America’s for-profit credit reporting system is not only a disaster for consumer privacy, it’s also built on—and continues to reinforce and expand—deep racial inequities. Today, Demos proposed establishing a public credit registry, housed in the Consumer Financial Protection Bureau, as an essential part of a larger effort to reshape rules around debt and lending in order to reduce racial wealth inequality.
This publicly run credit registry should replace the current for-profit credit reporting system and would be designed to be responsive to consumer needs and equity concerns rather than the corporate bottom line. A public credit registry would develop algorithms that diminish the impact of past discrimination, deliver transparent credit scoring, provide greater data security, and have a publicly accountable way to resolve disputes. The use of credit information for non-lending purposes, such as employment and insurance would be curtailed.
The credit reporting system is currently controlled by three big, for-profit companies—Experian, Transunion, and Equifax—which collect lending and payment data on 220 million Americans without consumers’ permission or approval, and there is no way for consumers to opt out from having personal financial data collected. “Recent security breaches at one of the ‘big three’ companies illustrate how unreliable and unaccountable to consumers these companies are,” said Demos Associate Director of Policy and Research Amy Traub, who is the author of a forthcoming 36-page report on the topic.
“Even more troubling, generations of discrimination in employment, lending, education and housing have produced racial disparities in credit history. Past discrimination is baked in to today’s assessments of who is creditworthy. That means people of color are more likely to pay more loans, but also that lives can be negatively impacted in countless other ways including housing opportunities and job prospects,” added Traub, an expert on credit reporting.
Demos’ forthcoming report, which will be released next week, details additional policy proposals to ban predatory lending, reform debt collection practices, ensure fairness in banking, prohibit forced arbitration, improve jobs and public services, and defend the Consumer Financial Protection Bureau—which the Trump Administration has tried to weaken.