Maxine Waters proposes consumer-friendly overhaul of credit reporting industry

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Rep. Maxine Waters on Tuesday called for a consumer-friendly overhaul of the nation’s credit reporting system as she brought the chief executives of Equifax, Experian and TransUnion to testify before her House committee about what she called a “broken system.”

The heads of the three leading credit reporting companies heard bipartisan criticism as Waters, the veteran Los Angeles Democrat, launched her first major legislative initiative as chairwoman of the Financial Services Committee.

For the record:

4:35 p.m. Feb. 28, 2019A previous version of this article omitted some words from a quote by Experian Chief Executive Craig Boundy about the potential effect of a change to federal laws. Boundy was quoted as saying, “... it has the risk of increasing consumers’ access to credit.” Boundy actually said, “… it has the risk of increasing the cost of consumers’ access to credit.”

“To credit reporting bureaus, consumers aren’t consumers. They are commodities,” Waters said, adding that dissatisfied Americans can’t just take their business to another company.


Although Equifax, Experian and TransUnion collect information from banks and other firms about Americans — their payment history on mortgages, credit cards, auto loans and other debt — they have little direct relationship with consumers. Their customers are the companies seeking a consumer’s credit history.

“This commodification of consumers and their personal data is the core reason why our nation’s consumer credit reporting system is broken,” she said.

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Spurred by Equifax’s massive 2017 data breach that exposed the Social Security numbers, birth dates and other private data for nearly 150 million people, Waters has released a discussion draft of a bill that she said would fix the system.

The 199-page bill would reduce how long most negative information stays on credit reports to four years from seven years and require credit reporting companies to remove such items within 45 days of the debt being fully paid or settled.

She wants to restrict credit checks for job applicants to instances in which a credit report is required by federal, state or local law or when it is needed as part of a security clearance. And the bill would shift the burden of removing mistakes on credit reports away from consumers and onto the credit bureaus and financial firms that provide them, as well as provide a new right for consumers to appeal determinations the companies made about disputed information.


Waters has been pushing the legislation for several years and had tried unsuccessfully to get all three CEOs to testify before the committee when she was in the House minority.

After Democrats took over the majority this year and she gained the committee chairmanship, the three executives — Mark Begor of Equifax, Craig Boundy of Experian and James M. Peck of TransUnion — agreed to appear.

The executives pledged their commitment to keep data secure and improve the accuracy of consumer information. But they did not appear enthusiastic about additional federal laws aimed at their companies.

“It could negatively affect a lender’s ability to assess risk and … it has the risk of increasing the cost of consumers’ access to credit,” Boundy said of the proposals.

But legislation could be coming as the committee’s top Republican also sharply criticized the credit reporting industry.

“What I see here is an oligopoly,” Rep. Patrick McHenry (R-N.C.) told the chief executives.


“We have three of you not really competing and the consumers are the ones that are losing out. I think that’s a problem,” he said. “How does an oligopoly protect consumers?”

None of the three executives volunteered an answer.

“OK,” McHenry responded. “I’ll take that as an answer.”

In their testimony, Begor was the most contrite. He took over as Equifax chief executive in April 2018, about seven months after former CEO Richard Smith stepped down in the wake of the data breach that compromised the sensitive information of about 148 million Americans.

He expressed his “personal regret” for the 2017 breach and said he appeared before the committee “because we recognize there are things we can do better.”

“Let me be clear: A single error on a consumer’s credit report is one error too many,” Begor told the lawmakers. “And I understand how frustrating it can be for a consumer to feel helpless when dealing with a credit bureau like Equifax.”

All the chief executives said they wanted to improve the credit reporting system.

But lawmakers were skeptical.

Waters said the changes in her bill might not go far enough and “we need to ask whether the system is so beyond repair that we need to completely rebuild the entire consumer credit reporting sector to truly put consumers first.”

Jaret Seiberg, an analyst with brokerage and investment bank Cowen & Co., said the hearing reinforced the firm’s view that the new Congress was likely to act.


“While there may not be agreement on exactly what should change, there was broad support to giving consumers more power to fix mistakes and to control the data,” Seiberg said in a research note.

McHenry, who proposed legislation in 2017 that would require Equifax, Experian and TransUnion to phase out the use of Social Security numbers to verify Americans’ identities, said he wanted more competition instead of more regulation. But he agreed that some changes were needed.

“While our approaches may be very different, we both know that we need to find a way that works better for the people we represent,” McHenry said in reference to Waters.

McHenry noted that the law dealing with credit reporting companies was originally enacted in 1970.

Rep. Gregory Meeks (D-N.Y.) emphasized that the data the credit reporting companies use belong to consumers and there is nobody advocating on behalf of them, particularly for a poor person, when it comes to disputes about accuracy. And the incorrect information could cost a person a job.

“It seems as though the three of you basically can control that … and that person therefore is out of a job and therefore can’t climb their way out of poverty,” he said.


Consumer advocates who testified at the hearing after the chief executives said that they supported Waters’ legislation and that it was a long time coming.

“By my estimate, this is the sixth time I’ve been before Congress talking about abuses by the credit bureaus,” said Chi Chi Wu, staff attorney at the National Consumer Law Center, who told committee members that the system for disputing information in a credit report is a “Kafkaesque nightmare” that needs reform.