Consumers Union recently released a report that errors in credit scores and credit reports impacted 40 million Americans and now Senators Sherrod Brown and Brian Schatz have introduced a bill to combat the problem. With credit reports affecting the interest rates people pay on mortgages, credit cards, and other loans and even employment prospects, errors can be extremely costly to consumers.
The CARD act of 2009 mandated that consumers be allowed a free credit report each year from each of the three main credit bureaus. It also established the Consumer Financial Protection Bureau (CFPB) as the agency to go to with complaints about credit reports. This new legislation, called the Stop Errors in Credit Use and Reporting (SECURE) Act, would go further in protecting consumers by making it easier to correct credit reporting errors.
A press release from Senator Brown’s office summarized major parts of the bill. The legislation attempts to:
- Improve accuracy of credit reports by requiring the CFPB to develop procedures for the credit reporting agencies to follow to prevent errors. This puts the CFPB in a more proactive roll instead of merely helping consumers after an error has occurred. In addition, the Federal Trade Commission would be authorized to intervene if proper procedures are not followed and the courts would be able to prevent credit reporting agencies from continuing to disseminate inaccurate information.
- Protect consumers when they believe an error has occurred by requiring credit reporting agencies to notify creditors of consumers’ disputes and send supporting materials so that the creditor can take the information into account when making a credit decision.
- Put the onus on the credit reporting agencies to inform consumers, and supply a free copy of the credit report for the consumer to review, if their credit report was the cause of a negative decision by a creditor or employer. This gives the consumer an opportunity to spot any errors that may have had an adverse impact.
A provision that is sure to be popular with all consumers, and not just those concerned about reporting errors, entitles consumers to a free credit score annually. Currently, consumers have access to a free credit report that does not include a credit score.
Senators Brown and Schatz are both democrats, as are the bill’s cosponsors, Senators Sanders, Elizabeth Warren and Richard Blumenthal. The bill is endorsed by the Consumers Union, the National Consumer Law Center (NCLC), the National Association of Consumer Advocates (NACA), Consumer Action, and U.S. Public Interest Research Group (PIRG). Experian, Equifax, and TransUnion have not yet commented on the legislation.
The goal of the act is to provide consumers with more information about their credit, give consumers recourse in correcting errors and to hold the agencies accountable for accuracy in credit reporting to begin with. With more accurate information on credit reports, consumers will not pay unnecessarily high interest rates or lose a job or housing opportunity based on false information. With creditworthiness being used as a basis for many decisions affecting their economic well-being, consumers have the right to demand accuracy.