▶ 0:14:49The Subcommittee on Financial Institutions will come to order. Without objection, the chair is authorized to declare a recess of the committee at any time. Today's hearing is titled promoting access to credit for everyday Americans. Without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. I now recognize myself for 4 minutes for an opening statement.
▶ 0:15:20I want to thank our witnesses for appearing before us today, and I look forward to a constructive discussion on access to credit and the future of our credit reporting system. Access to credit is fundamental to economic mobility. It is the foundation that provides families the opportunity to buy homes. It gives Main Street small businesses leverage to grow, and it provides individuals the flexibility to manage through both opportunity and hardship.
▶ 0:15:48At the center of that system is the Fair Credit Reporting Act, a law that for decades has aimed to balance two core objectives: consumer protection and enabling the responsible flow of reliable information that lenders rely on to provide credit. For decades, that balance has helped create one of the most robust and accessible credit markets in the world. But today, that balance is being tested.
▶ 0:16:16We're seeing increasing pressure to weaken the complete-less completeness of credit reporting, whether by removing entire categories of debt or by promoting reporting systems that only consider positive information. Let's be clear. A credit reporting system that ignores real obligations is not more It's simply less accurate. And when accuracy suffers, access to credit suffers with it.
▶ 0:16:47Lenders rely on a full picture of risk. If that picture is incomplete, they don't simply absorb more risk without consequence. They pull back, raise prices, or both. That ultimately hurts the very consumers these proposals claim to help. It also threatens the safety and soundness of our financial institutions, who no longer understand the risks on their balance sheet. At the same time, the system is facing growing strain from from another direction.
▶ 0:17:18The rise in questionable and duplicative complaints in the CFPB's consumer complaint database. Consumer protections are essential, and dispute mechanisms are a cornerstone of the Fair Credit Reporting Act, ensuring the accuracy that is the center of our robust consumer reporting system.
▶ 0:17:35But when furnishers and consumer reporting agencies are flooded with frivolous or even fraudulent submissions, it undermines their credibility, slows down the resolution of legitimate claims, and increases costs across the system. If we want these tools to work for consumers, they must be rooted in accountability and good faith.
▶ 0:17:56Strengthening the integrity of the CFPB's consumer complaint database, as my Eliminating Fraud in the CFPB's Consumer Data Consumer Consumer Complaint Database Act would do, is not about limiting consumer rights, it's about preserving them. We also should be focused on expanding opportunities in ways that are consistent with safety and soundness.
▶ 0:18:19Millions of Americans are credit not because they lack fiscal responsibility, but because the system doesn't fully capture it. Responsible use of additional alternative data, like rent, telecom, and utility payments, positive information about performing on credit can help bring more people into the financial system without distorting risk.
▶ 0:18:43I look forward to hearing from our witnesses and working with my colleagues on both sides of the aisle to get this right, to make sure that we are advocating for completeness and accuracy in credit reporting, so that lenders have the confidence to deploy credit into the economy and help Americans achieve their God-given potential, help them achieve the American dream of upward mobility. Thank you. And I now recognize the ranking member of the subcommittee, Dr.
▶ 0:19:12Foster, for 4 minutes for an opening statement. Uh thank you, Chairman Barr, and to our witnesses. Uh today's hearing is about something that affects nearly every American family, whether they realize it or not, our nation's credit reporting system. Credit reports and scores determine whether someone can buy a home, start a business, rent an apartment, or even get a job. When this system works, it can open doors, but when it fails, it can unjustifiably slam the doors shut and greatly restrict the opportunities available to Americans.
▶ 0:19:41In recent years, we've seen a significant increase in consumer complaints about credit reporting. Consumers struggling to fix errors, fight fraud, or hoping to simply understand what is on their report have it submitted millions of complaints to the Consumer Financial Protection Bureau, which until recently has provided resources, guidance, and answers for those consumers. The Trump administration's move to gut the CFPB is having a clear effect on Americans seeking answers about their credit reports.
▶ 0:20:08Shortly after taking office, President Trump moved to slash the CFPB budget by nearly half. He attempted to fire up to 90% of the staff in certain departments, and acting director Voght has put up new barriers for consumers who are seeking guidance for or financial relief. In fact, under the Trump administration, we've already seen a steep decline in the number of consumers receiving relief um after filing a complaint with the bureau.
▶ 0:20:33By the middle of 2025, certain credit bureaus were closing complaints with relief at half the rate of the previous year, with others seeing even steeper reductions. The CFPB is the main agency with authority and the mission to help consumers with credit reporting issues. Uh if we're serious about protecting Americans and ensuring the integrity of the credit reporting system, then we must support a strong CFPB. We will also discuss how credit reporting affects Americans access to credit.
▶ 0:21:02New forms of data, like rental payments, utility payments, uh cash flow information, can paint a more full and accurate picture of a person's financial life. And if used correctly, alternative data can improve access to credit for millions of credit invisible Americans who struggle to access traditional lending options.
▶ 0:21:21These new data sources can help those without a traditional financial history access credit, but they must be incorporated carefully to ensure that the new data does not replicate old patterns of discrimination or create new risks for for consumers. We should consider whether the inclusion of of certain medical debts is appropriate on credit reports. Studies have shown that medical debt is not always predictive of of a person's creditworthiness, and credit scores should accurately depict those risks.
▶ 0:21:50Finally, I encourage um this committee to evaluate the promise and risk of new technologies, like artificial intelligence. AI, in in particular, personal financial AI agents, will allow consumers and the credit bureaus to identify errors faster, to resolve disputes more efficiently, and ensure that consumers get timely and meaningful relief. If developed with appropriate guardrails, these systems can empower consumers with greater control and insight into their financial history.
▶ 0:22:18These possibilities depend on strong oversight by a competent regulator, and this committee should immediately act to restore the CFPB's ability to carry out its statutory responsibilities. Uh thank you again, Chairwoman Barr, and I yield back. Gentleman yields back, and Chairman Hill is not here, so I'm going to take the liberty of of using that additional minute to address this issue of medical debt just at the outset.
▶ 0:22:40I think it's I think the point is well made that uh when there's an unexpected medical expense, sometimes that's not necessarily totally indicative of the creditworthiness of the person, because it's an unexpected expense. However, this idea of just imagining that debt and not disclosing it is not conducive to promoting accuracy of the financial picture of the individual and the individual's ability to repay. It is a real debt.
▶ 0:23:09And uh medical services cost money, whether you like it or not. Medical school costs A development of a uh of a pharmaceutical costs money. The electricity bill at the hospital costs money. Imagining that just away is is just is a fiction that does not promote a healthy credit market.
▶ 0:23:33There are ways to help people who have unexpected medical debt, but taking uh making a credit report incomplete is not the solution. With that, I will now recognize the ranking member, if she's here. She's not here. Okay. No. Um would the gentleman like an additional minute? No, I'll simply make the point. I don't believe we're going to be discussing uh medical drug development costs in this hearing.
▶ 0:23:59I may be wrong, but um otherwise, it's Gentleman yields back. Today, we welcome the testimony of Mr. Dan Smith, the president and CEO of the Consumer Data Industry Association, uh Ms. Rebecca Keen, a partner at Hudson Cook, Ms. Celia Winslow, the president and CEO of the American Financial Services Association, and Ms. Manisha Fernand, the director of the compliance policy at Simmons Bank here on behalf of the American Bankers Association, and Ms.
▶ 0:24:26Chi Chi Wu, the director of Consumer Reporting and Data Advocacy at the National Consumer Law Center. We thank each of you for taking the time to be here. Each of you will be recognized for 5 minutes to give an oral presentation of your testimony. Without objection, your written statements will be made part of the record. Mr. Smith, you are first recognized for 5 minutes for your oral remarks.
▶ 0:24:49Chairman Barr, Ranking Member Foster, and distinguished members of this thank you for the opportunity to appear before you today. My name is Dan Smith, and I serve as the president and CEO of the Consumer Data Industry Association.
▶ 0:25:04CDIA represents over 30 consumer reporting agencies, including the nationwide CRAs, regional and specialty credit bureaus, resellers of consumer reports, and companies offering fraud prevention tools and background We believe every American deserves fair, transparent, and affordable access to It is the foundation upon which people build their lives. Credit helps families finance a home and buy a car to get to work.
▶ 0:25:33Our consumer reporting system is a critical component that makes all of that possible. The Fair Credit Reporting Act is the legal framework that balances the value the system brings to all consumers, while ensuring the system is fair, accurate, and trustworthy.
▶ 0:25:50The consumer reporting framework and the protections in the FCRA replaced a system which based on personal relationships, creating a nationwide, objective, data-driven approach that lending to that looks at consumers past repayment behavior and their ability to The FCRA gives consumers unprecedented protections, such as the restriction on use to those with a permissible purpose, and reasonable procedures to ensure maximum possible accuracy.
▶ 0:26:20The FCRA gives consumers important rights, the right to see their information, to dispute errors, to be notified if adverse decisions are made based on their reports, and to protect themselves from identity theft. At the same time, it ensures that data is only used for clearly defined legitimate purposes.
▶ 0:26:41The provisions of the FCRA are critical to a well-functioning consumer reporting system, and CDIA members take these responsibilities very seriously. The most important factor of the consumer reporting system is that the information is complete and accurate.
▶ 0:26:58All participants benefit from this core principle, and anything less degrades the value of the information to the market, and limits consumers access to Participation by data furnishers is entirely voluntary.
▶ 0:27:13There's no requirement for anyone to share data with a consumer reporting Furnishers who choose to participate take on regulatory, operational, and legal obligations, and in return, their data helps create a more accurate and complete picture of a consumer's credit The more furnishers that participate, the better the system works for consumers. But that balance is delicate.
▶ 0:27:37If those risks become too great, fewer furnishers will participate, the picture becomes less complete, lending consumers ultimately have few fewer options. One of the core issues that put the system at risk is liability provisions of the FCRA. FCRA's current liability rules have fueled lawsuits, burdening businesses with high costs, while delivering little consumer benefit.
▶ 0:28:02They also deter new entrants from participating, such as furnishers of rental, utility, telecom, and permission-based data. This limits credit options for consumers. The FCRA Liability Harmonization Act offers targeted reforms that strongly protects consumers by focusing on real harm, ensuring consumers can still fully seek redress and receive meaningful remedies.
▶ 0:28:30Consumer reports also play a critical role in everyday safety and trust, whether it's preventing fraud with identity verification tools, or background screening of employees in sensitive roles, such as teachers and The FCRA has been a cornerstone of consumer protection for more than 50 It also enables innovation and supports economic opportunity.
▶ 0:28:54CDIA looks forward to ongoing work with this subcommittee to ensure the credit reporting system continues to serve consumers well. Thank you. Thank you. The uh Ms. Keen, you're now recognized for 5 Chairman Barr, Ranking Member Foster, and members of the subcommittee, thank you for the opportunity to testify before you today.
▶ 0:29:19My name is Rebecca Keen, and I am a partner at Hudson Cook, where I chair the firm's credit reporting, privacy, and data security practice group. Over the past three decades, I have worked with the Fair Credit Reporting Act from multiple perspectives, including as a private practitioner, as an assistant director at the Federal Trade Commission responsible for the federal government's FCRA program, and as in-house counsel for a consumer data I appreciate the subcommittee's focus on promoting access to credit for everyday
▶ 0:29:50The United States has developed one of the most robust and inclusive consumer credit systems in the world. Credit reporting sits at the center of that system. It allows lenders to make rapid, objective, and scalable assessments of risk, which lowers costs of credit, expands access, and it fuels economic activity across housing, education, transportation, and small Congress recognized this in 1970 when it enacted the Fair Credit Reporting Act,
▶ 0:30:21finding at that the banking system depends on fair and accurate credit By providing standardized, objective credit reports have helped democratize access to credit, allowing consumers to apply for and obtain credit quickly and remotely, rather than relying on personal relationships or wealth. That democratizing effect continues today, especially as credit reporting has evolved.
▶ 0:30:48Decisions about alternative credit data have real consequences for access to credit. Responsible use of information, such as utility and telecommunications payment data, and cash flow data derived from bank account activity, can help credit invisible and credit underserved consumers demonstrate reliability and qualify for mainstream credit. When used with appropriate safeguards and reasonable procedures, these tools can expand opportunity without sacrificing fairness or accuracy.
▶ 0:31:20Accuracy remains foundational. The FCRA establishes a procedural, reasonableness-based standard for Congress deliberately chose a an an a this standard and rejected a standard of perfection or strict liability, recognizing that absolute accuracy is not achievable in a system that processes billions of constantly changing data points supplied by tens of thousands of furnishers. Instead, Congress created a self-correcting ecosystem.
▶ 0:31:51Consumers have strong rights to access their credit reports and dispute information they believe is inaccurate. Furnishers bear a foundational responsibility for data accuracy. Regulators supervise and enforce. And market forces reward accuracy because unreliable data quickly loses its value. Congress has strengthened this framework repeatedly.
▶ 0:32:15The 1996 amendments modernized the statute by expanding accuracy and dispute resolution obligations, clarifying permissible uses of permissible reports, including employment, and strengthening disclosure and privacy protections. FACTA, importantly, expanded identity protection and access tools. Dodd-Frank enhanced supervision and employment and enforcement. And in 2018, Congress made security freezes free for all consumers.
▶ 0:32:46However, while Congress has modernized the FCRA's substantive provisions, the statute's civil liability framework, last revised in 1996, has developed along a different and increasingly misaligned path. Today, the FCRA is an outlier among consumer financial protection laws.
▶ 0:33:06Unlike statutes like the Equal Credit Opportunity Act, the Truth in Lending Act, or the Fair Debt Collection Practices Act, the FCRA permits uncapped statutory and punitive damages in class actions, even for purely technical or procedural violations. Experience has shown that this structure can distort incentives, shifting focus away from promptly correcting towards prolonged litigation.
▶ 0:33:33Litigation generally isn't designed to provide consumers with timely relief, and disputes may persist for extended periods while cases proceed. Meanwhile, the costs of settlements are ultimately borne by consumers through higher prices, reduced innovation, and reduced access to credit. The FCRA Liability Harmonization Act would address this misalignment.
▶ 0:33:54This is not a rollback of consumer protection, it is a one that preserves meaningful remedies for harmed consumers while supporting access to credit. Thank you for the opportunity to testify. I look forward to your Thank you. Ms. Winslow, you are now recognized for 5 minutes.
▶ 0:34:16Good morning, Chairman Barr, Ranking Member Foster, and members of the Thank you for the opportunity to The American Financial Services Association is the primary trade association for the consumer credit industry. 110 years ago this week, small loan association representatives gathered in Philadelphia, founding what would become AFSA with the purpose of expanding access to credit for everyday Today, our members continue to serve consumers across the credit spectrum, those with prime scores,
▶ 0:34:46first-time borrowers, and people rebuilding after a AFSA's membership includes state-regulated finance companies and national and state banks, providing credit in many forms, from auto and home financing to installment loans, payment cards, and retail credit. Our industry contributes more than 145 billion annually to the economy and supports nearly 840,000 Crucial to this competitive and well-functioning market is a sound credit reporting system.
▶ 0:35:14Credit reporting is voluntary, and lenders who participate in the system comply with the Fair Credit Reporting Act. Lenders provide consumer data to credit bureaus and use bureau information when reviewing credit reports before making loan decisions. Creditors have legal obligations under the FCRA, reporting accurately, investigating disputes, notifying consumers of adverse actions, and addressing identity theft claims. Creditors have robust compliance systems to ensure they furnish accurate data, which they do almost 100% of the time.
▶ 0:35:46Responsible lending runs on reliable information. When the data lenders use is trustworthy, they can extend credit more broadly and better priced. Lower rates for lower risk. We also can chances for borrowers who earn them. That's how risk-based pricing works, and it benefits everyone. Corrupt that data, and the whole system is compromised. Lenders must tighten standards and raise rates. Fraudsters don't pay, honest borrowers do. That's exactly what's happening today.
▶ 0:36:14Four threats are chipping away at the integrity of the credit reporting system, but Congress can act to defend it and the consumers who depend on it. First, frivolous and duplicative disputes. The FCRA provides a clear process for disputing inaccurate information, but bad actors have weaponized that process. The scheme is called credit washing.
▶ 0:36:33Certain credit repair organizations and social media scammers flood lenders, bureaus, and the CFPB's complaint database with millions of identical form letter disputes until the volume forces accurate but negative information off a borrower's report temporarily. The harm? Credit washing contributes substantially to the 10.2 billion in fraud loss the vehicle finance industry is facing. Why?
▶ 0:36:57Borrowers with scrubbed records default three and a half times more often, creating hidden risk for which other consumers pay. Congress should reduce this flood of false disputes by amending the FCRA and other statutes, making it harder for scammers to remove negative but accurate Second, false identity theft claims. Social media scammers and illegitimate businesses direct consumers to file false ID theft complaints with the FTC to wipe accurate negative information from their credit reports.
▶ 0:37:27Lenders spend real money on on claims they know are fake. Honest consumers pay with something harder to recover, a fair shot at credit. Congress should encourage the FTC to make it harder to falsely claim ID theft and to hold social media platforms accountable by requiring them to take reasonable steps to stop out fraudulent and deceptive credit repair ads. Third, debt settlement schemes. Some debt settlement companies aren't just targeting consumers in financial trouble.
▶ 0:37:54They are pursuing consumers who are current on their loans, encouraging them to stop paying and funnel payments into accounts with the settlement Consumers' credit scores crater, and these settlement companies profit. Congress should update debt settlement disclosures, ensuring consumers understand the risks. Fourth, artificially inflating scores. Consumers with higher credit scores pay less for credit, but artificially attempting to increase consumer scores doesn't help them. It distorts the system, making it less reliable.
▶ 0:38:23When reporting certain debts is prohibited, when creditors are pressured to support negative information, and when credit builder products aren't held to consistent underwriting standards, credit scores jump. Creditworthiness does not. When those consumers apply for loans, they may be approved for more than they can handle. The defaults that follow hurt everyone. In conclusion, the consumer credit industry helps Americans buy homes, get reliable transportation, and handle life when it doesn't go as planned.
▶ 0:38:49When the credit reporting system works accurately, transparently, transparently, and free from manipulation, lenders can say yes more often. Fraudsters, predatory operators, and AI-driven scam platforms may be attempting to distort the credit reporting system at scale, but Congress has the tools to stop it, and AFSA is ready to help. Thank you. Ms. Ferdinand, you are now recognized for 5 minutes. Chairman Barr, Ranking Member Foster, and members of the subcommittee.
▶ 0:39:19Thank you for the opportunity to testify on behalf of the American Bankers Association. My name is Vinisha Ferdinand, and I serve as Assistant Vice President and Director of Compliance Policy at Simmons Bank. I have spent over 24 years in banking, and much of my career focused on consumer credit reporting and compliance with the Fair Credit Reporting Act, or FCRA. My perspective today is grounded in practical experience.
▶ 0:39:45How credit reporting requirements operate inside a bank, how they shape credit decisions, and how policy changes affect consumers and financial institutions in real, measurable ways. I'm sorry, could you pull your microphone a little bit closer? Thank Banks play a key role in the credit reporting system and only access credit reports for purposes allowed by FCRA.
▶ 0:40:14With strict controls in place to protect consumer information, banks rely on the reports to understand a consumer's overall financial picture. For instance, when a bank reviews a loan application, it looks for what debts the consumer already has, how they paid in the past, and whether they're keeping up with their obligations. Credit reports guide critical credit decisions, whether to approve a loan, how to price it, and whether a consumer can afford to repay that loan.
▶ 0:40:42Banks also use these credit reports for risk-based pricing, which allows them to extend credit to consumers with high credit risk while offering lower rates to those with lower credit risk. This helps expand access to credit. And this credit analysis is not optional. Under the Truth in Lending Act, banks are required to assess a consumer's ability to repay before making certain loans, including mortgages and credit cards.
▶ 0:41:11That obligation depends on having complete and accurate information. Banks that report consumer information, such as payment history, balances, and account status, are considered furnishers under FCRA. While banks are not required to report, once they do, the law is clear. The information must be accurate. Meeting these obligations requires significant investments.
▶ 0:41:37Banks maintain written policies, procedures, system controls, conduct employee training, and ongoing One of the most challenging is handling consumer disputes. Consumers have the right to dispute information on their credit reports, and banks must investigate those disputes within strict timelines, whether they come to the bank directly from a consumer or through consumer reporting agencies.
▶ 0:42:05Banks review relevant records and verify, correct the information to ensure the system remains accurate. For instance, if a loan payment is past due and the consumer disputes it, the bank must investigate and verify the facts. Or, if a deposit account is closed with a negative balance and the consumer later pays that balance in full, the bank must update the consumer reporting agency.
▶ 0:42:32These updates can make a meaningful difference when a consumer is trying to open a new account or apply for credit. When the system works as intended, it allows banks to manage credit risk while expanding access to credit, and that benefits the consumers, the local communities, and the broader economy. When laws restrict the reporting of accurate information or add unnecessary dispute resolutions can slow and the compliance costs rise.
▶ 0:43:00Removing accurate information from credit reports does not eliminate the risk, it just hides it. It forces banks to either take on more credit risk, restrict lending, or increase the cost of credit. Ultimately, the consumer would be adversely impacted. Similar concerns exist at the state level.
▶ 0:43:21While the FCRA preempts state law, some states have enacted laws that exclude entire categories of debt from credit reporting, yet still expecting lenders to assess a consumer's ability to repay. In conclusion, the FCRA framework works because it balances consumer protection and access to credit.
▶ 0:43:43As future policy decisions are considered, clarity, consistency, and practical implementations are critical to ensuring that the system continues to work for banks and to serve our consumers in the real world. Thank you. I look forward to your And Ms. Woo, you are now recognized for 5 minutes. Chair Chairman Barr, Ranking Member Foster, members of the subcommittee, thank you for inviting me to testify today.
▶ 0:44:11I'm testifying on behalf of the low-income clients of the National Consumer Law Center. We oppose each of the bills posted today, which all benefit the big three credit bureaus, the most complained about financial services companies with 5 million complaints to the CFPB. With respect to HR 5775, the FCRA Liability Harmonization Act, we are opposed because it would drastically reduce accountability for credit reporting violations.
▶ 0:44:38It would limit the legal remedies available to people like Scott Kayler, who TransUnion falsely accused of committing a sex offense against a child, had to explain to a potential landlord he was not a child sex offender, and even after convincing the landlord, had to pay six months rent up front, totaling over $18,000. People like Tamaya Cornelius, who was shut out of her job driving for Uber for over a year because of a background check screener falsely reporting her license with was withdrawn.
▶ 0:45:08And then when she disputed, failed to even check the DMV records. People like David Anthony Taylor, who was left homeless because Equifax mixed up his credit report with David Allen Taylor. He couldn't close on his new house after settling the old one despite a VA mortgage pre-approval.
▶ 0:45:24He couldn't get an apartment cuz he owned several pit bulls, ultimately spent months in a motel, had to kennel board and rehome his dogs, and then because he couldn't rehome all his dogs, had to put them all down, to put two of them down, all because of Equifax's error. HR 5775 would deny hardworking people like Kayler, Cornelius, and Taylor the ability to seek full accountability.
▶ 0:45:49Not only would it eliminate punitive damages under the FCRA, would significantly hamper their ability to find legal representation by capping attorney's fees under the act, making it vastly harder find a lawyer to take their case. We also oppose HR 8141, the Fair Credit Reporting Reseller Act, which purports to impose new accuracy standards on resellers, but actually gives these companies a free pass from liability.
▶ 0:46:12Resellers, such as companies that merge credit reports from all three credit bureaus for mortgage applications, would be off the hook for errors if they conveyed information unaltered from the credit bureaus, even if the accuracy was obvious on its face, like the reporting the consumer is filing for bankruptcy when only one out of the three credit bureaus reporting it, and then making no effort to reconcile the obvious There's a narrative that resellers are mom-and-pop organizations, but many resellers are multi-billion-dollar companies, some owned by private
▶ 0:46:43equity, with more than adequate resources for compliance. All of these bills are especially harmful in light of how Russell Vote has sidelined the CFPB, proposing to reduce its enforcement staff by 80% and its supervision staff by 85%.
▶ 0:46:59Indeed, the sidelining already has had an impact with ProPublica reporting that experience rate of relief for consumers complaining to the CFPB dropped from 20% in 2024 to a minuscule in 2025. Without an effective CFPB, the main check against abuses of the credit bureaus are private attorneys willing to assist consumers whose reputations have been shredded.
▶ 0:47:23We oppose HR 5402, the Credit Access and Inclusion Act, which is touted as helping consumers build credit by including rent and utility payment history, but is in reality a preemption bill that would override state and other federal laws giving consumers control over their information. And reporting negative rent and utility payment data can seriously harm struggling renters and consumers in the middle of a rental housing crisis and skyrocketing utility costs. Such Such reporting should be positive only.
▶ 0:47:53We oppose HR 787588, the Eliminating Fraud in the CFPB Consumer Complaint Database Act, which would deliberately sabotage the CFPB's ability to help consumers, um hinder the ability to third-party assistance in filing complaints by requiring submission of sensitive ID documents and require consumers to wait 60 days before they can file a complaint.
▶ 0:48:16Instead of fixing the problems with the big three credit bureaus, HR 7588 bows to the industry's demands to sweep the problem under the Also, the credit bureaus constantly complain that millions of complaints against them are the result of illegitimate credit repair. This minimizes the frustration of consumers who've been unfairly burdened with credit reporting errors. And the CFPB under Vote, even under Vote, noted in 2025 only 10% of credit reporting complaints were flagged by companies as being potentially submitted by unauthorized third parties.
▶ 0:48:46Third, if credit repair is the issue, why isn't the bipartisan Ending Credit Scam Credit Repair Act noticed for this hearing? Instead of these four giveaway bills, we urge Congress to pass meaningful reform of the credit reporting industry, such as the Comprehensive Credit Act that the House passed in 2020, and provide a public option for credit reporting. Thank you for the opportunity to testify, and I look forward to your questions. Thank you to all of the witnesses for their testimony. Um we will now turn to member questions.
▶ 0:49:14I will recognize myself for 5 minutes for opening questions. Mr. Smith, let's pick up where Ms. Woo left off on this complaint database. Uh it's my view that this database is being abused to inundate financial institutions and consumer reporting agencies with disputes based on faulty advice on social media and beyond and that view is informed by public reporting.
▶ 0:49:43I'd like to enter into the record two articles outlining how false information on social media has led to a rise in unfounded CFPB complaints. Without objection, those will be included in the record. So, Mr. Smith, my question to you is can you discuss how reforms in my legislation HR 7588 would help curb these abuses and strengthen the system by reducing noise in the CFPB's complaint database. Thank you, Chairman.
▶ 0:50:13First of all, the complaint portal is a very important tool for consumers, for the CFPB, and for industry. It is a way to identify potential issues. The problem we're facing is that the credit repair organization is using social media and AI to inundate the system and overload the process.
▶ 0:50:32The statutory requirement under the FCRA is that a consumer who has identified an inaccurate trade line in their credit report is to either go to the lender directly or to the CRAs to file a legal The current process of going to the complaint portal is bypassing that and taking away important consumer protections from consumers.
▶ 0:50:55And I want to just note that my legislation doesn't prevent consumers with complaints to submit to the to the complaint portal. It just simply requires that consumers attest under penalty of perjury to the accuracy and legitimacy of their complaint.
▶ 0:51:11We want legitimate complaints to be in there and we also want to avoid these frivolous, unauthorized, fraudulent complaints and we want to protect the complaint narrative confidentiality while at the same time permitting the publication of aggregated non-identifiable data so that the complaint database is actually to to everyone. Do you think that this would help improve the accuracy of consumer reporting system? I do.
▶ 0:51:39The most important part of the Fair Credit Act is that the report be complete and False disputes, and that's what they are, are people trying to remove negative but accurate information. It is critical for a lender to be able to look at a credit report and analyze the risk they are going to take so that more consumers can get credit. Ms.
▶ 0:52:02Winslow, one often looked overlooked feature of the consumer reporting system is that it a strong and good incentives for responsible financial behavior. Consumers financial decisions, both positive and negative, are reflected in their credit profiles which in turn affect their access to credit and the terms they receive. How important is it that credit reports reflect a complete behavioral record to maintain these good incentives? Very important, Mr. Chairman.
▶ 0:52:30Pressuring creditors to remove accurate negative information like medical debts as you mentioned earlier and prohibiting certain reporting of certain information. It may seem like a consumer but this is the kind of thing that ends up hurting borrowers in the long run. Artificially attempting to increase consumer scores, it distorts the system making it less reliable. And so attempts to protect consumers have had unforeseen consequences.
▶ 0:52:53For example, the FACT Act which Becky had mentioned was supposed to help consumers when their identities have been stolen and it was supposed to help them get inaccurate information off of their credit reports. But what happened now? We're seeing thousands of fake identity theft complaints. It's so bad that we believe 95% of the identity theft claims filed with the FTC are fake. So credit credit reports and credit scores are only valuable if they're helping creditors assess an applicant's risks.
▶ 0:53:20If they aren't accurate and they don't work, it's the consumers who end up being hurt.
▶ 0:53:24Yeah, I think on the medical debt point pretending that healthcare is free is not going to help consumers. It's it's going to reduce accuracy and therefore it's going to reduce confidence on the part of lenders to actually extend credit. Ms. Keene, final question to you. Can you explain how the Fair Credit Reporting Act, including the updates since its enactment and other industry led initiatives helps promote accuracy in consumer reporting?
▶ 0:53:56Thank you. The The Fair Credit Reporting Act contains a number of significant provisions and requirements on all occupant all participants in the system from the consumer reporting agencies to the furnishers to the consumers themselves.
▶ 0:54:12It is a self-correcting system and Congress has routinely updated the Fair Credit Reporting Act to address new and different changes in the market including expanding access to consumers to their information making that available electronically as well as expanding the identity theft protection.
▶ 0:54:31Yeah, I'm sorry the time has expired but we'll now turn to the ranking member of the subcommittee Dr. Foster for 5 minutes. Thank you, Chairman. Ms. Winslow, the after the CFPB saw a record number of consumer complaints last year, acting director of all has taken steps to actually make the complaint complaint submission process harder for consumers including adding additional web pages that you have to navigate through in order to submit a complaint.
▶ 0:54:58Why do you think he's trying to do this and won't this actually just harm the CFPB's ability to monitor what's happening in the consumer finance so that they can ideally would be able to focus their resources on the bad actors that need to be investigated? Absolutely. What the Vaught-led CFPB has first of all is wrong on the law.
▶ 0:55:22It has instituted not one, not two, but three all caps menacing web pages saying that consumers can't file a complaint with the CFPB for credit reporting errors unless they file one with the credit bureaus first which is wrong on the law. You know, instead of actually addressing
▶ 0:55:40she just said that they actually are posting factually wrong information at the entry. So the first thing that the consumers encounter are all caps false assertions about what the law is. Is that actually what's on the the CFPB website right now? That's correct. It says Thank you. It says you have to go to the credit bureaus first. There's no such requirement.
▶ 0:56:06But more importantly, most consumers do actually dispute with the companies first before they go to the CFPB. But the credit bureaus are so bad at tracking them where over 90% the CFPB under Vaught reported over 90% say they previously disputed but the credit bureaus say only a third of them did. So we have serious questions about the credit bureaus own ownability to track these disputes.
▶ 0:56:31Secondly, there's a mechanism already in the CFPB complaint process where a company can a complaint as with an administrative response flag it as unauthorized or fraudulent. Last year only 10% of the 5.8 million credit reporting complaints were flagged as fraudulent. That means the other 90% they didn't flag as fraudulent. So this idea that all 5.8 million are the results of credit repairs and bots is is just wrong.
▶ 0:57:01They're just trying to sweep the Vaught-led CFPB is just trying to sweep this under the rug instead of dealing with the problem head on which is the millions of errors you know, the FTC found one in five consumers has a verified error in their credit reports. That's tens of millions of consumers. Thank you.
▶ 0:57:19You know, one of my hopes in in sort of resolving a lot of what we're talking about here is that the combination of AI agents acting on behalf of of individual consumers and also a much higher quality identity system in in our ecosystem can get rid of a lot of identity errors which seem to be a lot of what's in dispute all the way along the line.
▶ 0:57:41You know, that back in 2020 when Dems were in control we passed in a bipartisan manner Your Credit Score Act that among other things, you know, had real provisions in it to try to improve making sure that the right credit events and credit reports are associated with a correct entity. The Senate, of course being the Senate, did nothing on that.
▶ 0:58:04But in this session Representative Pete Sessions and I have the Stop Identity Fraud and Identity Theft Act which is trying to get some money to the states to actually implement the mobile driver's digital driver's license mobile ID that really the best defense against you know, either mistaken or deliberate identity fraud in here.
▶ 0:58:24So I really hope that on a bipartisan basis we we move that one forward and that we we join the rest of the world in getting a high quality identity system available to citizens who want one. That would I think eliminate a lot of the mistakes that happen in the system. And let's see let's say I'll start with Ms. Winslow. What if you could just snap your fingers and and get rid of identity mistakes or identity fraud, what fraction of the workload would disappear?
▶ 0:58:55I would say probably upwards of around Our members spend [clears throat] an inordinate amount of time responding to duplicative and false those cookie-cutter disputes that you get if you just type into chat GPT, you know, how do I get negative information off my credit report and they copy what comes back and send it in. And so they want to focus on the real disputes that CC mentioned. If there is an issue, if someone's identity is stolen, that's what they want to focus on.
▶ 0:59:20But instead, they just spend countless number of dealing with with fake disputes.
▶ 0:59:26On the other on the other hand, if we get a high quality AI agent acting on behalf of consumers, they will be able to give legally correct advice. And I think that's going to be the challenge of the coming years to make sure that when consumers depend on AI agents for financial advice, that they're actually aligned with the interest of the consumer and not just another level of scam trying to hit consumers. Gentleman's time That's right. Gentleman's time has expired. The gentleman from Texas, Mr. Williams, is now recognized. Thank you, Mr. Chairman. Thank you all of you being here.
▶ 0:59:56Uh in full disclosure, I'm an auto dealer in Texas. and I've used your industry for many, many years, the last 57 to be exact. Uh for a long time, access to credit has depended on a family or a fairly narrow picture of a person's financial history. In recent years, we've seen rapid changes in how alternative data like or especially with the growth of alternative data like rent, utility, and cash flow information and can now give lenders a more complete view of a potential borrower's risk.
▶ 1:00:25Uh when done right, the kind of data can be expanded access to credit while preserving safety and soundness across the financial system. So, Mr. Smith, to you, how has consumer reporting and the use of alternative data changed in recent years? And can you expand on how these changes impact those who might have had not had success to reliable credit in the past? Thank you for the question.
▶ 1:00:48Uh expanding access to credit is extremely important and alternative data or additional data sets are extremely important and we support the inclusion of all data sets to allow a lender to accurately and completely evaluate the consumer's ability to repay a loan. So, we fully support it. Our system keeps being improved to allow new data sets in so that the consumer and the lender is able to extend credit. All right, thank you. Uh Ms.
▶ 1:01:17Winslow, in your testimony, you highlighted credit creditors being overwhelmed with disputes to get information removed from a borrower's report in order to make them look like less of a credit risk. And another type of fraud that I hear about is bust-out fraud, which is when bad actors manipulate their credit through credit washing uh or other or other things and false credit information to purchase multiple vehicle vehicles across dealerships like my business and then quickly flip or export them on
▶ 1:01:47the black market all before lenders and dealers can discover the fraud. So, this kind of activity can lead to higher costs, we know that, and limited credit for honest borrowers. So, Ms. Winslow, what can Congress do to address these types of frauds and ensure that auto dealers have correct credit information before selling a car to a fraudulent operation? You're absolutely right, Congressman. Bust-out fraud is increasing and it's hurting auto dealers and auto lenders around the country.
▶ 1:02:13So, as you said, when the fraudsters come in, they to a dealership, they've already established a fake credit history by washing their own credit, buying someone else's, stealing someone else's, using AI to build one, purchasing it on the dark web. Whatever the method, they end up with this fake but great uh good credit profile.
▶ 1:02:32Then they max it out quickly without any intention of So, in the auto context, it's usually an organized crime ring targeting multiple dealerships one after after another, sometimes in the space of only a few hours. So, we encourage Congress to work with lenders and the credit bureaus to limit artificial credit score inflation, reduce consumers' ability to remove accurate but negative information from their credit reports, and perhaps most importantly, pass legislation that would allow lenders and dealers to communicate regarding suspected
▶ 1:03:02fraud. That would go a long way if we addressed privacy concerns, but at the same time allow that communication to happen. So, we look forward to working with your office on that. Thank you.
▶ 1:03:12Thank you very much. Lastly, for the credit reporting system to work effectively, lenders need a reliable and consistent view of borrowers' financial obligations and repayment behavior. That information is crucial to how banks evaluate risk, determine loan terms, and decide whether or not to extend that line of credit in the first place. When the information lenders receive is and what they receive is incomplete or inaccurate, it can distort those decisions ultimately limit access to credit, leading for small businesses like myself like mine. So, Ms.
▶ 1:03:39Ferdinand, and lastly, how does the accuracy and completeness of credit report data impact a bank's ability to extend credit to more small businesses? Thank you for your question, Uh so, banks rely on the credit reporting system to, you know, make credit decisions. Banks have stringent underwriting We rely heavily on the information in the credit reports.
▶ 1:04:06So, if a consumer has a past-due loan or, you know, a good loan, that's, you know, their creditability, their repayment ability has been verified and validated. That helps us make those loan decisions and those credit decisions. We rely on the accuracy of the information in those credit reports.
▶ 1:04:23And uh for small businesses, there's no other way and more you know, cost-effective way for them to you know, as a car dealer or as a small financer or as a small bank, there's no other accurate way for them to determine the repayment ability for that consumer or that business loan. Well, thank you and I yield the rest of my time back. Thank you very much.
▶ 1:04:45Gentleman yields. The gentlelady from California, Ms. Waters, is now Thank you very much. Uh Mr. Chair, as we hold this hearing on consumer issues, I note uh we have a person missing from the witness table. In the past, Republican chairs had no problems inviting past directors of the Consumer Financial Protection Bureau every 6 months, as it is required by law.
▶ 1:05:16Nevertheless, Republicans have blocked any accountability for the laws lawless actions of Mr. Russell Vote. And it's not like Mr. Vote is not willing to testify. He testified yesterday before the Budget Committee. Rather, Republicans just don't want the public to know how Trump has illegally dismantled the Consumer Financial Protection Bureau.
▶ 1:05:44And I was disappointed to learn that committee Republicans privately met with Mr. Vote just a few weeks ago. He should be immediately required to appear before this committee to testify under oath and answer questions from all members about his actions. Now, Ms. Woo, thank you for your testimony. Would you briefly describe the impact of Trump's shutdown of the Consumer Financial Protection Bureau?
▶ 1:06:15What has been What has happened uh to our consumers, especially those who have an error on their credit report? For example, 88% of consumer complaints filed last year were about credit reporting and all of the errors that have made it difficult for consumers to obtain access to Is it fair to say that this data is a blinking red light that we have a big problem in credit reporting?
▶ 1:06:44And if Trump's Consumer Financial Protection Bureau director won't help, when Congress should hold him accountable and pass legislation to clean up the broken credit reporting system, what should we be doing? Uh thank you for the question, Ranking Member Waters.
▶ 1:07:03Um absolutely, the sidelining the CFPB has been devastating to consumers, especially consumers with credit reporting complaints, 5 million of them with rates of a relief of zero from 0.1%. That's minuscule.
▶ 1:07:19Um if the CFPB is sidelined and Russell Vote is not doing anything to help consumers, then Congress must act and must pass the Comprehensive Credit Act, um which you led uh several years ago and which this House passed out in 2020. Um thank you, Ms. Woo. When I was chairwoman of this committee, we passed comprehensive legislation that would overhaul the broken credit reporting system.
▶ 1:07:47Do you think this Congress should pass the Comprehensive Credit Act into law? And if so, could you highlight just a couple of the key reforms and explain how it would help consumers? Um thank you, Ranking Member Waters. Um yes, absolutely, Congress should pass the Comprehensive Credit Act. It was a great bill that would help so many consumers. It would reform the dispute process to make it meaningful and not this automated perfunctory Kafkaesque system.
▶ 1:08:17It would provide for free free credit scores. It would shorten the time limits of negative information so that consumers aren't burdened for 7 years. It would ban medical debt from credit reports because medical debt nobody should have their credit report ruined because they got sick. And there have been multiple studies showing medical debt is just not predictive. It is different. It's the result of the dysfunction of our health care system. Ms.
▶ 1:08:44Woo, are you aware of how helpful the Consumer Financial Protection Bureau has been to consumers and the millions of dollars that have been returned? Are you aware of that? Um yes, the CFPB before Russell Vote returned 21 billion dollars to consumers. Um without a a vigorous CFPB, it's costing consumers millions and millions of In a time of
▶ 1:09:09that prior to the Consumer Financial Protection Bureau, consumers had nowhere to turn until Dodd-Frank was realized? That's right. That's right. Um nobody wants to go back to 2007, 2008 when bad mortgages and terrible credit cards crashed our economy.
▶ 1:09:28The CFPB was designed to protect our economy from abuses like that that can crash our entire economy, and its sidelining is bad for consumers and bad for our Well, what is happening now, consumers have no one to really protect them because despite the fact that the Consumer Financial Protection Bureau still stands, the infrastructure has been destroyed. That's correct. Russell Vote wants to get rid of 80% of the enforcement staff.
▶ 1:09:57And for a different perspective from California, the gentlewoman from California, Ms. Kim, is now recognized. Thank you, Chairman Barr and Ranking Member Foster, for hosting this hearing, and I want to thank all of our witnesses for joining us today. I want to take a second to recognize April as Financial Literacy Month.
▶ 1:10:17And as co-chair of the uh Financial Literacy and Wealth Creation Caucus, I'm committed to furthering financial education and making sure that Californians are on the right path to financial success. And part of that success begins with access to credit. Over 12 million Americans do not have a credit score, and over a quarter of all Americans have a subprime credit score.
▶ 1:10:43In California, credit scores are declining by over half a percent, and this is extremely concerning as an individual's credit score has a direct impact on a consumer's ability to finance their purchase of a home or a car or other necessities. Uh I'd like to ask you, uh Mr.
▶ 1:11:03Smith, uh in the context of housing affordability, how do pulling multiple credit reports impact the final mortgage interest rate that a consumer will receive? Thank you. Uh the housing market and obtaining a mortgage is mortgages extremely complex. Many homes are uh on average over $350,000. Uh it is something that it impacts every consumer's life that's purchasing a home.
▶ 1:11:32It's critical that a lender, when doing an evaluation of a consumer's ability to repay, that they have a full picture and they have all the information. So, that it is it it's extremely important that when a lender evalu- evaluates the risk they're taking, that they have all the data available. Thank you. You know, I believe um that we need to ensure that consumers have the most accurate credit reporting available.
▶ 1:11:58Uh especially when these scores can determine a payment that will be make that they will be making for the next 30 years of their lifetime, right? And that's why I work with my colleague, Representative Bynum, to introduce the Credit Access and Inclusion Act.
▶ 1:12:13And our bill would allow rent, utility, uh tech, you know, the providers to be um to be able to report those information and include that in the credit scores and study how payment cash flow data can be used for credit scores as well. Um so, Mr.
▶ 1:12:33Smith, uh can you talk about how the current regulatory framework creates uh barriers for new data sources such as rent reporting for and or payment a payment cash flow? Thank you.
▶ 1:12:47Um the biggest challenge a new participant has to entering the system is the the uh uh liability associated with FCRA, and we believe the Harmonization Act puts a balance between consumer protections and a well-functioning market.
▶ 1:13:05And the proposals align with other consumer financial protections laws like the Equal Credit Opportunity Act and the um uh TILA, Truth in Lending Act. So, we believe it's important to uh encourage new participants, and anything that we can do to bring them into the system will help lenders extend credit to
▶ 1:13:27Absolutely. You know, we should be rewarding families for doing the simple things in life such as paying their rent, utilities, or receiving consistent paychecks. So, um I'm committed to fixing that system until we see those changes reflected. Uh another aspect of credit scoring where consumers have been left behind is through the credit repair.
▶ 1:13:50While there are some organizations that do work to help the consumers, the unfortunate truth is that far too many of them over-promise and deliver few results that actually benefit the consumer. So, Mrs. Winslow, can you talk about how the bad actors in the credit repair space take advantage of our consumers? Sure, and we really appreciate your support for the Ending uh Scam Credit Repair Act.
▶ 1:14:19That bill will ensure that consumers know they're paying for something that they could do themselves, saving them money and dressing and addressing the affordability problem in the country at the moment. Uh it'll ensure that credit repair lawyers are truly representing their clients, not just spamming them with these cut and paste disputes. And it'll make credit uh certain credit repair companies it'll ensure that they're not getting paid fraudulently for removing a debt that ends up just getting put right back on.
▶ 1:14:47So, I think it brings important responsibility to a space, and it'll ensure that the some credit repair organizations do what they say they're going to do and really help uh consumers repair any credit problems that they
▶ 1:14:59mentioning that Ending Scam Credit Repair Act because that concept is very simple. You wouldn't pay a contractor doing work on your house full amount up front, right? You pay and make the full payment when they finish the services. So, thank you. General Lady's time has expired. The gentlewoman from New York, Ms. Velázquez, is now recognized. Thank you, Mr. Chairman. Ms.
▶ 1:15:21Wu, as um we already heard, alternative data is often promoted as a solution to credit invisibility and the racial credit score gap. Yet, you have expressed concern about the use of alternative data. I have expressed similar concerns, and I don't believe it is the cure-all for credit inequality.
▶ 1:15:48Can you explain your concern and how the use of alternative data can actually be extremely harmful to certain Thank you for the question, Congresswoman. Yeah, alternative data um the devil is in the details, and certain types of alternative data can harm consumers.
▶ 1:16:09For example, rent payments, if you report negative as well as positive rent you can literally make someone homeless because 90% of landlords use credit reports, and a late payment on a rent tr- a trade line, landlords won't rent to them. Um and we've seen that happen. Also, landlords use negative rent payment as a tool to coerce tenants to pay even when the consumers have a right to withhold payment because there's no heat or there are rats running around.
▶ 1:16:39Um in your own um home state and city of New York, you have Guardian Realty who used negative rent reporting to retaliate in such a very situation. So, you know, rent reporting, we said positive only so that it helps consumers. Um utility payments, same thing. Um utility costs are going through the roof. A third of consumers, um low-income consumers, have late payments. We don't want to mess up their credit reports with negative information.
▶ 1:17:06Um we want alternative data to be positive, voluntary, opt-in, um and preferably not shoveling data to the credit bureaus, but whole new uh regimes like cash flow underwriting. You take the data from the bank account with the consumer's permission. What about telephone uh payments?
▶ 1:17:25So, telephone payments, um you know, there there are alternative scores that use um telephone payments from this uh company called National Telecom Consumer Telecom Utilities Exchange. It's a second chance score. It's not going to the big three credit bureaus, and that can be helpful. Devil's in the detail. But the Credit Access Inclusion Act isn't even about because that data can be reported already. You don't need a law. It's about preempting state privacy.
▶ 1:17:54Thank you. Um Ms. Wu, one of the bills we are discussing here today, HR 5402, allows public housing authorities to provide rent information to credit reporting agencies. Yet, the bill provides no funding to PHAs to carry out this mandate. You know, wait a minute. I- I- isn't the Republican Party against unfunded mandates?
▶ 1:18:23In my hometown of New York, NYCHA, the largest PHA in the country and home to more than 500,000 New Yorkers, has repeatedly warned that they do not have the funding or personnel to carry out this mandate this mandate without the funding or the personnel to do so.
▶ 1:18:46Given your warnings about the use of alternative data, wouldn't you agree that we should be giving PHAs the necessary resources to ensure consumer data is accurately reported? This on top of the budget cuts on operational and capital funding that NYCHA is already facing. Absolutely, Congressman. You're Rent reporting also costs money, and you're absolutely right.
▶ 1:19:15Either the landlord has to pay for it, in this case it would be NYCHA, or the tenant has to pay for it. And we wouldn't want public housing tenants to have to pay for it. Um because these are consumers that are already financially struggling. And this is another problem with rent reporting. Often times the consumer, the renter ends up having to pay for it, and it becomes another burden at time when so many people are struggling with rent. Thank you. Mr. Chairman, yield back. Gentlelady yields.
▶ 1:19:45The gentleman from Tennessee, Mr. Rose, is now recognized for 5 minutes. Thank you, Chairman Barr and Ranking Member Foster for holding this important hearing, and thank you to our witnesses for being with us here today and taking time from your schedules to join us. Ms.
▶ 1:20:00Ferdinand, in your testimony, you mentioned that federal regulators are making welcome reforms to focus their supervisory efforts on preventing and remediating consumer harm rather uh punishing minor technical foot faults in banks' compliance programs. Could you elaborate on what you mean by quote unquote technical foot faults?
▶ 1:20:24What kinds of issues have historically fallen into that category in your view, and how have those regulatory approaches affected community banks or smaller institutions in particular? Thank you for your question, Congressman. Uh first of all, I'll say from a regulatory perspective, the compliance burden is enormous, uh especially uh if I were to speak on behalf of the uh small banks.
▶ 1:20:48Uh the cost of compliance, uh you know, those are the same resources a small bank could be using to serve their community and their consumers. Instead, when regulatory burden is so harsh that, you know, one or two people in that compliance department at a small bank have to play have multiple hats, and that's really hard to balance. Uh you know, bigger institutions have a whole team uh of individuals and associates who can manage that workload and the uh regulatory burden.
▶ 1:21:16Uh just ensuring once you decide as a bank that you will uh report the information as furnisher to a credit reporting agency, then by law we are required to be compliant and report accurate information.
▶ 1:21:30And so it takes a lot of time uh and effort when a new law or a rule is passed or there is an amendment to say FCRA, it takes a lot of resources on the compliance team, and uh it is really uh you know, we start implementing from day one as far as far as the mandatory date is announced. Uh it takes a lot of time, a lot of resources, those resources that we could be serving uh used to serve the our communities, our local communities, and have a broader impact on our uh nation.
▶ 1:22:00Well, thank you, and and I will just reiterate and second what you're saying as a former board member of a small community bank, um I can I can concur that the regulatory burden on small financial institutions, particularly following the 2008 financial crisis, became oppressive and distracting to their core function of providing credit, getting credit to uh serve the communities that they're in. Mr.
▶ 1:22:26Smith, the Credit Score Competition Act passed in 2018, which required FHFA to consider alternatives to the long-dominant FICO for loans sold to Fannie Mae and Freddie Mac, um it now appears we are finally very close to having competition for FICO from Vantage Score. What is your view of this development, and what do you anticipate the benefits for consumers will be of having credit score competition?
▶ 1:22:57Thank you. Uh the inclusion of additional scores will definitely increase competition within the mortgage market. Uh it provides um opportunity for lenders to look at different data sources, different uh methods of determining a score. So we are supportive of the inclusion of different scores in the competition. Thank you. I I concur in that as well. Uh in the time we have left, Mr.
▶ 1:23:24Smith, you mentioned in your testimony that consumer reporting agencies have procedures in place to safeguard sensitive data. Recently, there has been growing discussion about Anthropic's new Mytho's model, an advanced AI system that some experts worry could be exploited for cyberattacks targeting sensitive data systems.
▶ 1:23:44How prepared are the major credit bureaus for this new and rapidly evolving threat environment, and should consumers have any reason to be concerned about the security of their private financial information? Our our members spend enormous amount of time and resources ensuring the safety of the data that they are responsible for. It is critical that our data is secure, that consumers protected.
▶ 1:24:09Um it is a significant risk, and AI is something that we are challenged with every day. The bad actors don't have to follow the laws. That's the problem. We do, and we will follow them to the full Thank you. I I uh share your concerns and and hope that you're right. Uh in the interest of the Well, Mr. Smith, how how can strictly positive reporting impact the safety and soundness of financial institutions? Right.
▶ 1:24:36The So the challenge with positive only is that the lender's not getting a full picture. Right? It's important that they see the accurate and complete amount of information. If you're just seeing the positive only, then you're going to be be not sure exactly if there's any negative information. We support the inclusion of more information all the time. It helps the consumer, it helps the market. Thank you. I yield back. Chairman yields. Gentleman from California, Mr. Sherman, is now recognized.
▶ 1:25:05Um I'm one of several here who co-sponsored the bill that gave us the it has done tre- did tremendous good until Musk and Trump pulled the plug.
▶ 1:25:23One example is the 19 uh $19.7 billion returned to Americans by the CFPB, not to mention all of the scams it Uh the ranking member is correct in saying that the uh head of that agency should be testifying periodically before this committee as required by law, and we should not defund the police, and that includes those who police our lending markets.
▶ 1:25:55I understand the FHA FHFA and the GSEs are considering changing from a system where you they look at three credit to underwrite a mortgage to only a single uh credit report. Uh this would give them limited uh visibility into a borrower's credit score, and increases the default risk. If we have a higher default risk, that raises interest rates for everyone, whether they be getting a new mortgage or refinancing.
▶ 1:26:26Uh Mr. Smith, uh mortgages are sold in the capital markets that depend on consistent, high-quality underwriting data. Um should we move toward uh just having one credit report behind these mortgages on which the uh uh taxpayers at risk? I believe that would be a uh very risky decision to make. The credit reporting system is voluntary.
▶ 1:26:53So the difference between one report and another is substantial. Uh a a lender chooses uh if they want to send it to all three, and so you'll have a variance between reports. And so it is critical that all information is looked at. If a significant debt is missed, that puts the consumer at risk. And I'd point out with a mortgage, it's not like a credit card with a $3,000 limit. We're talking half a million bucks in my area as a minimum.
▶ 1:27:22Um there's the issue of trigger leads. When I apply for a mortgage, I my lad the person I apply with, the lender I apply with, knows that I'm applying. If I apply two or three places, well, two or three lenders know. But the fact that I'm applying for a mortgage, I think, is private. I don't tell my neighbors.
▶ 1:27:40And yet we do have a situation where all of a sudden you apply for a mortgage, and somehow pulling the credit report leads to 50 phone calls from 50 people who think that they're the best uh um mortgage lender. Um should we pro- Mr. Smith, should we prohibit uh trigger So Congress last year enacted a law to restrict the use of mortgage trigger leads. We're fully in compliance with that.
▶ 1:28:07We believe that abusive telephone calls are completely inappropriate, and they should all stop. Got you. Okay, we've got these uh credit uh repair folks, or so-called credit repair folks.
▶ 1:28:26Uh in 2024, the CFPB announced it was distributing $1.8 billion to 40 4.3 million consumers who were harmed by the predatory credit repair companies. Uh this is the largest refund in the CFPB's history. we've had other we've had testimony already about how uh often these are scams. Uh Sarah McBride has introduced legislation HR 306.
▶ 1:28:56I'm one of many co-sponsors. Uh the Ending Scam Credit Repair Act. Um uh Ms. Uh Winslow, can you explain uh how legislation uh affecting the quote credit repair would improve things for consumers? Yes, thank you, Congressman. And it's not just the CFPB that's gone after these credit repair organizations, it's the FTC as well.
▶ 1:29:24And you can find warnings for consumers on the FTC's website, the CFPB's website, the FDIC's website, as well as a number of the attorneys general. Uh so, the bill would prohibit jamming financial institutions with meritless disputes. It'd require the credit repair organizations to perform the services for which they're getting paid and disclose that they aren't doing anything that the consumers couldn't do themselves for free. So, we very much appreciate your support of the legislation. Thank you. Thank you.
▶ 1:29:54And I'll point out that so many consumers uh state that they face significant upfront uh fees without meaningful results and without permanent results. And I yield back. Gentleman yields. Gentleman from Georgia, Mr. Loudermilk is recognized. Thank you, Mr. Chairman. Thanks uh to everyone on the panel for being here today. Very very important uh issue we're discussing. Um Ms.
▶ 1:30:15Keene, we've seen a growing concern we've seen growing concerns that the current FCRA liability framework, particularly around statutory and punitive damages uh in class actions can create incentives for litigation that may not always correspond to actual consumer harm.
▶ 1:30:32Do you believe that aligning FCRA's liability framework with other consumer protection statutes, such as by capping statutory damages in class actions and limiting punitive damages, would reduce abusive litigation while still preserving meaningful remedies for Thank you for the question. I do. Um the open-ended civil liability uh provisions of the FCRA disproportionately burden small and emerging consumer reporting agencies and furnishers who might enter the market.
▶ 1:31:03Uh it operates to incentivize dragging out the consumer's dispute to basically increase recovery rather than it um focusing on things that would help the consumer most immediately. We've seen, for example, some plaintiffs' lawyers advising consumers not to file identity theft reports, instead to submit incomplete it you know disputes with limited information to basically create the grounds for a lawsuit rather than taking advantage of the important
▶ 1:31:33um requirements that were enacted in fact uh to allow a consumer to block fraudulent information when they're a victim of identity theft. That's not helping the consumer. And I think that's what we need the reform for the FCRA liability provisions. Uh we all know that, you know, private litigation does have its place in uh in in consumer protection.
▶ 1:31:54But what other mechanisms, uh such as federal and state supervision, can help uh ensure consumer reporting agencies and data furn- uh furnishers take obligations under FCRA very seriously. Well, I think it was important I wanted to make sure mentioned that the Fair Credit Reporting Act is not just enforced by the CFPB. So, setting aside the debate about the current CFPB, it is also enforced by the Federal Trade Commission and the state attorneys general in addition to private lawsuits.
▶ 1:32:25So, there are quite a number of enforcement entities with authority to bring cases or investigate potential violations of the Fair Credit Reporting Act. Thank you for that. And that's uh why I've introduced HR 5775, the FCRA Liability Harmonization Act, to bring FCRA liability in line with that of other consumer protection statutes.
▶ 1:32:46This would reduce cost and promote further competition in the consumer reporting system while ensuring consumers still have robust protections to ensure their reports are accurate. Uh Mr. Chairman, I'd like to submit a letter uh to the record uh in support of the uh FCRA Liability Harmonization Act.
▶ 1:33:05This letter is from the Consumer Data Industry Association, American Bankers Association, US Chamber of Commerce, Consumer Bankers Association, American Fintech Council, America's Credit Unions, National Automobile Dealers Association. Without objection. Thank you, Mr. Chairman. Mr. Smith, um following on this topic of liability reform, can you discuss how the uncapped civil liability currently embedded in FCRA uh can make it difficult to run a consumer reporting agency, especially as uh Ms.
▶ 1:33:35Keene said, the smaller ones who can't afford large teams of attorneys or or uh self or they have to self-insure with omissions and insurance. This is really That is a really important question because there are many small uh mom-and-pop owned credit bureaus. That's how the credit bureau system started many years ago. It was regional and local.
▶ 1:34:00And they've uh the liability risk associated is created the consolidation that we see today. That liability is enormous. It's uncapped, and it will put a company out of business overnight. It also impacts the users of reports. So, employers buy credit reports and consumer reports to make sure that their customers and their employees are safe. That liability transfers to the user of the report as well.
▶ 1:34:27So, under the current FCRA system, um can you talk a little bit about the settlements and how the uh awards of the settlements currently break down and how much of the settlements does the consumer who was supposedly victim, how much does the consumer actually receive? Well, it's astonishing when you see that. Um the consumer should have all the protections of the FCRA, including the right to sue. That is a backbone of the system. It is an important tool.
▶ 1:34:56But we're seeing cases in Georgia and Illinois, for example, where lawyers are entering into agreements with consumers, and the consumer winds up firing their because it turns out that the lawyer is recouping all of the costs upfront and then receiving 40% of the settlement. So, the consumer gets at best 10%. What are we doing to help the consumer in that case? Thank you. I yield back. Gentleman yields. The gentleman from Texas, Mr. Green, is recognized.
▶ 1:35:26Thank you, Mr. Chairman. I thank the ranking member as well. Thank the witnesses for appearing today. Uh Ms. Woo, let's talk for just a moment about alternative data. Uh I like to refer to it as additional But for our purposes today, let's talk about the invisibles and the persons who are non-scorables. Um we have a good many of them in the country.
▶ 1:35:49According to a report that I have from 2015, there were 26 million consumers who are invisible and about 19 million who are not scorable. Um do we have enough of the automation such that these persons can receive credit scores based upon some of the non-traditional aspects of credit utility bills, uh phone bills, light bill, water bill.
▶ 1:36:19Do we have enough of the automation to cover them in the process of scoring? Thank you for the question, Congressman. Um so, as I said earlier, with alternative data, the devil is in the details. Um what kind of alternative data and how it's used is important.
▶ 1:36:37Um in terms of automation, we've seen the rise of an entire sector of data aggregators who are able to tap into bank accounts and use cash flow to um provide for credit underwriting, and this provides an to the big three credit bureaus that's in the consumer's control.
▶ 1:36:57Um and the CFPB wrote this really great regulation under 1033 of Dodd-Frank that would have provided a great framework, strong privacy protections, while promoting this this kind of alternative data that is um that gives uh consumers an option be- besides the oligopoly that's the big three credit bureaus. And you know, you got to do the we have to do this in in a the right way.
▶ 1:37:22Um you know, it's and and so, you know, we have to think outside the box, and the box being the big three credit bureaus. And with the utilization of what we're calling alternative data, actually, you can still maintain the traditional credit data and have additional data added to that. It doesn't have to supplant, it can supplement. Uh is that a fair statement?
▶ 1:37:49So So, yes, you know, uh cash flow underwriting could be used in addition to traditional credit bureau data. Um you know, and speaking of advancements, there was a question before about FHFA and and using Vantage Score in addition to FICO. I just like to point out that Bill Pulte um has not approved the latest FICO scoring models to be used in mortgages.
▶ 1:38:12So, I mean, what are we doing if we're going to talk about alternative data and we're not even going to use the most recent scoring model, FICO 10T, which which actually does consider rent and utility data. And I usually don't I'm not in the habit of defending corporations, but you know, this it seemed like it was making FICO um compete with one hand behind the back, and that's not good for competition, Well, let's move to another area.
▶ 1:38:37I'd like to talk to you now about something the uh credit scoring models don't pick up, and that is invidious discrimination in lending itself. Um person goes into a bank, does not get a loan who is qualified and uh the person doesn't get the loan because of the person's skin color or the person's ethnicity. Uh this still exist.
▶ 1:39:02Uh proof of it is the fact that uh City National Bank in 2023 agreed to pay 31 million to to allegations of avoiding lending to black and Latino communities in Los Angeles. Uh Lakeland Bank 2022 settled with the DOJ for redlining in Newark, New Jersey So, we still have this invidious discrimination in lending. And I have a piece of legislation HR 166 who deal that deals with this type of discrimination.
▶ 1:39:33It would establish an office of fair lending testing to test for compliance with the Equal Credit Opportunity Act, and this would ensure that persons in injured by discriminatory practices can seek relief. But, it would be in the And we currently have a an administration that is not enthralled with the way the CFPB functions in that it does really help consumers. Do you have a comment on this type of invidious discrimination that exists, Ms. Waters?
▶ 1:40:02yes, um Congressman, this kind of invidious discrimination still does exist. Um there's still a lot of it in the system. The CFPB is the agency that was supposed to root it out, but it's been sidelined. And the led CFPB is trying to water down the Equal Credit Opportunity Act to remove tools that are necessary to combat discrimination when it is invidious by by removing the disparate impact standard from the ECOA. Uh Mr.
▶ 1:40:28Chairman, uh without objection, if it's at all possible, I'd like to introduce HR 166 into the record. It's the bill to establish the Office of Fair Lending Testing to test for compliance with the Equal Credit Opportunity Act. Without objection. Thank you. I yield back. Gentleman yields. The gentleman from Michigan, Mr. Huizenga, is the vice chairman of the full committee, is recognized. Well, thank you, Mr. Chairman Barr. I appreciate that.
▶ 1:40:55Um I appreciate uh your time and attention to this today. Uh I'm going to start with uh with you, Mrs. Ferdinand. Um I appreciate testimony that you had have uh given and and why a full and complete picture of a consumer's credit uh history is vitally important to financial institutions such as uh as they make credit decisions.
▶ 1:41:20Um I was a I was a realtor in my prior life, and I will literally never forget the time sitting at my first closing when the uh when the closing agent slid a check across to the seller, and then slid a check across to the And it was like, something's out of whack here with the system.
▶ 1:41:40And I also remember in that period of time uh where you had people that um had credit that given credit beyond what they really should have been granted. All right? And all that leads me uh kind of to this.
▶ 1:42:02You know, it would seem to me that having a full and complete credit of your customers would not certainly not just benefit your bank, and by the way, your bank, which is being told by its regulators what it uh what kind of risk profile it needs to have, but even more importantly, it's going to benefit the customers that you have um so that they're only approved for a loan that they can realistically afford. Is that Is that the case? Thank for your question, Congressman.
▶ 1:42:32Yes. So, as a bank, we rely heavily on the credit reporting system and the accuracy of the information that is not just furnished by our bank, but other furnishers as well. And that cumulative full picture, that full financial picture, gives us a better credit analysis. We're able to do a more accurate credit analysis and assess the risk of that customer. So, so what happens What happens if there's a removal of certain categories of debt in this credit report?
▶ 1:43:02Um is that going to expand or limit the access to that So, uh let me start with this. Uh so, if information, valid information, is suppressed uh from a consumer's credit report, that will ultimately impact the uh credit underwriting standards for any bank. Uh it would be a systemic change in the market.
▶ 1:43:26Banks would have to lower their standards or increase price or uh tighten credit, and that would directly impact consumers in the local economy and the broader spectrum. Uh we never want to see a customer have a loan they can't afford. Uh we have to, and we are obligated uh by the Truth in Lending Act uh to verify the ability to repay.
▶ 1:43:51And if that consumer cannot repay or we don't know if they cannot repay that loan, that's not good for the consumer, and that's not good for our economy as So, expand on that a little bit. Like, what what would you see as vital pieces of information that are being discussed about being removed? Right. So, when a consumer makes a loan application, they provide us their income information, so we know how much they make in a month or a year. Oh, oh, it turns out that income is an important part. Absolutely. Okay.
▶ 1:44:21How about How about maybe a history of what you did with that income?
▶ 1:44:23Right. And then the the credit report gives us a full picture of their debt. It tells us how much credit they have, uh how much how many loans they have, uh what their credit card limits are, what they other loans they have, what their monthly payments are. It gives us a really good picture of how they are paying on their current debt, how they have paid down on their prior debt. It gives us a full picture. So, that is how we assess debt-to-income ratios.
▶ 1:44:52We assess the ability to repay, and it gives us a better analysis to assess if this consumer can afford that loan, and it is to their benefit as well. Great. I I've got just under a minute. Uh Mr. Smith, uh Ms. Keene, uh you both highlighted the challenges regarding the liability provisions in and FCRA. Uh the harmonization act here, liability harmonization act, seems like a common sense set of reforms.
▶ 1:45:18So, could you both explain how this would uh how passing this legislation would directly benefit the American consumer? Thank you for that question. By harmonizing the Fair Credit Reporting Act with all other consumer financial statutes and basically bringing its liability scheme in accordance with those would provide more certainty.
▶ 1:45:38It would incentivize um the resolution of those cases for the benefit of the consumer um and lower overall costs to allow companies to focus on consumer I think the liability harmonization act is a great common sense reforms to allow competition within the market, not just within the credit reporting system, but allow new entrants to remove barriers of entry so we can bring alternative or additional data to help
▶ 1:46:08more consumers. Thank you. I yield back. Gentleman yields. The gentleman from Illinois, Mr. Casten, is now recognized. Thank you, Mr. Chairman. Um so, I uh want to get way too specific, and I'm hoping I can land this on a uh on a larger point, but I don't know if we'll get there or not. Um on on Monday, before I flew out back to DC, I met with a small business who had a dozen employees, 3 million in revenue, 1,500 annual clients.
▶ 1:46:35Um almost all their cost structure was labor, and their revenue structure depended on customers who tend to stretch payment terms. And, you know, at that size business, you don't have the ability to go through and get upside down on that. And they they they needed they needed a half a million dollars to cover payroll because a couple of their vendors were getting a little uh difficult, shall we say? And they found a fintech firm, took them 2 days to get a a $500,000 transferred into their account. And I don't even know what to call it.
▶ 1:47:04It wasn't really debt, but they basically got in exchange for $500,000, this firm took a a percentage of their future cash flows for a finite period of time. So, they had sort of equity-ish risk. And as they were describing all this, I'm thinking, okay, this is this is all this alternative data we're talking about. Um they essentially, you know, the the the fintech firm had essentially done a credit test, right? But, but I don't think was actually using credit data.
▶ 1:47:31It was the data that they had from their bank account of how much were you paying on rent, how much were you paying on payroll. You couldn't fudge the data. And and I guess I I guess I'd love to start with you, Mr. Smith. You know, can you try to generalize that? There's a there's a rich conversation about alternative data and the the upside, the downside from an individual but from a from a commercial perspective, um if a company like this does that, does that affect their credit score? How do you guys think about using that data in the future?
▶ 1:48:00Cuz clearly they're satisfying a repayment risk, but it's not a debt vehicle. And would a more traditional lender also find it beneficial to do commercial lending? And how do you how do you think about that? How do you work with work with folks to do that sort of analysis? I appreciate that question. You know, alternative data can be an enormous value to Uh but there are risks associated, and and one of the values of the credit reporting system is the history of it and how it performs.
▶ 1:48:28And so, when you bring a new alternate data or an additional data set, it's really important that you analyze the data and spend time to see how predictive it actually is. So, the combination of traditional credit report with new data sets together gives the lender the ability to see a better picture and manage their risk. And in the end, that uh fintech holds the risk, right? So, they're going to look at it and say, I'm not going to give this loan because it's riskier than I want. And somebody else might look at it and say, I'm willing to take the risk on the person.
▶ 1:48:59Yeah, and in this case, I don't even know I I I hesitate to even call it a loan because of like the way that it was structured. And that's that's really a part of the question. You can be pretty creative here, Right, but now you've got something that is that going to show up in you know any kind of a UCC filing as loan repayment? I don't know. I think your question
▶ 1:49:15But they were able to but it was literally two days they were able to do the credit check and get it through which was you know thinking of my own days you know in the small business space man I wish that was around. I actually this is a the great point where oversight is important right and we've been talking about the CFPB and having a balanced regulator to oversee the entire market is critical. And so we endorse and support the CFPB when it is a balanced entity to make sure that all customers including small businesses have protections.
▶ 1:49:42Well I I think we all would need to remind particularly Trump appointed CFPB chairs that the function of the agency is right there in the name it's job is to protect And if you think you need to balance it against something else you're missing the point. Miss Miss Wood I'm I'm curious if you could comment on are there risks of saying this is okay for commercial but maybe not for individual you know dealing with some of the issues that Mr.
▶ 1:50:06Green mentioned about some of the discriminatory risk that lots of people have pointed out if you start using this alternative data that becomes a proxy for someone something else. I don't know what the organization structure of the firm was it may have been a sole proprietorship in which case what's the difference between that and individual? Should we do we should we think about this for commercial risk assessment differently than for individuals?
▶ 1:50:25So the model you're talking about Congressman of looking at the businesses um cash flow the ins the outs the expenses and the income is what we're talking about when we talk about cash flow underwriting or bank account transaction underwriting and it is a form of alternative data that looks promising because it doesn't necessarily have to feed data into the credit bureaus files.
▶ 1:50:49It gives consumers control because it's permission and the CFPB uh under the previous administration it develops strong set of rules to guard consumers privacy interest um you know guardrails such as no secondary use such as data minimization such as strong consents. But the vote led CFPB has um put those rules on hold and is re-examining them.
▶ 1:51:12Those rules are are crucial to develop this new technology so that we can use the same sort of underwriting with respect to consumers that make sure it's safe but yet a progress. Thanks I yield The gentleman's [clears throat] time has expired. The gentleman from South Carolina Mr. Timmons is recognized. Thank you Mr. Chairman and thank you to the witnesses for being with us today. The consumer credit reporting system plays a foundational role in our economy influencing how Americans access credit secure housing and even obtain employment.
▶ 1:51:40At its core this system depends on the accurate and consistent flow of information between data furniture furnishers consumer reporting agencies and the institutions that rely on these reports to make decisions. When it functions properly it supports both sound risk management and broader access to credit. Mr. Smith I'd like to start with you. As we consider the broader credit reporting ecosystem it is important for this committee to understand how each participant contributes to the final product that lenders and landlords rely on.
▶ 1:52:08Many Americans may not fully appreciate how data flows from furnishers to consumer reporting agencies and ultimately to end users of consumer reports. Can you walk us through how these different actors interact under the Fair Credit Reporting Act to produce a reliable and usable credit report? I'd be happy to talk um at a high level on how the credit reporting system works and and it the the most [clears throat] important piece is that it's a completely voluntary system.
▶ 1:52:33A furnisher of data that being a lender credit union community bank chooses to participate in this system for the back end value that it brings for their underwriting. So they balance between the risks associated the oversight the regulatory the legal the liability right and they take on that voluntarily because they know that the information they can use will make their underwriting better which means they'll be able to lend to more consumers.
▶ 1:52:59So you have the furnisher of the data you have the repositories or the credit bureaus that hold that and secure it and sell it to the the user of the data only under permissible purposes. It's highly regulated how a end user can use that data. So it's really that's the flow of the information. Sure thank you for that. Miss Keen turning to you as you know mortgage resellers compile credit information from multiple sources and present it to consumers in a single accessible format effectively serving as intermediaries between credit bureaus and borrowers.
▶ 1:53:28My colleagues uh Mr. Lawler and Mr. Gottheimer have introduced legislation to clarify FCRA terminology around accuracy obligations of resellers. Based on your experience both both as a regulator and an FCRA expert how would this bill assess assist consumers as well as the small businesses that serve them?
▶ 1:53:48Um so the the bill proposed with respect to resellers would actually align the accuracy responsibilities and the liability structure with the existing dispute responsibilities under the law. Right now the law is very clear on what a reseller has to do when it gets a dispute as opposed to what the upstream credit bureau or originating consumer reporting agency does.
▶ 1:54:13And that's because the originating consumer reporting agency has the relationship with the furnishers as as Mr. Smith explained um and has the ability to resolve the consumers dispute quickly. Um the proposal would actually align that and give some clarity to consumers on sort of who bears what responsibility in the system. Thank you for that. Miss Winslow I I would like to ask about the principle of fairness. There is an important distinction between fairness and process and fairness and outcomes.
▶ 1:54:41The current framework is designed to treat data alike in an objective and consistent manner. Would you agree that the fairest system is one that applies neutral accurate standards to all consumers rather than attempting to engineer specific Yes and the consumer finance companies that are headquartered in your district uh rely on fit accurate and reliable credit information. It's essential to their risk decisions.
▶ 1:55:08And those risk decisions are what benefit the the consumers and your constituents. When the when the credit reporting system is has accurate and reliable data lenders can use risk-based pricing and that's how consumers who may not have perfect credit scores who may be new to the credit system with with risk-based uh they can get access to credit they can get those loans they need whether it's for their you know small business or to to meet a need in an emergency.
▶ 1:55:36So it's crucial to be able to rely on the data that they get. It also incentivizes behavior in certain respects. But do you see risks that shifting toward outcome-based policy making could undermine confidence in the objectivity of the credit reporting system and limit its effectiveness overall?
▶ 1:55:54Yes and if our scores are artificially inflated because people think oh they have a better score they'll get cheaper credit this is the outcome we want but that's not what will happen because if there's inaccurate data artificially inflated scores lenders will simply move away and won't look at that. And if they're not looking at credit reports what are they going to look at? How much money is in your bank account? What assets you have?
▶ 1:56:16And so consumers without big bank balances without houses and you know fancy cars to rely on they're going to be left out of that system and that's going to hurt a lot of Americans. Thank you for that. I'm out of time and I yield back. Gentleman yields. Before we move on to the last questions I'd like to recognize the ranking member out of order for a request. Yeah Mr.
▶ 1:56:36I request unanimous consent to enter into the record statements from several experts and stakeholders including the Americans for Financial Reform Consumer Action Consumer Federation of America Credit Builders Alliance Castly Johnson and our colleague Representative Sarah McBride who shared materials related to a bipartisan bill that she has with Representative Kim entitled the Ending Scam Credit Repair Act. Thank you. Without objection uh the the gentlewoman from Ohio Ms. Beatty is now recognized for 5 minutes. Thank you Mr.
▶ 1:57:06Chairman and ranking. Miss Wood my first question comes to you. In 2020 the House passed a package of reforms to the Fair Credit Reporting Act including my bill the Free Credit Scores and Consumer Act which expands free access to consumer reports and credit scores including those that are used for underwriting purposes. It also requires a clear explanation of how these scores are calculated.
▶ 1:57:32Can you briefly describe how this provision and others included in the package would be key steps towards fixing our broken credit reporting system? Thank you Congresswoman for the question.
▶ 1:57:46Yes um in 2020 um you and uh ranking members Waters and some uh uh Representative Cleaver and a whole bunch of others introduced a series of great bills um under the umbrella of the Comprehensive Credit Act that would have done something real and meaningful with respect to all the flaws and abuses of the credit reporting system. The fact that one in five consumers has a verified error in their credit report one in 20 has a error so serious it would cause them to be denied credit or have to pay a higher price.
▶ 1:58:17The credit reporting system has too many flaws uh too many too much inaccuracy too many people affected by the impact of identity theft or mixed files or incorrect information. Um uh your bill would have provided free credit scores along with the free credit reports that consumers have so consumers knew where they stand. They would have it required the most widely used score so that um it would be the the score that would actually be used in lending.
▶ 1:58:43It would reform the dispute process to make it more meaningful because right now the dispute process is very automated it's very perfunctory and Kafkaesque. It would ban medical it these bills would have banned medical debts from credit reports and you know this idea that you we need to have medical debts on credit reports that's completely wrong. Nobody should um have their credit messed up because they got sick. Medical debt isn't like other types of debt.
▶ 1:59:08And you know, both the CFPB and the National Bureau of Economic Research, hardly a leftist organization, has found medical debt is not predictive. It is not predictive. It is not needed. And this idea that hiding it would cause all sorts of problems. The 15 states that have banned it, credit is still flowing nice and good in those states. So, I would urge this body to pass those laws those bills against and make them to law. Thank you. Mr.
▶ 1:59:37Chairman, I'd like to yield a minute to my colleague. We have a same issue here to Congressman Fields. Let me uh Oh. Let me Let me thank the gentlelady for yielding. I just have one question and it's in the area of uh uh fair credit reporting uh uh as it relates to section 616 and uh 621. 616, you know, hasn't been changed in 30 years.
▶ 2:00:08Uh that allows the consumer to uh file for damages and the damages range from $100 to $1,000. Uh however, 621, we've changed that. Uh it it moves with inflation. So, my question to each of the witnesses and first of all, thank you all for being here. Uh do you think it's time to change uh to to comply with uh 616? Uh may I? Yes. Absolutely.
▶ 2:00:39Um the penalties in the FCRA Fair Credit Reporting Act as well as a whole bunch of other consumer statutes, you know, passed in 1970 um have not kept up inflation. Rather than, you know, removing punitive damages, um which, you know, only occurs in very rare but very egregious cases like the ones I said I talked about before.
▶ 2:01:02Um the the statutory damages should be raised to keep up with inflation like the price of a credit report has gone from $8 to now over 16.
▶ 2:01:10Thank you, Ms. Woo. If I could get each of the other witnesses to tell me their perspective real quickly. I I do not have an opinion on that at this time. Thank you.
▶ 2:01:20Why not? I do not have an opinion on that at this time.
▶ 2:01:23why not? I mean
▶ 2:01:24I haven't read the bill. Okay. Yes, thank you.
▶ 2:01:26Is is the sec Yes. We're concerned about excessive costly litigation that does little to improve consumers' lives but lots to enrich plaintiffs' attorneys as Dan had
▶ 2:01:38Well, I mean, it's really it's for the consumers. We can talk about what the plaintiff attorneys will do, what the fees uh what fees they will charge. But do you think that 616 section 616 should be in increased based on inflation? I couldn't weigh in on that without talking about those the the fees that you were mentioning.
▶ 2:02:00One of the things we're trying to do, I think that's important, is to align the FCRA with the other consumer financial statutes and they do not have escalators in their statutory damages provisions. The gentlelady's time has expired. I would like to thank all of our witnesses for their testimony today. Without objection, all members will have five legislative days to submit additional written questions for the witnesses to the chair. The questions will be forwarded to the witnesses for their response. Witnesses, please respond no later than May 21st, 2026.
▶ 2:02:31This hearing is now adjourned.