U.S. Developments
Regulatory Developments
House Task Force Looks to Allow Alternative Data for Credit Scoring
A newly formed U.S. House of Representatives task force, the Financial Technology Task Force, held a hearing this week to discuss a proposed bill that would allow new types of data to appear on consumer credit reports, including items like rent and phone payments. Proponents of the bill argue that in an era of more people renting, a large population of consumers could have positive payment histories excluded from their credit reports under the existing regulations.
Consumer advocates at the hearing cautioned lawmakers that some lower-income consumers could be hurt by the inclusion of this alternative data, including tenants who withhold rent payments due to substandard living conditions.
Two bills were introduced at the hearing—the Credit Access and Inclusion Act of 2019 and the FHA Additional Credit Pilot Program Reauthorization Act.
The Credit Access and Inclusion Act of 2019 would amend the Fair Credit Reporting Act (“FCRA”) to clarify reporting requirements of certain consumer credit information to consumer reporting agencies (“CRAs”). Specifically, the bill would amend the FCRA to permit a person that obtains the written authorization of a consumer to furnish information relating to the consumer’s payments under a lease agreement for a dwelling or under a contract for services by a utility or telecommunication firm to CRAs.
The FHA Additional Credit Pilot Program Reauthorization Act would authorize a pilot program to establish a process for providing additional credit rating information for mortgages. The bill directs that within a year a commercially available alternative credit rating model be provided for a pilot program for mortgages. The bill does not, however, direct what alternative credit factors should be included in the new model.
Lawmakers Seek to Require Federal Reserve to Create Real-Time Payments System
A number of Democratic lawmakers have proposed a bill (the Payments Modernization Act of 2019) that would require the Federal Reserve to create a real-time payments system by amending the Expedited Funds Availability Act. The lawmakers say the proposed bill is necessary to ensure that individuals and families have faster access to funds and to decrease the number of overdrafts or trips to payday lenders. Proponents also want to ensure that the Federal Reserve creates a system to compete with private payment systems, like The Clearing House’s Real-Time Payments (RTP®) system, seeking to prevent the speedy electronic movement of money from becoming a solely private endeavor. Among the supporters of the bill is presidential candidate and U.S. Senator Elizabeth Warren. The bill was also introduced in the House of Representatives by Rep. Ayanna Pressley.