Representative Maxine Waters of California has introduced sweeping legislation designed to improve the credit reporting system for student loan borrowers and other consumers.
Credit reporting has become a major national issue. Even with critical consumer protection laws like the Fair Credit Reporting Act (FCRA), creditors and credit bureaus often still report inaccurate information about people’s credit histories. This can have serious and damaging consequences – credit reports can be the deciding factor in obtaining housing or employment, and negative information can make a huge difference. And even when negative events are accurately reported on people’s credit reports, their effects can be far-reaching and long-lasting, since damaging credit report information can remain on a consumer’s credit report for many years.
This new bill, called the “Comprehensive Consumer Credit Reporting Reform Act,” is designed to increase protections for consumers and make credit reporting a bit more fair. Here are some of the highlights of the bill:
Clearer rules for credit disputes
Under current law, a consumer can dispute inaccurate credit report information directly with the major credit bureaus. However, each bureau has its own process for investigating a dispute, and the process is not exactly transparent. Furthermore, if a credit bureau ignores a consumer credit dispute or fails to delete the inaccurate information, a consumer’s only real recourse is to file a lawsuit under the FCRA. Under the proposed legislation, credit bureaus would be required to provide a clearer, fairer, and more transparent dispute system, and consumers would have the right to appeal a dispute if it’s ignored or denied.
Private student loan credit fixes
Borrowers can rehabilitate defaulted federal student loans and remove the record of default by making a series of consecutive on-time payments. No such rehabilitation program exists for private student loans. The new bill would create a rehabilitation-type program whereby borrowers could have negative information about delinquent students loans deleted from their credit report after they make a series of consecutive on-time monthly payments.
Protection for borrowers who attended for-profit colleges
Under the proposed reform bill, credit bureaus and creditors would be required to delete credit report trade-lines for delinquent private student loans that were obtained for borrowers to attend certain for-profit schools that engaged in fraud.
Expedited removal of negative credit history
Under current law, negative information that is accurately reported to the credit bureaus (such as a late payment or a charge-off) can remain on a consumer’s credit history for seven years. So if you defaulted on a student loan three years ago but paid it off in full today, the default and associated negative history would remain in your credit history for the next four years. The new bill would shorten the time window for negative reporting to three years. So in that preceding example, the default would drop from the consumer credit report this year.
These changes would substantially benefit not just student loan borrowers, but many other consumers in other contexts as well (there are additional provisions in the bill designed to improve credit reporting for mortgages and medical debt). Given how impactful credit reports can be on people’s everyday lives, these are much-needed changes that will help millions of people access housing, employment, and new credit where they would otherwise be barred.
It is difficult to assess the bill’s chances of passage in today’s political environment, so we’ll have to wait and see. In the meantime, spread the word, and contact your congressperson.