Housing Opportunity Through Modernization Act of 2015

Floor Speech

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Mr. ELLISON. Mr. Chairman, I want to thank the gentlewoman, Ranking Member Waters, and Chair Hensarling for their leadership on the committee.

Mr. Chairman, too many people are excluded from the financial mainstream. Fifty million Americans lack a credit score. Either they have no credit file at all, or they have too few trade lines to establish a credit score.

There have been some real innovations in helping these people we call ``credit invisibles'' to build an accurate score. FICO, which has a large presence in my State, has been a real leader in building more inclusive and accurate scoring methodology.

But credit scoring agencies cannot score information they don't have, and they tend to have late payment information but not on-time payment information. In other words, Mr. Chairman, if somebody doesn't pay a bill, probably it is scored. If they do pay it, probably it is not.

This is the case for HUD residents. That is why we need to make it easier for firms to provide customers' on-time payment data.

My amendment specifically aims to help some of the 3 million people who live in HUD-assisted housing. By law, families, people with disabilities, and the elderly who receive HUD assistance pay 30 percent of their income for rent. I want to see them get credit they deserve for paying their rent on time. These folks pay their rent on time, yet it never shows up in their FICO score.

Why are we not reporting their on-time rental payment? Because the law requires each tenant to provide prior written consent before having their on-time rental payment information reported, but it does not require the same information to report late payments of rent. So they can get hit for late payment, no credit for on-time.

The prior written consent is mandated by the Privacy Act of 1974, which I believe was a well-meaning and good piece of legislation-- except it needs to be updated. This piece of legislation, the Privacy Act of 1974, wants to protect the privacy of affordable housing residents, which is good, and I support that. But in this case, it is causing more harm than good. Requiring each resident to grant written permission and then have the housing provider manage all those forms is a burden.

We have empirical evidence to show that such rent reporting helps tenants. Recently, Credit Builders Alliance led a Rent Reporting for Credit Building pilot in eight communities. The Rent Reporting for Credit Building pilot reported rent payments of 1,255 low-income residents who lived in assisted housing.

The research found that credit-invisible residents who participated in the pilot were able to build a high nonprime of 646, or prime score of 688 with the inclusion of their rental payment history. Even if they don't want to borrow money, their scores are going up, meaning that they apply for, perhaps, lower interest rates, apply for jobs, and have a better situation all around.

To repeat: from credit-invisible to credit scores above 646, and some much higher. Even those who had a credit score already saw it go up. Seventy-nine percent--a vast majority--saw an increase in credit scores. This was an average increase of 23 points.

Credit Builders Alliance and other researchers want to expand their efforts to help more residents. Another pilot program is pending. HUD is partnering with Experian; FICO; LexisNexis; the Policy and Economic Research Council, PERC; and TransUnion to evaluate the impact of reporting rental payment history on credit scores of subsidized housing residents and the general population.

The Privacy Act requirement has hindered their effort. Already overworked housing staffs struggle to maintain the paperwork necessary to report renters' on-time payment. Housing staffs find that it is difficult to set up automated payment data transmission between property managers and the credit bureaus with an always changing database.

My amendment includes language from H.R. 4172, the Credit Access and Inclusion Act. H.R. 4172 has 20 cosponsors. Ten are Republican. Seven of the ten Republicans serve with me on the Financial Services Committee.

In conclusion, please support this amendment because it would do a number of very important things:

It would help credit invisibility for hundreds, if not thousands-- millions, even, and that is not an exaggeration--of very low-income people.

It makes it easier to provide predictive data of someone's ability to pay and willingness to repay. And based on solid empirical evidence, that rental payment data can move people from unscoreable to prime or near prime.

We should help HUD-assisted tenants enter the financial mainstream. Let's implement rent reporting on a large scale.

I yield back the balance of my time.

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