Schatz, Brown, Sanders, Warren, Blumenthal Introduce Bill to Protect Consumers From Credit Errors
Consumers Union Released New Report Describing Credit Report Errors Affecting 40 Million Americans
Washington, DC – Today, U.S. Senators Brian Schatz (D-Hawai‘i), Sherrod Brown (D-Ohio), Bernie Sanders (I-Vt.), Elizabeth Warren (D-Mass.), and Richard Blumenthal (D-Conn.) introduced S.2224, the Stop Errors in Credit Use and Reporting (SECURE) Act of 2014, legislation that would make it easier for consumers to identify and dispute errors in their credit reports and build on a proposal from Senator Sanders to provide consumers with free credit scores. The senators’ legislation has been introduced as Consumers Union releases a new report describing credit report errors that affect 40 million Americans. Credit report errors can lower consumers’ credit scores and lead to higher interest rates, driving up consumers’ costs and causing financial hardship. Credit reports are also increasingly used by employers, so errors can also prevent Americans from getting jobs. In its 2012 report on credit reports, the Federal Trade Commission found that one in five consumers had an error on at least one of their credit reports. And one in twenty had an error that was significant enough to push them into a lower credit tier, which would increase their costs or hurt their chances of getting a loan.
“Errors in a credit report can make the difference between whether or not someone can live the American Dream and buy a home or even get a job,” Senator Schatz said. “Whether you have good credit is determined by a dark ecosystem of companies that are not accountable to consumers. When the stakes are this high and your credit can affect whether you get a job or house, consumers deserve to be on a level playing field with banks. Our legislation will make credit reports more accurate, help people to correct any mistakes, give federal agencies more tools to enforce the law, and hold reporting agencies and data furnishers accountable for their mistakes.”
According to Hawai‘i’s Office of Consumer Protection, thousands of Hawai‘i consumers are vulnerable to errors in their credit reports following the data breaches at big retailers that have compromised consumers’ private financial information. This year, over 125,000 Hawai‘i consumers were affected by the Target breach alone, and another 14,000 were affected by other data breaches.
“In today’s economy, it is critical that consumers have access to a safe and reliable way of checking their credit reports and scores,” Senator Brown said. “This legislation ensures consumers have the resources they need to correct credit report errors that could potentially impact future employment opportunities, credit applications, and other transactions that require a good credit score. Consumers would also have access to a free annual credit score and report.”
“A credit score affects consumers’ ability to finance important purchases like homes and cars, but many Americans may not be fully aware of the significance of their credit score or know what they can do to correct serious errors,” Senator Sanders said. “The bottom line is that everyone applying for a loan should be able to see the same information that banks rely on to judge whether a consumer is creditworthy.”
“Credit reports regularly contain errors that can make it harder for families to access credit, find jobs, and get housing," said Senator Warren. “And as many consumers know all too well, it's very difficult to get those errors corrected. I'm pleased to join Senators Schatz and Brown to introduce the SECURE Act, which will cut down on the inaccuracies in credit reports and make it easier for consumers to correct any errors they discover.”
“Whether consumers are trying to secure housing, buy a car, or even apply for a job, their credit report can make all the difference,” Senator Blumenthal said. “And yet – shockingly – millions of consumers, or about 1 in 20, have serious errors on their credit reports. To make matters worse, the current system stacks the deck against consumers who dispute these errors. This bill will ensure that consumer reporting agencies provide greater disclosures to consumers, conduct more thorough investigations, and respond more fully to consumer disputes. Consumers need and deserve a better, more accurate credit reporting system, and today’s widespread errors make clear that reform is desperately needed.”
The SECURE Act of 2014 would make commonsense changes to the credit reporting industry that would:
Make credit reports more accurate. Currently, there are no minimum standards for CRAs and data furnishers to accurately match consumers’ names, addresses, or Social Security numbers, often resulting in incorrect information included in a consumer’s credit report. The SECURE Act would direct the CFPB to establish minimum procedures that a CRA must follow to ensure maximum possible accuracy of consumer reports. When errors are caught, the bill would require CRAs to gather and report information on consumer disputes and resolutions. It would also require CRAs to pass along documentation sent by consumers to data furnishers, making it easier for consumers to correct their credit report.
Give consumers the information they need. While consumers today are entitled to free credit reports, they can be difficult to interpret. The SECURE Act would ensure that consumers get the information they need to understand their credit reports by enabling consumers to understand how their credit report is being used and by whom. It would also allow them to see the same information that is used by lenders to deny a consumer credit or increase interest rates and would provide consumers with access to meaningful credit scores free of charge annually.
Give regulators better tools for enforcement. CRAs and data furnishers operate in a system with little transparency and accountability. This legislation would create a national registry of CRAs so that consumers know which companies are collecting and disseminating information about them. It would also direct the Government Accountability Office to conduct a study of existing public credit reporting systems and evaluate the feasibility, as well as the costs and benefits, of creating a national credit reporting system in the United States.
Give consumers legal remedies. The legislation would provide injunctive relief as a remedy for consumers who sue CRAs under the Fair Credit Reporting Act and hold CRAs accountable to the FTC for negligent violations of the FCRA.
The SECURE Act of 2014 is supported by National Consumer Law Center, National Association of Consumer Advocates, Consumers Union, Consumer Action, U.S. PIRG, Demos, and the Hawaii Department of Commerce and Consumer Affairs.
The Hawai‘i Department of Commerce and Consumer Affairs expressed support for the bill because of its strong consumer protections. “It is important for consumers to have the chance to address errors in their credit reports. The Office of Consumer Protection welcomes the bill's goal of enhancing existing regulations requiring credit reporting companies to timely address errors in credit reports," Hawai‘i Office of Consumer Protection Executive Director Bruce Kim said. “Credit reports play a critical role in protecting yourself from illegal identity theft and other financial scams. We applaud the effort to help consumers address this need."
Consumers Union, the policy and action division of Consumer Reports, supports the bill for expanding resources for consumers and helping hold credit reporting agencies accountable for their mistakes. “Free access to credit scores will help consumers know where they stand with lenders and others when it comes to their credit record,” Pamela Banks, Senior Policy Counsel for Consumers Union, said. “Maintaining an accurate credit report is absolutely critical in today’s economy, but too often, reports contain errors, and those mistakes can mean higher interest rates on loans, pricier insurance premiums, and even missed job opportunities. This bill provides consumers with free access to reliable scores, and it provides a good framework for holding credit reporting agencies and creditors accountable for making sure credit reports are fair and accurate.”
The National Association of Consumer Advocates (NACA) and the National Consumer Law Center (NCLC), on behalf of its low-income clients, strongly endorse SECURE Act of 2014. “This bill is an important first step to allow consumers who play by the rules to obtain good credit, jobs and the financial stability they seek,” said NACA’s Executive Director Ira Rheingold.