Pub. 11 2021-2022 Issue 3

coloradobankers.org 8 R ecently, the House Financial Services Committee held a hearing entitled “A Biased, Broken System: Examining Proposals to Overhaul Credit Reporting to Achieve Equity.” Committee Chairwoman Maxine Waters called for this creatively named hearing to gain support for legislation to create a government-run credit bureau within the Consumer Financial Protection Bureau. Bankers in Colorado understand the value of accurate credit reporting. It is how risk is assessed and interest rates are determined. Incomplete or inaccurate credit reports force banks to either deny loans or raise the cost of credit. As one of the few members of Congress with a banking background — I started my career as a bank examiner then spent over 30 years in the banking and insurance industries — I often find myself explaining these very basic facts to some of my colleagues on the Financial Services Committee, particularly those who believe government control over credit reporting is a good idea. The bills discussed at the hearing would quite literally give the CFPB the power to determine who is creditworthy in the U.S. by giving the Bureau the authority to decide which portions and how much of a person’s credit history is made available to banks when considering a loan application. Proponents of these bills believe this new, centralized credit bureau would benefit disadvantaged communities that struggle with access to credit. They believe the current system unfairly punishes certain people based on factors out of their control. While we all likely have ideas on how to improve the current credit reporting system, this solution would only exacerbate the problem. Misreporting credit history or limiting available information raises the cost of credit across the board, but particularly for low-income communities — the people reading this know-how to assess and price risk. It takes information, and when that information is limited or altered, you have no choice but to assume additional risk. Not only will that raise costs for low-income borrowers, but it will also eliminate access for some altogether, which is bad for consumers, the banks, and the surrounding communities. Eighteen months ago, the American economy was ground to a halt. Businesses were shuttered, people were forced to stay at home, and everyone was left to wonder what’s next. When the American People looked to the government for a solution, the government turned to the banks. Through PPP and other rescue programs, banks Congressman Blaine Luetkemeyer House Financial Services Committee Update Washington Update