Credit union trade groups are warning Congress that proposals to establish a public credit reporting agency within the Consumer Financial Protection Bureau would give the agency enormous new power that it should not have.
“Such an agency would not only expand the influence of the Bureau within the lending ecosystem but also require considerable costs and many years to fully implement before providing a benefit to consumers – if any benefit at all,” Credit Union National Association President/CEO Jim Nussle wrote in a letter to the House Financial Services Committee this week.
The committee held a hearing Tuesday on proposals aimed at improving the credit reporting system, which members of both parties agree is plagued with problems. The CFPB has reported that it has received thousands of consumer complaints about the credit reporting industry.
“We need big, bold legislative solutions to transform this broken system,” House Financial Services Chairwoman Maxine Waters, D-Calif., said at Tuesday’s hearing.
During the hearing, Amy Traub, associate director of policy and research at Dēmos, a progressive think tank, outlined her organization’s plan for a public credit registry at the CFPB. “Under our plan, the publicly run credit registry would gradually replace the current for-profit corporate system and is designed to address the structural flaw in the credit reporting industry,” she said. “By design, the public credit registry will be responsive to consumer needs and equity concerns rather than the corporate bottom line.”
A new public credit reporting agency would not benefit consumers, the National Association of Federally-Insured Credit Unions vice president of legislative affairs, Brad Thaler, told the committee in a letter.
“NAFCU has concerns about the cost of establishing and running a government credit bureau, but more importantly, we think that such a system will not benefit consumers as much as improving upon the current private sector credit reporting industry,” he wrote. “Furthermore, government retention of credit reporting information could erode consumer privacy, particularly if a single agency presented a data-rich target for criminals.”
Nussle said that CUNA is concerned that political control of the CFPB could have an impact on any credit reporting duties it might be given. “In fact, given the Executive Branch’s firm control over the CFPB and its leadership, a public CRA could allow an administration to meddle in the nation’s lending ecosystem to the detriment of fair and equitable access to credit,” he wrote.
House Financial Services Committee ranking Republican Patrick McHenry of North Carolina was blunt in his criticism of the public credit reporting agency proposal. “Instead of creating more competition in the private sector my colleagues go to the same playbook – a government run bureau based on anecdotal evidence and faulty ‘data’ such as slanted surveys,” he said. “This is part of their broader goal to dismantle the financial system as we know it.”
He added, “We should be promoting competition to create better opportunities for consumers.”