Overhaul of Credit Reporting Act Proposed to Help Consumers, Says Strategic Consulting Services

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Credit scores of average American would improve with the proposed Fair Credit Reporting Act of 2014

Strategic Consulting Services

Anyone who is frustrated with their credit score or the lending process should to have their voice heard. The proposed Act represents a big step in helping consumers, but needs public support to pass Congress without being dramatically watered down.

Strategic Consulting Services (http://www.strategiccs.org), a New York firm providing financial consulting for consumers, announces a new bill in Congress could make a major impact on credit scores and lending calculations in the United States. The “Fair Credit Reporting Improvement Act of 2014” proposes changes aim to dramatically improve consumer credit scores, reduce interest rate payments, and provide financing to borrowers who would otherwise be denied. While it is far from being passed into law, the new Act reflects a groundswell of support for reform to financial policies that impact consumers.

The Chair of the House Financial Services Committee, Rep. Maxine Waters (D-Calif.), introduced the Fair Credit Reporting Improvement Act of 2014 with sweeping changes to how consumers’ credit reports are calculated, according to the Sept. 10 edition of the Wall Street Journal. An update to the 44-year-old Fair Credit Reporting Act (FCRA), the proposals would shorten the amount of time that black marks remain on credit reports, streamline how inquiries are treated and remove adverse debt from a report within 45 days of being paid or settled. The last amendment to the law was a decade ago, providing consumers the right to one free credit report annually and directing mortgage lenders to disclose credit scores to borrowers.

The proposed Act represents the largest changes to FCRA since it was passed in 1970. According to the CFPB Law Blog and other media reports, consumers would benefit from changes that include:

  • Late payments or adverse items would have to be removed from consumer credit reports after four years instead of seven years.
  • Collections and paid/released tax liens would be removed after four years instead of after seven years.
  • Bankruptcies would be removed seven years instead of after 10 years.
  • Mortgage, auto or student loan inquires that occur within 120 days would be treated as one inquiry.
  • Adverse real estate loans (foreclosure, short sale, or other derogatory items) would be removed if the FTC or CFPB deem the loan involved deceptive lending practices.
  • Adverse student loan information would be removed if the debtor makes nine consecutive payments on time.
  • Fannie Mae and Freddie Mac would be required to regularly validate that their scoring models are statistically sound and investigate “alternative or additional” credit score products.
  • Credit scores would be defined as a score to arrange loans and not for insurance, utilities or tenant scoring scores.
  • Credit bureaus would be required to maintain sufficient staff for investigations with the ability to directly correct errors identified in credit reports, following set policies with full transparency for consumers.

The proposed Act comes in the wake of reports from the CFPB advocating reform of credit scoring, lending practices and debt collection. Responding in August, Fair Isaac Corp. announced its FICO Score would reduce the impact of settled debt and treat medical debt differently than other forms of debt. The changes proposed by Rep. Waters would make FICO’s change federal law and have a dramatic impact for borrowers with credit problems. Critics may argue the changes are too sweeping, reducing the level of insight that lenders need to adequately underwrite loans and imposing unnecessary burdens on lenders and credit bureaus.

“The proposed Fair Credit Reporting Improvement Act of 2014 reflects an urgency to reform the financial system and lending processes in America. Most Americans over the last decade have experienced financial hardships, struggled to pay off credit cards, or lost sleep over their mortgages while banks have seen growing profits. While the Act could be divisive in Congress, it does provide needed reform and help to consumers in a period when banks have tightened lending, seen record profits, and foreclosed record numbers of homes. This Act would improve the average American’s credit score, while keeping safeguards in place for lenders, and carefully extend credit to those who would have been denied otherwise,” says Ben Kittle, Senior Financial Consultant at Strategic Consulting Services. ”Anyone who is frustrated with their credit score or the lending process should contact their Member of Congress to have their voice heard. The proposed Act represents a big step in helping consumers, but it needs public support to pass Congress without being dramatically watered down.”

About Strategic Consulting Services
Strategic Consulting Services is a financial services firm with teams specialized in Debt Management, Mortgages and Business Services. With a comprehensive client-focused approach, the Company provides assessments looking beyond immediate financial issues to help clients build greater financial strength with smart habits and choices. Since 2007, Strategic Consulting Services has helped individuals and small businesses create savings plans, reduce debt, and make wiser spending choices. For more information visit http://www.strategiccs.org.

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