On Wednesday, Jan. 29, 2020, the U.S. House of Representatives passed bipartisan legislation introduced by U.S. Congressman Josh Gottheimer (NJ-5) to stop upcoming changes in credit score models that would decrease the credit scores for millions of Americans, harming their financial futures.
The amendment comes following reports of upcoming changes to the formula of the widely used three-digit credit score, which may lower the scores for 40 million Americans, hardworking consumers who may be penalized after spending years doing everything right. The amendment gives the Consumer Financial Protection Bureau (CFPB) authority to review credit model changes if they would lower the score for a group of consumers. If the changes are found to be inappropriate, the agency could prohibit the model change. The amendment would not require the company to have the CFPB review their models before deployment, and it would not be mandatory for a review to be conducted.
It was passed by the House within H.R.3621 - the Comprehensive Credit Act of 2020.
“There are a handful of companies in the United States that are deciding Americans’ fates in a black box, on whether they should get access to credit: whether they should get or how much they should be paying for a car, a mortgage for a house, a loan to send their children to college, a rate on a credit card, and how much they can receive for a small business loan,” said Congressman Josh Gottheimer (NJ-5). “But one of the controllers of that black box is developing a new credit model to decide our financial fates in and that this new model may lower the scores for 40 million Americans, even though they have done absolutely nothing wrong.”