Realty Times: Major Credit Reform Bill Passed Unanimously by House Subcommittee

July 21, 2003

Major Credit Reform Bill Passed Unanimously by House Subcommittee
by Kenneth R. Harney

A far-reaching piece of bipartisan reform legislation affecting millions of American home buyers and refinancers was passed unanimously last week by a House subcommittee.

The House Financial Services Subcommitee reported out the “Fair and Accurate Credit Transactions Act of 2003”: (HR 2622) after holding six hearings involving over 100 witnesses this spring. The bill, which is expected to pass the full committee and the House by the Fall, would overhaul key elements of the current credit reporting system and would seek to reduce the incidence of identify theft.

Home buyers and home equity loan applicants should notice several key changes as soon as the bill emerges from Congress:

Free credit reports. Under current law only a handful of states require the big three national credit bureaus--Equifax, Experian, and TransUnion--to provide one free credit report, on request, to any resident of the state per year. Under the new federal credit reform bill approved last week, this would become the standard rule, nationwide. You will be able to write to all three bureaus once a year, and say: Send me what you’ve got on me, at no charge, so I can correct anything that’s wrong.

Credit score disclosure. Thanks to an amendment by Rep. Bernard Sanders (I-VT), the bill would require credit bureaus to provide you your credit score, as computed from their own credit databases, once a year at your request. And if you forget to ask for the score when you request your credit file, the bureau would be required to notify you that you can obtain your score, plus an explanation of what factors may be depressing your score.

Under current law, you have no right to see your credit score except in California and Colorado, where disclosure is mandatory. At least once a year, in other words, all Americans will be effectively guaranteed the right to do a comprehensive “credit check” on themselves, examining their credit file data from the bureaus and their individual credit scores from each bureau.

Notification of consumers by creditors when they plan to send negative information to the credit bureaus. A potentially huge advance for consumers concerned about misinformation in their credit reports, this provision sponsored by Rep. Gary Ackerman (D-NY), would require creditors to provide notification about all derogatory information, in writing, to the consumer.

To illustrate: every time a credit card company, department store or mortgage company believes you were late on a payment, it would have to notify you that it is reporting that negative information to the credit bureaus. The notification would have to be mailed or emailed to you no later than 30 days after the creditor sends it to the bureaus.

Think about the impact this could have on the widespread problem of mortgage applicants being charger higher rates because of erroneous negative information sitting in their credit files, depressing their scores. If the new bill passes Congress later this year, you will know whenever a bank or credit card company botches up the facts. And with the notification in hand, you’ll be better equipped to challenge the negative information and get it corrected.

Of course, if the creditor has the facts right--and you did indeed skip a payment or sent it in late--you’ll know that your credit files will reflect these facts, and your scores will decline as a result.

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