The House Financial Services Subcommittee on Financial Institutions and Consumer Credit considered legislative proposals to help consumers, particularly those with low incomes, gain more access to mainstream banking and credit services during a hearing on September 27. One of the proposals discussed was the “Credit Access and Inclusion Act of 2015” (H.R. 4172) that would allow landlords, including public housing authorities (PHAs), and utility and telecom companies to report on-time payment data to credit reporting agencies, not just negative payment data. Introduced by Representatives Keith Ellison (D-MN) and Mike Fitzpatrick (R-PA), the bill seeks to help those with little to no credit build their credit scores based on a more comprehensive picture of their payment history.
“Millions of Americans lack credit scores or have scores that are too low to gain access to affordable credit,” Rep. Ellison said when introducing the bill back in July 2015. “The problem disproportionately affects young people, African-Americans, Latinos and immigrants, many of whom can't establish a credit score without taking on debt. Congress should give companies permission to thicken credit reports with predictive alternative data, like payments on gas, water, electric, heating oil, cable TV, broadband, wireless cellphone bills and rent payments.”
Dr. Michael Turner of the Policy and Economic Research Council (PERC) explained that there are currently 54 million American “credit invisibles”—people who have no credit report or who have insufficient information to generate a credit score. Because of their credit invisibility, these individuals have more difficulty accessing affordable sources of mainstream credit and must rely on high cost lenders, such as check cashing and payday loan companies. Dr. Turner said that one study has shown that $3.4 billion is stripped from credit invisibles each year. Credit invisibles are overwhelmingly comprised of younger individuals, the elderly, people with low incomes, and members of minority communities.
Currently HUD and PERC are undertaking a joint study on rental payment data that includes six PHAs and various credit reporting agencies. The study is specifically looking at how reporting rental payment data will impact public housing residents. PHAs currently do not report this data to HUD. The results from the study are expected to be released in six months to a year.
Subcommittee Ranking Member William Lacy Clay (D-MO) questioned whether it was prudent to advance H.R. 4172, allowing PHAs to report rental payment data, without seeing the results from the study. Dr. Turner responded that while it might make sense to hold off on encouraging PHAs to report positive rental payment history, there is “over a decade of research based on the experience of millions of Americans that show benefits of energy, utility, and telecom data being fully reported.” Given the chronic underfunding of public housing, Mr. Clay also raised concerns about PHAs’ ability to maintain accurate rental payment data, and pointed out that H.R. 4172 does not include language to ensure that data is reported accurately. Dr. Turner said the processes for setting up rental data reporting would address most of Mr. Clay’s concerns and that there are organizations currently working with PHAs and credit reporting agencies to help residents build credit histories.
Representative Andy Barr (R-KY) wanted to know whether residents would have the option to decide whether to have rental payment data reported.
Watch the archived hearing and read witness testimony here: http://bit.ly/2d45fwP