116th CONGRESS 1st Session |
To establish requirements relating to credit scores and educational credit scores, and for other purposes.
July 5, 2019
Mrs. Beatty introduced the following bill; which was referred to the Committee on Financial Services
To establish requirements relating to credit scores and educational credit scores, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
This Act may be cited as the “Free Credit Scores for Consumers Act of 2019”.
Congress finds the following:
(1) While nationwide consumer reporting agencies (“CRAs”) are required by law to supply consumers with a free copy of their credit report annually, they can charge consumers to obtain a credit score disclosure.
(2) A July 2011 report by the Consumer Financial Protection Bureau (“Consumer Bureau”) titled “The Impact of Differences between Consumer- and Creditor-Purchased Credit Scores” found that the credit scores made available to and purchased by consumers from CRAs are unlikely to be the same credit scores used by creditors and lenders to evaluate consumers’ creditworthiness.
(3) That report found that the scarcity of public educational tools to inform consumers of the differences among credit scores, the large combined market share and brand recognition of FICO credit scores, and the marketing practices of some credit score sellers may perpetuate consumers’ confusion about credit scores. As a result, some consumers may be purchasing an educational credit score or subscribing to a credit monitoring service sold by a CRA, without realizing the limitations and usefulness of these products and services.
(4) Similarly, a September 2012 Consumer Bureau report titled “Analysis of Differences between Consumer- and Creditor-Purchased Credit Scores” found that consumers do not know before they purchase a credit score from a CRA whether this credit score will closely track or vary significantly from the credit score sold to creditors or lenders. Given the lack of transparency about the usefulness of credit scores that are marketed for purchase by consumers from CRAs and the resulting consumer confusion, the Consumer Bureau recommended that companies selling scores to consumers clearly inform consumers that the scores marketed to consumers for purchase by CRAs can vary, sometimes substantially, from the scores that are actually sold to and used by creditors and lenders.
(5) A February 2011 study by Consumer Federation of America and VantageScore also found that half of the consumers surveyed did not know that a credit score is designed to indicate the risk of not repaying a credit obligation. Consumers also did not know who makes credit scores available, what numerical range constitutes excellent credit standing, or the financial implications of having a low credit score.
(6) Many consumers do not realize that they have more than just “one” credit score. Because the submission of credit information to CRAs is voluntary and not all furnishers submit information to every CRA, the information contained in a report also varies among CRAs. As a result, the credit score generated by each CRA is also likely to vary, resulting in potentially different credit decisions based on an evaluation of different credit reports obtained from different CRAs.
(7) A February 2015 Consumer Bureau report titled “Consumer Voices on Credit Reports and Scores” found that consumers had questions about what actions to take to improve their scores once they had seen them, suggesting that additional disclosures and educational content would be helpful to consumers. The Consumer Bureau found that consumers were confused by conflicting advice on how to improve their scores.
(8) That report also noted that consumers found the process for obtaining consumer reports and credit scores confusing. Consumers also were uncertain about whether, and under what circumstances, they could obtain a consumer report for free.
SEC. 3. Credit score and educational credit score definitions.
(a) In general.—Section 603 of the Fair Credit Reporting Act (15 U.S.C. 1681a) is amended by adding at the end the following new subsection:
“(bb) Credit score and educational credit score definitions.—
“(1) CREDIT SCORE.—The term ‘credit score’ means a numerical value or a categorization derived from a statistical tool or modeling system used by a person who makes or arranges a loan or extends credit to predict the likelihood of certain credit behaviors, including default, as determined by the Bureau.
“(2) EDUCATIONAL CREDIT SCORE.—The term ‘educational credit score’ means a numerical value or categorization derived from a statistical tool or modeling system based upon information from a consumer report that assists consumers in understanding how a lender or creditor may view the consumer’s creditworthiness in deciding whether to make a loan or extend credit to that consumer.
“(3) KEY FACTORS.—The term ‘key factors’ means relevant elements or reasons affecting the credit score for the particular individual, listed in the order of importance based on the effect of each element or reason on the credit score or educational credit score.
“(4) CREDIT SCORING MODEL.—The term ‘credit scoring model’ means a scoring algorithm, formula, model, program, or mechanism used to generate a credit score or an educational credit score.”.
(b) Conforming amendments.—The Fair Credit Reporting Act (15 U.S.C. 1681 et seq.) is amended—
(1) in section 605(d)(2), by striking “(as defined in section 609(f)(2)(B))”; and
(A) by striking “as defined in section 609(f)(2)(A)” each place that term appears; and
(B) in subsection (a)(2)(B), by striking “set forth in subparagraphs (B) through (E) of section 609(f)(1)” and inserting “with respect to a credit score described in section 609(f)(2), if available” each place that term appears.
SEC. 4. Expands explanatory information given to consumers about how scores are calculated.
Section 609(f) of the Fair Credit Reporting Act (15 U.S.C. 1681g(f)) is amended to read as follows:
“(f) Disclosure of credit score and educational credit score by consumer reporting agencies.—
“(1) IN GENERAL.—Upon the request of a consumer for a credit score or educational credit score, a consumer reporting agency shall supply to the consumer a statement—
“(i) a current credit score at the time of the request generated using a commonly used credit scoring model to generate credit scores, subject to regulations of the Bureau;
“(ii) an educational credit score at the time of the request, if it is not practicable to generate such a credit score, as determined by the Bureau; or
“(iii) an explanation that the consumer’s file does not have sufficient information from which to generate such a credit score or educational credit score; and
“(B) with respect to each previous credit score in the file of the consumer—
“(i) the date on which the credit score was generated;
“(ii) the name of any entity that the credit score was provided to; and
“(iii) the credit score itself.
“(2) REQUIREMENTS.—A statement provided under clause (i) or (ii) of paragraph (1)(A) shall include—
“(A) a minimum of 4 key factors, if available, that adversely affected the credit score or educational credit score, except that if one of the key factors consists of the number of enquiries made with respect to a consumer report, that factor shall be provided to the consumer in addition to the factors required by this subparagraph;
“(B) to the extent possible, specific actions a consumer could take with respect to each key factor listed in subparagraph (A) to improve the consumer’s credit score or educational credit score;
“(C) a minimum of 4 key factors, if available, that positively affected the credit score or educational credit score;
“(D) the range of possible credit scores or educational credit scores under the credit scoring model used;
“(E) the distribution of credit scores or educational credit scores among consumers who are scored under the same credit scoring model by the consumer reporting agency, and using the same scale as that of the score that is provided to a creditor or consumers—
“(i) in the form of a bar graph containing a minimum of 6 bars that illustrates the percentage of consumers with credit scores or educational credit scores within the range of scores represented by each bar; or
“(ii) by another clear and readily understandable graphical depiction, statement, or illustration comparing the consumer’s credit score or educational credit score to the scores of other consumers, as determined by the Bureau;
“(F) the date on which the credit score or educational credit score was created; and
“(G) the name of the person that developed the credit scoring model on which the credit score or educational credit score was based.
“(3) APPLICABILITY TO CERTAIN USES.—This subsection shall not be construed so as to compel a consumer reporting agency to—
“(A) develop or disclose a credit score if the agency does not distribute credit scores used by a person who makes or arranges a loan or extends credit to predict the likelihood of certain credit behaviors; or
“(B) develop or disclose an educational credit score if the agency does not develop educational credit scores that assist in understanding the general credit behavior of a consumer and predicting the future credit behavior of the consumer.
“(4) MAINTENANCE OF CREDIT SCORES.—
“(A) IN GENERAL.—All consumer reporting agencies shall maintain in the consumer’s file credit scores relating to the consumer for a period of 2 years from the date on which such information is generated.
“(B) DISCLOSURE ONLY TO CONSUMERS.—A past credit score maintained in a consumer’s file pursuant to subparagraph (A) may only be provided to the consumer to which the credit score relates and may not be included in a consumer report or used as a factor in generating a credit score or educational credit score.
“(C) REMOVAL OF PAST CREDIT SCORES.—A past credit score maintained in a consumer’s file pursuant to subparagraph (A) shall be removed from the consumer’s file after the end of the 2-year period described under subparagraph (A).”.
SEC. 5. Requires consumer reporting agencies to disclose prominently the differences between and limitations of credit scores and educational credit scores required prior to a consumer obtaining such scores.
Section 609(f) of the Fair Credit Reporting Act (15 U.S.C. 1681g(f)), as amended by section 3, is further amended by adding at the end the following new paragraphs:
“(5) WEBSITE DISCLAIMER.—A consumer reporting agency that generates or provides credit scores or educational credit scores shall clearly and conspicuously display on the home page of the agency’s Internet website, and as part of any application, solicitation, or marketing material or media providing information related to a credit score or educational credit score, the following notice, in boldface type of 18-point font or larger and in a text box with boldface outer borders:
‘There is no “one” credit score. There are many scoring formulas derived from a wide variety of models available to a consumer and used by lenders and creditors. Different lenders and creditors use different scoring formulas to determine whether to extend credit or make a loan to you, and the terms of the credit or loan. An educational credit score is not a credit score that a person who makes a loan or extends credit to you is likely to use. Educational credit scores are merely intended to be used as an educational tool to help consumers understand how the information contained in a consumer report may affect the terms and conditions of a loan or extension of credit that may be available to a consumer. Lenders and creditors may also rely on information not contained in your consumer report and not reflected in the calculation of your credit score.’ .
“(6) ADDITIONAL REQUIREMENTS FOR EDUCATIONAL CREDIT SCORES.—
“(A) DISCLAIMER.—If an educational credit score is provided pursuant to paragraph (1), a consumer reporting agency shall clearly and conspicuously include in a prominent location on the statement, in boldface type of 18-point font or larger, and in a text box with boldface outer borders, the following notice:
‘The educational credit score provided to you is not a credit score that a lender or creditor is likely to use to make a loan or extend credit to you. There are many different credit scores derived from a wide variety of models used by lenders and creditors. An educational credit score is merely an educational tool. It is intended to provide consumers with a basic understanding of how the information contained in a consumer report may affect the terms and conditions of credit that are available. The credit scores you receive directly from different lenders and creditors may not be the same as an educational credit score. There are a number of reasons for this:
‘(1) Each company may use a different formula for calculating credit scores and the differences in the formulas may lead to differences in your scores.
‘(2) Companies may produce scores that give results on different scales.
‘(3) Not all lenders or creditors report to every consumer reporting agency, and therefore the information contained in your consumer report that the consumer reporting agencies use to calculate your educational credit score may differ among agencies.’ .
“(B) PROHIBITION ON MISLEADING REPRESENTATIONS.—A consumer reporting agency may not refer to an educational credit score as a credit score in any application, solicitation, marketing, or other informational materials or media.
“(7) MODIFICATION OF DISCLAIMERS.—The Bureau may modify the content, format, and manner of the disclaimers required under paragraphs (5) and (6), if warranted, after conducting consumer testing or research.”.
SEC. 6. Provides consumers with free credit score disclosures with their free annual consumer reports upon request and creates instances when consumers automatically receive free consumer reports and credit scores.
(a) In general.—Section 612 of the Fair Credit Reporting Act (15 U.S.C. 1681j) is amended—
(i) in subparagraph (A), by inserting after “section 609” the following: “(including the disclosure of a credit score or educational credit score under subsection (f) of such section)”; and
(I) by striking “Commission” and inserting “Bureau”; and
(II) by inserting “, credit scores, and educational credit scores (as applicable)” after “consumer reports” each place that term appears;
(i) by striking “15 days” and inserting “3 business days”; and
(ii) by inserting “, credit score, or educational credit score” after “consumer report”;
(C) in paragraph (3), by inserting “, credit score, or educational credit score” after “consumer report”; and
(D) in paragraph (4), by inserting “, credit scores, or educational credit scores” after “consumer reports”;
(2) in subsection (b), by inserting “(including the disclosure of a credit score or educational credit score, as applicable, under subsection (f) of such section)” after “section 609”;
(A) by inserting “(including the disclosure of a credit score or educational credit score under subsection (f) of such section)” after “pursuant to section 609”;
(B) in paragraph (2), by striking “; or” and inserting a semicolon;
(C) in paragraph (3), by striking the period at the end and inserting a semicolon; and
(D) by adding at the end the following new paragraphs:
“(4) has disputed information, or submitted an appeal of an investigation or reinvestigation of such information, under section 611 or 623, regardless of whether the consumer has already received a credit report, credit score, or educational credit score under section 611 or 623; or
“(5) has had information that was previously deleted under section 611(a)(5) reinserted into the consumer’s file, regardless of whether the consumer has already received a credit report, credit score, or educational credit score under such section.”;
(4) in subsection (d), by inserting “(including the disclosure of a credit score or educational credit score under subsection (f) of such section)” after “section 609”;
(A) by striking “reasonable charge” and all that follows through “section 609” and inserting “reasonable charge on a consumer for providing a consumer report to a consumer”;
(B) by striking subparagraph (B);
(C) by redesignating clauses (i) and (ii) as subparagraphs (A) and (B), respectively (and conforming the margins accordingly); and
(D) in subparagraph (B) (as so redesignated), by striking “disclosure; and” and inserting “disclosure.”; and
(6) by adding at the end the following new subsections:
“(h) Centralized source for obtaining free copy of consumer report and scores.—
“(1) NATIONWIDE CONSUMER REPORTING AGENCIES.—
“(A) IN GENERAL.—Not later than 180 days after the date of enactment of this subsection, each consumer reporting agency described under subsection (p) of section 603 shall prominently display on the home page of the agency’s website—
“(i) a hyperlink labeled ‘Get Your Free Annual Credit Reports along with either your Credit Scores or Educational Credit Scores provided for under Federal Law’ or substantially similar text, as determined by the Bureau; and
“(ii) a disclosure titled ‘Consumer’s Right to Free Credit Scores, Educational Credit Scores, and Reports under Federal Law’ or substantially similar text, as determined by the Bureau that includes the following statement:
All consumers are entitled to obtain a free copy of their consumer report and credit score or educational credit score annually from each of the nationwide consumer reporting agencies. Under Federal law, a consumer is entitled to obtain additional free copies of their consumer reports, along with a copy of either the consumer’s credit score or educational credit score (under certain circumstances), including:
‘(1) When a consumer is unemployed and intends to apply for employment within 60 days.
‘(2) When a consumer is a recipient of public welfare assistance.
‘(3) When a consumer has a reasonable belief that their report contains inaccuracies as a result of fraud.
‘(4) When a consumer asserts in good faith a suspicion that the consumer has been or is about to become a victim of identity theft, fraud, or a related crime, or harmed by the unauthorized disclosure of the consumer’s financial or personally identifiable information.
‘(5) When a consumer files a dispute or an appeal of the results of a dispute with a consumer reporting agency or a person who furnished information to the consumer reporting agency regarding the accuracy or completeness of the information contained on their report.
‘(6) After a furnisher of information discovers it has furnished inaccurate or incomplete information to a consumer reporting agency, and the furnisher notifies the agency of the error.
‘(7) After an adverse action is taken against a consumer or a consumer receives a risk-based pricing notice.
‘(8) When a mortgage lender, private educational lender, indirect auto lender, or motor vehicle lender obtains and uses a consumer’s reports or scores for underwriting purposes.’ .
“(B) HYPERLINK REQUIREMENTS.—The hyperlink described in subparagraph (A)(i) shall be prominently located on the top of the home page and should link directly to the website of the centralized source established pursuant to section 211(d) of the Fair and Accurate Credit Transactions Act of 2003 (15 U.S.C. 1681j note).
“(C) MODIFICATIONS.—The Bureau may modify the disclosure described in subparagraph (A)(ii) as necessary to include other circumstances under which a consumer has the right to receive a free consumer report, credit score, or educational credit score.
“(2) NATIONWIDE SPECIALTY CONSUMER REPORTING AGENCIES.—
“(A) IN GENERAL.—Not later than 180 days after the date of enactment of this subsection, each nationwide specialty consumer reporting agency shall prominently display on the Internet home webpage of the agency a disclosure titled ‘Consumer’s Right to Free Consumer Reports and Credit Score or Educational Credit Score (as applicable) under Federal Law’. Such disclosure shall include the following statement:
Upon request, all consumers are entitled to obtain a free copy of their consumer report and credit score or educational credit score (as applicable) during any 12-month period from each of the nationwide specialty consumer reporting agencies. Federal law also provides further circumstances under which a consumer is entitled to obtain additional free copies of their consumer report and credit score or educational credit score (as applicable) including:
‘(1) When a consumer is unemployed and intends to apply for employment within 60 days.
‘(2) When a consumer is a recipient of public welfare assistance.
‘(3) When a consumer has a reasonable belief that their report contains inaccuracies as a result of fraud.
‘(4) When a consumer files a dispute or an appeal of the results of a dispute with a consumer reporting agency or a person who furnished information to the consumer reporting agency regarding the accuracy or completeness of the information contained on their report.
‘(5) After a furnisher of information discovers it has furnished inaccurate or incomplete information to a consumer reporting agency, and the furnisher notifies the agency of the error.
‘(6) After an adverse action is taken against a consumer or a consumer receives a risk-based pricing notice.
‘(7) When a mortgage lender, private educational lender, indirect auto lender, or motor vehicle lender obtains and uses a consumer’s reports or scores for underwriting purposes.’ .
“(B) MODIFICATIONS.—The Bureau may modify the disclosure described in subparagraph (A) as necessary to include other circumstances under which a consumer has the right to receive a free consumer report and credit score or educational credit score (as applicable).
“(C) TOLL-FREE TELEPHONE ACCESS.—The information described in this paragraph shall also be made available via a toll-free telephone number. Such number shall be prominently displayed on the home page of the website of each nationwide specialty consumer reporting agency. Each of the circumstances under which a consumer may obtain a free consumer report and credit score or educational credit score (as applicable) shall be presented in an easily understandable format and consumers shall be directed to an individual who is a customer service representative not later than 2 minutes after the initial phone connection is made by the consumer. Information provided through such telephone number shall comply with the requirements of section 633.
“(D) ONLINE CONSUMER REPORTS; EXEMPTION.—Upon receipt of a request by a consumer for a consumer report, each nationwide specialty consumer reporting agency shall provide access to such report electronically on the Internet website described in section 611(h).
“(i) Automatic provision of free consumer reports and credit scores or educational credit scores.—A consumer reporting agency shall provide to a consumer a free copy of the file and credit score or educational credit score of the consumer who—
“(1) obtains a fraud alert, extended alert, active duty alert, or security freeze as described in section 605A; or
“(2) has disputed information, or submitted an appeal of an investigation or reinvestigation of such information, under section 611 or 623.”.
(b) Technical amendment.—Section 615(h)(7) of such Act (15 U.S.C. 1681m(h)(7)) is amended by striking “section” and inserting “subsection”.
SEC. 7. Requires private educational lenders to provide consumers with free copies of any consumer reports and credit scores that they used for underwriting before consumers sign loan agreements.
Section 609 of the Fair Credit Reporting Act (15 U.S.C. 1681g) is amended by adding at the end the following new subsection:
“(h) Disclosure of consumer reports and credit scores by private educational lenders.—
“(1) IN GENERAL.—If a private educational lender obtains a copy of any consumer reports or credit scores and uses such reports or scores in connection with an application of a consumer for a private education loan, the private educational lender shall provide to the consumer, not later than 3 business days after obtaining such reports or scores and before the date on which the consumer enters into a loan agreement with the private educational lender, a copy of any such reports or scores, along with the statement described under subsection (f)(2).
“(2) COSTS.—None of the costs to the private educational lender associated with procuring consumer reports or credit scores under this subsection may be charged, directly or indirectly, to the consumer.
“(3) RULE OF CONSTRUCTION.—Nothing in this subsection shall be construed to eliminate any requirement for creditors and lenders to provide credit score disclosures, including the statement described under subsection (f)(2), to consumers as part of an adverse action or risk-based pricing notice.”.
SEC. 8. Requires motor vehicle lenders or indirect auto lenders to provide consumers with free copies of any consumer reports and credit scores that they used for underwriting before consumers sign lease or loan agreements.
Section 609 of the Fair Credit Reporting Act (15 U.S.C. 1681g), as amended by section 6, is further amended by adding at the end the following new subsection:
“(i) Disclosure of consumer reports and credit scores used by motor vehicle lenders or indirect auto lenders.—
“(1) IN GENERAL.—If a motor vehicle lender or indirect auto lender obtains a copy of any consumer reports or credit scores and uses such reports or scores in connection with an application of a consumer for a motor vehicle loan or lease, the motor vehicle lender or indirect auto lender shall provide to the consumer a document, separate from the consumer’s lease or purchase agreement and before the consumer enters into a lease or purchase agreement, disclosing any consumer reports and credit scores, including the statement described in subsection (f)(2), used by the lender to determine whether to extend credit to the consumer.
“(2) COSTS.—None of the costs to the motor vehicle lender or indirect auto lender associated with procuring consumer reports or credit scores under this subsection may be charged, directly or indirectly, to the consumer.
“(3) RULE OF CONSTRUCTION.—Nothing in this subsection shall be construed to eliminate any requirement for creditors and lenders to provide credit score disclosures, including the statement described under subsection (f)(2), to consumers as part of an adverse action or risk-based pricing notice.
“(A) INDIRECT AUTO LENDER.—The term ‘indirect auto lender’ has the meaning given the term by the Bureau, and shall include a person extending a loan made with respect to a car, boat, motorcycle, recreational vehicle, or other similar vehicle used primarily for personal or household purposes.
“(B) MOTOR VEHICLE LENDER.—The term ‘motor vehicle lender’ has the meaning given the term by the Board of Governors of the Federal Reserve System, and shall include a person extending a loan made with respect to a car, boat, motorcycle, recreational vehicle, or other similar vehicle used primarily for personal or household purposes.”.
SEC. 9. Requires residential mortgage lenders to provide consumers with free copies of any consumer reports and credit scores that they used for underwriting before consumers sign loan agreements.
Section 609(g) of the Fair Credit Reporting Act (15 U.S.C. 1681g(g)) is amended—
(1) by redesignating paragraph (2) as paragraph (5);
(A) by striking “a consumer credit score” and inserting “any consumer reports or credit scores”;
(B) by striking “, as defined in subsection (f),”;
(C) by striking “the following to the consumer as soon as reasonably practicable:” and inserting “, not later than 3 business days after using such reports or scores, a document disclosing any consumer reports and credit scores used by the lender to determine whether to extend credit to the consumer along with the statement described in subsection (f)(2).”;
(D) by striking subparagraphs (A), (B), (C), (E), and (F);
(E) by redesignating subparagraph (D) as paragraph (3) (and adjusting the margins accordingly); and
(F) by redesignating subparagraph (G) as paragraph (4) (and adjusting the margins accordingly);
(3) by inserting before paragraph (3) (as so redesignated) the following new paragraph:
“(2) RULE OF CONSTRUCTION.—Nothing in this subsection shall be construed to eliminate any requirement for lenders to provide credit score disclosures, including the statement described under subsection (f)(2), to consumers as part of an adverse action or risk-based pricing notice.”;
(4) in paragraph (3) (as so redesignated), in the quoted material—
(A) by inserting “, free of charge,” after “disclose to you”; and
(B) by striking “affecting your credit scores” and inserting “affecting your credit score or scores”;
(5) in paragraph (5) (as so redesignated) by inserting “or scores” after “credit score” each place such term appears; and
(6) by adding at the end the following new paragraphs:
“(6) ACTIONS NOT REQUIRED.—This subsection shall not require any person to disclose any credit score or related information obtained by the person after a loan has closed.
“(7) NO PROCUREMENT COSTS.—None of the costs to the creditor or lender associated with procuring any consumer reports or scores under this subsection may be charged, directly or indirectly, to the consumer.”.
Not later than the end of the 2-year period beginning on the date of the enactment of this Act, the Bureau of Consumer Financial Protection shall issue final rules to implement the amendments made by this Act.