Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, gave the following statement at a full Committee hybrid hearing entitled, “A Biased, Broken System: Examining Proposals to Overhaul Credit Reporting to Achieve Equity.”
As the title of this hearing indicates, our current credit reporting system is broken.
Good credit is a gateway to wealth. Yet, for far too long, our credit reporting system has kept people of color and low-income persons from access to capital to start a small business; access to mortgage loans to become homeowners; and access to credit to meet financial emergencies.
That’s why even before the pandemic, the House passed two bills out of this Committee — the Comprehensive CREDIT Act and the Protecting Your Credit Score Act — that provide long overdue reforms to our credit reporting system. We are considering those bills again with this hearing.
But allow me to also explain how the pandemic has exposed just how broken our credit reporting system is.
Last week, I received a letter from a gentleman in Ohio. In this letter, he explained how he had lost his job because of the pandemic. Without his salary, and with no help from any of his creditors, he couldn’t afford to cover all of his bills. Though he had never before missed a credit card payment, his credit score has suffered so badly, he wrote, and I quote, “I couldn’t get credit now if I paid someone to give me credit” unquote. He closed his letter by asking what this Committee was doing to protect consumers like him.
As Chairwoman of the Financial Services Committee, it is indeed a priority of mine to protect consumers like him, who are unfairly penalized in their credit reports, and it is precisely why we're holding this hearing today — to ensure greater transparency, accountability, and protections for consumers across the country.
We saw this coming. That’s why Democrats worked to include strong credit reporting protections in the HEROES Act and other COVID legislation that Republicans rejected.
This issue is not a matter of personal failings. This is about a failed system. This is a system that fails people with “perfect credit” who may be victims of identity theft. This is a system that fails people who get caught in a debt trap because of predatory lending. And this is a system that fails people who don’t have the means to dispute errors that reporting agencies make.
As further proof of the need for reforms, in a ruling issued last Friday, the Supreme Court denied relief for thousands of consumers who TransUnion wrongly matched with the names of those on a terrorist watch list. The credit bureaus can now label Americans as terrorists with impunity.
The Consumer Financial Protection Bureau’s complaints about credit reporting surged 50 percent in 2020, receiving nearly 50,000 complaints in December alone.
During his campaign, President Biden supported a proposal for a public credit reporting agency, and I directed staff to prepare the discussion draft we are discussing today. As some of today’s witnesses will attest, creating a consumer-oriented public credit reporting agency would be a major upgrade over today’s broken, biased credit reporting system.
We need big, bold legislative solutions to transform this broken system. So, I encourage my colleagues to join me in re-evaluating how we determine creditworthiness and learning how we can harness new technologies to build a fairer and equitable credit system.