Cash-strapped Americans — even those who lost their jobs — can’t expect to catch a break on their credit report if they miss a loan, rent or mortgage payment because of the coronavirus pandemic, a new report said Tuesday.
The powerful financial industry successfully lobbied Congress to reject a moratorium on recording missed and late payments on credit reports during the deadly coronavirus pandemic, the Wall Street Journal reported.
The sector’s success in persuading lawmakers to drop the protections for consumers sparked fears that people who lose their livelihoods through no fault of their own will see their credit scores plunge, making it harder if not impossible for them to get credit in the future.
Lawmakers told the paper that legislation that would have stopped credit bureaus from reporting negative credit information for four months was shelved in the frenzy of special interest lobbying before the $2 trillion bill was passed last week.
Democratic Sens. Sherrod Brown of Ohio and Brian Schatz of Hawaii pledged to keep fighting for the moratorium proposal.
“While our bill didn’t make it into the final package, this issue isn’t going away,” Brown wrote on Twitter.
“I’ll keep fighting with @brianschatz to make sure families don’t take an unfair hit to their credit during this crisis.”
The National Consumer Law Center said trusting creditors to help consumers was a fantasy that was “just not acceptable.”
But the industry insisted that it already had sufficient measures to protect people’s credit rating during disasters, and argued that incomplete reporting could create headaches for banks, credit card companies and other lenders.
Before the vote on the package, Republican Sen. Mike Crapo of Idaho, chair of the Senate Banking Committee, had removed the Democrats’ proposal and replaced it with language that leaves it up to creditors to help consumers.
An individual’s three-digit credit score determines whether they can get credit cards, loans and mortgages and what interest rate they would pay.
The score is calculated by factoring in payment history, the amount of outstanding debt, length of credit history and other information.
Creditors said they would use a natural-disaster code during the pandemic for missing or late payments, and tell lenders that the borrower wasn’t to blame so credit scores wouldn’t be negatively affected.
“Reporting negative information with a code doesn’t work because that negative information is still in the system,” Ed Mierzwinski, who oversees the federal consumer program for PIRG, a consumer advocacy group, told the Journal.
“We are bracing for a flood of late and missed payments because of the crisis. The only way to truly help people is to shut off the spigot of negative information from the credit bureaus.”
Brown and Schatz introduced their proposed moratorium on March 18.
On March 21, the US Chamber of Commerce and associations repping banks, financial services companies and credit unions delivered a letter to Senate and House leadership assuring them that they don’t need to step in.
“As you consider options to protect consumers from harm, please be aware that blanket suppression of all adverse information in credit reports could disrupt consumer access to credit in the future,” the letter said.
But Chi Chi Wu, a staff attorney with the National Consumer Law Center, scoffed at that argument.
“Where is the political willpower to protect consumers? This is one of the few things that the federal government can do to truly help people that doesn’t cost the federal government any money,” Wu said.
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April 01, 2020 at 03:38AM
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Lenders blocked plan to protect Americans' credit scores amid coronavirus - New York Post
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