Free Credit Scores for Consumers Act of 2019

IB Union Calendar No. 247 116TH CONGRESS 1ST SESSION H. R. 3618 [Report No. 116–306] To establish requirements relating to credit scores and educational credit scores, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JULY 5, 2019 Mrs. BEATTY introduced the following bill; which was referred to the Committee on Financial Services NOVEMBER 21, 2019 Additional sponsor: Mr. CLEAVER NOVEMBER 21, 2019 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed [Strike out all after the enacting clause and insert the part printed in italic] [For text of introduced bill, see copy of bill as introduced on July 5, 2019] VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 3618 RH A BILL To establish requirements relating to credit scores and educational credit scores, and for other purposes. VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6652 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 3618 RH 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 for 4 Consumers Act of 2019’’. 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 ally, they can charge consumers to obtain a credit 11 score disclosure. 12 (2) A July 2011 report by the Consumer Finan- 13 cial Protection Bureau (‘‘Consumer Bureau’’) titled 14 ‘‘The Impact of Differences between Consumer- and 15 Creditor-Purchased Credit Scores’’ found that the 16 credit scores made available to and purchased by con- 17 sumers from CRAs are unlikely to be the same credit 18 scores used by creditors and lenders to evaluate con- 19 sumers’ creditworthiness. 20 (3) That report found that the scarcity of public 21 educational tools to inform consumers of the dif- 22 ferences among credit scores, the large combined mar- 23 ket share and brand recognition of FICO credit 24 scores, and the marketing practices of some credit 25 VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6203 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 3618 RH score sellers may perpetuate consumers’ confusion 1 about credit scores. As a result, some consumers may 2 be purchasing an educational credit score or sub- 3 scribing to a credit monitoring service sold by a CRA, 4 without realizing the limitations and usefulness of 5 these products and services. 6 (4) Similarly, a September 2012 Consumer Bu- 7 reau report titled ‘‘Analysis of Differences between 8 Consumer- and Creditor-Purchased Credit Scores’’ 9 found that consumers do not know before they pur- 10 chase a credit score from a CRA whether this credit 11 score will closely track or vary significantly from the 12 credit score sold to creditors or lenders. Given the lack 13 of transparency about the usefulness of credit scores 14 that are marketed for purchase by consumers from 15 CRAs and the resulting consumer confusion, the Con- 16 sumer Bureau recommended that companies selling 17 scores to consumers clearly inform consumers that the 18 scores marketed to consumers for purchase by CRAs 19 can vary, sometimes substantially, from the scores 20 that are actually sold to and used by creditors and 21 lenders. 22 (5) A February 2011 study by Consumer Federa- 23 tion of America and VantageScore also found that 24 half of the consumers surveyed did not know that a 25 VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6203 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 3618 RH credit score is designed to indicate the risk of not re- 1 paying a credit obligation. Consumers also did not 2 know who makes credit scores available, what numer- 3 ical range constitutes excellent credit standing, or the 4 financial implications of having a low credit score. 5 (6) Many consumers do not realize that they 6 have more than just ‘‘one’’ credit score. Because the 7 submission of credit information to CRAs is vol- 8 untary and not all furnishers submit information to 9 every CRA, the information contained in a report 10 also varies among CRAs. As a result, the credit score 11 generated by each CRA is also likely to vary, result- 12 ing in potentially different credit decisions based on 13 an evaluation of different credit reports obtained from 14 different CRAs. 15 (7) A February 2015 Consumer Bureau report 16 titled ‘‘Consumer Voices on Credit Reports and 17 Scores’’ found that consumers had questions about 18 what actions to take to improve their scores once they 19 had seen them, suggesting that additional disclosures 20 and educational content would be helpful to con- 21 sumers. The Consumer Bureau found that consumers 22 were confused by conflicting advice on how to improve 23 their scores. 24 VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6203 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 3618 RH (8) That report also noted that consumers found 1 the process for obtaining consumer reports and credit 2 scores confusing. Consumers also were uncertain 3 about whether, and under what circumstances, they 4 could obtain a consumer report for free. 5 SEC. 3. DEFINITIONS. 6 (a) IN GENERAL.—Section 603 of the Fair Credit Re- 7 porting Act (15 U.S.C. 1681a) is amended by adding at 8 the end the following new subsection: 9 ‘‘(bb) CREDIT SCORE AND EDUCATIONAL CREDIT 10 SCORE DEFINITIONS.— 11 ‘‘(1) CREDIT SCORE.—The term ‘credit score’ 12 means a numerical value or a categorization derived 13 from a statistical tool or modeling system used by a 14 person who makes or arranges a loan or extends cred- 15 it to predict the likelihood of certain credit behaviors, 16 including default, as determined by the Bureau. 17 ‘‘(2) EDUCATIONAL CREDIT SCORE.—The term 18 ‘educational credit score’ means a numerical value or 19 categorization derived from a statistical tool or mod- 20 eling system based upon information from a consumer 21 report that assists consumers in understanding how a 22 lender or creditor may view the consumer’s credit- 23 worthiness in deciding whether to make a loan or ex- 24 tend credit to that consumer. 25 VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 3618 RH ‘‘(3) KEY FACTORS.—The term ‘key factors’ 1 means relevant elements or reasons affecting the credit 2 score for the particular individual, listed in the order 3 of importance based on the effect of each element or 4 reason on the credit score or educational credit score. 5 ‘‘(4) CREDIT SCORING MODEL.—The term ‘credit 6 scoring model’ means a scoring algorithm, formula, 7 model, program, or mechanism used to generate a 8 credit score or an educational credit score.’’. 9 (b) CONFORMING AMENDMENTS.—The Fair Credit Re- 10 porting Act (15 U.S.C. 1681 et seq.) is amended— 11 (1) in section 605(d)(2), by striking ‘‘(as defined 12 in section 609(f)(2)(B))’’; and 13 (2) in section 615— 14 (A) by striking ‘‘as defined in section 15 609(f)(2)(A)’’ each place that term appears; and 16 (B) by striking ‘‘set forth in subparagraphs 17 (B) through (E) of section 609(f)(1)’’ and insert- 18 ing ‘‘with respect to a credit score described in 19 section 609(f)(2), if available’’ each place that 20 term appears. 21 VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6203 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 3618 RH SEC. 4. EXPANDS EXPLANATORY INFORMATION GIVEN TO 1 CONSUMERS ABOUT HOW SCORES ARE CAL- 2 CULATED. 3 Section 609(f) of the Fair Credit Reporting Act (15 4 U.S.C. 1681g(f)) is amended to read as follows: 5 ‘‘(f) DISCLOSURE OF CREDIT SCORE AND EDU- 6 CATIONAL CREDIT SCORE BY CONSUMER REPORTING 7 AGENCIES.— 8 ‘‘(1) IN GENERAL.—Upon the request of a con- 9 sumer for a credit score or educational credit score, 10 a consumer reporting agency shall supply to the con- 11 sumer a statement— 12 ‘‘(A) containing— 13 ‘‘(i) a current credit score at the time 14 of the request generated using a commonly 15 used credit scoring model to generate credit 16 scores, subject to regulations of the Bureau; 17 ‘‘(ii) an educational credit score at the 18 time of the request, if it is not practicable 19 to generate such a credit score, as deter- 20 mined by the Bureau; or 21 ‘‘(iii) an explanation that the con- 22 sumer’s file does not have sufficient infor- 23 mation from which to generate such a credit 24 score or educational credit score; and 25 VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6203 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 3618 RH ‘‘(B) with respect to each previous credit 1 score in the file of the consumer— 2 ‘‘(i) the date on which the credit score 3 was generated; 4 ‘‘(ii) the name of any entity that the 5 credit score was provided to; and 6 ‘‘(iii) the credit score itself. 7 ‘‘(2) REQUIREMENTS.—A statement provided 8 under clause (i) or (ii) of paragraph (1)(A) shall in- 9 clude— 10 ‘‘(A) a minimum of 4 key factors, if avail- 11 able, that adversely affected the credit score or 12 educational credit score, except that if one of the 13 key factors consists of the number of enquiries 14 made with respect to a consumer report, that fac- 15 tor shall be provided to the consumer in addition 16 to the factors required by this subparagraph; 17 ‘‘(B) to the extent possible, specific actions 18 a consumer could take with respect to each key 19 factor listed in subparagraph (A) to improve the 20 consumer’s credit score or educational credit 21 score; 22 ‘‘(C) a minimum of 4 key factors, if avail- 23 able, that positively affected the credit score or 24 educational credit score; 25 VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6203 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 3618 RH ‘‘(D) the range of possible credit scores or 1 educational credit scores under the credit scoring 2 model used; 3 ‘‘(E) the distribution of credit scores or edu- 4 cational credit scores among consumers who are 5 scored under the same credit scoring model by 6 the consumer reporting agency, and using the 7 same scale as that of the score that is provided 8 to a creditor or consumers— 9 ‘‘(i) in the form of a bar graph con- 10 taining a minimum of 6 bars that illus- 11 trates the percentage of consumers with 12 credit scores or educational credit scores 13 within the range of scores represented by 14 each bar; or 15 ‘‘(ii) by another clear and readily un- 16 derstandable graphical depiction, statement, 17 or illustration comparing the consumer’s 18 credit score or educational credit score to 19 the scores of other consumers, as determined 20 by the Bureau; 21 ‘‘(F) the date on which the credit score or 22 educational credit score was created; and 23 VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6203 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 3618 RH ‘‘(G) the name of the person that developed 1 the credit scoring model on which the credit score 2 or educational credit score was based. 3 ‘‘(3) APPLICABILITY TO CERTAIN USES.—This 4 subsection shall not be construed so as to compel a 5 consumer reporting agency to— 6 ‘‘(A) develop or disclose a credit score if the 7 agency does not distribute credit scores used by 8 a person who makes or arranges a loan or ex- 9 tends credit to predict the likelihood of certain 10 credit behaviors; or 11 ‘‘(B) develop or disclose an educational 12 credit score if the agency does not develop edu- 13 cational credit scores that assist in under- 14 standing the general credit behavior of a con- 15 sumer and predicting the future credit behavior 16 of the consumer. 17 ‘‘(4) MAINTENANCE OF CREDIT SCORES.— 18 ‘‘(A) IN GENERAL.—All consumer reporting 19 agencies shall maintain in the consumer’s file 20 credit scores relating to the consumer for a pe- 21 riod of 2 years from the date on which such in- 22 formation is generated. 23 ‘‘(B) DISCLOSURE ONLY TO CONSUMERS.— 24 A past credit score maintained in a consumer’s 25 VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 3618 RH file pursuant to subparagraph (A) may only be 1 provided to the consumer to which the credit 2 score relates and may not be included in a con- 3 sumer report or used as a factor in generating 4 a credit score or educational credit score. 5 ‘‘(C) REMOVAL OF PAST CREDIT SCORES.— 6 A past credit score maintained in a consumer’s 7 file pursuant to subparagraph (A) shall be re- 8 moved from the consumer’s file after the end of 9 the 2-year period described under subparagraph 10 (A).’’. 11 SEC. 5. REQUIRES CONSUMER REPORTING AGENCIES TO 12 DISCLOSE PROMINENTLY THE DIFFERENCES 13 BETWEEN AND LIMITATIONS OF CREDIT 14 SCORES AND EDUCATIONAL CREDIT SCORES 15 REQUIRED PRIOR TO A CONSUMER OBTAIN- 16 ING SUCH SCORES. 17 Section 609(f) of the Fair Credit Reporting Act (15 18 U.S.C. 1681g(f)), as amended by section 3, is further 19 amended by adding at the end the following new para- 20 graphs: 21 ‘‘(5) WEBSITE DISCLAIMER.—A consumer report- 22 ing agency that generates or provides credit scores or 23 educational credit scores shall clearly and conspicu- 24 ously display on the home page of the agency’s Inter- 25 VerDate Sep 11 2014 19:58 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6203 E:\BILLS\H3618.RH H3618 pamtmann on DSKBC07HB2PROD with BILLS 13 •HR 3618 RH net website, and as part of any application, solicita- 1 tion, or marketing material or media providing infor- 2 mation related to a credit score or educational credit 3 score, the following notice, in boldface type of 18- 4 point font or larger and in a text box with boldface 5 outer borders: 6 ‘‘ ‘CREDIT SCORE DISCLAIMER. 7 ‘‘ ‘There is no ‘‘one’’ credit score. There are many scor- 8 ing formulas derived from a wide variety of models avail- 9 able to a consumer and used by lenders and creditors. Dif- 10 ferent lenders and creditors use different scoring formulas 11 to determine whether to extend credit or make a loan to 12 you, and the terms of the credit or loan. An educational 13 credit score is not a credit score that a pe [Text truncated for display. Full text available on Congress.gov.]