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AN OVERVIEW OF THE 

CREDIT REPORTING SYSTEM 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 10, 2014 

Printed for the use of the Committee on Financial Services 

Serial No. 113–97 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

GARY G. MILLER, California, Vice Chairman 

SPENCER BACHUS, Alabama, Chairman 

Emeritus 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

STEVEN HORSFORD, Nevada 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

SHELLEY MOORE CAPITO, West Virginia, Chairman 

SEAN P. DUFFY, Wisconsin, Vice Chairman 

SPENCER BACHUS, Alabama 

GARY G. MILLER, California 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

MARLIN A. STUTZMAN, Indiana 

ROBERT PITTENGER, North Carolina 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

KEITH J. ROTHFUS, Pennsylvania 

GREGORY W. MEEKS, New York, Ranking 

Member 

CAROLYN B. MALONEY, New York 

RUBE ́ N HINOJOSA, Texas 

CAROLYN MCCARTHY, New York 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

KEITH ELLISON, Minnesota 

NYDIA M. VELA ́ ZQUEZ, New York 

STEPHEN F. LYNCH, Massachusetts 

ED PERLMUTTER, Colorado 

MICHAEL E. CAPUANO, Massachusetts 

JOHN K. DELANEY, Maryland 

DENNY HECK, Washington 

KYRSTEN SINEMA, Arizona 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

September 10, 2014 .......................................................................................... 1 

Appendix: 

September 10, 2014 .......................................................................................... 29 

WITNESSES 

WEDNESDAY, SEPTEMBER 10, 2014 

Beales, J. Howard III, Professor, Strategic Management and Public Policy, 

The George Washington School of Business, The George Washington University ................................................................................................................... 8 

Ikard, John, President and Chief Executive Officer, FirstBank, Lakewood, 

Colorado, on behalf of the American Bankers Association (ABA) .................... 10 

Pratt, Stuart K., President and Chief Executive Officer, Consumer Data Industry Association (CDIA) ................................................................................... 6 

Wu, Chi Chi, Staff Attorney, National Consumer Law Center (NCLC) ............. 12 

APPENDIX 

Prepared statements: 

Ellison, Hon. Keith ........................................................................................... 30 

Beales, J. Howard III ....................................................................................... 33 

Ikard, John ........................................................................................................ 42 

Pratt, Stuart K. ................................................................................................ 52 

Wu, Chi Chi ...................................................................................................... 77 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Duffy, Hon. Sean: 

Letter to Thomas Oscherwitz, Office of Supervision Policy, Consumer 

Financial Protection Bureau, from Paul Zurawski, Senior Vice President, Government Relations & Regulatory Management, Equifax, dated 

January 14, 2014 .......................................................................................... 135 

Ellison, Hon. Keith: 

Letter from Buddy Flake, NCTUE Board President, and Michael Gardner, Senior Vice President, Equifax, dated September 9, 2013 ................ 137 

Report of the Policy & Economic Research Council (PERC) entitled, ‘‘The 

Credit Impacts on Low-Income Americans from Reporting Moderately 

Late Utility Payments,’’ dated August 2012 ............................................... 139 

Meeks, Hon. Gregory: 

Written statement of Representative Ruben Hinojosa .................................. 159 

Waters, Hon. Maxine: 

Written statement of the Consumers Union, including a report entitled, 

‘‘ERRORS AND GOTCHAS: How Credit Report Errors and Unreliable 

Credit Scores Hurt Consumers,’’ dated April 9, 2014 ................................ 162 

Written statement of Demos ............................................................................ 201 

Written statement of the National Consumer Reporting Association .......... 205 

Written statement of the National Patient Advocate Foundation ............... 214 

New York Times article entitled, ‘‘Discrepancies on Medical Bills Can 

Leave a Credit Stain,’’ dated May 4, 2012 .................................................. 220 

Written statement of Rodney Anderson, Executive Director, Supreme 

Lending, Plano, Texas .................................................................................. 224 

Page

VI 

Westmoreland, Hon. Lynn: 

Letter from Buddy Flake, NCTUE Board President, and Michael Gardner, Senior Vice President, Equifax, dated September 9, 2013 ................ 228 

(1) 

AN OVERVIEW OF THE 

CREDIT REPORTING SYSTEM 

Wednesday, September 10, 2014 

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:05 p.m., in room 

2128, Rayburn House Office Building, Hon. Shelley Moore Capito 

[chairwoman of the subcommittee] presiding. 

Members present: Representatives Capito, Duffy, Pearce, Posey, 

Fitzpatrick, Westmoreland, Luetkemeyer, Stutzman, Pittenger, 

Barr, Cotton, Rothfus; Meeks, Hinojosa, McCarthy of New York, 

Green, Ellison, Perlmutter, and Sinema. 

Ex officio present: Representatives Hensarling and Waters. 

Chairwoman CAPITO. The Subcommittee on Financial Institutions and Consumer Credit will come to order. Without objection, 

the Chair is authorized to declare a recess of the subcommittee at 

any time. 

I now recognize myself for 5 minutes for the purpose of making 

an opening statement. 

Since the passage of the Fair Credit Reporting Act (FCRA) in 

1970, our Nation’s consumer credit markets have relied on the data 

compiled in a consumer’s credit report. These reports serve as a 

comprehensive historical view of a consumer’s financial decisions 

and actions. Depending on their credit history, a consumer’s credit 

report can have a very real impact on their ability to access credit. 

One of the foundations of the Fair Credit Reporting Act is ensuring 

the accuracy of the data that appears on a consumer credit report. 

I think all of us have had experiences with our own consumer credit report. Many consumers diligently monitor their credit reports to 

ensure that inaccurate data is not on their report. 

Since 2003, consumers have had the right to access a free credit 

report from each of the three main credit reporting bureaus. This 

access to free credit reports is a critical tool for consumers, especially in the wake of major data breaches that have occurred in the 

United States in the past year. According to the Federal Trade 

Commission (FTC), nearly 20 percent of Americans have errors on 

their credit report. Furthermore, 5 percent of Americans have errors that could expose them to higher interest rates or could cause 

them to lose access to consumer credit through no fault of their 

own. If the consumer does identify errors on their report, they 

should have those errors removed as quickly as possible. 

2 

Last year, an investigation by 60 Minutes raised significant concerns about the ability of consumers to have their errors removed. 

In one case, it took 6 years for a consumer to rectify inaccuracies 

on her credit report. Today, we will learn more about the systems 

that credit bureaus have in place to resolve discrepancies on a consumer credit report. We must work together to ensure that if consumers have legitimate discrepancies on their credit report, they 

can have them removed as quickly as possible. 

Another area of concern—and I am very interested in this—is the 

impact that student loan debt has on young consumers just entering the workforce. It is estimated that the average student loan 

burden for the class of 2014 is approximately $33,000. While paying off this debt on time can certainly help improve a student’s 

credit profile, going into default can have a lasting negative impact 

on their credit profile. We must find ways to help students find better paying jobs, but we must also provide them with the skills necessary to better understand the economic impact and risks associated with taking on large amounts of student loan debt. 

I would like to thank our witnesses for joining us here today and 

for providing their perspectives on these issues. I will now yield 

time to the ranking member of the subcommittee, Mr. Meeks, for 

the purpose of making an opening statement. 

Mr. MEEKS. Thank you, Madam Chairwoman, for conducting this 

important hearing on credit reporting. This hearing is especially 

important because credit reporting is an issue that affects most 

American consumers. The strength and resilience of our economy 

resides in consumer spending which has been sustained by the 

most effective consumer credit system of any nation. 

However, as we note the progress of our credit reporting system 

in facilitating access to credit and enabling risk-based pricing 

which overall lowers the cost of credit for most Americans, we must 

also vigorously pursue reforms to address errors and inappropriate 

use of credit information which, in the most pervasive cases, results in denial of opportunities in jobs to a large segment of Americans. Therefore, there is no question that our credit reporting system needs to be reformed. 

Our nationwide consumer reporting agencies receive close to 38 

million disputed items for consumers every year. Millions more experience high frustration with the difficulty of getting errors removed. In 2013, a congressionally mandated FTC report noted that 

40 million Americans have errors in their credit reports and that 

26 million have lower scores as a result of such errors. And research conducted by the California Labor Federation revealed that 

only 25 percent of employers researched the credit history of job 

applicants in 1998. This practice had increased to 60 percent by 

2011, and there is no scientific evidence which supports the notion 

that credit information can predict job performance or risk performance in the workplace. 

Exacerbating this troubling trend are the lingering effects of the 

Great Recession. The foreclosure crisis and the ensuing job crisis 

resulted in millions of Americans having their credit history impaired, many through no fault of their own. Latino and AfricanAmerican households were particularly targeted and steered into 

3 

high-cost mortgages, leading to the highest foreclosure rates and 

then unemployment rates. 

And the problems don’t stop there. Americans who have fallen 

sick, even those who have fully paid their medical debt, are being 

plainly being discriminated against because of their medical debt 

history. I therefore applaud Ranking Member Waters for her leadership on this issue and for coming forward with proposals to address these many shortcomings. 

And lastly, I am also troubled by the growing student loan burden, as you mentioned, that young Americans are facing. The Fed, 

in a 2013 survey of consumer finances, revealed that the amount 

that families with student debt have incurred has nearly doubled 

since 2001, so we must pass some legislation that would ensure 

that private education loan borrowers get the same chance to rehabilitate their credit as Federal student borrowers. Thank you. I 

yield back. 

Chairwoman CAPITO. Thank you, Mr. Meeks. I now recognize Mr. 

Fitzpatrick for 2 minutes. 

Mr. FITZPATRICK. Thank you, Madam Chairwoman, and I appreciate you holding this hearing today. Congressman Ellison and I introduced the Credit Access and Inclusion Act last year to help 

those who are termed ‘‘credit-invisibles.’’ These are individuals who 

have little or no traditional credit history and are therefore 

unscorable. Our bill would help nearly 100 million Americans establish a credit score or raise their existing score by removing barriers, including payment history. 

While credit-invisibles have all manner of demographic and socioeconomic backgrounds, there is a particular impact on those who 

are young and those with lower incomes. Laws on the books already allow energy, utility, and telecom services to report payment 

data to credit bureaus, but those that do report, primarily report 

negative payment data, so right now, customers’ credit scores are 

being punished for poor behavior but not recognized for their good 

behavior. The purpose of this hearing is to explore credit reporting 

and its impact on consumers and those that use credit scores. We 

are going to be hearing testimony about the importance of credit 

scores in the economy and how it can affect quality of life. 

I look forward to that testimony, and I appreciate the opportunity to discuss the issues and to perhaps learn how Congress can 

help improve the lives of American families. Again, I appreciate the 

hearing, and with that, I yield back, Madam Chairwoman. 

Chairwoman CAPITO. The gentleman yields back. Mr. Perlmutter 

for 1 minute. 

Mr. PERLMUTTER. Thanks, Madam Chairwoman. I want to welcome my friend John Ikard to the Financial Services Committee 

today. He is a well-respected businessman and leader in the Denver area and throughout Colorado, and under his leadership, 

FirstBank, his bank has grown steadily and now has over $13 billion in assets in over 115 locations in Colorado, Arizona, and California. 

FirstBank has grown because of its financial stability and its 

strong commitment to convenience, friendly and intelligent customer service, and loyalty to its employees. John has been with 

FirstBank for over 28 years and has been a great steward of the 

4 

bank. John now serves as the chairman of the American Bankers 

Association, and he sits on the boards of the Children’s Hospital 

Colorado Foundation, the Denver Foundation, and the Federal Reserve Bank of Kansas City. And I thank him for being here today. 

I guess my only concern as it applies to reporting, credit reporting, 

is it is incumbent on anybody to get it right because this is the 

kind of situation where you are guilty until proven innocent, and 

given that situation, you have to get the reporting right the first 

time. With that, I yield back. 

Chairwoman CAPITO. Thank you. Mr. Duffy for 2 minutes. 

Mr. DUFFY. Thank you, Chairwoman Capito, for holding this important hearing. Credit reports are valuable tools to both consumer 

and lending institutions that can also be used to determine job 

placement and rental agreements. As America continues to move 

away from the community model where everyone knows each other, 

like when you buy your first car from the dealership that your best 

friend’s dad owns or you get your first loan from your aunt who is 

a mortgage broker, and if you miss your payment, your mom will 

wring your neck, to a more standardized means of extending credit, 

these credit reports become your character assessment. That is why 

it is essential that they contain factual, accurate information and 

that they cannot be manipulated. 

My bigger concern, however, is whether the proper protections 

are in place for consumers’ data that is being collected. I am happy 

that we haven’t heard of a data breach yet at one of our credit reporting agencies, but we also didn’t hear of a data breach at Target 

until it actually happened, so I look forward to hearing from the 

witnesses today on how they are protecting consumers in their data 

collecting practices and credit reporting efforts, and I appreciate all 

of your time today. With that, Madam Chairwoman, I yield back. 

Chairwoman CAPITO. Thank you. Mr. Green for 1 minute. 

Mr. GREEN. Thank you, Madam Chairwoman. I thank you and 

the ranking member for this hearing. I am also grateful to the 

ranking member of the full Financial Services Committee, Ms. 

Waters, for the outstanding job that she has done in addressing 

this issue. It is indeed imperative that we look at this situation 

with student loans. We have a good many persons who unfortunately have loans at a time when they cannot acquire jobs, and 

those who do have jobs cannot make necessary payments. I think 

it is a good thing to look at the student loans. I am also pleased 

that we are going to look into the question of jobs being predicated 

upon a credit score. I, too, have difficulty making the connection 

between the job and the credit score. 

And finally, we have language that passed the House to allow 

HUD to develop an alternative credit scoring system. I want to talk 

more about that at a later time. Thank you, Madam Chairwoman, 

and I will yield back. 

Chairwoman CAPITO. Thank you. Mr. Pittenger for 2 minutes. 

Mr. PITTENGER. Thank you, Madam Chairwoman, for having this 

hearing and allowing me to make an opening statement. We are 

here today to examine the credit reporting system and gain a better understanding of how this system impacts lenders, consumers, 

and the reporting agencies themselves. With recent changes made 

in the Dodd-Frank Act, it is important that we hear from those 

5 

who participate directly within the system and understand the 

challenges that they face facilitating access to credit. Given the 

amount of authority that the Consumer Financial Protection Bureau now has over our credit reporting system, I am interested to 

hear from our panel today on how this layer of regulation has affected reporting agencies and all of those who participate in this 

system. 

As credit reports gain an increasingly significant role in the lives 

of the consumers, we must ensure that there are systems that provide accurate and effective reporting on their behalf. I do thank the 

panel for their participation and their duty today, and I yield back 

my time. Thank you. 

Chairwoman CAPITO. Thank you. Mr. Ellison for 11⁄2 minutes. 

Mr. ELLISON. Thank you, Madam Chairwoman. I appreciate the 

time, and I will be quick. For those who are looking to improve our 

financial security in our country for our families and help small 

businesses start up and expand and help grow our economy, today’s 

topic of credit reporting is vitally important. Dr. Beales, I think, 

said it well when he said, ‘‘Well-functioning credit markets are the 

essential component of economic prosperity.’’ I quite agree, and I 

am eager to see this Congress take action to improve our system 

by making it more inclusive. 

More than 50 million Americans have no credit score, are just 

credit-invisible. Another 50 million have scores that are lower than 

they should be because they do not have enough lines of debt to 

generate a score. The solution is simple. Mr. Fitzpatrick and I, in 

a bipartisan way, have a bill called the Credit Access and Inclusion 

Act, and this bill clarifies that current law does not prohibit utility 

and telecom firms from reporting their customers’ on-time payments. The bill has 12 cosponsors, and we are looking for more, including a lot of people on this committee. Including alternative 

data such as utility, telecom, and rent helps consumers, lenders, 

and small businesses and the economy, and it is time for us to 

make this no-cost change to provide greater access to affordable 

credit for millions of Americans. I yield back. Thank you. 

Chairwoman CAPITO. The gentleman yields back. I would now 

like to recognize the ranking member of the full Financial Services 

Committee, Ms. Waters, for 21⁄2 minutes for an opening statement. 

Ms. WATERS. Thank you very much, Chairwoman Capito. I would 

like to thank you and Chairman Hensarling for granting my request for this important meeting. Our Nation’s credit reporting system impacts almost all Americans and their families. No longer are 

credit reports used exclusively by lenders in making credit decisions. Increasingly, they are used to determine whether a consumer 

is qualified to get a job, rent a home, buy a car, or obtain auto or 

homeowners insurance, but despite their growing significance, 

credit reports continue to contain inaccurate information. Some estimate serious errors affect up to 25 percent of reports. The Federal 

Trade Commission estimates 1 in 5, or roughly 40 million consumers have had an error on one of their credit reports, with 10 

million facing increased costs as a result. 

Sadly, the burden is too often placed on the consumers to prove 

information on their reports as false rather than on the consumer 

reporting agencies and furnishers. Errors on credit reports are very 

6 

difficult for consumers to dispute, and it is even harder to have 

these inaccuracies actually removed from reports, causing heartache and pain for millions across the country. It is time to change 

that paradigm and ensure that a bad credit score will no longer 

haunt a consumer for years on end. 

That is why this morning I released a draft proposal that makes 

comprehensive and long overdue reforms that will protect consumers and bring much-needed accountability to the credit reporting system. My proposal would provide relief to millions of borrowers who were victimized by predatory mortgage lenders and 

servicers by removing adverse information about residential loans 

that are found to be unfair, deceptive, abusive, fraudulent, or illegal. It stops punishing consumers who pay off their debts by removing paid or settled debt from credit reports. It ends the unreasonably long time period that most adverse information can remain 

on credit reports by shortening such periods by 3 years. 

It provides credit rehabilitation to distressed private education 

loan borrowers by giving them a chance to repair their credit, and 

it gives consumers the tools to truly verify the accuracy and completeness of their credit reports by requiring furnishers to maintain 

records for as long as the information remains on a person’s credit 

report. 

Finally, the draft proposal also restricts the use of credit reports 

for employment purposes. My proposal attempts to meet our obligations to ensure that consumers who have fallen victim or fallen on 

hard times are not deprived of the chance to achieve their American dream. I look forward to hearing feedback from my colleagues 

and advocates on this measure. Thank you, Madam Chairwoman. 

I yield back the balance of my time. 

Chairwoman CAPITO. Thank you. I would like to thank the ranking member, and we are now ready to hear from our panelists. I 

do want to make Members and our witnesses aware that we are 

expecting two series of votes. It is my intent to finish this hearing 

before the second series would begin, so we may have to take a 

timeout here. I appreciate everybody’s patience. 

We welcome our panel of distinguished witnesses. Each of you 

will be recognized for 5 minutes to give an oral presentation of your 

testimony. And without objection, each of your written statements 

will be made a part of the record. 

We will begin with Mr. Stuart Pratt, who is president and chief 

executive officer of the Consumer Data Industry Association. Welcome. And I would remind the witnesses that you need to pull the 

microphones close to your mouth so we can hear you. Some have 

had trouble picking up the sound. Thank you. 

STATEMENT OF STUART K. PRATT, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CONSUMER DATA INDUSTRY ASSOCIATION (CDIA) 

Mr. PRATT. Chairwoman Capito, Ranking Member Meeks, thank 

you for this opportunity to appear before you today. I am Stuart 

Pratt with the Consumer Data Industry Association. So, today, let 

me just summarize some key points that are drawn from our written testimony. Thank you for including our full testimony in the 

record. And first of all, just maybe some basics about the industry. 

7 

A competitive private sector full-file nationwide credit reporting 

industry empowers economic opportunity for consumers and for the 

Nation as a whole. I think it was described very well that a credit 

report really serves as an advocate. It is a mechanism for a lender 

who doesn’t know you to know you. It is a mechanism for that 

lender to approve a loan and to approve it at a price that is affordable and that makes sense for you as the consumer and makes 

sense for them as the lending institution. 

Our members are the leading—decision sciences companies 

around the world, we are the leading world’s best credit reporting 

system around the world, 200 million credit reports per database, 

3 billion updates a month. 98 percent of the credit reports do not 

contain serious errors and yet our members are working to build 

on that success to push that percentage down even further. 95 percent of consumers that we have polled express satisfaction with the 

consumer relations process. That leaves us with 5 percent, and that 

is our homework, to continue to push that number down as we go 

forward. 

Being best in class, however, hasn’t caused our members to rest 

on their laurels. CDIA members are consistently proactive. They 

are ahead of the curve and ahead of law. For example, standards 

established even as far back as the 1960s, and again in the 1990s, 

preceded law, preceded amendments to law, and in fact, framed 

new laws and regulations which regulate our industry even today. 

Data standards which materially contribute to the quality of data 

were pioneered by our members, rolled out voluntarily to more 

than 10,000 data furnishers, and it is a success story, and it is a 

story that shows our partnership with the lending community in 

terms of ensuring that consumer information is accurate, precise, 

and complete in credit reports. 

Online dispute exchanges were stood up by our members as well. 

Fraud alerts and fraud alert exchanges were stood up as well. All 

of this with the intention of protecting consumers, serving consumers, simplifying the process for consumers, and ensuring that 

the credit reporting industry is accessible to consumers. 

There is more work to be done. There are some actions which we 

think Congress could take to help consumers and in some cases 

help us help consumers as well. Let me just walk through a couple 

of those, and then we have provided additional detail in our testimony. First of all, we urge Congress to exempt financial literacy 

products which help consumers learn about and protect their credit 

standing from the Credit Repair Organizations Act, often know as 

CROA. The Act wasn’t intended to cover these products because 

they didn’t even exist at the time of the enactment of CROA, which 

ironically was Title 2 of the 1996 amendments to the Fair Credit 

Reporting Act. No State AT has attempted to apply CROA to our 

members products, nor has the Federal Trade Commission. It is 

unfair to consumers that they cannot have access to an even more 

robust set of products in the marketplace because of the risks 

posed by class action lawsuits and opportunistic private attorneys. 

We urge action on CROA reform, and we are happy to talk about 

that subsequent to this hearing. 

Class actions are threatening our small and medium-sized enterprise members. Some are losing their errors and omissions insurVerDate Nov 24 2008 13:38 Mar 10, 2015 Jkt 091161 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\91161.TXT TERRI
8 

ance coverage completely. For them, it is almost an existential risk. 

E&O providers are stepping back from providing coverage even 

through trade associations. Our own E&O program for small businesses, though 95 percent of our members in that program have 

not had a claim in the last 2 years, 80 percent in the last 4 years, 

they are going to pay 50 percent higher premiums next year as a 

result of litigation risks as perceived by the insurance industry. 

We think reform in this area is important. We also urge Congress to act now. You don’t even have to vote. Urge the financial 

housing finance authority to work with their GSEs and open the 

door for consumers through the use of automated alternative data 

sets and to credit score competition. There is no reason for secondary markets to impede the choices of the primary market when 

it comes to which score is best or which combination of predicted 

data should be used. 

Ultimately, consumers who are new immigrants, unbanked and 

underbanked, are the beneficiaries. Even consumers who may have 

adjusted their use of credit due to the Great Recession could benefit from the use of the bills that they pay in everyday life and the 

assets they own. We really believe this is now the time to act. Let’s 

push forward. Let’s open that door today. 

Finally, we believe that providing our members with access to 

the SSA’s database would allow us to do additional cross-matching, 

validating of identifying information, and ensuring that the right 

information gets into the right file at the right time. We share 

those goals with all of you. We look forward to our dialogue today. 

Thank you for this opportunity to testify. 

[The prepared statement of Mr. Pratt can be found on page 52 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness is Mr. J. Howard Beales, professor of strategic 

management and public policy at George Washington University. 

Welcome. 

STATEMENT OF J. HOWARD BEALES III, PROFESSOR, STRATEGIC MANAGEMENT AND PUBLIC POLICY, THE GEORGE 

WASHINGTON SCHOOL OF BUSINESS, THE GEORGE WASHINGTON UNIVERSITY 

Mr. BEALES. Chairwoman Capito, Ranking Member Meeks, and 

members of the subcommittee, thank you very much for the opportunity to be here today. I want to make five key points. First, credit reporting is vital. The widespread credit availability that lubricates consumer spending and powers the American economy depends on an efficient system for credit reporting. Lenders can’t economically make loans without understanding the risks they face, 

and credit reporting is an essential tool for objective risk assessments. 

Efficient credit reporting makes possible the miracle of instant 

credit which enables the consumer to visit a car dealer and arrange 

financing for the transaction probably in less time than it takes to 

negotiate the price. Such arrangements offer significant benefits to 

both consumers and sellers, and they facilitate economic activity. 

Our credit reporting system also facilitates competition among 

lenders to the benefit of consumers. Lenders can readily identify 

9 

consumers who deserve a better deal and offer credit on terms that 

lenders find profitable and consumers find more attractive. One 

study described credit report data as the jet fuel for an acceleration 

in competition that led to declines in annual fees and interest rates 

on credit cards as well as the introduction of new card features 

such as rewards. 

Efficient credit reporting is also important to small businesses 

that are important job creators. The adoption of commercial scoring 

systems based on credit report data for evaluating small business 

loans led to an expanded volume of loans and a net increase in 

lending to relatively risky borrowers. 

Second, risk-based pricing benefits consumers. A fundamental 

principle of economic efficiency requires that those who create cost 

must pay them. If not, they will create excessive cost. That is why 

it is both equitable and efficient that teenage males pay higher 

auto insurance premiums than teenage females or older men. They 

are higher-risk drivers. They should and do pay higher insurance 

premiums. The same principles apply in credit markets. There is 

no reason that good credit risk should be expected to subsidize the 

choices made by those who are less likely to repay their debts. 

Loans made based on objective risk assessments reduce the risk of 

default by 20 to 30 percent in some studies compared to using judgment to decide which consumers deserve a loan. Moreover, such 

judgmental decisions often rely on stereotypes about which borrowers are most likely to repay. They are, in short, discriminatory. 

Risk-based pricing based on credit scores offers two important 

benefits. First, responsible borrowers, undoubtedly the vast majority, pay less for credit, as much as 8 percentage points less. Second, 

risk-based pricing substantially expanded credit availability. In the 

one-size-fits-all world of standardized plain vanilla credit products, 

the lender’s only choice was yes or no. For marginal borrowers, the 

answer was often no. 

In 1970, only 2 percent of the lowest income quintile had any 

credit cards. By 1998, after the introduction of risk-based pricing, 

the percentage had increased to 28 percent. 

Third, more information in this system leads to better performance. Information in the credit reporting system is provided voluntarily by some 30,000 data furnishers in return for access to the 

credit report information. Indeed, an important dimension of competition for business among consumer reporting agencies is the 

breadth and robustness of the information about consumers in 

their database. Some 30 to 50 million Americans do not have sufficient credit information in their files to qualify for affordable mainstream credit. Instead, they are left to rely on high-cost credit 

sources such as overdraft protections, short-term loans, or pawn 

shops. Studies have shown that adding positive payment information from utilities and telecommunications providers in addition to 

the negative information that many now report can improve the 

credit scores of those within files that otherwise do not have sufficient information to support a reliable credit score. Such additional 

information can help to further reduce the differences in the accessibility of credit on reasonable terms. 

Fourth, accuracy and completeness are both important. Credit reporting agencies face a difficult task of matching incoming informaVerDate Nov 24 2008 13:38 Mar 10, 2015 Jkt 091161 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 K:\DOCS\91161.TXT TERRI
10 

tion to the right file when identifying information is incomplete, as 

it often is. It is obviously a mistake to include information in my 

file if it is not in fact about me, but it is also an error to leave out 

information that should be in my file, simply because there is some 

ambiguity about the match. Such errors of omission reduce the 

value of credit reports to lenders because a report that does not include all of the relevant information is less likely to be predictive 

of future behavior. 

To be sure, ongoing efforts to improve accuracy and completeness 

are essential, and there are significant competitive pressures on 

consumer reporting agencies to do so, but all such efforts must recognize the voluntary nature of the reporting system. Regulatory requirements that require participation by furnishers may well be 

worse than the disease they are trying to cure. 

Finally, different risks are different. The best prediction of risk 

depends on the particular risk involved. Different information may 

be especially valuable for certain kinds of risks. That is why there 

are specialized agencies that specialize, for example, in small dollar 

products, otherwise known as payday loans, because different information is predictive, different populations lead to different risk 

analytics. There are some real gains to specialization in the particular risks that have happened in the market. Thank you again 

for the opportunity to testify today, and I look forward to your 

questions. 

[The prepared statement of Mr. Beales can be found on page 33 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness is Mr. John A. Ikard, president and chief executive officer, FirstBank, on behalf of the American Bankers Association. Welcome. 

STATEMENT OF JOHN IKARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER, FIRSTBANK, LAKEWOOD, COLORADO, ON BEHALF OF THE AMERICAN BANKERS ASSOCIATION (ABA) 

Mr. IKARD. Chairwoman Capito, Ranking Member Meeks, and 

members of the subcommittee, my name is John Ikard, and I am 

president and CEO of FirstBank. We are based in Lakewood, Colorado. I am also the chair-elect of the American Bankers Association. I appreciate the opportunity to be here to represent the ABA 

and discuss the importance of accurate credit reporting and the 

banking industry’s commitment to it. The availability of consistent 

accurate credit reports provides tremendous value to consumers 

and banks alike. 

For consumers, credit reports provide a history of the performance on obligations which enables them to shop around for credit 

from any lender. Without these reports, consumers would have to 

provide extensive documentation, lender by lender, in order to receive credit. The credit report opened up options for consumers and 

ensures that they can shop around for the best loan or account that 

serves their needs. The greater efficiency in competition means better deals and lower prices for consumers. 

For lenders, credit reports allow them to evaluate a borrower’s 

creditworthiness even if they have not previously dealt with the 

customer. Banks benefit because an accurate understanding of a 

11 

credit applicant’s history means they are better able to predict who 

is likely to repay a loan. This allows banks to make a better decision in order to grant credit and at what price. 

Accuracy within the credit reports is critical, of course, to ensure 

that customers are evaluated based on their history of their individual performance. Inaccurate reports undermine the value of the 

system and could prevent a qualified borrower from getting the 

credit they deserve. A report that is missing negative information 

also makes a borrower eligible for credit that they are ill-prepared 

to handle. Thus, accurate credit reports ensure that credit is extended to deserving borrowers. 

Because banks have a vested interest in ensuring that accurate 

credit histories are available, they invest heavily in systems and 

processes to ensure they can provide accurate credit data. Although 

the reporting system is very accurate, there is still the possibility 

of errors. That is why it is important to have a clear process for 

consumers to dispute their credit reports if they feel there are inaccuracies. There are multiple avenues consumers can use to dispute 

their credit reports. This dispute process is quick and effective with 

the average dispute resolved in about 14 days, at a satisfaction rate 

of over 95 percent. 

Congress should be aware that this dispute process can be taken 

advantage of in an attempt to eliminate accurate but negative 

marks on an individual’s credit history. For example, credit report 

scams often charge a large up-front fee and mislead the consumer 

into believing that accurate but negative information can easily be 

removed. These services operate by repeatedly sending disputes alleging the same issues in the hope that the data supplier will drop 

the ball and fail to respond within the mandated window, thereby 

triggering the expungement of the contested data. 

To give you an example, at my bank, our main dispute handler 

handles about 100 to 150 disputes a month, many of which are repeated claims. Of the disputes we receive, less than 1 percent call 

for any type of corrective action. While amendments to the Fair 

Credit Reporting Act took a step forward in stopping this kind of 

abuse, that law should go further to allow the ability to truncate 

repetitive unfunded disputes. This would do nothing to prevent customers from pursuing legitimate claims and would save money 

from being wasted on these false claims. 

In summary, credit reports are a public good, providing real tangible benefits to consumers and lenders alike. Banks invest in consumer resources to ensure that credit reporting is consistent and 

is accurate. When disputes arise, banks investigate them promptly 

and thoroughly. The dispute process, while effective, is susceptible 

to abuses by those who want to misrepresent past consumer credit 

experiences. Such abuses undermine the value provided by credit 

reports and hurt all borrowers. Thank you. 

[The prepared statement of Mr. Ikard can be found on page 42 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

And our final witness is Ms. Chi Chi Wu, staff attorney at the 

National Consumer Law Center. Welcome. 

12 

STATEMENT OF CHI CHI WU, STAFF ATTORNEY, NATIONAL 

CONSUMER LAW CENTER (NCLC) 

Ms. WU. Thank you. Chairwoman Capito, Ranking Member 

Meeks, and members of the subcommittee, thank you for inviting 

me here today and for holding this hearing on the American credit 

reporting system. Credit reports play a critical role in the economic 

lives of Americans. They are the gatekeeper for affordable credit for 

insurance, an apartment, and sometimes, unfortunately, even a job. 

As Congress stated when it passed the Fair Credit Reporting Act 

(FCRA), the banking system is dependent upon fair and accurate 

credit reporting. Yet, the credit reporting system in this country is 

neither fair nor completely accurate. 

One of the most outrageous flaws is the negative marks from 

medical debts on the credit reports of millions of Americans. This 

is a huge issue. Medical debt makes up over half of the items on 

credit reports for debt collection, and one study estimated up to 41 

million Americans could be suffering from this type of credit damage. Such negative marks are unfair because medical debt is often 

the result of insurance disputes or billing errors. A May 2014 study 

by the Consumer Financial Protection Bureau (CFPB) found that 

medical debt unfairly penalizes a credit score by up to 10 points, 

and for paid-off medical debt up to 22 points. 

Now, there have been some changes. Last month, FICO announced that it would no longer consider paid collection items, both 

medical and non-medical, and VantageScore already had made a 

similar change last year. In addition, FICO has said it will give 

less weight to unpaid medical debts, potentially helping consumers 

up to 25 points. However, these changes will not completely eliminate the negative impact of medical debt on credit reports. They 

are voluntary, which means they can be reversed at any time. More 

importantly, they won’t benefit mortgage applicants because the 

changes only affect VantageScore and FICO’s latest scoring model, 

FICO 09. And apparently neither of these models is used by Fannie 

Mae or Freddie Mac, the mortgage giants. 

Finally, they won’t help job applicants with medical debt because 

employers generally don’t use credit scores to evaluate applicants. 

They review the full report and so they will see the medical debt 

collection items. Thus, legislation that would remove paid or settled 

medical debts from credit reports is the effective solution to this 

problem. 

Regarding the use of credit reports by employers, we again urge 

Congress to ban this practice. It creates a Catch-22. Job loss prevents workers from paying their bills, and the resulting damage to 

a credit report prevents them from getting a job. Yet, there is no 

evidence that credit history can predict job performance. Its use in 

hiring discriminates against African-American and Latino applicants. Despite these problems, about half of employers use credit 

reports to screen applicants. A Demos survey reported that 1 in 10 

unemployed workers had been informed that they would not be 

hired for a job because of information in their credit report. Another survey reported that employers are examining credit reports 

for student loan debts and that two-thirds of surveyed employers 

had little to no interest in job applicants with student loan debts 

over $50,000. 

13 

Another problem with the credit reporting system is the high 

level of errors. As you heard, the FTC found that 21 percent of consumers had verified errors in their credit reports, 13 percent had 

errors that affected their credit scores, and 5 percent had errors serious enough to be denied credit or to be forced to pay more for 

credit. That 5 percent is unacceptable. It means 10 million Americans have seriously damaging errors in their credit reports. Yet, 

there are simple commonsense measures that could reduce this 

error rate such as using all of the digits in the Social Security number to match information from a creditor to a consumer’s file. 

Now, one of the most important safeguards for accuracy is the 

dispute system under the FCRA, yet the credit bureaus flagrantly 

violate their obligations to conduct a reasonable investigation when 

there is a dispute. Instead of conducting real investigations, they 

do nothing more than forward the dispute to the creditor or the 

provider of the information and then blindly accept or parrot whatever the information provider responds with, no matter how good 

the consumer’s evidence. Now, maybe in some cases, like Mr. 

Ikard’s bank, the information provider does do a good job in handling the dispute, but in some cases, it is not true. In 30 to 40 percent of cases, the information provider is a debt collector whose 

main goal is to get paid, not to get it right, or it could be a 

subprime auto lender like First Investors Financial Group against 

which the CFPB took enforcement action last month for systematic 

violations that harmed thousands of consumers. 

So the credit bureau’s automatic deference to debt collectors and 

creditors is outrageous. It is like a judge who finds in favor of the 

defendant in every single lawsuit. Yet, the industry is now saying 

it wants to be held less accountable by private enforcement under 

the FCRA for these errors and for its failure to conduct reasonable 

investigation. 

Beyond errors and disputes, the credit reporting systems need reform to help the millions of consumers who lost their jobs or their 

homes during the Great Recession. Foreclosures were often not due 

to irresponsible borrowing but abuse by lenders and mortgage 

servicers. Defaults due to job loss or bad luck say nothing about a 

consumer’s responsibility in handling credit, yet these black marks 

last for 7 years, or 10 years in the case of bankruptcies, shutting 

these consumers out of affordable credit, insurance, jobs, and 

apartments. Creating a class of consumers that are shut out of economic necessities creates a drag on our Nation’s economy. For 

these reasons and others, the credit reporting system in the United 

States is in need of substantial reform. The CFPB has made substantial progress, which is great, given it has only had authority 

to supervise this industry for about 2 years, but congressional action is necessary. 

I thank you for the opportunity to testify and look forward to 

your questions. 

[The prepared statement of Ms. Wu can be found on page 77 of 

the appendix.] 

Chairwoman CAPITO. Thank you. 

I want to thank all the witnesses, and I will now recognize myself for 5 minutes for questions. 

14 

All of you addressed this issue of inaccuracies in credit reports. 

I can attest to having one on mine, so I have tried to get that undone, and sometimes it was difficult. So I would like to ask you, 

Mr. Pratt, what steps are available to consumers to remove inaccurate data from their report? How long does it take? Mr. Ikard 

said 20 days, but is that what is actually occurring, and can you 

tell me what your industry is doing to help that? 

Mr. PRATT. Thank you for the opportunity to do that. Our members have done a couple of different things, even some steps just 

recently to try to ensure that the system works well for everyone. 

All of them have quality assurance processes, all of them are looking for monitoring and making sure that employees are welltrained. In fact, I will tell you that the CDIA has launched in partnership with our largest corporate members an entirely new training platform that will be used and that matches up with some of 

the examination experience that we are getting out of the CFPB as 

well, so that is a commitment we have made to further the training 

of employee bases to make sure that they are well-prepared to handle the needs that consumers have. 

Mr. Ikard mentions the e-OSCAR system. The e-OSCAR system 

does allow us to resolve disputes. Going a long way back, everything was processed by mail. I am old enough to remember that. 

Not everybody is these days, but I am, and consumers would have 

to dispute credit bureau by credit bureau. The e-OSCAR system 

solved that problem. It is a one-stop shop. You dispute one time, 

it is distributed to the lender, the lender responds not just simply 

to the credit bureau that received the dispute but it responds to 

other credit bureaus and the data is corrected across-the-board one 

time, single stop. Fourteen days is accurate. On average, a dispute 

is processed in 14 days rather than the full 30 days that law allows. Law does— 

Chairwoman CAPITO. Let me stop you there. 

Mr. PRATT. Sure. 

Chairwoman CAPITO. Let’s say that after 14 days, the consumer 

is not satisfied with the result, still believes that it is accurate 

data. There is a grievance, I am sure, a secondary appeal? 

Mr. PRATT. Normally a consumer will—they will normally call. 

Let’s say they went online. They submitted their dispute online, 

ground one, and by the way, that was another step that the companies took voluntarily, drop-down menus, mechanisms so that you 

could look at your credit report online, dispute online, click on the 

dispute, submit it and get a return, but let’s say you are happy 

with two out of the three results but not the third. You get another 

disclosure that tells you these are the results, this is what you— 

and this is by law. This is what you have, this is what we think 

is correct, call the toll-free number if you have a question, and this 

is where the consumer will then end up with a customer service 

person to then work through in more detail what is it that you 

think is wrong with this other report. 

Chairwoman CAPITO. Out of the grievances that are filed, do you 

have the data for how many have to go to the secondary, to the 

toll-free line and all that, what percent is it? 

15 

Mr. PRATT. It has been awhile, but between 15 and—around 15 

percent, I think, was the number that I had quite a while ago, so 

most are being resolved the first time through. 

One of the challenges is that when consumers call again, it 

doesn’t mean that they are—they may have all the right intentions 

in the world, but they may have misunderstood something. An example would be in divorce. We will have consumers call and say, 

the judge made my ex-spouse pay for that loan. That is her responsibility or his responsibility. Actually, judges in divorce courts can’t 

do that. They can’t abrogate a loan and sever the contract between 

a joint loan. So, in other words, the lender still has a claim against 

both of those consumers, and so the consumer’s credit report will 

still reflect that. 

So that is just a matter of law, but that is the kind of confusion. 

The consumer may not recognize that a retailer with whom they 

chose to do business and open up a credit card relationship, that 

there was a bank behind that relationship, and on the credit report, it may be the bank that is listed, not the name of the retailer, 

and so the consumer says, I don’t think I ever opened up that account, that is wrong. On the phone, that is normally where that 

kind of thing is resolved. ‘‘Did you open up an account recently 

with a retailer?’’ ‘‘Yes, I did.’’ ‘‘Well, this is the bank that works for 

that retailer.’’ ‘‘Ah. Okay.’’ 

Chairwoman CAPITO. I am going to stop you here because I want 

to get into the student loan issue with Mr. Beales. A student loan— 

I talked about it in my report. Obviously, there is a lot of national 

concern about increasing student debt and then what kind of impact that is going to have on the long life of a student, in the positive or negative. If you pay off a student loan, does it come off your 

credit report? What kinds of things are positive or negative about 

a student loan? I only have 25 seconds left, so it is kind of a quick 

question. 

Mr. BEALES. Like any loan, a student loan is an opportunity to 

build a history of responsible use of credit. If you make payments 

on time, that experience, like any other credit account, potentially 

increases your score and increases your attractiveness to lenders. 

People who have too much debt, whether it is student loan debt or 

any other kind of debt, and can’t pay it, that is obviously going to 

be bad for your score. Students have had—certainly the amount of 

debt has increased, and to the extent that it is more than students 

can handle, that reduces their scores. 

Chairwoman CAPITO. Right. I am going to stop you here because 

I am sure we are going to have more student loan discussion. I 

have exceeded my time, so I am going to yield to Mr. Meeks. 

Mr. MEEKS. Thank you, Madam Chairwoman. Let me just start 

with Ms. Wu. Ms. Wu, you wrote in a report that to solve the credit 

conundrum, we need a system that can distinguish between consumers who are truly irresponsible and those who simply fell on 

hard times. 

What recommendations do you have to ensure that our credit reporting system makes this distinction, and to what extent is it possible to do so? 

Ms. WU. Thank you for the question, Congressman Meeks. I 

think one of the simplest measures in terms of trying to address 

16 

this problem is the proposal in Congresswoman Waters’ bill to 

shorten the amount of time that negative information stays on a 

credit report from 7 years to 4 years. There is nothing magic about 

the 7-year time limit in the Fair Credit Reporting Act. There are 

other countries with much shorter time periods. In Sweden, it is 3 

years. In Germany, it is 4 years, and the last I heard, the German 

economy is doing fairly well. So, one thing that could help consumers is just to shorten this time period. 

Another thing is to exclude information such as medical debts 

and foreclosures as a result of abuse by lenders and servicers 

which Congresswoman Waters’ bill also does. 

Mr. MEEKS. Mr. Pratt, do you have any objection to reducing the 

time from 7 years to 4 years? Is there a magic formula for you with 

that 7 years? 

Mr. PRATT. Thank you. We do, and for some reasons that I—and 

this is the beginning, probably not the end of a dialogue, and it will 

extend beyond the borders of this hearing today, but just a little 

bit of background: 82 percent of credit reporting systems around 

the world retain data for a period of time longer than the proposal 

to reduce the current 7 years to 4 years, so systems around the 

world are generally designed for more data, not less. 

Systems around the world are also actually expanding data, not 

reducing data. For example, Australia and Brazil went to full-file 

positive systems within the last few years to adopt a system that 

looks very similar to ours. So, our system is often viewed as the 

best-in-class system that should be emulated by others. By the 

way, in Germany, if you don’t pay your bill, that stays on your 

credit report forever, so in other words, it is not— 

Mr. MEEKS. I am just wondering, why is 7 years— 

Mr. PRATT. I can’t go back to 1970 and go into Bill Proxmire’s 

head and wonder how he came up with the 7 years at that time, 

but I can tell you that at this point, here is what I think is most 

important. We need data before the Great Recession, we need data 

coming out of the Great Recession, and we need data now extending from the Great Recession so that if we are going to build risk 

management tools, we see the same data cross all those tranches. 

If we change it now, we are erasing data that is really important 

to how we manage risk and how we make better lending decisions 

in the future. 

Mr. MEEKS. Let me take my time back, because I don’t see a 

magic 7-year formula or 4 years, especially with helping consumers. But let me ask Mr. Ikard a question. 

Mr. IKARD. Yes, sir. 

Mr. MEEKS. Really quick, going back to what Ms. Wu was talking 

about, that we need to distinguish between consumers who are 

truly irresponsible and those who simply fell on hard times, I understand that—and sometimes we have—when we were talking 

about, especially with small banks, that they say, and I think you 

found that they found that credit officers who know of an individual’s personal circumstances provide more accurate and detailed information for credit reporting purposes. And that is why I am told 

by some members, especially small banks, they say, well, we don’t 

want to be restricted in this sphere. We want some flexibility so 

17 

we can make a determination as to whether a person truly will pay 

this back. Do you find that to be true? 

Mr. IKARD. Absolutely. I think the credit report is just one part 

of the underwriting process. The key is to sit down with the customer and hear their story. Some customers may have bad credit 

because it has been a lifelong pattern of just acting irresponsibly. 

Some might have had a catastrophic event at some point in their 

life, and I think it is up to us, incumbent on us to say, okay, let’s 

look at this person in totality, what is their income potential, what 

has been their past behavior. If this is one catastrophic event that 

is out of the ordinary, I think you should have an obligation to set 

that aside; this person is still a good credit risk. 

So I think that as a banker, all bankers, we have the obligation 

to sit down with our customers and get the complete story, not just 

run somebody out the door because of a bad credit report. You have 

an obligation to sit down and talk to them about their complete financial situation. 

Mr. MEEKS. Now, is there a way, do you think—and I will direct 

this to Mr. Ikard or Ms. Wu—that we could have a system where 

you can truly determine whether someone is just not paying, they 

are a bad credit risk, they just won’t pay their debt, as opposed to 

someone who has fallen on hard circumstances, they were paying 

all of their debt, and all of a sudden, because of the economy or 

because of their loss of jobs, now they are not paying, so that they 

are not stuck for 7 years or 10 years once they get a job again? 

Mr. IKARD. Sure. I think the way you look at that is based on 

their pattern. Just talk to the customer. If they had a history of 

making all their payments as agreed and all of a sudden they have 

one blip, that is obviously not their normal operating position. They 

have obviously had some catastrophic event take place. Let’s take 

a look. Ask them what happened, explain it to me, tell me your 

story. If it makes sense, let’s move on. It is interesting, we have 

banks down in Arizona, and Arizona had— 

Mr. DUFFY. Mr. Ikard, if I could just— 

Mr. IKARD. —a huge problem with real estate, and what happened was is that we— 

Mr. DUFFY [presiding]. Mr. Ikard, I am going to cut you off. The 

gentleman’s time has expired. I am sure you will get more questions on that and have further opportunity to answer those questions. The Chair now recognizes himself for 5 minutes. 

The Fair Credit Reporting Act requires consumer reporting agencies to provide credit reports to child support agencies to ascertain 

the ability of a father or mother’s ability to pay child support, and 

it is required to give 10 days notice to that mother or father before 

their credit report is pulled. Mr. Pratt, do you believe that there 

are any issues with that 10-day notice requirement? 

Mr. PRATT. That is probably a better question on the side of the 

child support enforcement agencies themselves. My understanding 

is some of them have concerns with that 10-day period because it 

might be the heads-up that some noncustodial parent needs to 

push and move some assets around to make sure that those don’t 

show up and they either pay less or they don’t pay child support 

that they might otherwise owe. I think that is the concern. 

18 

That was a set of language that was pushed into the FCRA 2003 

maybe. 

Mr. DUFFY. I am all about notice and making sure people understand when their credit is being pulled, but listen, I am going to 

look out for kids and make sure that children are being treated 

fairly, and if someone has a 10-day notice, they can liquidate assets, is that fair to say, or max out credit cords that could have an 

impact on their credit score? 

Mr. PRATT. Clearly, that is going to have an impact on the financial profile of the consumer who is being evaluated in terms of the 

ability to then make child support payments. 

Mr. DUFFY. And I believe in California there was a case that I 

found where the child support enforcement process was considered 

debt settlement and that 10-day notice wasn’t required, but that is 

only for California. Do you think that the CFPB could or should 

give new guidance and extend it not just to California, but around 

the rest of the country? 

Mr. PRATT. I guess first, I have to go look at the California law 

to see what that looks like. I think some dialogue post-hearing to 

figure this out, to make sure we understand in detail what it is 

that you think ought to be done and what it is that we think current law permits us to do would be a good dialogue to have. 

Mr. DUFFY. I would ask for unanimous consent to insert a letter 

into the record from one of the consumer reporting agencies asking 

that the CFPB actually back this guidance change. Without objection, it is so ordered. 

I guess maybe I would ask the panel, what steps are taken to 

protect the millions of bits of information that are collected in regard to people’s credit history and personal information? 

Mr. PRATT. I probably should start since we are the industry. 

CDIA’s members, even before the enactment of the Gramm-LeachBliley Act, understood their obligation to secure the information 

and make sure that it was protected. Our members are—have the 

same risks posed for them that you would see with any U.S. business that has a valuable data set. We employ entire data security 

teams and audit processes, and I can tell you that the audit processes in the oversight includes on-site inspections of downstream 

users and on-site inspections of resellers in the process. I have had 

resellers sometimes complain about how robust those on-site inspections can be. We have IP address monitoring systems to make 

sure we understand when a company is in the normal cycle. 

So, for example, if we have a bank in Colorado that normally orders credit reports during its normal business day, but that bank 

code seems to now be tied to orders that are showing up at 3 a.m., 

and oh, by the way, it is a Russian IP address and it is not one 

that is U.S.-based, those are the kinds of red flags that we are 

going to use to shut down that access, go back to that bank, and 

talk about it and find out what is going on. 

I can tell you that we have gone to some very small users. One 

small financial institution had the codes for accessing the credit bureau’s systems on a bulletin board. We suggested that wasn’t a 

great idea. That is the kind of outreach we have on a regular basis, 

and we have remote learning information security training that we 

make available to customers as well as our members. 

19 

Mr. DUFFY. In regard to the information that you collect, do you 

collect information on—just to get a good read on someone’s credit 

history—do you collect information on their religion? 

Mr. PRATT. No. 

Mr. DUFFY. How about the number of children they have? 

Mr. PRATT. No. 

Mr. DUFFY. How about the ages of their children? 

Mr. PRATT. No. 

Mr. DUFFY. How about the GPS coordinates of their home? 

Mr. PRATT. No. 

Mr. DUFFY. Okay. I am just checking to make sure. 

Ms. Wu, listen, I share a concern about what happens with reporting of medical debt, but one concern that I have is if it isn’t 

reported and maybe even weighted properly, do you have a concern 

that individuals may put that at the bottom of their payment list, 

there may be more delinquencies in regard to, or less incentive to 

pay off medical debt which rises costs for hospitals, clinics, and in 

turn, creates higher healthcare costs for the rest of us at a time 

when we are trying to reduce healthcare costs? 

Ms. WU. One important thing to note about medical debt on credit reports is the vast majority are for small amounts. A 2003 Federal Reserve study found something like over 80 percent of medical 

debt collection items were under $500 or $644 in today’s dollars, so 

these are usually things like copays, the ambulance bill that— 

Mr. DUFFY. I am sorry for asking you a question when my time 

had expired, so my time has expired. And with that, I now recognize Mrs. McCarthy for 5 minutes. 

Mrs. MCCARTHY OF NEW YORK. Thank you, Mr. Chairman. 

Ms. Wu, I am going to let you finish the answer only because I 

am curious about it. Last year, unfortunately, I was ill and my 

medical expenses certainly were high, and then I had to have surgery at the beginning of this year, and had a great doctor. I have 

no complaints about the care I got, but I have to say that my medical bills were extraordinary, where I took money out of my savings 

account, and from my retirement to pay the bills, so they are way 

over $500, believe me. 

What we are seeing with the, now looking at how we are going 

to be handling those who are in debt from medical bills that there 

is going to be a certain time where they are not going to count that 

against—am I correct in the legislation—not legislation, but the decision from FICO in August of 2014 that they are going to look at 

medical debt and not put it onto their FICO score? 

Ms. WU. First of all, my sympathies toward your situation, Congresswoman McCarthy. Medical debt shows up on credit reports 

solely as a result of debt collection. Something like 97 percent of 

medical debts on credit reports are because they are referred to a 

debt collector, and often the reason it is referred to a debt collector 

is because there is an insurance dispute, a billing error, the provider doesn’t get paid, and then it is automatically referred to a 

debt collector and they put it on a consumer’s credit report. The 

CFPB’s research found that kind of debt collection item unfairly penalized consumers’ credit reports. 

And so I think partly as a result of that research, and partly as 

a result of complaints, VantageScore, which is the other scoring 

20 

provider, had already stopped counting paid collection items. FICO 

also did, and so this helps consumers not be unfairly penalized by 

medical debt that has been paid off, or if it is the only item on their 

credit report. But it is not going to help mortgage applicants because Fannie Mae and Freddie Mac won’t use these changes. 

Mrs. MCCARTHY OF NEW YORK. I agree with you, because the 

surgery was in January, and I am certainly working with the insurance company to readjust the amount that they paid back to the 

doctor was over 4 months before it was able to be worked out. I 

was still left with a heavy bill but at least we got it cleared up to 

a certain extent, but I want to go back to Mr. Ikard. When someone 

comes to you in the bank and he is a customer and you know him, 

and you started to talk about that a little bit earlier, that he comes 

in whether it is a medical bill or maybe he just got laid off, and 

he might need a bridge loan, but he can’t make the payments on 

what probably is more money than he has usually put down to pay 

off, you work with him, how often does that actually happen? 

Mr. IKARD. It actually happens quite a bit because we see a lot 

of these small medical charge-offs Ms. Wu was talking about. And 

if the customer has relatively clean credit, and there is nothing in 

their behavior that would lead you to believe they had problems 

paying their debt, just give us a reasonable explanation of what 

surrounds that issue. And we’ll say fine, and move on. For us, that 

is not a deal breaker because we do see that quite a bit. 

Ms. MCCARTHY OF NEW YORK. Do a lot of consumers do that, or 

do they even know that—most of them are usually afraid to talk 

to the bankers, not because of the bankers, but they don’t want 

anybody to know that financially they might be getting a little bit 

behind. 

Mr. IKARD. I think that is a part of the process. I think a lot of 

the time, the first time they find out about it is when we run a 

credit report when they come in and ask for a mortgage loan. A lot 

of times they don’t even know it is there. So we ask them to come 

in and just give us an explanation. If their whole credit report is 

bad, then we would assume that is probably just the way they do 

their business. But if they have clean credit and they have a good 

work history and they have a history of paying their bills, and they 

have this one medical charge-off, explain it to us, and we will document it, and we will move on. I think that is the reasonable way 

to do it. 

Ms. MCCARTHY OF NEW YORK. I know, during the financial crisis, we saw an awful lot of people with their mortgages, and we offered to have seminars, brought in the experts. And hardly anybody ever showed up because they didn’t want anybody to know 

that they were going under. It is very, very difficult. So I can understand where they might prefer going to the bank, or now that 

we have somewhere for our constituents to go to make a complaint 

and it is going to be hidden to a certain extent, but they can get 

the help they need, so I appreciate that part. 

Going back to the student loans, that is a real problem. We actually talked about that this morning in the Education Committee 

and how we can do financial literacy to educate our young students 

on how to use their debit card, how to use a credit card. I think 

that is important, and I hope that we can do that because these 

21 

young people don’t understand that you just can’t do it. And I have 

to say I do love, even on my own bills, if I don’t pay a certain 

amount, this is how long it is going to take for me to pay off, and 

it is a real eye-opener. 

Mr. DUFFY. The gentlelady’s time has expired. 

The Chair now recognizes the gentleman from North Carolina, 

Mr. Pittenger, for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Mr. Pratt, in light of the Dodd-Frank Act, I would just like to 

know, from your perspective, has this changed the credit reporting 

system? Are there any conflicts at all with that being the new governing body with the FTC? Have there been any differences in 

terms of mixed signals or different guidances that have been sent 

out or enforcement orders that have been in conflict? Have they 

worked together? 

Mr. PRATT. It is a little early to get too deep into that question. 

I can tell you that we have had members who have been concurrently subject to an examination process and also a FTC CID, and 

they have had to negotiate between the two agencies to try to decide whether they had to produce the same data or different data 

and what the costs might be relative to one versus the other, and 

there are varying degrees of cooperation around that sort of thing. 

That is really anecdotal, though. 

Overall, the CFPB has ruled out a larger participant rule. Many 

of our largest corporate members at CDIA are, in fact, larger participants. And they are subject to examination, and we are really 

in the middle of it, member by member, in terms of what these 

exams look like. And ultimately, the examination process will result in, in some cases, direction by the CFPB to make changes. A 

lot of that is still kind of forward-looking and not immediately in 

front of us, so it is hard to measure. So we are kind of midstream. 

Mr. PITTENGER. Sure. Thank you. From your initial observation, 

do you feel like this is good prudent oversight and good management by the CFPB that they are providing? 

Mr. PRATT. The examiners that my members report to me have 

been professional and have been on point, and it has been a dialogue, so I can’t tell you that it is not an issue of the relationship. 

Measuring results, that is a harder thing, and I can’t tell you yet 

whether all the money that is being spent to match the CFPB examination requirement is necessarily going to get you to where you 

want to be. That is kind of an opportunity cost. It is a sunk cost 

that is now being built into the companies. It is how they will do 

business going forward, and I just can’t tell you yet. 

Mr. PITTENGER. The compliance and reporting costs, it is just another burden for these reporting institutions. Is it warranted? Do 

you feel like they are headed in the right direction, that this is 

good, prudent management? 

Mr. PRATT. If you look at our testimony, we feel like we were out 

in front on a lot of different issues without a regulator necessarily 

showing up at the door to tell us there was something else we 

ought to focus on. I don’t think our culture has changed. We are 

never troubled by a dialogue about compliance and about getting 

it right, and to Chairwoman Capito’s point, making sure the consumers are served properly. That is not a problem. It is really just 

22 

a question of whether, at the end of the day, direction given by the 

CFPB is going to result in a change which just imposes more costs 

but very, very small, if any, benefits. We just don’t know. 

Mr. PITTENGER. Mr. Beales, you have spoken a little bit to this, 

but speak relative to the credit reporting system of the United 

States vis-a-vis other countries in the world and why you believe 

this is a better credit reporting system. Is there any way to improve it? 

Mr. BEALES. There are some studies actually that go a long way 

towards proving it. And what they really focus on is the positive 

information that is in the U.S. credit reporting system, as opposed 

to negative-only systems in a number of other countries. That has 

been the primary focal point of the academic research, and it is 

clear you get better risk predictions and better credit availability 

out of the U.S. full-file system than you do out of those other countries’ negative information systems. 

Mr. PITTENGER. Sure. Mr. Ikard, in the banking industry—and 

I was on a bank board for a decade, so I appreciate your good 

work—are there any existing areas of uncertainty that you found 

in attempting to comply with the Fair Credit Reporting Act that 

have become challenging? 

Mr. IKARD. I think there are always issues about how credit 

should be reported, I think some of the enhanced reporting. I think, 

for us, we want to see a very accurate, predictive model. In order 

to do that, you need to get as much information as possible into 

the system that is relevant and that can actually be used to help 

a consumer actually reflect a proper score. So I think sometimes, 

Congressman, we are not always sure exactly what we should report. 

The real challenge for us is bankruptcies. There are different 

stages of bankruptcies or foreclosures. At what point do we report? 

Is there a deed-in-lieu? Is there a short sale? Those type of things 

that might have an impact on a customer’s credit score or at least 

allow the customer to tell a better story down the road. We are not 

exactly sure how those should be reported. Sometimes, we get confused on that. 

Mr. PITTENGER. Thank you. 

I yield back. 

Mr. DUFFY. The gentleman yields back. 

The Chair recognizes Mr. Meeks for a unanimous consent request. 

Mr. MEEKS. I would like to ask unanimous consent to place in 

the record the opening statement from Representative Ruben Hinojosa. 

Mr. DUFFY. Without objection, it is so ordered. 

Mr. DUFFY. The Chair now recognizes the gentleman from Texas, 

Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you so much, Mr. Chairman. It is good to be 

in your company again, and you are doing quite a job today. And 

I appreciate this hearing very much. I want to thank all the witnesses for appearing today, and I always have to give some credit 

to the staff for the outstanding work that they do in compiling intelligence for us. 

23 

I have information indicating that approximately 32 million people have files that are too thin to score, and 22 million people have 

no credit at all to be scored. I am concerned about persons who pay 

their light bills, their gas bills, their water bills, their phone bills, 

cable bills, tuition, and insurance, but they don’t get scored, generally speaking. Perhaps they are scored sometimes when someone 

will make a special request and someone would bother to look. 

And I know that there is the argument being made to be careful 

with this, because if a person fails to pay a utility payment timely 

for a couple of months but still maintains the lights, gas, water, 

and then continues to pay, that could be harmful. I understand 

that argument. But that argument aside, why would we not allow 

these portions of a person’s credit history to become a part of the 

scoring process so that persons who don’t have other opportunities 

will at least have the opportunity to be scored based upon this part 

of their credit history? Who would like to be the first to respond? 

Ms. Wu, I know you have something to say on the topic, so I will 

start with you. 

Ms. WU. Thank you, Congressman Green. 

Yes, this is an issue on which we have testified before, before 

this very subcommittee. We do have concerns about promoting the 

practice of what is called full-file utility credit reporting. It is because of the unique nature of utility bills, for example, in Massachusetts, it kind of gets cold very often. We just came through the 

polar vortex, and so people had really high heating bills, but they 

catch up. They catch up in May. That is why, in Massachusetts, 

there is a winter moratorium. You can’t shut off somebody’s heat 

if they have an elder or infant in the house or they are sick between the months of November and May. People know that, and 

they rely on that. And so, we are concerned that full-file reporting 

might undermine those protections or that it might hurt the consumers who are late for 1 or 2 months but then do catch up. 

Also just to make clear, there is nothing in the Fair Credit Reporting Act right now that prohibits a utility from engaging in fullfile reporting. There is a bill filed, and some of our concerns over 

that bill actually have to do with the way it is written and the way 

it impacts the Fair Credit Reporting Act apart from utility credit 

reporting. 

Mr. GREEN. Would anyone else care to comment? 

Mr. IKARD. Congressman, one of the things that we look at is, 

our philosophy is that bad credit will hurt you, but no credit is neutral. So if you have no credit, we would like for you to sit down 

with one of our loan officers and just explain, what is going on in 

your life, where are you working, what bills have you been paying? 

We don’t necessarily see that as a negative. Obviously, you can’t 

get a credit score, but you are correct; that score means a lot. But 

in our world, bad credit is an obstacle, but no credit is simply an 

opportunity to start this discussion. 

Mr. GREEN. I appreciate your willingness to sit and have that 

conversation, but on the large scale, when we look at the macro, 

it becomes very difficult. 

Mr. IKARD. That is true. 

Mr. GREEN. An automated process would be a much more viable 

means of getting a person’s credit properly before you. We, in 2008, 

24 

had language in the Housing and Economic Recovery Act that 

called for an automated process. HUD was to develop a pilot program. I think that an automated process could factor in some of the 

things that Ms. Wu has called to our attention and still allow persons to be scored. I just know of too many circumstances where 

persons can afford to pay rent that exceeds a mortgage payment, 

and given the opportunity to have a mortgage, they would become 

homeowners and develop equity, build their equity. There must be 

some middle ground here for us so that we can help people who do 

pay their light bills, gas bills, and water bills timely, and don’t 

have the opportunity to be scored in an automated fashion. To do 

it on a case-by-case basis probably is helpful to persons on a caseby-case basis but not to all of the persons we want to serve. 

Thank you, Mr. Chairman. I yield back. 

Mr. DUFFY. The gentleman’s time has expired. 

As we have all heard the magic bells ring, we do have a vote series which we do anticipate coming back after. So with that, the 

committee stands in recess subject to the call of the Chair, and the 

call of the Chair will be right after votes. 

[recess]. 

Chairwoman CAPITO. The committee will come back to order. 

And I will call on Mr. Fitzpatrick for 5 minutes for questions. 

Mr. FITZPATRICK. I thank the Chair for calling the hearing, and 

I want to direct most of my questions to Professor Beales. 

Professor, in his opening statement Representative Ellison referred to a bill that he and I have co-sponsored and introduced together, called the Credit Access and Inclusion Act. The substance 

of the bill pretty much comports with what you referred to in the 

third section of your remarks, that more information in the system 

leads to better performance. You said in your statement that an estimated 30 million to 50 million consumers do not have sufficient 

credit information in their files to qualify for affordable mainstream credit. Are you familiar, Professor, with the Act that Representative Ellison and I have introduced? 

Mr. BEALES. I know about it as a general concept. I haven’t actually read it, but I am familiar with it in general. 

Mr. FITZPATRICK. The bills clarifies existing law under the Fair 

Credit Reporting Act to demonstrate or prevent utility and 

telecomm firms, current law prevents them, I think, from reporting 

accurate and enough information out of fear that it is not specifically authorized. So it specifically authorizes that utility payments, 

rent payments and the like can be reported without fear of being 

in violation of the Credit Reporting Act and without fear of the 

kind of lawsuits that might result. So, so-called thin file customers 

would have more robust information in their file and theoretically 

more access to credit. Would that be a good thing, in your view? 

Mr. BEALES. Absolutely, that would be a good thing. That is what 

the academic research shows, is that it improves the predictiveness 

of who is a good risk and who is not, and by and large makes some 

people who look like really thin files, makes it clear that they are 

pretty responsible about managing their money. I think that would 

be a good thing. And it makes sense to remove anything that might 

be a statutory or regulatory barrier to letting that happen. I don’t 

know whether the most efficient way for that information to get 

25 

into the system is through the main credit reporting agencies as 

opposed to through specialized agencies that specialize in that kind 

of information and are supplemental information sources. I think 

that is something the market would pretty clearly sort out if it is 

clear to everybody that they can provide the information. 

Mr. FITZPATRICK. And there is nothing in the bill as it is written 

that would mandate the reporting of such information, so in other 

words, it would be instructive or permissive. Is that— 

Mr. BEALES. I think that is the right way to go is to be permissive rather than mandatory, because it is, the whole structure of 

credit reporting is a voluntary furnisher system, and I think there 

is a lot at stake if you try to change that. 

Mr. FITZPATRICK. Is there anything in particular you would like 

to add? What do you understand about the bill, because I am going 

to be asking—as Representative Ellison said, we have a good selection of co-sponsors already, but we are going to be asking other 

Members of Congress to co-sponsor this. Would you make any recommendations? 

Mr. BEALES. Not without reading it in detail, no. I think the approach of removing barriers and leaving it voluntary, I think that 

is exactly the right way to go. 

Mr. FITZPATRICK. Professor, there is a graph up on the screens 

on either side of the room, and I am not sure if you can see it, but 

it is a 2012 FERC report, and it seems to indicate credit score 

along the bottom and percentage of thinly filed or thinly reported 

consumers, what their credit score would be. And it seems to indicate that if you have more reporting of the kind of reporting that 

Representative Ellison and I are suggesting would be helpful and 

appropriate, that those who are helped, it goes from about 5 percent of the so-called credit-invisibles are able to get anything on 

the credit reporting scoring system, 2, 3, 4, maybe as much as 5 

percent, but with more information, it goes up as high as 35 percent, interestingly enough, in an area of the credit graph which is 

really beneficial to some of these potential consumers. And I would 

think that these individuals who are currently credit-invisible, who 

currently don’t have a credit score, if they are getting not only a 

credit score, but a pretty good credit score, when they go out to buy 

their first vehicle or whatever their consumer purchasing may be, 

they are going to be getting better rates. They are going to be able 

to purchase more and, frankly, have a better future for themselves. 

So I am not sure if you are familiar with that graph, but in your 

view, is that graph accurate? 

Mr. BEALES. It is. That graph and the work behind it are the 

basis for—and I think I cited them in the testimony—saying more 

information is better. This is one of the primary pieces of evidence 

for that proposition. There is no piece of information that is good 

for everybody. We know that because risk assessment doesn’t work 

like that. The idea is to better separate good risks from bad risks, 

but I think what this graph makes clear is that for this group of 

people as a whole, they are better off with this information in the 

system than not. 

Mr. FITZPATRICK. I am sure there is another view. What is the 

downside of more robust reporting? Is there anybody in the system 

who would be hurt? 

26 

Ms. WU. We are concerned that a lot of consumers would be hurt 

if you started reporting every single late utility payment. There is 

data showing that sometimes 20 to 30 percent of energy consumers, 

especially consumers who receive low-income heating and energy 

assistance, do have 30- or 60-day late payments, and so you would 

end up adding a lot of negative data. 

Mr. FITZPATRICK. I appreciate that. The question was actually to 

Professor Beales. 

Mr. BEALES. And I think the question is, what is the predictive 

value of that information? It is going to be good information for 

some people. It is going to indicate problems for some other people, 

but that is why information is useful, is to sort between those good 

risks and bad risks. 

And what I think you are seeing in the graph here is a much better sorting and a substantial benefit to most of the people, not everybody, because some people’s bill paying history isn’t so good, 

just like some people’s credit history isn’t so good, but where that 

information is more positive than not for this group of people. 

Mr. FITZPATRICK. Thank you for the answer. I yield back. 

Chairwoman CAPITO. I believe we are waiting for one more Member, Congressman Ellison. I don’t know if he has questions. So 

while we are waiting—I guess we will wait a couple of minutes, 

and if he doesn’t show, we will ring it down. 

Is there anything that you all would like to add in the line of 

questioning that we have had that you think might be good to have 

on the record or any clarifications that anybody would like to 

make? 

Ms. WU. I would like to address a couple of issues that came up 

earlier regarding data security breaches. Certainly, our organization is concerned about data security breaches and consumers’ information being out there. Consumers should know that the good 

news is there are currently protections under Federal law when 

your existing credit card or bank account is used by a thief, and 

that for things like the Target data breach, we had said the most 

important thing is to monitor your existing bank or credit card accounts. And the thing not to do is to go out and buy credit monitoring products. These are expensive products, $15 to $20 a month, 

and they do nothing to prevent ID theft. They just detect it after 

it happens. For consumers who are actually concerned about identity theft, the most effective thing is the security freezes mandated 

by State law. 

But we have great concerns about the way credit monitoring has 

been offered to consumers. And, in fact, three or four of CFPB’s actions against credit card issues have been over the sale of products 

such as credit monitoring. 

Chairwoman CAPITO. Yes, Mr. Pratt? 

Mr. PRATT. I want to respond to that thought that credit monitoring is essentially useless, and I can’t tell you how much we disagree with that idea. There are a whole range of financial literacy 

products that are out there today in the marketplace. Even the 

CFPB’s report about the credit reporting ecosystem talks about the 

fact that not only do consumers get free file disclosures, which is 

important, through annualcreditreport.com. That is the free Web 

site. That is how you go and get it and exercise your right under 

27 

law. But an additional 30 million to 40 million file disclosures are 

in the hands of 30 million to 40 million consumers as a result of 

these products. The idea that I shouldn’t, that it is not valuable for 

me to have a product that may notify me when changes to my file 

take place, the idea that I shouldn’t be able to look at changes to 

my credit report and understand how that might affect a score, the 

idea that learning process is not valuable is just ludicrous. 

So it is a significant disagreement between us and certain advocacy organizations, but I just want to make that point for the 

record, that this is a really important product. That is one of the 

reasons why we believe it should be exempted from CROA. That 

is why we believe that the Credit Repair Organizations Act, which 

was never written to regulate these products, is wrong. These products are regulated under the FTC’s Section 5, the unfair, deceptive 

acts or practices. They are regulated under specific rules for advertising practices. It is a safe and sound product. Millions and millions and millions of consumers buy it, and they are okay with it. 

Chairwoman CAPITO. With that, I am going to have extended a 

couple of minutes courtesy to Mr. Ellison, who has obviously gotten 

hung up. I don’t want to be rude to my witnesses here because you 

all had to have a disruption, so he can submit questions for the 

record, and we can ask for your response. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

Without objection, the hearing is adjourned, and again, I thank 

you for your patience. 

[Whereupon, at 4:21 p.m., the hearing was adjourned.] 

(29) 

A P P E N D I X 

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