New Bills Would Reshape Credit Reporting For Private Student Loan Borrowers And Other Consumers

WASHINGTON, DC – Chairman of the House Financial Services Committee Maxine Waters (D-CA) speaks at a… [+] Financial Services Committee of the House of Representatives He (Photo courtesy of Getty Images/Zach Gibson)
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Multiple new proposals are being considered in Congress that may drastically change credit reporting for private student loan borrowers and other consumers. The Comprehensive Consumer Credit Reporting Reform Act, for example, would establish a private student loan rehabilitation program that would allow borrowers in default on private student loans to get their loans back on track by making a series of on-time monthly payments. Following the successful completion of the payment sequence, private student loan lenders would be obligated to delete any adverse credit reporting from the borrower’s credit report. Student loan rehabilitation is now solely available for federal student loans; private student loans have no way to reverse or cure default. Even paying or settling a defaulted private student loan would not guarantee that the previous negative credit reports will be removed.
The Act would also revamp the credit dispute procedure for inaccurate credit reporting and provide consumers with free access to credit scores. Negative credit reporting linked with predatory mortgages and predatory private student loans used to attend for-profit colleges would also be prohibited.
Two more credit reporting legislation are being considered by Congress, each of which could have a significant impact on consumers:
By providing an online consumer web gateway to access their credit report and score information, the “Protecting Your Credit Score Act” would make it easier for consumers to monitor and fix their credit ratings. The “National Credit Reporting Agency Act” would create a new public credit reporting agency under the umbrella of the Consumer Financial Protection Bureau (CFPB), a federal agency whose mission is to protect consumers from predatory financial institutions. The “National Credit Reporting Agency Act” would create a new public credit reporting agency under the umbrella of the Consumer Financial Protection Bureau (CFPB), a federal agency whose mission is to protect consumers from predatory financial institutions. This would effectively serve as a new credit bureau, providing consumers with a public alternative to the private, for-profit national credit agencies that already exist.

Last Monday, House Committee on Financial Services Chair Maxine Waters (D-Calif) noted, “Good credit is a pathway to riches.” The proposals under discussion, according to Waters, would “bring long overdue reforms to our credit reporting system.”
At a hearing last week, Chi Chi Wu, an attorney with the National Consumer Law Center, spoke in favor of the credit report amendments. She stated that establishing a public national credit bureau under the auspices of the Consumer Financial Protection Bureau (CFPB) would be particularly transformational. “While government agencies aren’t perfect, they don’t put profit above all else. They’d be responsive to public pressure and scrutiny from the government. They could also be tasked with establishing credit scoring models in order to address the country’s massive racial and economic disparities.”
ADDITIONAL INFORMATION FOR YOU
Credit reporting is just one of several comprehensive financial reforms that Congress and the Biden administration are considering. Reforming the bankruptcy code to make it easier for consumers to discharge student loans and medical debt in bankruptcy, as well as possibly revising the Public Service Loan Forgiveness program and income-driven repayment plans for federal student loan borrowers, are among them.
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