What This Bill Does
This bill requires the Secretary of Veterans Affairs to run a test program using different ways to check if veterans and military members can repay loans. The program will look at things like rent and utility payment histories instead of just traditional credit scores. The goal is to help more veterans qualify for loans guaranteed by the federal government.
Who It Affects
Veterans and active duty military members who want loans but don't have enough credit history, lenders who offer VA-guaranteed loans, and the Department of Veterans Affairs.
Key Provisions
• The Secretary of Veterans Affairs must start the pilot program within one year and must finish by September 30, 2026 (Sec. 2(f)(1))
• Veterans and military members with insufficient credit history can voluntarily choose to use alternative credit scoring information like rent, utility, and insurance payment histories to qualify for loans (Sec. 2(a)(1)(A) and 2(a)(3))
• The Secretary must review and approve any credit scoring models before lenders can use them in the program (Sec. 2(c)(1))
• Lenders participating in the program must tell eligible veterans they can participate and offer them the chance to join (Sec. 2(b)(2))
• The Secretary must submit a report to Congress within two years describing the program's results and whether alternative credit scoring information helps veterans qualify for loans (Sec. 2(e)(1) and 2(e)(2))
What Changes
If this becomes law, veterans and military members with little or no credit history will have a new option to qualify for federal loans by showing they pay their rent, utilities, and insurance on time instead of relying only on traditional credit scores.
Important Definitions
"Insufficient credit history" means a person either has no credit record with major credit reporting agencies or their credit record does not have enough information to judge if they can repay a loan (Sec. 2(g))
Effective Date
Not specified in bill text
I
118TH CONGRESS
1ST SESSION H. R. 1266
To require the Secretary of Veterans Affairs to carry out a pilot program
on using alternative credit scoring information for veterans and members
of the Armed Forces, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 28, 2023
Mr. TIMMONS (for himself and Mr. LEVIN) introduced the following bill; which
was referred to the Committee on Veterans’ Affairs
A BILL
To require the Secretary of Veterans Affairs to carry out
a pilot program on using alternative credit scoring infor-
mation for veterans and members of the Armed Forces,
and for other purposes.
Be it enacted by the Senate and House of Representa-
1
tives of the United States of America in Congress assembled,
2
SECTION 1. SHORT TITLE.
3
This Act may be cited as the ‘‘Building Credit Access
4
for Veterans Act of 2023’’.
5
VerDate Sep 11 2014
00:18 Mar 15, 2023
Jkt 039200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H1266.IH
H1266
kjohnson on DSK79L0C42PROD with BILLS
2
•HR 1266 IH
SEC. 2. DEPARTMENT OF VETERANS AFFAIRS PILOT PRO-
1
GRAM ON USE OF ALTERNATIVE CREDIT
2
SCORING INFORMATION OR CREDIT SCORING
3
MODELS.
4
(a) PILOT PROGRAM REQUIRED.—
5
(1) IN
GENERAL.—Not later than one year
6
after the date of the enactment of this Act, the Sec-
7
retary of Veterans Affairs shall commence carrying
8
out a pilot program that will assess the feasibility
9
and advisability of—
10
(A) using alternative credit scoring infor-
11
mation or credit scoring models using alter-
12
native credit scoring methodology for an indi-
13
vidual described in paragraph (2)—
14
(i) to improve the determination of
15
creditworthiness of such an individual; and
16
(ii) to increase the number of such in-
17
dividuals who are able to obtain a loan
18
guaranteed or insured under chapter 37 of
19
title 38, United States Code; and
20
(B) in consultation with such entities as
21
the Secretary considers appropriate, estab-
22
lishing criteria for acceptable commercially
23
available credit scoring models to be used by
24
lenders for the purpose of guaranteeing or in-
25
VerDate Sep 11 2014
00:18 Mar 15, 2023
Jkt 039200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H1266.IH
H1266
kjohnson on DSK79L0C42PROD with BILLS
3
•HR 1266 IH
suring a loan under chapter 37 of title 38,
1
United States Code.
2
(2) INDIVIDUAL DESCRIBED.—An individual de-
3
scribed in this paragraph is a veteran or a member
4
of the Armed Forces who—
5
(A) is eligible for a loan under chapter 37
6
of title 38, United States Code; and
7
(B) has an insufficient credit history for a
8
lender or the Secretary to determine the credit-
9
worthiness of the individual.
10
(3) ALTERNATIVE CREDIT SCORING INFORMA-
11
TION.—Alternative credit scoring information de-
12
scribed in paragraph (1)(A) may include proof of
13
rent, utility, and insurance payment histories, and
14
such other information as the Secretary considers
15
appropriate.
16
(b) VOLUNTARY PARTICIPATION.—
17
(1) IN GENERAL.—The Secretary shall ensure
18
that any participation in the pilot program is vol-
19
untary on an opt-in basis for a lender, a borrower,
20
and an individual described in subsection (a)(2).
21
(2) NOTICE
OF
PARTICIPATION.—Subject to
22
paragraph (3), any lender who participates in the
23
pilot program shall—
24
VerDate Sep 11 2014
00:18 Mar 15, 2023
Jkt 039200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H1266.IH
H1266
kjohnson on DSK79L0C42PROD with BILLS
4
•HR 1266 IH
(A) notify each individual described in sub-
1
section (a)(2) who, during the pilot program,
2
applies for a loan under chapter 37 of title 38,
3
United States Code, from such lender, of the
4
lender’s participation in the pilot program; and
5
(B) offer such individual the opportunity
6
to participate in the pilot program.
7
(3) LIMITATION.—
8
(A) IN GENERAL.—The Secretary may es-
9
tablish a limitation on the number of individ-
10
uals and lenders that may participate in the
11
pilot program.
12
(B) REPORT.—If the Secretary limits par-
13
ticipation in the pilot program under subpara-
14
graph (A), the Secretary shall, not later than
15
15 days after establishing such limitation, sub-
16
mit to Congress a report setting forth the rea-
17
sons for establishing such limitation.
18
(c) APPROVAL OF CREDIT SCORING MODELS.—
19
(1) IN GENERAL.—A lender participating in the
20
pilot program may not use a credit scoring model
21
under subsection (a)(1)(A) until the Secretary has
22
reviewed and approved such credit scoring model for
23
purposes of the pilot program.
24
VerDate Sep 11 2014
00:18 Mar 15, 2023
Jkt 039200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H1266.IH
H1266
kjohnson on DSK79L0C42PROD with BILLS
5
•HR 1266 IH
(2) PUBLICATION OF CRITERIA.—The Secretary
1
shall publish in the Federal Register any criteria es-
2
tablished under subsection (a)(1)(B) for acceptable
3
commercially available credit scoring models that use
4
alternative credit scoring information described in
5
subsection (a)(1)(A) to be used for purposes of the
6
pilot program.
7
(3) CONSIDERATIONS; APPROVAL OF CERTAIN
8
MODELS.—In selecting credit scoring models to ap-
9
prove under this section, the Secretary shall—
10
(A) consider the criteria for credit score
11
assessments under section 1254.7 of title 12,
12
Code of Federal Regulations; and
13
(B) approve any commercially available
14
credit scoring model that has been approved
15
pursuant to section 302(b)(7) of the Federal
16
National Mortgage Association Charter Act (12
17
U.S.C. 1717(b)(7)) or section 305(d) of the
18
Federal Home Loan Mortgage Corporation Act
19
(12 U.S.C. 1454(d)).
20
(d) OUTREACH.—To the extent practicable, the Sec-
21
retary shall conduct outreach to lenders and individuals
22
described in subsection (a)(2) to inform such persons of
23
the pilot program.
24
(e) REPORT.—
25
VerDate Sep 11 2014
00:18 Mar 15, 2023
Jkt 039200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H1266.IH
H1266
kjohnson on DSK79L0C42PROD with BILLS
6
•HR 1266 IH
(1) IN
GENERAL.—Not later than two years
1
after the date of the enactment of this Act, the Sec-
2
retary shall submit to Congress a report on the pilot
3
program.
4
(2) CONTENTS.—The report submitted under
5
paragraph (1) shall include the following:
6
(A) The findings of the Secretary with re-
7
spect to the feasibility and advisability of using
8
alternative credit scoring information or credit
9
scoring models using alternative credit scoring
10
methodology for individuals described in sub-
11
section (a)(2).
12
(B) A description of the efforts of the Sec-
13
retary to assess the feasibility and advisability
14
of using alternative credit scoring information
15
or credit scoring models as described in sub-
16
paragraph (A).
17
(C) To the extent practicable, the fol-
18
lowing:
19
(i) The rate of participation in the
20
pilot program.
21
(ii) An assessment of whether partici-
22
pants in the pilot program benefitted from
23
such participation.
24
VerDate Sep 11 2014
00:18 Mar 15, 2023
Jkt 039200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6201
E:\BILLS\H1266.IH
H1266
kjohnson on DSK79L0C42PROD with BILLS
7
•HR 1266 IH
(D) An assessment of the effect of the
1
pilot program on the subsidy rate for loans
2
guaranteed or insured by the Secretary under
3
chapter 37 of title 38, United States Code.
4
(E) Such other information as the Sec-
5
retary considers appropriate.
6
(f) TERMINATION.—
7
(1) IN GENERAL.—The Secretary shall complete
8
the pilot program required by subsection (a)(1) not
9
later than September 30, 2026.
10
(2) EFFECT ON LOANS AND APPLICATIONS.—
11
The termination of the pilot program under para-
12
graph (1) shall not affect a loan guaranteed, or for
13
which loan applications have been received by a par-
14
ticipating lender, on or before the date of the com-
15
pletion of the pilot program.
16
(g) INSUFFICIENT CREDIT HISTORY DEFINED.—In
17
this section, the term ‘‘insufficient credit history’’, with
18
respect to an individual described in subsection (a)(2),
19
means that the individual does not have a credit record
20
with one of the national credit reporting agencies or such
21
credit record contains insufficient credit information to as-
22
sess creditworthiness.
23
Æ
VerDate Sep 11 2014
00:18 Mar 15, 2023
Jkt 039200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6301
E:\BILLS\H1266.IH
H1266
kjohnson on DSK79L0C42PROD with BILLS