Ohio Senator Introduces Bill to Improve Accuracy of Consumer Credit Reporting

U.S. Senator Sherrod Brown (D-Ohio), ranking member of the Senate Banking Committee, introduced a bill on Tuesday aimed at improving the credit accuracy reports for consumers who have had a debt extinguished through bankruptcy.

The devastation of the 2008 financial crisis resulted in the elimination of $13 trillion in household wealth and caused about five million Americans to lose their homes. Seven years later, many Americans are still having difficulty obtaining mortgage loans due to the adverse impact of the crisis on their credit scores. Brown's proposed bill, known as the Consumer Reporting Fairness Act, would require banks or creditors to notify credit reporting agencies when a bankruptcy extinguishes a consumer's debt.

"During the financial crisis, more than 50 million people saw their credit scores fall due to foreclosures and financial hardships," Brown said. "Many turned to bankruptcy, but are still haunted by debt on their credit report that they no longer owe. This bill would ensure that debts prior to bankruptcy aren’t in effect double counted and don’t continue to make it difficult for consumers to get a job or secure a loan for a home."

So-called "zombie debts," which are debts paid or discharged but continue to appear on credit reports, continue to haunt millions of Americans years after the financial crisis. A bankruptcy remains on a credit report for up to 10 years, but the debt extinguished by a bankruptcy should be removed from the credit report once it is discharged. The Consumer Reporting Fairness Act would not only require creditors to make sure a discharged debt is removed from a consumer's credit report in an accurate and timely manner, but it would allow the consumer to take legal action against creditors who fail to do so.

Brown was joined in introducing the legislation by Senators Richard Blumenthal (D-Connecticut), Al Franken (D-Minnesota), and Jeff Merkley (D-Oregon). Brown announced his intention to introduce the bill Tuesday in a Senate Banking Committee hearing in which Consumer Financial Protection Bureau director Richard Cordray delivered the Bureau's semi-annual report to Congress.

"A disturbing number of creditors have failed to ensure that bankruptcy discharges are reflected on consumer credit reports – and some appear to have done so deliberately, seeking unfair and illegal leverage over consumers," Blumenthal said. "This bill, which will require banks to notify reporting agencies about discharged debts, will help prevent those debts from hanging over consumers’ heads as they seek a more financially secure future."