Detroit, MI: Field Hearing on Credit Reporting


Welcome to the Consumer Financial Protection
Bureau’s field hearing on Consumer Credit Reporting. The Consumer Financial Protection
Bureau is an independent Federal agency whose mission is to make markets for consumer financial
products and services work for consumers, whether they are applying for a mortgage,
choosing among credit cards, or using any number of other consumer financial products.
My name is Zixta Martinez. I am the Acting Associate Director for External Affairs. Today’s
field hearing is being livestreamed at ConsumerFinance.gov, and you can follow us on Twitter at CFPB.
The hash tag for the event is “credit reporting.” We’ll begin today’s field hearing with remarks
from some well-known Michigan luminaries. Then you’ll hear from CFPB’s Director Richard
Cordray, followed by a panel discussion on consumer credit reporting, after which you,
our audience, will have an opportunity to tell us your story. So why don’t we get started with our first
speaker. Congressman Hansen Clarke represents Michigan’s 13th congressional district, which
includes our wonderful venue here today, the Detroit Institute of Arts. We thank him for
hosting us. Congressman Clarke. [Applause.] REPRESENTATIVE HANSEN CLARKE: Everyone, I’m
Hansen Clarke, U.S. Representative, and I am a product of the Detroit Institute of Arts.
My mother got me a scholarship here when I was a kid to take Saturday morning classes
in art, and I was able to graduate from college, first in my family, with a bachelor of fine
arts in painting because of this great institution. So I wanted to put in a personal plug for
the DIA. I wanted to thank Director Cordray, Deputy
Director Date, and all of the members here of the Consumer Financial Protection Bureau,
but most importantly, I wanted to thank all of you as our consumer advocates, because
you clearly understand the debt that’s really burdening our families here in Metro Detroit,
and it ain’t the Federal debt. It’s student loan debt, over $1 trillion nationally, and
it’s robbing our people of financial security or even a chance to make a living or go into
business, even if they have a great graduate education. We also are aware living in Metro Detroit
of the impact of home mortgage debt, what it’s done to families, what it’s done to our
communities, forcing people out of their homes, decimating our property tax base, making it
so difficult for local communities to even have the money for police and fire or to keep
our schools fully staffed. Just in closing, what makes this debt so onerous
here in Michigan is this, is that in this State, if you own an automobile, you are required
to have auto insurance, and then the insurers use credit history, the fact that you may
have fallen behind in your payments on your student loans or on your mortgages or on your
credit card statement, use that to charge you more money even though you have a perfect
driving record. That’s outrageous. That’s a double whammy. As a Member of Congress, I’ve introduced legislation
to help forgive and reduce student loans, help stop foreclosures, and write down the
home mortgage principles on mortgages, and as Congressman Conyers will share with you,
to give this Bureau some power in regulating and hopefully outright banning the use of
credit history in auto insurance. Thank you so much for this very important
hearing. This is one powerful way that we can create jobs, is by cutting the personal
debt that our families have to pay, freeing up their money, increasing their purchasing
power. That will make our economy stronger not only in Metro Detroit but throughout our
country. Thank you so much. [Applause.] ZIXTA Q. MARTINEZ: Thank you, Congressman
Clarke. Our next speaker is Congressman John Dingell
who represents Michigan’s 15th district. He has been a steadfast advocate for consumer
rights and is the longest serving Member of the United States House of Representatives
in history. Congressman Dingell. [Applause.] REPRESENTATIVE JOHN DINGELL: The stairs are
a little harder, but it’s always worth it getting up here to talk to you. Good morning. Thank you, Zixta, for that very kind introduction
and to you, Director Cordray, and your very fine staff and the members of the Commission.
Thank you for being here. Welcome to Michigan. And I want to welcome all of our panelists
and those in the audience this morning. This hearing is going to be valuable to us
all, including the Commission but to our people here also. It’s interesting to note that prior
to the Dodd-Frank Act, no Federal agency was tasked with overseeing the credit rating companies.
These companies play a major role in our economy and have played major roles in the financial
collapse that led to the recession from which we are only now recovered. As you all know, your credit rating can make
or break your ability to get a loan, to buy a car, to move into a new home, or to move
forward financially. I believe that how your credit rating is set must be a transparent
process, and it is one which should not be based on smoke and mirrors and secretive ways
of doing business. I want to commend Director Cordray and the
CFPB for working to move forward on a new set of regulations for credit rating bureaus.
It is very much needed. I understand the new regulations will be out at the end of July,
and I hope that the CFPB will move with all speed and due deliberation to make that event
a reality. What the CFPB is doing is helping consumers
by protecting their interests in making sure the bad actors on Wall Street and elsewhere
don’t take advantage of the ordinary citizens on Main Street. I wholeheartedly support the
CFPB and in fact played a small role in its creation when the Congress started the whole
process of financial reform back in 2009 and 2010. My colleagues who are here with you this morning
— and Gary Peters who had much to do with enacting this legislation, my friend John
Conyers and Hansen Clarke and I are going to continue to work together to make sure
that the CFPB has the funding and the other resources that it needs to protect all of
our citizens and to see to it that the benevolent forces seeking to do away with their success
are brought under sufficient control that they can participate in a useful way in the
government. We need strong, sensible financial regulations,
and, Director Cordray, we know you are doing that, and we are pleased, and we wish you
great success in that undertaking. We commend you for your work, and we hope that you will
call on us in the delegation to be of help in whatever way we can. So, again, welcome to Detroit, to the DIA,
which as you will see is a great treasure, and by the way, I’ll just mention a quick
aside. There is going to be a vote on the ballot shortly to increase funding for this
wonderful institution, and it gives me a chance to just mention that. Those of you who are
voters might want to come out and help DIA to see to it that they get the support they
need to preserve this treasure for us, so that not only can the CFPB when they come
to town conduct their business here, but we can continue to derive the wonderful benefits
of this institutions. Thank you for the privilege of being with you. [Applause.] ZIXTA Q. MARTINEZ: Thank you, Congressman
Dingell. Our next speaker is Congressman John Conyers,
who represents Michigan’s 14th congressional district. He is the Ranking Member of the
House Judiciary Committee, and he is also a member of the Conference Committee that
wrote the Dodd-Frank Wall Street Reform and Consumer Protection Act which created the
CFPB. He is the second-most senior Member in the U.S. House of Representatives. Congressman
Conyers. [Applause.] REPRESENTATIVE JOHN CONYERS: Top of the morning,
friends. I am delighted to be here. I am an old visitor to the Detroit Institute
of Arts because of my interest in jazz and the musicians and the music that has been
here so often, and we appreciate this kind of a forum, and we’re delighted to be here.
I urge, as Chairman Dingell did, that we think about the millage involved and that can come
to the DIA but also in the voting process itself. I am one that is trying to figure
out new ways to motivate more people, particularly in the primary. The general, okay, but the
primary vote, which is actually the gatekeeper to whether you even get to the general, is
frequently ignored. So I join in. As you’ve heard from Ms. Martinez, my support of the
Consumer Financial Protection Bureau is very great. Congressman Clarke mentioned this overhanging
student loan debt, and he has a bill that I know I’m on and probably others that are
dealing with this important relationship of credit history to car insurance, and the Clarke
bill is worth our examination. Now, I have no idea what these nine panelists
are going to talk about, because after Congressman Peters gets through, all of us, I mean, we’ve
said it all. We can go directly to the questions and commend the panelists for everything that
they’re doing. My last observation that I think is related
to this is the whole question of deregulation. There’s a move on among conservatives and
the Federal legislature to deregulate everything, and I think it’s connected with this other
related theme that they advance and that I oppose, is that we need smaller government,
let’s make things smaller and less. And that kind of attitude would have never got a financial
protection bureau off the ground, and I think this is where the discussion comes from us,
that we have to examine where this is. I’d like to get some conservative legislators
here to show another point of view, if there is one, on this important subject. Thank you very much for letting me make a
brief presentation. [Applause.] ZIXTA Q. MARTINEZ: Thank you, Congressman
Conyers. And just a point of clarification, we did invite the entire Michigan delegation
to join us today. Our next speaker is Congressman Gary Peters.
He represents Michigan’s 9th congressional district and serves on the House Financial
Services Committee and the House Small Business Committee. He was also a member of the Conference
Committee on the Dodd-Frank Wall Street Reform and Consumer Protection which, as I noted,
created the Bureau. Congressman Peters. [Applause.] REPRESENTATIVE GARY PETERS: Well, thank you,
Director Martinez. Welcome back to Michigan as well, as you were with me at a hearing
that we had in my district to talk about the important work of the Bureau, and it’s great
to have you back. And, Director Cordray, it’s great to have you, and it’s great to have
you head of the department finally, so we can move forward. This is an interesting time for us to have
this hearing and the fact that this is really about the 2-year anniversary of Dodd-Frank,
which was the most sweeping Wall Street reform since the Great Depression. As was mentioned,
I was on that Conference Committee, and I remember 2 years ago spending hours and hours
locked up in rooms as we negotiated this final version of this, and certainly, this protection
bureau is a key part of the Dodd-Frank bill that we need to make sure is strong and can
continue to do the work for consumers. Before this Bureau was formed, there wasn’t
one single agency that really could oversee all of this, and in fact, there were huge
gaps in the types of protection that was available for consumers. And I always thought it was
quite interesting that we have significant consumer protection when it comes to physical
products and the physical things that we deal with, and yet prior to Dodd-Frank when it
came to financial products, there was very, very little protection. In fact, it was only
disclosure, and people said, “Well, you should have read the fine print, and you should have
read that big thick document you get that you get with a credit card,” and as we all
know, that big thick document doesn’t contain consumer protections in that big thick document.
It’s all the ways in which you can be tripped up. And I like to give the example of the fact
when you buy a product, if you buy a toaster, for example, when you buy that toaster, you
usually feel pretty comfortable that that toaster is going to work and it’s not going
to electrocute you, because we have consumer protections in there. In the financial products
industry, there isn’t any. It says you should have looked at the fine print. So if you make
that comparison to the toaster, it would have been like you used the toaster, and all of
a sudden it electrocutes you. And someone says, “Well, you should have looked at the
schematic and seen that after three uses, it was going to electrocute you. Quit complaining.”
Well, we can’t have that kind of process. We have to have protections up front to make
sure that that doesn’t happen, and a part of that certainly is more than disclosure.
It’s having that impact early, particularly when it comes to differences depending on
communities. The Consumer Financial Protection Bureau will
be dealing, what I hope to hear during this panel in addition to credit scoring, how different
communities get impacted dramatically in the financial system, particularly our urban communities
and minority communities that are paying higher fees. And as from example of some of the news
that we’ve been getting with some practices related to mortgages, we find out that urban
areas, particularly African-American buyers as well as Latino buyers, pay higher interest
rates on average, are not in prime mortgages, tend to be in subprime mortgages and pay much
higher fees, which then leads to more defaults and then leads to destruction of their credit
rating as well. In fact, a recent Department of Justice investigation,
which really focused on Wells Fargo — and you may have read about the recent settlement
with Wells Fargo — showed that between 2004 and 2009 — they’re independent brokers — the
found that wholly qualified African-American borrowers were four times as likely to receive
a subprime loan as similarly qualified white applicants. Even though they qualified for
a prime loan, they were put into subprime. Hispanic borrowers were three times as likely
to get a subprime loan. And in addition to being in these higher loans with much higher
interest rates, that they fully qualified for lower rates, when black and Hispanic customers
got prime loans, they paid higher fees than white borrowers. The average African American
taking out a prime loan was charged $2,000 more in broker fees than a similarly qualified
white customer. Latino borrowers paid an average of $1,251. This is why we need the CFPB. We
have to end this process. We have to make sure that everybody, no matter
who you are, no matter where you live, you are treated the same way as anybody else in
this country, and if you are not treated that same way and you are put in a situation then
when your credit report then gets damaged as a result of this, it’s difficult for you
to get auto insurance now with these outrageous laws that we have. It’s difficult for you
now even to get a job. We have employers that are using credit reporting to determine whether
or not to hire somebody, and we don’t know the accuracy of that report. And it may be
because of the discrimination practices within the lending themselves. So this Bureau’s job is extremely important.
It impacts people’s lives each and every day, and I’m going to say to my colleagues here
in the front row, we are fighting right now efforts to try to limit this Bureau’s ability
to move forward. They want to attempt to take the resources away from this Bureau, so it
doesn’t do its job to protect American citizens. So I appreciate all of you coming out today.
I appreciate your testimony. I look forward to hearing from the panelists, but we have
to stand firm. The American people deserve to have a strong protection bureau that protects
our finances. Thank you for being here. [Applause.] ZIXTA Q. MARTINEZ: Next is the Consumer Financial
Protection Bureau’s Richard Cordray. Richard Cordray is the CFPB’s first director. Director
Cordray. [Applause.] CFPB DIRECTOR RICHARD CORDRAY: I hadn’t quite
seen this from this angle yet, so I’m just sort of taking it in. Thank you all for coming today. We are glad
to be here in Detroit to hold this field hearing, and we’re especially glad to be here at the
Detroit Institute of Art, which is a magnificent edifice and foundation, just the kind that
we hope to build at the Bureau for the years ahead. I myself am Midwestern, born and bred. I am
from neighboring Ohio, and I received my undergraduate degree from Michigan State University where
I was a classmate of Magic Johnson — [Applause.] CFPB DIRECTOR RICHARD CORDRAY: — and where
I still have many lasting friends. So I’m well aware that this State has suffered greatly
in the last 10 years with the one-two punch of lost manufacturing jobs and then the foreclosure
crisis. People here, as in some other parts of the country, understand what it means to
fight hard to find traction in a tough economy. After the financial crisis and the extreme
credit crunch of 2007-2008, tens of millions of Americans are now being pursued by debt
collectors. Many people’s credit ratings have taken a hit, and now they are having a tough
time regaining their financial footing. They are blocked from obtaining access to the credit
that is so often essential to meaningful opportunity — to get an education, start a business,
or buy a home. We understand these realities at the Consumer
Financial Protection Bureau because we hear about them from consumers every day. We also
believe it’s important to get out of Washington and listen directly to consumers by meeting
them face to face. So we are glad to be here with you today and have you help us better
understand how credit reporting companies, also called “consumer reporting companies,”
affect people’s daily lives for better and for worse.
These businesses track your credit history and payment records, and they analyze the
information to determine what risks are posed by extending credit to you in the form of
any kind of loan. Over the years, they have made it possible for a broad system of individual
credit to grow and develop in our country, which has encouraged and promoted people’s
pursuit of the American dream of financial success. But whether you realize it or not,
their scorekeeping exerts a tremendous and growing influence over the ways and means
of your financial life. And so it is important for all of us to understand more about their
work and the ways it can affect us. Today, the Consumer Bureau is issuing a new
regulation to expand our supervision program to oversee these credit reporting companies.
The authority to supervise firms is the authority to conduct on-site examinations of whether
and how they are complying with the law. It affords an opportunity to gain a more thorough
understanding of their business models and business practices, to work with them to correct
any problems we find, and to find ways to resolve matters that may be causing harm to
consumers. Before we open this hearing, I want to take
a few minutes to discuss the credit reporting market and our role in overseeing it. This
is a field hearing. We are here to listen, to learn, and to gather on-the-ground information
that will help inform our approach. We are thinking hard about the issues in the credit
reporting market, and we do not yet have all the answers worked out by any means. We need
your help and your insight. As Henry Ford once said, “If there is any
one secret of success, it lies in the ability to get the other person’s point of view and
see things from that person’s angle, as well as from your own.” We believe in the wisdom
of that statement. So, please, tell us what you think today.
Let me start by talking about the credit reporting market. Credit reporting plays a critical
role in consumers’ financial lives, as has been mentioned, a role that most people do
not recognize because it is usually not very visible to them. Credit reports on a consumer’s
financial behavior can determine a person’s eligibility for credit cards, for car loans,
for home mortgage loans, and they often affect how much a consumer is going to pay for that
kind of loan. If you have a credit record that appears to show a greater risk that you
will fail to repay a loan, then you may be denied credit altogether or you likely would
be charged higher interest rates on any loan that is offered to you.
Our credit reporting system involves several key participants. First are the creditors
and others that supply the information about your financial behavior, which can include
your credit card issuers, your mortgage company, or companies that are collecting debts they
claim you owe, among others. Second are those that collect and sell the information, which
are the credit reporting companies. Third are those that use the information, which
largely consist of financial institutions, but can also include insurance companies,
auto dealers, retail stores, and even prospective employers. Fourth are consumers themselves,
who are the object of all this scrutiny and who are immediately affected by it. That’s
you and me. All of these participants play important roles in ensuring that the credit
reporting system operates effectively to help consumer credit markets work better for us
all. The credit reporting market is huge. Almost
every adult in America has a credit file. Estimates are that each of the three biggest
credit reporting companies maintains files on about 200 million Americans, gleaned from
over 10,000 providers of information. The amount of information collected and exchanged
is astounding. Each year, approximately 3 billion credit reports are issued and more
than 36 billion updates are made to consumer credit files.
A credit report contains information about the consumer’s transactions, including loans
that a consumer has paid on time, has paid late, has not paid, or has paid off, along
with current amounts and sources of debt. The credit reporting companies also collect
and report on information about consumer finances available from public records, including civil
judgments, liens, and bankruptcies gathered from thousands of Federal, State, and local
courts and public offices. The information contained in consumers’ credit
reports is used to derive their credit scores, such as various versions of the three-digit
FICO score. Credit scores translate this great mass of information into a single number that
indicates, in shorthand, a consumer’s expected likelihood of repaying a loan. Generally,
the lower the score, the lower a consumer’s perceived likelihood of repaying the loan
compared to other consumers. But credit reports are also used in a wide
range of other types of decision-making, including determinations about eligibility for rental
housing, what deposits are required for utility or telephone service, and premiums, as mentioned,
for auto and homeowners’ insurance. Credit reports are even sometimes used, and increasingly
used, to determine eligibility for a job. Banks, landlords, cell phone providers, and
all kinds of other companies rely on the accuracy of this information to make good decisions
and manage their risk of suffering losses. Credit reporting is an important element in
promoting access to credit that a consumer can afford to repay. Without credit reporting,
consumers would not be able to get credit except from those who already have had direct
experience with them; for example, from local merchants who know whether or not they regularly
pay their bills. This was the case 50 or a hundred years ago with “store credit,” or
when consumers really only had the option of going to the local bank. But now consumers
can instantly access credit, because lenders everywhere can look to credit scores to provide
a uniform benchmark for assessing risk. Conversely, credit reporting may also help reinforce consumer
incentives to avoid falling behind on payments or not paying back loans at all. After all,
many consumers are aware that they should make efforts to build solid credit.
So this critical market is at the heart of our lending systems. It has enabled many of
us to get credit and to afford a home or a college education. But it is also clearly
a market that can cause considerable problems for consumers. For example, sometimes credit
reports contain errors that inaccurately reflect people’s financial histories and can unfairly
block them from getting approved for credit or make it cost more than it should. Consumers
also can encounter great difficulties at times in getting errors corrected. When the Consumer
Bureau first opened its doors almost a year ago, we asked people to share their consumer
experiences with us. They have been doing that ever since, and we have heard reports
from many consumers that their credit reports are not accurate, and it is difficult to get
them corrected. Because of the critical role that credit reports play in consumers’ lives,
it is our job to make sure we understand the full extent of these problems and address
them effectively. Given its enormity, given its influence, and
given its wide impact on our overall economy, you can see that there is much at stake in
ensuring that the credit reporting market is working properly for consumers.
Today the Consumer Bureau is announcing that we will be supervising the credit reporting
companies that are the larger participants in this marketplace. These companies have
never before been subject to any Federal supervision program. Starting this September, we will
be monitoring and examining them, just as we monitor and examine the big banks. Our
new supervision authority means that we will now have a clear window into the entire credit
reporting system. Up to this point, no single Federal Government
agency could access all the information necessary to generate a complete picture of what was
happening inside these companies. Now the Consumer Bureau has the clear authority to
oversee this industry, including the very largest credit reporting companies. Our oversight
will also extend to specialty credit reporting companies, such as those that focus on payday
loans or checking accounts, as well as resellers of credit reports and those that analyze credit
report information. This new supervisory authority will complement our existing authority over
the creditors that supply much of the information to the credit reporting companies.
Our country’s credit system is a resource in which we all have much at stake, both directly
and indirectly, and we need this system to operate effectively in order for the credit
markets to work properly and fairly. Because no Federal agency has previously had
the kind of broad access to information about the operations of the credit reporting companies
that the Bureau will now have, there is much we do not know yet about the true risk that
consumers face in this market. As we go forward, we will be gathering data to determine how
the various parts of the Consumer Bureau can best act to protect consumers. We start with
three areas of focus. First, our oversight of the credit reporting
companies will help us make sure that the information provided to them in the first
place is itself reliable. Lenders and others who furnish information to the credit reporting
companies are legally required to have policies in place about the accuracy and integrity
of the information they report, which includes identifying consumers accurately, correctly
recounting their actual payment history, and keeping their information and recordkeeping
in order. Otherwise, their sloppy work becomes the true source of harm to the consumer’s
overall creditworthiness. We want to deepen our understanding of the recordkeeping and
reporting practices by lenders, and we want to see what the credit reporting companies
can be doing to test and screen for the quality of information they receive.
Second, given the number of complaints we have already heard from consumers and the
findings reached in some, but not all, reports on the subject, we want and need to know more
about the accuracy of how the credit reporting companies assemble and maintain the information
contained in consumer credit reports. Accuracy is critical for consumers and for markets.
We recognize that achieving such accuracy takes a great deal of discipline and effort,
particularly for a company that is handling and processing a huge volume of information.
But because of the increasingly significant role that these reports are taking on in our
financial lives, the collateral consequences of mistakes can greatly harm consumers. The
wrong information may cause them to be denied a loan, to be charged a much higher interest
rate, or to be passed over for a job, causing them serious economic hardship, and inaccurate
credit reports also deprive lenders of essential information they need to assess credit risk
properly. Third, we are keenly interested in understanding
more about the problems and frustrations that consumers tell us they encounter in trying
to resolve disputes about the information contained in their credit reports. Some errors
may be unavoidable even in the best of systems, but when consumers find what they perceive
to be erroneous information in their credit reports, they should not be burdened by unreasonably
laborious processes to get errors removed from their files. There are certainly valid
reasons why a credit reporting company must conduct a reasonable investigation when a
consumer disputes information and follow the procedures outlined in the law, but the harm
done by errors is borne, above all, by consumers, and they deserve straightforward, effective,
and timely mechanisms for addressing disputed items.
These initial areas of concern — accuracy of the information received by the credit
reporting companies, their accuracy in assembling and maintaining that information, and the
processes that govern error resolution — are just a start. They are the obvious and essential
basics, but as we learn more about this market from consumers, from the supervised firms,
and from others, we will adapt and adjust. The Fair Credit Reporting Act sets out an
ambitious goal. Credit reporting companies “shall follow reasonable procedures to assure
maximum possible accuracy of the information.” In this context, we are here to correct what
is not going well, and we are here to see that this market is made to work better for
those who are affected the most, and we will exercise our supervisory authority to make
sure that the consumer financial laws are being followed.
So the credit reporting industry is continuing to become more central to people’s lives just
at a time when they are experiencing widespread problems with credit availability. Many Americans
have been greatly affected by the financial crisis, the housing crash, and the deep recession
that followed. Today, because of accumulated debts, foreclosures, and bankruptcy filings,
many people have more negative information on their credit reports than they did before
the crisis. As I said earlier, this country’s credit reporting
system is a resource in which we all have a stake. That system must merit our trust
and confidence for the credit markets to be perceived as fair. We all share in this responsibility,
but the credit reporting market is not one where consumers can shop around among different
providers, for people have no choice about whether to have any of the credit reporting
companies keep track of their credit history. That is going to happen whether you like it
or not. That is why the Consumer Bureau’s new authority is so important and why it must
be exercised carefully and effectively. What consumers can do, however, is be as smart
as possible about how they manage their own credit. They need to know how to build up
their creditworthiness, so they can take control over their credit history in a positive way.
They also need to be aware that Federal law gives them the right — Congress has passed
this law — to a free credit report from each of the nationwide credit reporting companies,
which can be obtained at AnnualCreditReport.com once each year. It’s critical for each of
us to exercise that right. Keep in mind that nobody else has as much incentive to protect
you as you have to protect yourself. Checking your credit report can reveal odd entries
that you do not recognize, which may be signs of identity theft. It also can uncover errors
that will hurt your creditworthiness unless you dispute them and get them fixed. I urge
every consumer to perform this self-check at least once every year. Starting today,
we are including advice about how to do that in the “Ask CFPB” function on the Consumer
Bureau’s website at ConsumerFinance.gov. Our website also provides tips for consumers on
how to manage their credit generally, how to get and keep a good credit score, and how
to navigate the consumer credit markets. So, as we wade into these issues, we look
forward to hearing more from you both today and in the future. Share your thoughts and
experiences. We are intent upon hearing from consumers about their personal experiences
to inform our work. To quote Henry Ford once again, “Coming together is a beginning. Keeping
together is progress. Working together is success.” Thank you.
[Applause.] ZIXTA Q. MARTINEZ: Thank you, Director Cordray. At this time, I’d like to invite our panelists
to join the stage. The CFPB’s Deputy Director Raj Date will lead our panel of experts through
brief statements and Q&A. While our panelists take their seats, I’d
like to take a moment to thank those joining by a livestream. The CFPB’s website address
is ConsumerFinance.gov. You can follow us on Twitter at CFPB. The hash tag is “credit
reporting.” Deputy Director Date, you have the floor. RAJ DATE: Thank you, Zixta. As Zixta just mentioned, we’d like to step
into the next phase of our field hearing this morning, and there may be a way to turn on
this microphone that I’m not aware of. Much closer. In this phase of the field hearing, what we’d
like to do is hear from experts, experts who know a great deal about the consumer reporting
system in the United States, experts on two panels which are drawn from the industry and
industry representatives, as well as experts who spend a fair amount of their time thinking
about how it is that the consumer reporting system in the U.S. impacts consumers, creates
issues or problems or opportunities for consumers over time. Here is how we’d like to conduct this portion
of our hearing. We will ask both sets of panelists to provide opening statements, which owing
to the constraints of time will have to be slightly more brief, I think, than any of
us otherwise would want, and we’ll take in opportunity for my colleagues here at this
table from the CFPB to be able to follow up with some questions. But before we do any of that, why don’t I
introduce the folks who are up here with me. You have already met the Director of the CFPB,
Richard Cordray. To my left is Peggy Twohig. Peggy serves as the Assistant Director for
Nonbank Supervision at the CFPB. To my right is Tom Oscherwitz. Tom serves as the program
manager for Credit Information Markets at the CFPB. And now all the way on my left-hand side is
Stuart Pratt. Stuart serves as the President of the Consumer Data Industry Association.
Next is Ms. Anne Wallace. Ms. Wallace is the President of the Identity Theft Assistance
Corporation and is also the Senior Director of the Consumer Financial Services organization
at Financial Services Roundtable. To her right, I suppose that is, is Mr. Terry Clemans who
is the Executive Director of the National Credit Reporting Association. And now stepping
all the way to Tom’s right is Professor Mary Spector. Professor Spector joins us from SMU’s
Dedman School of Law, and then finally, Mr. Bill Sermons, he is the Director of Research
at the Center for Responsible Lending. So why don’t we begin with our consumer-focused
panel, and before we do that, I should also acknowledge that a third panelist had meant
to join us this morning, Professor Howard Beales from the George Washington University.
Owing to an unanticipated travel mishap, the likes of which I have suffered many times,
he’s unable to be here. So I just wanted to thank him for being willing in any event. So why don’t we start with you, Mr. Sermons,
for your opening statement. BILL SERMONS: Thank you. I’d like to thank
CFPB Director Cordray. ATTENDEE: Can you move the microphone? BILL SERMONS: Can I move it closer? All right.
Is this better? Ah, there we go. So I’d like to thank CFPB Director Cordray,
Deputy Director Date, and also Assistant Director for Community Affairs, Zixta Martinez, for
having me and the entire consumer affairs staff for this opportunity to talk about what
has really become a factor that’s really central to the lives of consumers, which is consumer
credit reporting. In the wake of the Justice Department’s settlement
with Wells Fargo last week that provided further evidence of the discriminatory lending practices
that led to the financial crisis, we at CRL are heartened to hear the announcement by
Director Cordray that the CFPB intends for its oversight of credit reporting agencies
to result in greater accuracy in credit reporting and greater accountability to those agencies
in the dispute resolution process. Of course, the identification of which reporting
agencies to oversee and stating the intent to improve accuracy is just the beginning,
and I’d like to highlight three things that we’d like for the agency to consider as it
moves forward. First, the inaccuracies in credit reports represent a significant risk
to consumers, to the institutions that lent to them, and to the economy as a whole. Having
a reliable way to assess a consumer’s ability and willingness to repay is essential for
providing access to the safe and affordable credit that allows Americans to become homeowners
and to build wealth. Reports have estimated that between 3 and
37 percent of credit reports retain errors, and the burden to find dispute and resolve
those errors rests too much on consumers. For the sake of consumers and for the sake
of our entire economy, these errors must be dramatically reduced, and the process to resolve
them must be improved. Second, the CFPB should protect consumers
from the unfair debt collection and predatory lending practices that are facilitated by
credit reporting. Some debt buyers and debt collectors routinely misuse their ability
to furnish information to credit reporting agencies as a way of coercing consumers to
pay debts that either don’t belong to them, have already been paid off, or may have been
discharged in bankruptcy, and so they have protection from those. Additionally, some of the most egregious predatory
lending practices are targeted primarily or even exclusively to people with blemished
credit. In the run-up to the housing crisis, it was common for predatory mortgage lenders
to seek out African-American and Hispanic homeowners with equity but with blemishes
on their credit in order to bleed the equity from their homes in the form of fees, and
last year, we released a report on what is called a “yo-yo scam,” which is an auto lending
abuse that is really targeted and depends on people having no other options other than
the dealer for which to go to in order to get a loan. And lastly, we’d like for the CFPB to fully
account for the impact of the inaccuracies on consumers’ credit reports when it evaluates
the impact of greater accuracy. It’s not just the denial of credit. It’s also where people
can live, the jobs they can keep, whether or not they can keep those jobs, and whether
or not they can pay for insurance. So I’ll quickly summarize that we’d like for
the agency to set the expectation of zero errors and hold agencies accountable for meeting
that expectation, to protect consumers from unfair treatment in terms of abusive lending,
and also to fully account for the impact of inaccuracies as it considers remedies. Thank
you. RAJ DATE: Thank you, Mr. Sermons. Professor Spector. MARY SPECTOR: Can you hear me? Okay. Thank you, Director Cordray, and to all the
members of the Consumer Financial Protection Bureau for the opportunity to be here today.
It is a beautiful space and a treat to come up here from Dallas, so thank you. I teach in a law school clinic. I supervise
students who represent — law students who represent low-income clients with all kinds
of problems. Many of our clients have been sued by debt buyers to collect consumer credit
card debt. Those consumers often find themselves what I call the “one-two punch,” and that
one-two punch comes when the public records of that litigation show up on credit reports. The first punch comes from the collectors,
and the collectors, because the litigation itself may involve unfair practices, much
of that litigation is centered in urban areas and communities with high minority populations.
Other — some of the unfair collection practices in the litigation include suits to collect
stale debt or suits to collect accounts that have already been paid. One study of debt collection litigation by
debt buyers found that more than 75 percent of the cases included affidavits that we have
now come to know as “robo-signing.” Fifty percent of the cases result in dismissal.
Fully, 12 percent of cases served or filed in the courts are never served on the consumers,
and 40 percent of the cases result in default judgments. In the case of a dismissal or a default judgment,
often the first time the consumer learns about the litigation is when she sees the credit
report, when she has applied for a loan, a mortgage, or a car loan. That’s when the consumer
suffers the second punch. It doesn’t come from the collector, but it comes from the
Fair Credit Reporting Act. First, the credit reporting agencies are entitled
to rely on the accuracy of the public records. That means that even if the records are wrong,
the consumer has no remedy in the first pass at correcting the report and has to wait until
a reinvestigation of some sort occurs, and that means time, lost credit opportunities
or apartments. And in many cases, the only opportunity or what the consumers present
to the agency never actually makes it to the furnisher of the information. The automated dispute process is another process.
As Mr. Sermon said, it’s one that is very difficult for consumers to manage. It often
means that people aren’t reading the records carefully, that the consumers are providing
to the agencies, and little, if any, relief is available for consumers after using the
dispute process. These problems are real, but I’m optimistic they can be corrected with
the supervisory authority of the CFPB. Some potential solutions would include limiting
or preventing the use of name-only reports, which collect broad information about people
with similar names or Social Security numbers, and are far over-inclusive. A second type of remedy might be the limit
of types of public records that are reported, such as preventing the reporting of filings
at all without a disposition of that litigation. A proposed IRS regulation already prevents
the reporting of certain kinds of medical debt. And third would be to expand or enhance the
dispute process, to make it more transparent, to permit the consumers with more flexibility
and challenging incomplete as well as inaccurate records. These are only a few suggestions. I know that
the Bureau will hear many more. What’s clear is that reform is necessary, and with today’s
announcement, it appears to be on the way. Thank you. RAJ DATE: Thank you, Professor Spector. Why don’t we, before we move to the next panel,
spend a few minutes just following up on some of the issues raised by the last two speakers.
Uncharacteristically, I will allow someone else to ask first. Tom? TOM OSCHERWITZ: Thank you, Raj. To start off, we’d like to ask the panelists
to help us put the role of credit reporting into some context. So compared to a generation
ago, how does credit reporting affect consumers’ live? What’s changed? For Bill and Mary. MARY SPECTOR: Well, I can start by saying
that when the Fair Credit Reporting Act was first enacted, there was not nearly the kind
of technology that we have today, and so the increase in technology changes the whole system
from the collecting of the data to the reporting of the data to the dispute process to challenge
the reports of the data. So that would be one of the biggest changes that has occurred. BILL SERMONS: I think I would certainly agree.
I also think that the issue of identity theft is a big one. The responsibilities or the
opportunities for there to be errors in reports have increased, both from that perspective
and for the kind of data mining that’s going on to construct records. I also think the
consolidation into, I think, a $7-billion industry of the Big Three credit reporting
agencies also reflects a big difference from how things were done when my parents were
applying for loans and that sort of thing. RAJ DATE: I wonder if I might follow up on
a couple of elements that both of you mentioned, actually. You both talked about potential
problems for consumers within the credit reporting system, but also the potential, it seemed,
that those problems do not uniformly visit all consumers, that consumers in some circumstances
are more likely to be afflicted by certain kinds of problems than others. Could you just
say a little bit more about that, particularly in light of the fact that we are still recovering
from the financial crisis, a credit event across the country that is virtually unprecedented? BILL SERMONS: Right. And so I think Congressman
Peters actually, I think, answered this question really well. Actually, probably, the thing I would not
want to get away from here without talking about is the fact that this Wells Fargo settlement
really sort of lays bare the kind of discrimination that was going on in the years in the run-up
to the financial crisis. So African-American and Hispanic homebuyers who should have gotten
safe loans, fixed-rate loans that they’d still be repaying did not get those loans. Their
white counterparts who had the similar qualifications got those safe loans, and the outgrowth is
really appalling. Here in Michigan, a CRL study that we put
out last year shows that 45 percent of African-American homeowners who have bought homes in that time
period have either lost those homes or will lose them — 45 percent. Twenty-one percent
of all buyers in Michigan fall into that category. And so what we see there is that outright
discrimination caused a foreclosure, which will take 7 years to get off a record, which
may keep somebody from getting a job, which then may keep them from being able to buy
a home, which really will have intergenerational impacts. And so I think that not only will
these impacts stay with people for years to come but maybe even for generations to come
if they can’t live in safe communities because they can’t rent there. So I can’t understate or I can’t overstate
what this impact has been and the differential impact on African Americans and Hispanics. MARY SPECTOR: Well, it’s not just in the mortgage
industry. It’s in the payday lending industry, and it’s also been in the debt collection
industry as well. There are studies that show payday lenders and other alternative financial
products are marketed more aggressively to minority communities, African-American and
Hispanic families, many of whom are single-parent families who look to that kind of credit to
meet the weekly bills. That debt is aggressively collected, and that means it’s collected in
neighborhoods that are collected from minority and other lower income borrowers. It has a
tremendous effect when that collection account appears on a credit report. It can appear
as a collection account. It can appear as a judgment, and so it can keep appearing for
quite a long time after an original default. RAJ DATE: That’s helpful. I think we have time to follow up on one or
two more questions. Peggy? PEGGY TWOHIG: Good morning, everyone. I want to get back to the general issue of
credit report accuracy. As we’ve talked this morning, the accuracy of credit reports is
critical to consumers and to the system. If you could, give us, Professor Spector, your
perspective on how are we doing in terms of credit report accuracy. What’s your general
perception of the accuracy of the system? MARY SPECTOR: Well, accuracy, it sort of depends
on what you mean by accuracy. Okay. Broadly defined, the National Consumer Law Center
says that inaccurate reports account for nearly 40 percent of all consumer reports. That’s
a lot of inaccuracy. Other reports put the number someplace smaller, as low, as I think
Bill mentioned, 3 percent. But then again, it depends on how you define inaccuracy. A study from the Federal Reserve shows that
more than 11 percent of all medical collections that appear on credit reports have already
been paid. Okay. Showing accounts that will already have been paid will then have a negative
effect if the account is being shown as open or delinquent, and we know how medical debt
is handled. It takes time off for the various entities involved to get the payment to teach
other, and so that has a tremendously negative effect on consumers who are already suffering
from health problems as well. The Columbus Dispatch, our Director’s home
State, the newspaper there recently published a four-part series that was really terrific
on consumer credit reporting. It looked at complaints that were filed with the FTC and
certain Attorneys General, and it found that of the complaints filed, more than 15 percent
of those complaints related to errors in reports, related to public record errors, and those
are the ones that we presume to be accurate. PEGGY TWOHIG: Thank you, Professor Spector,
and, Bill, did you want to add to that? BILL SERMONS: I would simply add that I think
that if you think about the low number, that 3 percent, that really still is 6 million
consumers, and that’s just too high for there to be inaccuracies that high. And I think that Mary mentioned the medical
industry or medical debts. I mean, I think the medical industry has taken great strides
in recent years to use technology, even simple technologies like checklists, to get rid of
errors and take them from errors that are on a percent basis to an error-per-10,000
basis, and I really think the industry itself, the credit reporting industry, needs to take
responsibility for the accuracy, not just responsibility for resolving disputes, but
to be able to really say, “I can stand behind this report that it’s an accurate report.” RAJ DATE: I wonder before we move to the next
panel, in a sentence or two for each of you — you know, financial education is an important
part of the Bureau’s mandate. So if there is one thing that you wish that every consumer
in the United States knew about the consumer reporting system, what would that one thing
be? BILL SERMONS: That they could get a free credit
report every year and know what’s on it, just as Director Cordray indicated. MARY SPECTOR: If they know that, if they have
a problem, to write down the problem and send a written complaint to the consumer reporting
agency to start a dispute process. RAJ DATE: Well, thank you very much, both
of you. Why don’t we turn in the interest of time
to our second panel, and again, why don’t we begin with opening statement. Mr. Pratt,
if you wouldn’t mind starting. STUART PRATT: Thank you very much. Director
Cordray, thanks for the invitation to be here today and the same to Deputy Director Date
and all of the CFPB staff. We appreciate the fact that you’ve invited us as industry to
participate in this field hearing, and our time is short. So I’ll just make three key
points, and then we can dive into a little Q&A. And I think that’s always a richer way
to work our way through the details. But the first is — and I think that, Director
Cordray, you indicated some of this in your own opening remarks, and that is that the
credit reporting system we have in this country today, which, by the way, is studied all over
the world because it is the most successful system in the globe today, has done something
that was absolutely necessary in our society. It has replaced bias and opinion with facts
and data. That’s very important. We’re judged based on the decisions we’ve made, and by
and large, these are good decisions. We’re judged based on a history that sets into place
maybe even a struggle that one of us has had during the great recession, but sets it into
a context of a consumer who has worked hard for all of their life, and they’ve made payments
throughout their whole life. So it is a credit history. It shows, it tells our story across
the decades of our life as we interact with the financial services industry in this country.
So, in our mind, the credit reporting system establishes a baseline of fairness that just
simply wasn’t there before. It also encourages competition. Competition
drives down price. Competition encourages more choices, and we think that’s critically
important in any healthy financial services marketplace, and because of that choice, consumers
can learn what products are best for them and sometimes learn what products are not
best for them. Finally, credit reporting systems — our members
in the CDIA protect consumers. Our data and our systems, our analytics are on the front
line of preventing identity theft. We partner and deliver right at the front end of the
application the types of products that are available to consumers, and we make sure that
identity theft is stopped before it has started. And that’s critically important. Let me just talk a little bit about this new
relationship we have with the CFPB, and I see I am being told I have less than a minute
to go, but I’ve never been told I don’t talk fast. So let me just take a run at it here. Regulation is not new to us. Laws are not
new to us. Working with State Attorneys General is not new to us, and we see this as simply
an extension of the dialog we have always had, albeit one that will be a little bit
different going forward. But I’m very encouraged by something you yourself, Deputy Director
Date, said, and so I’m going to quote you here, if you don’t mind, and that is, Deputy
Director Date said the following: “First, we are committed to basing our judgments on
research and data analysis. We won’t shoot from the hip. We won’t reason from ideology.
We won’t press a political agenda. Instead, we are going to be fact-based, pragmatic,
and deliberative.” I don’t think I could have said it better myself. That is an excellent
framework for that dialog to continue forward. We certainly, as the credit reporting industry,
look forward to having that dialog. CDIA looks forward to working with our members to ensure
that your views are shared within our industry and likewise their needs are shared with you. And just in closing, I’ll just say that CDIA’s
members have never waited for regulators or laws to tell us what to do when it’s right.
Going as far back at 1960, we established data practices, which ultimately influenced
and framed the Fair Credit Reporting Act, and when it was enacted in 1970, the same
is true in the ’96 amendments to the FCRA. And the identity theft initiatives we put
into place, which were acknowledged by the Clinton administration, were in large part
what was codified in 2003 in order to assist consumers who were victims of identity theft. So we look forward to continuing to be an
industry that is proactive, independent of our regulators, and we look forward to the
dialog that we certainly will have going forward with the CFPB. Thank you. RAJ DATE: Thank you very much. Ms. Wallace. ANNE WALLACE: Thank you so much, Director
Cordray and Deputy Director Date and also Representative Clarke. It’s lovely to see
you all here this morning. I am Anne Wallace, and I am President of ITAC,
the Identity Theft Assistance Center. That is an affiliate. We are an affiliate, a non-profit
affiliate of the Financial Services Roundtable, and we have a very special mission. It is
to help consumers recover from identity theft. Our mission is to help consumers recover,
to educate, raise awareness about identity theft and how consumers can protect themselves,
and finally, to partner with law enforcement to catch the criminals who commit this terrible,
terrible crime. Well, I don’t have to tell you that identity
theft is a terrible crime and it’s the number-one complaint received by the Federal Trade Commission
last year and that it can wreak havoc with your credit report, but let me just quickly
tell you about this service that we have. We have helped 110,000 consumers recover from
identity theft since 2004, including 3,000 from the State of Michigan. The way this service
works is that you first go to your financial institution that’s a member of ITAC and report
the problem. They’ll solve the problem within that bank or credit card issuer, and then
they’ll refer you to ITAC where one of our agents will get a credit report from all three
credit bureaus and walk the consumer through that credit report to find any mistakes, to
find any fraud that’s happened. Then we help the consumer correct any problems that exist
and notify all the companies where fraud has occurred or is suspected. Now, the obvious benefit to this is that,
first of all, it’s a calm, reasonable voice on the phone, a helping hand at a time consumers
really need it, and it just cuts the length of time that it takes for a consumer to recover
from identity theft. So it’s a terrific service, and what’s more, it is the starting point
for our partnership with law enforcement, because we use the information. We take that
information that we’ve accumulated from the identity theft incidents and feed it into
the Federal Trade Commission’s Consumer Sentinel database. It’s a database that law enforcement
all over the country can access to find the criminals and prosecute identity theft cases. Finally, as part of our mission is education,
and we are just very, very committed to helping consumers understand what they can do to protect
themselves and to feel empowered in this process, that they are not without tools, and they
can manage their credit information and do a better job in that. And finally, I just want to say that we are
delighted to be here and want to work with the CFPB, particularly helping people, the
most vulnerable population servicemembers, the elderly and so forth, recover from identity
theft. I will just finally say that last month, USAA, one of our members who, of course, represents
a lot of military servicemember families, for 317 people to us who we helped, so we’re
very proud of that fact. Thank you so much. RAJ DATE: Thank you. Before we turn to Mr. Clemans, I should point
out we talked a lot about accuracy. I note even from here a grotesque typographical error
in your name card there. So we do, in fact, live in an imperfect world. So, Mr. Clemans,
please. TERRY CLEMANS: Thank you, Deputy Director
Date, Director Cordray, and CFPB team for inviting us here today. ATTENDEE: Can you put the mic closer? Thank
you. TERRY CLEMANS: Okay. Thank you. The National Credit Reporting Association
is celebrating our 20th year of representing our members, who are known as resellers in
the Fair Credit Reporting Act. These are specialty consumer reporting agencies that provide credit
reports and other products to mortgage lenders and to tenant screening companies. NCRA members
are 80 percent of the companies in the United States that can produce a credit report that
meets the requirements of HUD, Fannie Mae, and Freddie Mac for mortgage lending. Our
members routinely provide updates and corrections to these reports for mortgage lending and
tenant screening. As we are discussing here today, for the first
time the government will start examining the credit reporting agencies in a way that is
analogous with what the banking industry has experienced for decades. While the credit
reporting industry provides a vast majority of Americans a complete and accurate credit
history, there are also many Americans who experience problems, and that’s what we’re
focusing on. These problems have been well documented by the CFPB and the FTC through
the volumes of complaints. NCRA’s unique role of working with the consumers,
the lenders, and the credit repositories to provide the most accurate credit reports possible
gives us a unique perspective on this. We provide these lenders the most accurate credit
reports possible by working with these channels. As we’ve also talked about, one of the greatest
debates in the credit reporting system is about the accuracy of the data. It’s important
to remember that even at the most conservative 1 percent error rate, that means 2 million
Americans have an error in their report that can create a problem when they’re trying to
seek shelter. To resolve these issues, I believe one of
the most important elements that the CFPB can bring to this new supervision is that
of not only reviewing the industry for compliance with the FCRA but also examining the limitations
put on the credit reporting process. Many of these limitations are imposed not by law
but by policies of dominant industry participants, lenders, and even the formerly government-sponsored
enterprises, Fannie Mae and Freddie Mac. Some of these limitations also come with questionable
motives. For example, Fannie Mae and Freddie Mac completely
rewrote the time-in-recession-tested mortgage credit reporting standards of the mid 1990s,
seeking cheaper and faster reports to expedite mortgage lending. These expedited decisions
were credit score-driven and did not consider the alternative credit data only due to restraints
of speed. The quest for speed and disregard for quality led to decisions based on incomplete
and often inaccurate data, resulting in the recent credit crisis and enabling other bad
lending decisions. This was a significant contributor to the housing crisis and unfortunately
is a practice that’s still in place today. In closing, we urge the CFPB to go deep into
the weeds of the industry to truly understand the complex issues that drive it. Review some
of the practices that developed during the era that brought about the mortgage crisis,
critically questioning the real value and impact. Practices regarding credit reporting
agencies being owned by the lender whose greatest financial interest is the outcome of the loan,
practices like credit rescoring only offered to mortgage lenders, compliance of programs
with the ECOA that have policies that disregard credit trade lines only due to the size of
the creditor, the impact of medical collections on a consumer’s credit worthiness are just
a few of the non-FCRA areas in need of your scrutiny to obtain a better harmony between
the credit reporting agencies, the lenders, on behalf of the consumers we all ultimately
serve. Thank you. RAJ DATE: Thank you. Again, why don’t we have the chance for some
questions. Tom, would you mind starting? TOM OSCHERWITZ: Sure. This is for the industry
panelists. Many consumers think of credit reports as a tool used to evaluate credit
applications, but as we’ve heard today, there are a lot of other purposes that businesses
use credit reports. So I would wonder if the panelists could provide for us a description
of the range of types of business decisions that credit reports are used, and in that
vein, if that’s one big single change in the use of credit reports in the past generation,
what would you say it is? Stuart? STUART PRATT: So, Tom, actually, it’s a good
thing I have Director Cordray’s speech here, because he answers that question in a lot
of ways. Since 1970, the Fair Credit Reporting Act,
the law that regulates the credit reporting industry, the law that regulates those that
furnish data to the credit bureaus, and the law that regulates every company that uses
the credit report, that law has had something called “permissible purposes,” a list of various
uses that were permitted under the statute, and it’s always been, of course, credit and
all the various aspects of credit, account portfolio review, making sure I understand
that my portfolio is safe and sound longitudinally, but there’s always been use of credit reports
by a landlord who may want to evaluate a consumer’s ability to pay or propensity to pay. It’s always been true that insurers could
use credit reports for underwriting. It’s always been true that employment screening
has been a part of the consumer reporting agency regulation, and I think that’s an important
distinction. Then, of course, those who wrote the Fair Credit Reporting Act back in 1970
were very prescient. They didn’t write a law that regulated just credit reports. They wrote
a law that regulates consumer reports. It’s a much wider span of data that is regulated
for accuracy where I have rights as a consumer to dispute that information. So, Tom, in that
sense, it’s not new news. I would correct something I’ve heard a couple
of times, and that is that some would suggest there’s an escalation in the use of credit
reports for employment. We have surveyed our members, and we find 5 percent or less of
the total transactions of the largest background screening companies in the country involve
the use of a credit report. That is not inconsistent with the Society for Human Resources Management
data. They surveyed their members and asked a simpler question: Do you use a credit report
ever for any job opening? And 60 percent of those employers said, “Yes. For some job openings,
I may use a credit report.” In reality, once you get down to that granular level, though,
of how often is a credit report really part of the screening process, the answer is very
infrequently and used only for certain types of purposes, and that’s why that’s remarkably
different. I think sometimes we’re conflating kind of the larger number and the smaller
number at the same time, but I think those are generally, Tom, the uses that have always
been there. And they’re regulated today just as they were back in 1970. ANNE WALLACE: You know, I think one thing
that we should also focus on that has changed, I think, is consumers’ use of their credit
reports. I will just say that our recovery service at ITAC is based on a credit report.
So we couldn’t do our recovery service if we didn’t have the consumer’s credit report
and walk them through it to find what was accurate and what wasn’t accurate. But again, I think that one thing that has
changed is the extent to which consumers are aware of their credit report and use them
and actively monitor what’s in there to be sure that it is accurate. So I do think that
has changed, just consumer awareness of credit reports and the importance that it is to them
in their lives and their active involvement in the process. TERRY CLEMANS: I’d like to add on to that
in regards to something Stuart started in the use of credit for employment. First off,
credit scores are not used in employment. A lot of people see in their disclosure that
a credit report is going to be pulled, and they automatically think score because of
the increase in consumer awareness, but scores are not utilized. And what we see from our
members providing credit reports to the employment screening industry is also that what the credit
report is used for many times is not for the data of how someone has paid their bills but
just confirming the identity of the applicant to make sure the Bob Smith that is applying
for the loan is really the Bob Smith and checking out other background investigation processes
starting from that. So I think there’s a little confusion there, and there’s some misstatements
in the press that have been fueling this debate. RAJ DATE: Stuart, did you have something to
follow up on ? STUART PRATT: Could I just make sure that
we’re pouring the right foundation in your hearing? And I realize we have more questions.
I want to respond to just two thoughts that have been at the table, and one is the question
of accuracy. Candidly, accuracy of credit reports, nobody is more interested in the
accuracy of credit reports than the industry itself. That’s the product we sell. That’s
why we sell it. CDIA represents resellers as well as the nationwide
databases, probably the largest volume of all credit reports issued in this country
overall. And, Deputy Director, I know you know this,
but we are not shying away from the hard questions. When we were asked about accuracy, our largest
corporate members gave us the money to establish a grant, and we went to a third party. It
was a “let the chips fall where they may” type of study, and we did study the question
of accuracy. And I agree with the professor that “accuracy” is a difficult term to define. We looked at it a couple of different ways,
though. We said when a score point change changes over a period of time, we’re measuring
consequence of errors, not just simply whether or not my middle initial was missing from
the credit report, because ultimately that’s what’s important to us, this gatekeeping document,
did it or did it not let me in, based on fair and correct information. So, yes, it’s true. We found that when you actually look at the
real world of scorecards, in other words, how a lender prices and the price points that
a lender charges, less than a half percent of consumers have an item in their credit
report which is going to cause them to move from a lower pricing tier to a higher pricing
tier or vice versa. And by the way, for the sake of transparency,
not only was that produced, but we encouraged that third party. PERC is the group out of
Durham, North Carolina. We then turned not only the results of that data to the CFPB
and to the FTC, but we also offered both the Federal Trade Commission and the CFPB the
opportunity to obtain the raw data that was used to derive those results, so that you
weren’t blind to what was underlying the results themselves, and you could retest that information,
which we think is the better scientific method. And we sought outside professors at Duke University,
the Wharton School of Business, University of Pennsylvania, as well as UNC-Chapel Hill
to peer-review the work that we did to make sure that it met what we felt was more of
an academic standard that you would consider in the scientific journal world. We’re not
shying away from those hard questions. That’s part of this fact-based dialog that we hope
to have going forward. And by the way, Tom, I would applaud you for
having reached out to PERC and having had a separate dialog with PERC, independent of
us, to hear a little bit about the accuracy study that we conducted. RAJ DATE: Well, thank you. If I could just
come back to this notion to credit reports being used, consumer reports being used in
context other than lending decisions, especially in light and in the aftermath of the financial
crisis. Bear with me for a second. If it’s true that significant home price depreciation
in some areas is tightly correlated with increased delinquencies on mortgages and if it’s true
that in some basic sense the fact that my house just appreciated by 30 percent does
not necessarily make me a worse driver, could you talk about sort of what you have seen
in terms of the use of reports after the crisis compared to before in some of these non-lending
industries? STUART PRATT: So I don’t have data at my fingertips,
of course, to fully flesh that out, but let’s talk a little bit about the insurance industry’s
use of credit reports. I understand how I drive my car and what does a credit report
indicate about that, but I will tell you — and this is really the benefit of what we call
“decision sciences,” which is the broader umbrella in which we then develop credit scoring
tools. And these tools are developed by third parties. You, of course, worked for a large
lender at one time who had incredible internal decision sciences team that could crunch data
in a lot of different ways to manage risk and also to identify customers that you wanted
to do business with. The data has proven out over time that these
data do predict, these scoring technologies do predict loss ratios. That’s a little bit
different than your driving record, by the way. It’s a loss ratio: How frequently do
you make a claim against your policy? So that’s really the question that’s on the table for
the insurer, and that’s how insurers approach managing their portfolio. They ask the question
how often are you going to make a claim. So, Deputy Director, there’s always more dialog
around that. You really would need a different panel up here to talk about the insurance
industry uses, but I do think the science is there, and of course, the insurance commissioners
across this country, not only do they have access to the baseline pricing tiers, but
they also actually have access to the black box. In many States, the scoring technologies
are turned over to the insurance commissioners, and there is a great deal of transparency
that goes on between the insurance industry and those insurance commissioners. RAJ DATE: Peggy, would you like to follow
up on some items? PEGGY TWOHIG: To talk again about accuracy,
which is so fundamental, Stuart, I was just wondering if you could add. I understand you’ve
heard some of the comments about particular problems with collections reporting and collections
and the relationship between collections and accuracy. Can you shed any light on that and
any other area where — I understand there was a study that the industry did that showed
the levels you talked about in accuracy, but were there particular pockets of problems,
or can you say more granularly what’s going on there? STUART PRATT: Okay. So let’s talk about debt
collection first. And, Peggy, the nice thing about having you
at the CFPB is you have this wealth of experience with the Fair Debt Collection Practices Act
and, of course, the debt collection industry, having served as a public servant in many
different contexts, including at the Federal Trade Commission. So I think there will always be a higher rate
of disputes around debt collection. There’s always more tension around debt collection.
So I think as a default, we can’t look at the dispute rate and assume that by default,
all of those are valid disputes. There may be consumers, for example, in the credit card
industry who haven’t exercised their right under the Fair Credit Billing Act and unfortunately
chose not to pay any of their bill as opposed to just simply not paying the item of information
that was under — in dispute. In regard to medical collections, I think
you’d have to have — we don’t see dispute rates that are so remarkably different that
by default, the entire industry is failing in some way. I will tell you this. The CDIA’s members through
the Metro 2 Format, we have a special training program for the debt collection industry.
We are having an interesting outreach with some of the big software providers to make
sure that at least to the extent that the debt collector is using one of these larger
turnkey solutions, that we are encouraging them to use the latest version of Metro 2,
which ensures precision in the reporting, and, of course, we issue and reach out to
— just like we do with other data furnisher communities, we have special FAQs to try to
instruct them more specifically on how they should handle, for example, deleting the account
when they’re no longer responsible for collecting an account or showing that the account is
paid off when it in fact is paid off. We would agree with that. The credit reporting industry
doesn’t win by having an open collection item on the credit report if in fact it’s been
paid. I actually think debt collectors agree with
that, by the way. They, too, want to show that the account is paid. They want to show
that they have successfully collected in the first place. Accuracy. Do you want me to go to accuracy
a little bit, pockets of accuracy? RAJ DATE: If there are 60 seconds of accuracy. STUART PRATT: Okay, that’s good. I like that,
60 seconds. First of all, there were no radical differences
when we looked at the three national systems. So there were no differences between them
in terms of patterns of accuracy overall. Otherwise, that would have been an element
of the report going forward. We had an excellent distribution. We slightly oversampled the
African-American population. We were right on point with the Hispanic population, and
we also had a study which had a superb distribution across the various scores, as those scores
distribute across the database as well. We did not find in any of those siloed reviews
that there was some particular community that was singled out and had a problem that was
a pattern or practice problem that was different than the population overall. So we had a lot
of symmetry between the aggregate data and some of the more siloed data that we looked
at as well. RAJ DATE: Well, thank you. I should probably
call an end to this phase of our field hearing, but I hope you will join me in thanking our
panelists. This is an important part of our work, and you are making it possible really
from day one, so thank you. [Applause.] ZIXTA Q. MARTINEZ: Thank you for your participation
today. At this time, if you would rejoin the audience. Now it’s time to hear from you as community
leaders, advocates, industry representatives, residents, and consumers. The open mic portion
of today’s field hearing is an opportunity for the CFPB to hear about your experience
with consumer credit reporting, to hear what is working well in the consumer credit reporting
market and what is not. Each person will have 1 minute to tell us their story and experience
with consumer credit reporting. We want to hear from as many of you as signed up to testify
today. So please try to limit your statements. What we learn from you is incredibly valuable
to the CFPB. So we would like to hear from as many of you as possible. Our first witness is Frank Deyu [ph]. Laura
is going to meet you right here. ATTENDEE: I am a father, and I’m also currently
a victim if identity theft. This has been going on since 1997. This guy gets arrested,
and he doesn’t carry any ID on him. At that point, the cop goes back to his squad car,
puts in the information, and it goes on my State of Michigan ICHAT report. It’s costing
me jobs. I lost jobs at Davenport University because of this. He’s not the only one. Actually, my father
used my source in name, too, to buy cars and houses and things like that, and even on my
TransUnion report, it said I was born in 1953. I’m not there. RAJ DATE: You look great, by the way. ATTENDEE: Thank you. And the other thing with the ICHAT report,
it says I have tattoos all over my arms and neck and everywhere else. I mean, this is
all false information, and it’s pretty bad when I get a call at work and my son’s school
calls up and says, “You can’t go on the field trip or be a chaperone because of this background
check we ran.” And it’s costing me a lot. I lost a house, and I’m just trying to recoup,
and I’ve been dealing with this since inaccuracy that’s not even in definition of what is going
on here. ZIXTA Q. MARTINEZ: Thank you for that. It’s
not easy to share those types of stories with us, but we appreciate that you did so. Erin Handelsman. [No audible response.] ZIXTA Q. MARTINEZ: Maryellen Louis. ATTENDEE: Hello. I’m Maryellen Louis. I’m
the acting chair of the Michigan Community Reinvestment Coalition, and I am an elected
board member of the National Community Reinvestment Coalition. I want to thank Director Cordray. We were
very grateful to have you as our speaker here this spring in our national conference in
Washington, D.C. It was very useful to all our membership. We’ve very grateful, and we’re
also very happy to have the Consumer Financial Protection Bureau visit us here in Michigan.
We’ve all fought hard to make sure you got established, and we’re still fighting hard
and making sure you survived and get well funded. So I was first told that I would have 3 minutes,
and then when I signed in 2 minutes, and now 1 minute. So I’ll do my best, but please bear
with me. I wanted to add a couple of things that probably
won’t be heard today. It’s sort of academic, but I thought it might be useful for you to
know that — you probably already know, of course, at the agency, but there have been
a number of alternative credit scoring models that have been tested out in the nonprofit
sector since the early 2000s, even since the late 1990s, and a number of them have proven
to be extremely effective. I think that I was very grateful to have the
PERC, Policy and Economic Research Council, mentioned earlier by a panelist. That they
recently, that is, June of this year, put out a report on their analysis of alternative
credit reporting, using data that is different than the usually credit scoring data, and
they have found — it’s called a New Pathway to Financial Inclusion, and if you just search
on the Web on that title, you can find it, a New Pathway to Financial Inclusion. The idea of it is that there are lots of — there
are people that pay their rent on time every month, and there are people that pay their
bills and may not have a credit card, or they may have fallen back behind on some of their
credit cards or on their mortgage, but they always pay, they always pay the rent or similar
kinds of bills, and these alternative kinds of — ZIXTA Q. MARTINEZ: Thank you, Ms. Lewis. Thank
you. ATTENDEE: So, excuse me? Does that mean I’m
done? ZIXTA Q. MARTINEZ: Yes. ATTENDEE: Okay. I’m going to quote it, anyway.
This is a quote from the report, which I think you’ll find useful: Evidence is overwhelming
and incontrovertible, that alternative data is the single most powerful tool available
to drive credit access, make consumer credit fairer and more inclusive, and help those
with damaged credit reveal their good credit standing. Thank you. ZIXTA Q. MARTINEZ: Thank you. Mr. Charles Peltier. [No audible response.] ZIXTA Q. MARTINEZ: Robert Hersey. [No audible response.] ZIXTA Q. MARTINEZ: James Stevenson [ph]. ATTENDEE: Yeah. I guess I was someone to disagree
with the panelist who kind of seemed to minimize the effect of inaccuracies on people’s credit
report. Take a city like somewhere like Detroit, which [?] we’ve been subjected to [?] in lending
and also in the insurance agencies. If you walk out this door right now, I can do a survey
of a hundred people. You will probably find the people with credit scores anywhere from
500 to 700, and if you asked them what was the interest rates on their loan, they would
tell you 18, 19 percent on all of the loans throughout this entire city. So when you say that it’s only a half-point
interest if you were to correct this or correct that, that’s not what’s going on, because
when consumers are going into these places, they’re not told what the bar is. Is it 500?
Is it 600? Is it 700? It’s always a moving target as far as what category you fall in
for the interest rate. So what role would the Consumer Financial
Protection Bureau have in identifying what is the actual interest rate a person should
be charged as far as abuses go? Because there doesn’t seem to be a standard as to what a
person should be charged. It’s let the buyer beware, “We’re going to charge you whatever
we feel we can get away with.” ZIXTA Q. MARTINEZ: Thank you, Mr. Stevenson.
Appreciate the comment. Melanie Duquesnel. ATTENDEE: Melanie Duquesnel. I am the president
of the Better Business Bureau serving Eastern Michigan . So we get to see all kinds of things from
identity theft, fraud, scams, and the like, but I’m also a 20-year — I nickname myself
a “20-year recovering banker.” So when it comes to credit reporting accuracy, it’s imperative.
There’s no middle ground, quite honestly, but the other part of it that I’m hoping that
CFPB can actually affect is looking at how we educate our consumers, and not just from
our age group. It has to be at the elementary age group, and bringing back consumer education
and that kind of thing is imperative to prevent this kind of stuff going on in the future. ZIXTA Q. MARTINEZ: Thank you. Carol Long. ATTENDEE: Yes. I want to talk something about
that accuracy, because it’s bad for you to pull your credit report and find out you’re
dead, and I wanted to know who sent it in that I was dead, because I’m — evidently,
people see me. I’m not dead. [Laughter.] ATTENDEE: And I don’t know. I don’t know when
they decided I was deceased. I pulled it in January, and I was deceased. And I’ve been
fighting them I don’t know how long. ZIXTA Q. MARTINEZ: We’re confirming that we
see and hear you today. Ms. Kim Boyd-Harris. ATTENDEE: Hello. I would like to see more
accountability in terms of mortgage servicing and accurate reporting, and also looking at
the foreclosure prices, our city has been devastated, and not to mention the credit
history of those persons who should not have been foreclosed. They’re trying to live with
that. So there needs to be some accountability in terms of the information that was reported
on their credit regarding foreclosure. Thank you. ZIXTA Q. MARTINEZ: Thank you, Ms. Boyd-Harris. Mr. Roy Zilgust [ph]. [No audible response.] ZIXTA Q. MARTINEZ: John Shinberg [ph]. ATTENDEE: Yeah. I’m on disability and was
not able to pay credit cards. So, for several years, I went through the courts. They all
gave judgments and collected my State taxes and everything, and it all disappeared. And
I got judgments. Now all of a sudden, I have these credit agencies attacking me, because
they’ve bought it from the other one, and the other one hasn’t told them that I’m on
disability. And one called me the other day and says,
“Well, why don’t you just put it on another credit card?” I don’t have any credit cards.
I can’t get a credit card. And the gentleman about auto insurance, since
it’s being put on my credit report, my auto insurance went up 200 bucks. I live in Harper
Woods, but for the last 7, 8 years — and this is over a 10-year period that it happened
, and it all went away, and now it’s back again. And for 7 years, my insurance rates
were low. I had no claims. So what makes them think that it’s any different? And they are
using it to their advantage. I asked my insurance guy why did it go up.
He won’t tell me. I says, “How come it jumped 200 bucks from the last time?” Something has
got to stop somewhere. I’m being predatorized. I can’t afford — I’m under on my house. I
got lucky with the bank, because it was during the period that there was nothing on my report,
and they did refinance my one loan. But if I could afford a lawyer to go to bankruptcy
— I can’t get help from anybody. So I can’t get any relief. But the deal is this, is they’re selling . They
keep selling it to the next credit, and I told them, “I don’t even owe you.” In fact,
the last one, the one that I owed for what they’re trying to collect for, is Discovery,
and they just sent me a thing to give me a credit card. ZIXTA Q. MARTINEZ: Thank you, Mr. Shinberg.
We appreciate that. Dave Sullivan. ATTENDEE: Thank you for coming. I’ve been providing credit reports to mortgage
companies, banks, and credit unions for the last 20 years, and I’m sorry you’re dead,
ma’am, but you can’t come back from the dead. [Laughter.] ATTENDEE: I actually am pleased that you are
focusing on education. I started up a free website to provide education for free for
people who died and want to come back. But I think you guys missed an important part
of the industry that you’re not overseeing, and that’s the credit repair industry. The
credit repair industry is wrought with scams and fraud. I really hope that you pick up
that kind of oversight, if you don’t have it now, and hopefully, we can put out the
bad apples. There are good and bad in every industry, but for some reason, credit repair,
there’s a lot of bad apples there. And by the way, the double whammy you were
talking about earlier, it actually occurs more than that. It’s like a triple or four-druple
whammy, because they keep selling it, like that other guy was saying, and then they don’t
report it as paid. So, fortunately, there is a system that people
can get things corrected at the Bureau level in 1 day, but you have to be applying for
a mortgage, like what Terry is [?] So, anyway, that’s all I have. Thank you. ZIXTA Q. MARTINEZ: Thank you, Mr. Sullivan. Tim Poxall [ph]. ATTENDEE: First of all, I want to thank you
for coming, but this thing really is as much for the Congress Members and their staffers
as anything else. There’s a lot of inaccuracy in the reporting
of government documents, and when those government documents are reported to third party or private
sources, those documents, when found to be wrong, people are actually being charged to
make those corrections anyplace from 99, in my research, all the way up to $600 to make
corrections that the government themselves admits either the person’s status changed
or whatever or they made a mistake in those documents in the first place. The Congressmen should pass a law that says
that any government document that is used improperly or is shown to be used improperly,
then that’s against the law, or if they correct the document, that third party users cannot
charge somebody to make a correction there. Thank you. ZIXTA Q. MARTINEZ: Thank you, Mr. Poxall. Mac Elibed [ph]. [No audible response.] ZIXTA Q. MARTINEZ: Brad Vauter. ATTENDEE: Yes. I’m Brad Vauter. I’m an attorney
in Lansing. I mainly work with senior citizens, but there’s three observations that I hope
that the Consumer Financial Protection Bureau will take into account as they go forward
with their work. One is that there seems to be almost a perverse
hit on the activist consumer who is regularly checking their accounts or is actually shopping
for other rates, and the shopping for other rates can actually help lower a score rather
than increase it. So your reward for being a consumer activist is perversely penalized. And we have some of the seniors I work with,
the younger seniors who are still quite active with healthy incomes, finding that that has
actually worked against them. Another — two other things, I think, mainly
based on my experience working with seniors, one is that I do think seniors are targeted
more for ID fraud. Anne Wallace mentioned her group is working with seniors. I do think
that seniors, even though we have a pretty fast time frame, for instance, on credit card
inaccuracies to report, then 60 days, pay the undisputed fortune, et cetera, et cetera,
and in general, I think that’s good, but for some seniors, especially those on the edge
of senility or Alzheimer’s where the relatives might be helping, those inaccuracies aren’t
often caught for 3 or 4 months. I think there should be a carve-out or an exception to let
people repair those sort of reports or dispute those charges if there’s some reasonable proof
that I couldn’t attend to this before this time because of such and such reason. When
your granny is in the nursing home and you’re going in to take care of things for her, it’s
not uncommon for that to be a 3- or 4-month lag through no fault of anybody, really. And the last thing I’d like to say very quickly
is when collection agencies, collection groups, not necessarily the reporting groups, but
when collection agencies, if you could turn to them in your work, I think that they should
be required when they forward the file and the senior or somebody, the consumer has already
put in a do-not-contact letter, are already explained in great detail, “My only income
is Social Security disability. Your threats to garnish my income are unfair and improper,”
I think that entire — the forwarder must send that information on to the next person,
so that the poor consumer doesn’t have to write these letters every 3 months or so when
the file changes hands. ZIXTA Q. MARTINEZ: Thank you, Mr. Vauter. ATTENDEE: Thank you. ZIXTA Q. MARTINEZ: David Leclerc. ATTENDEE: Hello. I’m David Leclerc. I’m with
Michigan Lending Solutions. We’re owned by five nonprofit organizations through the State
of Michigan. First, I’d like to say a story about a client
that we were working with. For the last 21 days, we’ve been trying to get his credit
report corrected. On this credit report, he has a tax lien and two other collections that
are his father’s, not his. We reported to the bureaus. The bureaus came back and said
that they were wrong, but they won’t correct the credit report, because now they’re asking
$423 in fees to be removed. So he will not get approved for a mortgage because of this. The other item I want to bring up is the gentleman
brought up about counseling. All of our agencies provide credit counseling, prepurchase counseling.
The industry is fraught with fraud and scams, especially on the credit side. In my 24 years
in banking, I’ve never seen credit as bad as it is today, and these people are being
taken advantage of by for-profit entities. It really needs to be regulated, and the counselors
really need to be provided better education on how to correct these things and to provide
that information to the consumer. It would be great to see this, if you call do that. ZIXTA Q. MARTINEZ: Thank you, Mr. Leclerc. Mr. Ian Lyngklip. ATTENDEE: Thank you. My name is Ian Lyngklip.
I’m a consumer protection attorney. I’ve been litigating consumer cases for the last 17,
18 years, last dozen years representing victims of identity theft and [?] and other credit
reporting errors. The statute is missing something. It’s missing
transparency, enforceability, and accountability for inaccuracies in these credit reports.
It is not funny. I mean, with all deference, I understand the difficulty this poor woman
is having, but it’s not funny. Fact of the matter is we’re all standing in a room here.
We’re all standing in a room here looking at a woman who has been reported as dead.
We can see she’s not dead. The bureaus can see she’s not dead, and if she were walking
in my office today and want help, I’d have to ask her whether or not she’s been denied
credit because she’s dead, and she would have to tell me. She said, “I don’t know,” and
I couldn’t do anything for her. I can’t make the Bureau stop. I can’t make the furnishers
who are reporting the information stop. I can’t get a declaration that those reports
are inaccurate. We are standing here in a room looking at a dead person, and there literally
nothing that this statute will allow us to do to help this woman. There is no Federal
right to an accurate credit report. That is the absolute truth. Everybody who has an error in their credit
report and has banged their head against the walls for years, your remedy is take out a
pen and keep it up. This statute needs to change. That is the enforcement mechanism
that has been provided in any number of other consumer protection statutes to obtain declarations,
to obtain injunctions against further wrong conduct, but this statute with its negligent
standards, requirements that we prove actual damage, leave people like this absolutely
without any remedy. And by the time that she gets to something
that is actual damage, we will not be able to help her, and that lawsuit, if we have
to bring it, is going to be enormously expensive. Is we have to go take depositions, we’re going
to be taking depositions in literally India and Jamaica, where the credit reporting agencies
have sent all of our credit reporting data for reinvestigations. The fact of the matter is that only the best-heeled,
the best-financed consumer, attorneys in the country can afford to take only the best cases.
Your own records show that there are millions of people who have been banging their heads
against the wall for years, and the one remedy, we’re talking about all sorts of notices,
literally dozens of notices. And I’ve written the chapter in the NCLC manual on notices.
Literally dozens of notices — ZIXTA Q. MARTINEZ: Thank you, Mr. Lyngklip. ATTENDEE: Thank you very much for your time.
I appreciate it. ZIXTA Q. MARTINEZ: Cheryl Carpenter. ATTENDEE: Hello. I am a criminal defense attorney,
and you might wonder why am I here. I am here because we have a huge problem with credit
reporting for people who were on the Sex Offender Registry. I’m on a Coalition for Useful Registry.
I have had youthful offenders — these are teenagers who had consensual sex, no conviction
on their record. I have got them removed from the Sex Offender Registry, but we have private
industries who are preying on these people. There is somebody called OFFENDEX, says, “If
you pay us $499, we will take this off our public website. I don’t care about a [?] that
you’re not on the registry. I don’t care you don’t have a conviction, but unless you pay
us, we are going to ruin your life.” And this is affecting — there’s home facts which goes
to the — if you’re trying to rent an apartment, they use old data. They ruin people’s life,
and they’re doing this for profit, and we need to have a law. We need to have some protection
for these people who are no longer on the registry, so their lives aren’t ruined. They
can’t get a job. They can’t get an apartment. They can’t live. Thank you. ZIXTA Q. MARTINEZ: Thank you for that testimony. That concludes the field hearing in Detroit,
Michigan. Thank you all for attending, and thank you all who watched on livestream.

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