The Biden administration could substantially reduce the number of “credit invisible” and “thin file” consumers without legislation, simply through a determined use of federal contract regarding multi-family mortgages and wireless spectrum licenses. By requiring credit reporting as a condition of federal purchase of multi-family mortgages or sale of wireless spectrum, the Biden administration could ensuring credit reporting for a lot of renters and all cellphone contracts, which would help millions of Americans start to come into the credit system and escape the Catch-22 of credit invisibility. This would be a major step toward achieving economic equity in the United States.
Levitin adds that
* Treasury (as an amendment to its preferred stock purchase agreements) could require Fannie Mae and Freddie Mac to insert a clause in their multi-family mortgage loan documentation that requires the mortgagee to credit report regarding any tenants. That would result in credit reporting in a sizable part of the rental market.
* The FCC could require wireless providers to credit report on their customers as a condition of spectrum licenses under the term that allows incorporation of “public interest considerations into the process for assigning winning bids”. Getting credit reporting on cellphone contracts would be huge because of the high penetration rate of wireless devices.
These moves would require the assent of some independent regulatory agencies (FHFA and FCC), but critically, they would not require legislation. (An executive order would, at the very least, be quite persuasive in this area.) I don’t think it’s possible to reach other types of utilities—power, water—through federal contracting power, and legislation mandating credit reporting could run into First Amendment corporate speech problems. But if the Biden administration is willing to be creative about using federal contracting power, it could substantially advance the type of information—especially cellphone contracts—that is being reported and see meaningful results in reducing credit invisibility, which is a key step toward achieving economic equity.
Levitin and Chi Chi Wu of the National Consumer Law Center had a healthy exchange in the comments section of the blog post. Wu, being a long-time opponent of adding rental data to help consumers enter the financial mainstream.
Eric J. Ellman is Senior Vice President for Public Policy and Legal Affairs at the Consumer Data Industry Association (CDIA) in Washington, DC. He also served for eight months as Interim President and CEO of the Association. More