What would you do if you knew that the Big 3 credit bureaus (Experian, Equifax and TransUnion) were all among the Top Five leaders in complaints posted in the full Consumer Financial Protection Bureau Public Consumer Complaint Database (Equifax has more complaints than Wells Fargo!)? What would you do if you knew that their mistake-ridden reports cause consumers to either be denied jobs or pay more for or be denied credit due to those mistakes? Well, if you were the leadership of the House Financial Services Committee, you’d consider not one, but two bills to make this worse by both eliminating strong consumer protections, capping penalties and eliminating the deterrent of punitive damages when credit bureaus wreck consumer lives. (Note on the chart: The Top Ten companies are responsible for over half of the 848,325 complaints in the database today; the chart includes all complaints posted since the inception of the database until today; the CFPB has handled over 1.2 million complaints to date; some have been referred to other agencies; others are still being processed.)
One bill, from Rep. Ed Royce (CA), will be justified by claims it is ostensibly simply to let credit bureaus do consumer education, but they already can do that. Under the Credit Repair Organizations Act, which they are currently subject to, the bureaus simply cannot charge you fees for services that they do not first provide. Mr. Royce’s bill hides massive weakening of consumer protections inside a Trojan Horse bill that you will hear is only about letting the credit bureaus help people but actually is all about letting credit bureaus — and perhaps many others that make the bureaus seem like upstanding citizens in comparison — hawk over-priced credit repair products with little oversight or culpability if they violate the weak new proposed standards.
A second bill, the Orwellian-named FCRA Liability Harmonization Act, HR2359, from Barry Loudermilk (GA), Mr. Royce and other majority members of the committee would eliminate punitive damages and cap other damages payable to consumers harmed by violations of the Fair Credit Reporting Act.
Fortunately, our collegue Chi Chi Wu of the National Consumer Law Center is the Democratic witness at the hearing tomorrow Thursday, which will also consider several other problematic bills, including one to allow debt collectors to more easily pretend to be law firms to avoid consumer protections of the Fair Debt Collection Practices Act (committee summary of all 6 hearing bills).
Chi Chi Wu is the longtime editor of the authoritative NCLC Fair Credit Reporting Act Manual and will explain the highly-problematic proposals in such a way that it will be very clear that the committee’s goal is to serve the credit bureaus, not to improve the “dead-end” marketplace of credit reporting. Why is credit reporting a dead-end marketplace? You cannot vote with your feet and walk away, as you can with your bad bank. You can pick your bank and you can pick your friends, but you are stuck with the credit bureaus, no matter how poorly they work in the marketplace.
Let’s Review What We Know About The Reckless Credit Bureaus:
The credit bureaus have been investigated by news outlets ranging from the Columbus Dispatch to CBS 60 Minutes to Last Week Tonight (John Oliver). In 2013, the Federal Trade Commission concluded that up to 1 in 4 of all credit reports contain serious mistakes and 5% of all consumers have reports that contain mistakes that could lead to being denied jobs or paying more for or being denied credit.
The credit bureaus have been sued by numerous state attorneys general: a recent enforcement action by 31 bi-partisan state Attorneys General forcing removal of often-inaccurate public records from reports will result in credit scores for 12 million consumers increasing by 20-40 points. In June, in a lawsuit brought by private attorneys, a jury found the Big 3 credit bureau Transunion guilty of violating the Fair Credit Reporting Act and harming a class of over 8,000 consumers. The jury imposed statutory damages and additional punitive damages (banned by the Loudermilk bill), due to the willful nature of the violation, totaling $60 million. What did Transunion do? It mixed the names of ordinary consumers up with those of terrorists and drug traffickers with similar names on the U.S. Treasury Department’s very-scary-to-be-on Office of Foreign Assets Control (OFAC) database. Oops. Worse, it claimed in court it was no big deal and consumers were supposedly not harmed by being called terrorists and drug traffickers, so no damages should be awarded. (Truly, you do not have to make this stuff up.)
Both the Consumer Financial Protection Bureau and the Federal Trade Commission have also sued one or more of the Big 3 Credit Bureaus for deceptive marketing of credit monitoring and other “credit score improvement” products. In both 2005 and again, when it failed to clean up its act, in 2007, the FTC sued Experian affiliates that took advantage of new actual free credit reports by federal law to deceptively claim their credit monitoring products were free; even though only trial offers were free, and consumers needed to cancel within as few as 3-7 days to avoid payments. In 2017, the CFPB has sued and recovered multi-million dollar penalties from each of the Big 3 bureaus over deceptive practices related to selling of credit score and monitoring products (TransUnion/Equifax and Experian). Each of the largest banks (Bank of America $727 million) has also paid penalties and restitution for deceptive marketing of similar credit-card add-on products.
So What Would The Royce Trojan Horse Credit Repair Bill Do?
Credit monitoring improvement products are a form of credit repair. Previously, the Big 3 credit bureaus had sought more straightforward (but still problematic) legislation to simply exempt them from the Credit Repair Organizations Act (CROA). Perhaps the core provision of that law is that it says any firm offering any credit improvement service cannot collect a fee until a successful service is performed. The CFPB recently sued a pure credit repair doctor under the act.
The new Royce bill makes any of the Big 3 credit bureaus by definition exempt from CROA and instead covered for credit repair and improvement services under a new, less-regulated category of firm it invents — “credit services providers.” The bill also allows other firms to apply to join that lightly-regulated category. Under the bill, if the Federal Trade Commission (FTC) fails to act on review of their applications within 60 days, the application is automatically approved. Expect a massive march by current credit repair doctors to join the fun of facing less regulation while making more deceptive promises. The Royce bill also preempts stronger state CROA protections. It eliminates all consumer remedies (rights to sue “credit services providers”) in favor of sole FTC enforcement (it likely also eliminates both CFPB and state Attorney General authority). It purports to give consumers a right to cancel, but doesn’t require firms tell consumers about that right; it also allows firms to keep indeterminate “reasonable fees” for services supposedly “already rendered.”
Later I will link this blog to longer opposition letters opposing both bills from consumer groups. Chi Chi Wu’s testimony will be posted here either late today or when the hearing begins. But the questions remain. Why would some in the Congress seek to make it easier for credit bureaus to ignore the law? Why would the Congress seek to allow credit bureaus to take consumer money for services they do not provide? Why would the Congress reduce the threat of liability for these unaccountable gatekeepers who control access to jobs and credit?
Why wouldn’t the Congress, instead, consider real reform legislation such as HR5282, the Comprehensive Consumer Reporting Act of 2016, proposed last year by its ranking member, Maxine Waters (CA), to force the credit bureaus to follow the requirements of the Fair Credit Reporting Act and make the dead-end credit reporting marketplace work better? Go figure.
Senior Director, Federal Consumer Program, PIRG
Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.