Congress is considering several new bills that could drastically change credit reports for private student loan borrowers and other consumers.
A bill, the Comprehensive Consumer Credit Reporting Act, would create a private student loan rehabilitation program that would allow borrowers who default on their private student loans to restore their loans to good standing with a series of on-time monthly payments. Private student loan lenders would then be required to remove any adverse credit report from the borrower’s credit report once the payment sequence is successfully completed. Currently, student loan rehabilitation is only available for federal student loans; private student loans effectively have no option to cancel or remedy a default. Even paying or settling a delinquent private student loan would not necessarily result in the removal of the previous negative credit report.
The law would also revamp the credit dispute resolution process for faulty credit reports and expand access to free credit scores for consumers. It would also demand the removal of negative credit reports associated with predatory mortgages and abusive private student loans used to attend for-profit schools.
Congress is also considering two more credit bills that could transform consumers:
- The Protecting Your Credit Score Act would make it easier for people to monitor and process their credit scores by creating an online web portal for consumers to access their credit report and score information. The web portal would also provide consumers with additional options to dispute inaccurate credit reports or manage a security freeze.
- The National Credit Reporting Agency Act would create a new public credit bureau under the aegis of the Consumer Financial Protection Bureau (CFPB), a federal agency whose mission is to protect consumers from predatory financial institutions. It would effectively function as a new credit bureau, providing consumers with a public alternative to existing private, for-profit national credit bureaus.
“Good credit is a gateway to wealth,” House of Representatives Committee on Financial Services Chair Maxine Waters (D-Calif) said last week. Waters noted that the bills under consideration “would bring long overdue reforms to our credit reporting system.”
Chi Chi Wu, a lawyer at the National Consumer Law Center, testified in favor of credit report reforms at a hearing last week. She argued that the creation of a national public credit bureau under the CFPB would be particularly transformative. “Although public bodies are not perfect, at least they wouldn’t have profit as their top priority. They would be sensitive to public pressure and government surveillance. They could also be tasked with developing credit scoring models to reduce the yawning racial and economic inequalities in this country. “
Credit scoring is just one of many big financial reforms being considered by Congressional Democrats and the Biden administration. These include reforming the bankruptcy code to make it easier for consumers to pay off student loans and medical debts in bankruptcy, and possibly overhauling the civil service loan forgiveness program. and income-based repayment plans for federal student loan borrowers.
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