Rep. Ed. Royce Spearheads Effort to Expand Access to Credit for American Families

WASHINGTON, D.C. — Today, Representative Ed Royce (R-CA) questioned witnesses on his legislative proposal to protect and bolster consumer access to credit during a Financial Institutions and Consumer Credit Subcommittee Hearing entitled “Legislative Proposals for a More Efficient Federal Financial Regulatory Regime.”

“Thank you Ms. Fortney, I think Congresswoman Maloney made a point there. Perhaps I could ask on my time. Ms. Fortney, would you respond to the Congresswoman’s question?” said Rep. Royce.

“I would be glad to. The Consumer Financial Protection Bureau has brought action under its authority to deal with unfair or deceptive acts or practices. There is nothing in the Royce bill that addresses that at all that would interfere in any way. What the bill would do would simply let the FTC and consumers pursue the rights and protections of consumers under the credit repair organization act it does not in any way interfere with the ability of the CFPB to enforce the law,” answered Anne Fortney, Partner Emerita, Hudson Cook LLP.

“Thank you and I’ll continue with another point here. CROA is a law that protects consumers from the predatory practices of credit repair organizations. It does this by requiring written contracts, statutory disclosures, a cooling-off periods, a prohibition on prepayment under what we’re doing here with the Credit Service Protection Act, what we propose is leaving CROA in place for credit repair while changing the regulatory regime, for what? For credit education. That’s the point. We’ve tried to strike the right balance. On one hand offering a clear path to better financial literacy for consumers, while maintain the strong consumer protection by the FTC, by the CFPB, and by the state Attorneys General. So, how would consumers continue to be protected under this provision? Can the bad actors that offer predatory forms of credit repair simply use this law to escape CROA liability? No, but I will ask Mrs. Forte if she wanted to reply?” asked Rep. Royce.

“I would be glad to because that’s one of the misconceptions about this bill, that somehow companies that actually engage in credit repair could use this regulatory framework within the Federal Trade Commission to evade compliance with CROA. Actually in order to be certified and registered as an authorized credit services provider, there has to be a determination by the Federal Trade commission that you don’t engage in credit repair. I can say that there is no agency or entity in America that is better qualified to determine whether somebody’s engaging in credit repair or not. The FTC has successfully and vigorously enforced CROA for the last 20 years. What this bill does is create a separate regime, a separate framework, under the supervision of the FTC. One of the objections was that somehow credit repair organizations would apply in mass–I think it would take the FTC five minutes to determine if somebody is in fact a credit repair organization, or if somebody is an entity that actually wants to provide individualized consumer education; products and services; and identity theft protection services. The FTC would very carefully review the qualifications and the business of each of these entities. It would require a three day cancellation period. It would require a notice. I think there is concern also about whether this notice would be clear and conspicuous. You know the FTC has developed the standards for what’s clear and conspicuous–they’re going to know if the notice is clear and conspicuous. These companies that want to be authorized service providers would in fact subject themselves to very close scrutiny by the FTC. I think this would enhance the protections for consumers with respect to credit education and identity theft protection products,” answered Ms. Fortney.

“I’ll throw another point out there for Mr. Quaadman because your members provide credit to millions of Americans who want to buy a house or a car or to finance education and so forth. In previous testimony, we heard from the Economic Research Council, personalized credit education materially benefits consumers, and 23% of consumers improved and moved up score bands such as from subprime to near prime or to prime, after receiving personalized credit education from a national credit bureaus. What then does access to credit education mean for consumers from your standpoint?” asked Rep. Royce. 

“You know Mr. Royce I think you’re exactly along the right lines that consumers are much more savvy and understand they need to stay on top of their credit scores and be much more aware of what is impacting their financial situation. To the extent that we can help educate consumers to be better informed and to better use tools to protect their credit scores they’re going to be not only better consumers they’ll be better entrants into the financial system,” responded Thomas Quaadman, Executive Vice President, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce.

“Mr. Chairman, I’d like to ask for unanimous consent to submit for the record, nine letters of support for my draft legislation, including from the Coalition to Improve Credit Education, the National Black Caucus of State Legislators, the National Bankers Association, the Policy and Economic Research Council, the U.S. Chamber of Commerce, and the U.S Hispanic Chamber of Commerce,” said Rep. Royce. 

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