CREDIT Act Provisions Will Increase Loan Costs for Consumers

January 29, 2020

CREDIT Act Provisions Will Increase Loan Costs for Consumers


WASHINGTON – The Consumer Bankers Association wrote the House of Representatives expressing concern over the unintended consequences of H.R. 3621, the Comprehensive Credit Reporting Enhancement, Disclosure, Innovation, and Transparency (CREDIT) Act.


“The safety and soundness of our banking system requires lenders be able to rely on a consumer’s credit report to be up-to-date, accurate, and complete in order to determine a consumer’s ability to repay a loan,” CBA President and CEO Richard Hunt wrote. “Lenders consider many factors when determining the credit risk of a borrower, however, when important or historical credit data is restricted, lenders are unable to properly determine and price risk and are required to increase the cost of credit to offset loan losses caused by insufficient data.


“A safe and sound banking system operating with stringent credit underwriting provides greater consumer benefit through increased access to affordable lending products. Federal mandates to remove adverse—yet accurate—consumer information make loans riskier. The importance of ensuring safe and sound banking practices and utilizing the most accurate data available provides the basis of our core concerns with this legislation.”


Many of the provisions in the legislation would hide, mask or erase information from a borrower’s credit history. This would deny a complete, accurate view of a borrower’s credit history and make loans more expensive or harder for consumers to obtain because banks would have to factor unknown risks into their business models.


A full copy of CBA’s letter is available here.