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Thaler breaks down CU perspective on credit reporting ahead of HFSC hearing
NAFCU Vice President of Legislative Affairs Brad Thaler wrote to the House Financial Services Committee Monday ahead of its hearing to examine proposals to overhaul credit reporting to offer the credit union perspective on several of the proposals.
In the letter, Thaler reiterated NAFCU's commitment to an accurate, fair, transparent, and equitable credit reporting system and called on the committee to reject efforts aimed at a blanket suppression of adverse credit reporting information that may lead to significant changes in how lenders use credit information and could disrupt consumer access to credit. NAFCU noted concerns with proposals under consideration by the committee that go "too far in suppressing adverse information and could diminish the accuracy of the credit reporting system."
"A better step would be to encourage efforts to allow credit reporting to reflect loans where payments are deferred or in forbearance, so these loans do not negatively affect a consumer's credit score," wrote Thaler.
An example of this approach, Thaler noted, is the relief found in Section 4021 of the CARES Act, which requires furnishers of information to credit reporting agencies (CRAs) to report an account current if an accommodation has been made during the pandemic. In addition, accounts delinquent prior to the accommodation are reported as such unless the consumer brings the account current during the accommodation.
"This approach strikes a good balance by preserving the accuracy of credit reports while also protecting the credit profiles of consumers who receive payment relief due to the pandemic," added Thaler.
In addition, Thaler noted NAFCU's concerns with legislation to create a government-run credit bureau under the CFPB. NAFCU highlighted concerns with the cost-effectiveness of establishing and running such a credit bureau, as well as concerns about consumer privacy and data security. Additionally, Thaler noted the benefits of the current, private sector credit reporting industry.
"We believe that consumers and lenders alike benefit from a robust, competitive, and innovative private sector credit reporting industry that is constantly evolving to consider new sources of data and increase the scope of the system to include underserved consumers. Replacing this system with a government-run credit bureau will stifle innovation and competition and have the unintended consequence of reducing access to credit," wrote Thaler.
More of NAFCU's concerns regarding the proposals – and recommendations for the committee to consider – can be found in Thaler's letter.
The association will monitor the hearing, scheduled to begin at 10:00 a.m. Eastern, and continue to advocate against any provisions that would increase credit unions' compliance and reporting burdens.