As the candidate for the Democratic Primary has dwindled to former Vice President Joe Biden, we were waiting to see which stance his campaign would take on the consumer reporting industry. In our former blog post, The Data Debate: Presidential Candidates on Consumer Data, we outlined the stances of the candidates on the credit reporting industry, but Biden was one of the only candidates to not have a plan for that. In a recent 110 page publication titled, Biden-Sanders Unity Task Force Recommendation, he now has a plan for the industry.
The document comes on the heels of the Democratic Convention to be held in Milwaukee, WI this August 17th, and is a first attempt to unify the party and prove to the Bernie coalition that Biden has not forgotten them. The document lays out the policies where the moderate Joe Biden will meet the Democratic Socialist Bernie Sanders and other task force members like Congresswoman Ocasio-Cortez author of the Green New Deal. They uniformly agree that the existing wealth gap, and rightfully so, is ever-expanding in our country and propose policies to lift this economic anchor that is dragging the working poor down. What is clearly missing in this document is the absence of Medicare For All and the Green New Deal, the two most important legislative proposals to Bernie and Ocasio-Cortez’s followers. Biden is willing to agree to some Leftist proposals, but on his moderate terms.
The theme of the Unity document is the country’s income inequality gap – no doubt spurred by the recent protests after the killing of George Floyd and others like Breonna Taylor, but also a persisting and complicated issue our country faces. The Unity Task Force members foresee the closing of the income inequality gap by creating a new agency within the CFPB that would provide an alternative to the three credit bureaus. The “public credit reporting agency” is an attempt “to provide a non-discriminatory credit reporting alternative to the private agencies,” the policy announcement said. It would require all federal lending programs to use the public credit reporting agency to evaluate borrowers’ creditworthiness, including for home lending and student loans (two of the most enabling factors when acquiring wealth in our country today). Of course, under FCRA, the three credit bureaus cannot see the race of consumers nor sex or sexual orientation. How they will determine the race of individuals is yet to be seen, but perhaps a re-writing of FCRA or other governing laws would be a means to do so.
We have spoken of privacy legislative proposals in the past that create privacy bills of rights, preempt states or not and some build upon the CFPB or the FTC, and others create new agencies. They all mirror the European model of GDPR and California’s CCPA. By giving the green light to build a new agency at the CFPB, we can expect a bill of this nature to be hundreds of pages long and another partisan third-rail bill. Joe Biden is in the political fight of a lifetime and will face enormous pressures inheriting a downturned economy amongst a pandemic if inaugurated next year, but creating a new agency will simply be an uphill battle his Administration may not have the bandwidth to take on.
Biden has shown us time and time again that he is influenced by moderate, and institutional compromise as he sees this as the path forward to winning swing states and appealing to the disenfranchised American worker. The fact that there is a Unity document alone speaks to his compromising nature. What will an elected Biden Presidency look like in the first 100 days? I would count on entering back into the Paris Climate Agreement, rolling back of Trump’s Executive Orders, amending the new tax law and a renewed focus on health care. The time it would take to reinstate a new CFPB Director, garner the political will to create a new agency and corral political opponents to this proposal is an extremely heavy lift (who is the Treasury Secretary and what vision will they have?), and amend the laws that currently govern our industry.
By no means does this determine that we would turn our backs on this proposal, but presses us to continue to dialogue with the Biden campaign and the Congressional offices that have written similar bills in this space as I aforementioned. I have listed some of the arguments against a state run agency published by PERC below, and will also point out the other factors that we are constantly pushing, like; creating more volatility with data suppression, alternative data, trended data, dynamic scoring models and reminding law makers that the CARES Act “current” status on consumers’ files is working for Americans facing terrible economic hardship.
Why Are Private Credit Bureaus Superior to Public Credit Registries (when performing the same function)
- Private sector competition inspires innovation
- New data sources
- Trended Data
- Dynamic Scoring Models
- PCRs have no incentive to innovate
- Oversight & Accountability
- Private bureaus are answerable to consumers, customers, trial bar, Congress and regulators
- PCRs have sovereign immunity and little accountability
- Private bureaus in the US and abroad versus PCRs have fostered:
- Greater access to credit
- Lower cost of credit
- Diversified products and services from lenders
- Financial inclusion