Free Credit Scores for Consumers Act of 2021

I 117TH CONGRESS 1ST SESSION H. R. 4078 To establish requirements relating to credit scores and educational credit scores, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JUNE 23, 2021 Mrs. BEATTY introduced the following bill; which was referred to the Committee on Financial Services A BILL To establish requirements relating to credit scores and educational credit scores, 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 ‘‘Free Credit Scores 4 for Consumers Act of 2021’’. 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 (1) While nationwide consumer reporting agen- 8 cies (‘‘CRAs’’) are required by law to supply con- 9 sumers with a free copy of their credit report annu- 10 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 4078 IH ally, they can charge consumers to obtain a credit 1 score disclosure. 2 (2) A July 2011 report by the Consumer Fi- 3 nancial Protection Bureau (‘‘Consumer Bureau’’) ti- 4 tled ‘‘The Impact of Differences between Consumer- 5 and Creditor-Purchased Credit Scores’’ found that 6 the credit scores made available to and purchased by 7 consumers from CRAs are unlikely to be the same 8 credit scores used by creditors and lenders to evalu- 9 ate consumers’ creditworthiness. 10 (3) That report found that the scarcity of pub- 11 lic educational tools to inform consumers of the dif- 12 ferences among credit scores, the large combined 13 market share and brand recognition of FICO credit 14 scores, and the marketing practices of some credit 15 score sellers may perpetuate consumers’ confusion 16 about credit scores. As a result, some consumers 17 may be purchasing an educational credit score or 18 subscribing to a credit monitoring service sold by a 19 CRA, without realizing the limitations and useful- 20 ness of these products and services. 21 (4) Similarly, a September 2012 Consumer Bu- 22 reau report titled ‘‘Analysis of Differences between 23 Consumer- and Creditor-Purchased Credit Scores’’ 24 found that consumers do not know before they pur- 25 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 4078 IH chase a credit score from a CRA whether this credit 1 score will closely track or vary significantly from the 2 credit score sold to creditors or lenders. Given the 3 lack of transparency about the usefulness of credit 4 scores that are marketed for purchase by consumers 5 from CRAs and the resulting consumer confusion, 6 the Consumer Bureau recommended that companies 7 selling scores to consumers clearly inform consumers 8 that the scores marketed to consumers for purchase 9 by CRAs can vary, sometimes substantially, from 10 the scores that are actually sold to and used by 11 creditors and lenders. 12 (5) A February 2011 study by Consumer Fed- 13 eration of America and VantageScore also found 14 that half of the consumers surveyed did not know 15 that a credit score is designed to indicate the risk 16 of not repaying a credit obligation. Consumers also 17 did not know who makes credit scores available, 18 what numerical range constitutes excellent credit 19 standing, or the financial implications of having a 20 low credit score. 21 (6) Many consumers do not realize that they 22 have more than just ‘‘one’’ credit score. Because the 23 submission of credit information to CRAs is vol- 24 untary and not all furnishers submit information to 25 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 4078 IH every CRA, the information contained in a report 1 also varies among CRAs. As a result, the credit 2 score generated by each CRA is also likely to vary, 3 resulting in potentially different credit decisions 4 based on an evaluation of different credit reports ob- 5 tained from different CRAs. 6 (7) A February 2015 Consumer Bureau report 7 titled ‘‘Consumer Voices on Credit Reports and 8 Scores’’ found that consumers had questions about 9 what actions to take to improve their scores once 10 they had seen them, suggesting that additional dis- 11 closures and educational content would be helpful to 12 consumers. The Consumer Bureau found that con- 13 sumers were confused by conflicting advice on how 14 to improve their scores. 15 (8) That report also noted that consumers 16 found the process for obtaining consumer reports 17 and credit scores confusing. Consumers also were 18 uncertain about whether, and under what cir- 19 cumstances, they could obtain a consumer report for 20 free. 21 SEC. 3. DEFINITIONS. 22 (a) IN GENERAL.—Section 603 of the Fair Credit 23 Reporting Act (15 U.S.C. 1681a) is amended by adding 24 at the end the following new subsection: 25 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 4078 IH ‘‘(bb) CREDIT SCORE AND EDUCATIONAL CREDIT 1 SCORE DEFINITIONS.— 2 ‘‘(1) CREDIT SCORE.—The term ‘credit score’ 3 means a numerical value or a categorization derived 4 from a statistical tool or modeling system used by a 5 person who makes or arranges a loan or extends 6 credit to predict the likelihood of certain credit be- 7 haviors, including default, as determined by the Bu- 8 reau. 9 ‘‘(2) EDUCATIONAL CREDIT SCORE.—The term 10 ‘educational credit score’ means a numerical value or 11 categorization derived from a statistical tool or mod- 12 eling system based upon information from a con- 13 sumer report that assists consumers in under- 14 standing how a lender or creditor may view the con- 15 sumer’s creditworthiness in deciding whether to 16 make a loan or extend credit to that consumer. 17 ‘‘(3) KEY FACTORS.—The term ‘key factors’ 18 means relevant elements or reasons affecting the 19 credit score for the particular individual, listed in 20 the order of importance based on the effect of each 21 element or reason on the credit score or educational 22 credit score. 23 ‘‘(4) CREDIT SCORING MODEL.—The term 24 ‘credit scoring model’ means a scoring algorithm, 25 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 4078 IH formula, model, program, or mechanism used to gen- 1 erate a credit score or an educational credit score.’’. 2 (b) CONFORMING AMENDMENTS.—The Fair Credit 3 Reporting Act (15 U.S.C. 1681 et seq.) is amended— 4 (1) in section 605(d)(2), by striking ‘‘(as de- 5 fined in section 609(f)(2)(B))’’; and 6 (2) in section 615— 7 (A) by striking ‘‘as defined in section 8 609(f)(2)(A)’’ each place that term appears; 9 and 10 (B) by striking ‘‘set forth in subpara- 11 graphs (B) through (E) of section 609(f)(1)’’ 12 and inserting ‘‘with respect to a credit score de- 13 scribed in section 609(f)(2), if available’’ each 14 place that term appears. 15 SEC. 4. EXPANDS EXPLANATORY INFORMATION GIVEN TO 16 CONSUMERS ABOUT HOW SCORES ARE CAL- 17 CULATED. 18 Section 609(f) of the Fair Credit Reporting Act (15 19 U.S.C. 1681g(f)) is amended to read as follows: 20 ‘‘(f) DISCLOSURE OF CREDIT SCORE AND EDU- 21 CATIONAL CREDIT SCORE BY CONSUMER REPORTING 22 AGENCIES.— 23 ‘‘(1) IN GENERAL.—Upon the request of a con- 24 sumer for a credit score or educational credit score, 25 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 4078 IH a consumer reporting agency shall supply to the con- 1 sumer a statement— 2 ‘‘(A) containing— 3 ‘‘(i) a current credit score at the time 4 of the request generated using a commonly 5 used credit scoring model to generate cred- 6 it scores, subject to regulations of the Bu- 7 reau; 8 ‘‘(ii) an educational credit score at the 9 time of the request, if it is not practicable 10 to generate such a credit score, as deter- 11 mined by the Bureau; or 12 ‘‘(iii) an explanation that the con- 13 sumer’s file does not have sufficient infor- 14 mation from which to generate such a 15 credit score or educational credit score; 16 and 17 ‘‘(B) with respect to each previous credit 18 score in the file of the consumer— 19 ‘‘(i) the date on which the credit score 20 was generated; 21 ‘‘(ii) the name of any entity that the 22 credit score was provided to; and 23 ‘‘(iii) the credit score itself. 24 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 4078 IH ‘‘(2) REQUIREMENTS.—A statement provided 1 under clause (i) or (ii) of paragraph (1)(A) shall in- 2 clude— 3 ‘‘(A) a minimum of 4 key factors, if avail- 4 able, that adversely affected the credit score or 5 educational credit score, except that if one of 6 the key factors consists of the number of 7 enquiries made with respect to a consumer re- 8 port, that factor shall be provided to the con- 9 sumer in addition to the factors required by 10 this subparagraph; 11 ‘‘(B) to the extent possible, specific actions 12 a consumer could take with respect to each key 13 factor listed in subparagraph (A) to improve 14 the consumer’s credit score or educational cred- 15 it score; 16 ‘‘(C) a minimum of 4 key factors, if avail- 17 able, that positively affected the credit score or 18 educational credit score; 19 ‘‘(D) the range of possible credit scores or 20 educational credit scores under the credit scor- 21 ing model used; 22 ‘‘(E) the distribution of credit scores or 23 educational credit scores among consumers who 24 are scored under the same credit scoring model 25 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 4078 IH by the consumer reporting agency, and using 1 the same scale as that of the score that is pro- 2 vided to a creditor or consumers— 3 ‘‘(i) in the form of a bar graph con- 4 taining a minimum of 6 bars that illus- 5 trates the percentage of consumers with 6 credit scores or educational credit scores 7 within the range of scores represented by 8 each bar; or 9 ‘‘(ii) by another clear and readily un- 10 derstandable graphical depiction, state- 11 ment, or illustration comparing the con- 12 sumer’s credit score or educational credit 13 score to the scores of other consumers, as 14 determined by the Bureau; 15 ‘‘(F) the date on which the credit score or 16 educational credit score was created; and 17 ‘‘(G) the name of the person that devel- 18 oped the credit scoring model on which the 19 credit score or educational credit score was 20 based. 21 ‘‘(3) APPLICABILITY TO CERTAIN USES.—This 22 subsection shall not be construed so as to compel a 23 consumer reporting agency to— 24 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 4078 IH ‘‘(A) develop or disclose a credit score if 1 the agency does not distribute credit scores 2 used by a person who makes or arranges a loan 3 or extends credit to predict the likelihood of 4 certain credit behaviors; or 5 ‘‘(B) develop or disclose an educational 6 credit score if the agency does not develop edu- 7 cational credit scores that assist in under- 8 standing the general credit behavior of a con- 9 sumer and predicting the future credit behavior 10 of the consumer. 11 ‘‘(4) MAINTENANCE OF CREDIT SCORES.— 12 ‘‘(A) IN GENERAL.—All consumer report- 13 ing agencies shall maintain in the consumer’s 14 file credit scores relating to the consumer for a 15 period of 2 years from the date on which such 16 information is generated. 17 ‘‘(B) DISCLOSURE ONLY TO CON- 18 SUMERS.—A past credit score maintained in a 19 consumer’s file pursuant to subparagraph (A) 20 may only be provided to the consumer to which 21 the credit score relates and may not be included 22 in a consumer report or used as a factor in gen- 23 erating a credit score or educational credit 24 score. 25 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 4078 IH ‘‘(C) REMOVAL OF PAST CREDIT 1 SCORES.—A past credit score maintained in a 2 consumer’s file pursuant to subparagraph (A) 3 shall be removed from the consumer’s file after 4 the end of the 2-year period described under 5 subparagraph (A).’’. 6 SEC. 5. REQUIRES CONSUMER REPORTING AGENCIES TO 7 DISCLOSE PROMINENTLY THE DIFFERENCES 8 BETWEEN AND LIMITATIONS OF CREDIT 9 SCORES AND EDUCATIONAL CREDIT SCORES 10 REQUIRED PRIOR TO A CONSUMER OBTAIN- 11 ING SUCH SCORES. 12 Section 609(f) of the Fair Credit Reporting Act (15 13 U.S.C. 1681g(f)), as amended by section 3, is further 14 amended by adding at the end the following new para- 15 graphs: 16 ‘‘(5) WEBSITE DISCLAIMER.—A consumer re- 17 porting agency that generates or provides credit 18 scores or educational credit scores shall clearly and 19 conspicuously display on the home page of the agen- 20 cy’s Internet website, and as part of any application, 21 solicitation, or marketing material or media pro- 22 viding information related to a credit score or edu- 23 cational credit score, the following notice, in boldface 24 VerDate Sep 11 2014 00:30 Jul 10, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H4078.IH H4078 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 4078 IH type of 18-point font or larger and in a text box 1 with boldface outer borders: 2 ‘‘ ‘CREDIT SCORE DISCLAIMER. 3 ‘‘ ‘There is no ‘‘one’’ credit score. There are many 4 scoring formulas derived from a wide variety of models 5 available to a consumer and used by lenders and creditors. 6 Different lenders and creditors use different scoring for- 7 mulas to determine whether to extend credit or make a 8 loan to you, and the terms of the credit or loan. An edu- 9 cational credit score is not a credit score that a person 10 who makes a loan or extends credit to you is likely to use. 11 Educational credit scores are merely intended to be used 12 as an educational tool to help consumers understand how 13 the information contained in a consumer report may affect 14 the terms and conditions of a loan or extension of credit 15 that may be available to a consumer. Lenders and credi- 16 tors may also rely on information not contained in your 17 consumer report and not reflected in the calculation of 18 your credit score.’. 19 ‘‘(6) ADDITIONAL [Text truncated for display. Full text available on Congress.gov.]