporting Laws

Commercial Mortgage
Posted on 
September 30, 2014

The debate over credit reporting practices continues as one United States legislature has proposed removing negatives from credit reports, according to a report in the Miami Herald.

At a hearing before the House Financial Services Committee, Rep. Maxine Waters, D-California, proposed amending the federal Fair Credit Reporting Act to require the national credit bureaus to remove many negatives on credit reports, such as delinquencies on credit cards and mortgages, foreclosures and short sales, within four years instead of the present seven years. This proposal comes shortly after FICO announced that it will no longer include records of consumers failing to pay a bill if the bill has been paid or settled with a collection agency and that it will give less weight to unpaid medical bills with collection agencies

Waters, the ranking Democrat on the Financial Services Committee, said that these changes would end “the unreasonably long time periods that most adverse information can remain on a credit report,” and would treat borrowers more fairly.

The credit industry, however, is not on board with Waters’ plan, stating that the amendment would impede lenders’ ability to evaluate the true risk a borrower poses. The credit bureaus maintain that these changes would be harmful to both borrowers and lenders.

The hearing also touched on the idea that it would be beneficial to include rent, utilities, and other services requiring an ongoing monthly payment in credit reports. However, consumer groups have argued that this could be detrimental to lower-income borrowers who may be more prone to financial hardship.

Kenneth Harney, the executive director of the National Real Estate Development Center and author of the Miami Herald piece, had this to say: “Congress is beginning what could be an important long-term review of credit reporting and scoring system practices. But figuring out how to treat everybody fairly could be a challenge.”


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