Consumer Protection Legislation Introduced to Repeal Loophole in Fair Credit Reporting Act

New legislation would make it easier for consumers to seek help from professionals to repair their credit

Washington, DC- On Monday, May 31, 2022, Rep. Al Lawson (D-FL) introduced landmark consumer protection legislation to restore Americans’ right to seek help to improve their credit by repealing a loophole in the Fair Credit Reporting Act (FCRA) currently being exploited by entities in the credit reporting system. ​Millions of Americans rely on credit repair professionals and other consumer advocates for advice and guidance when they have questions about items on their credit reports. Regrettably, these consumer advocates are limited in their ability to adequately represent consumers because an anti-consumer loophole in the FCRA gives credit furnishers an excuse to ignore, without consideration or explanation, any correspondence sent on behalf of a consumer by a third party, be it a credit repair company or a nonprofit community organization. 

Many consumers would give up if they had to navigate the process for challenging and removing errors on their own. In fact, this is exactly what the Federal Trade Commission (FTC) found when it analyzed the credit reporting industry—around half of consumers abandon the process before completing it because they found it confusing and time consuming. Consumers use professional services for everything else. It’s common sense that they should be able to use them in credit reporting and that they should get an investigation into disputes from furnishers.

The FCRA loophole prevents consumer advocates from formally representing consumers in the dispute process, and worse yet, allowed many furnishers to adopt a policy of wholesale rejecting legitimate complaints whenever they suspected the correspondence was written by or with assistance from a third party. The new legislation proposed in Congress would repeal the loophole and more easily allow consumers to utilize credit repair professionals and require furnishers to fulfill their legal obligation to conduct investigations of consumer disputes.

The American Association of Consumer Credit Professionals (AACCP) applauds this new legislation, which will expand the ability of consumers to use credit repair organizations and positively affect their ability to repair their credit. In meetings on Capitol Hill, the AACCP has argued that Americans should have the right to consult with and be represented by consumer advocates with deep knowledge of the consumer credit system and consumer rights when dealing with credit furnishers and debt collectors. The AACCP partnered with nonprofit groups—including the African American Empowerment Coalition, the National Asian American Coalition and the National Diversity Coalition—to lobby Congress to close the FCRA loophole.

Below are excerpts from letters submitted by these groups in opposition to legislation in California that would limit the ability of consumers to use credit repair organizations:

Faith Bautista, President & Chief Executive Officer of the National Asian American Coalition and the National Diversity Coalition:

“As the CEO of NDC and NAAC and someone who is financially literate, I have had to utilize credit repair or challenge charges that either were not mine or unsubstantiated claims on my credit report. The only way I was able to address these marks on my report was to use professional services…. When a person needs legal help, they hire a lawyer. When a person needs help with their taxes, they often times hire a tax accountant. This matter is no different.”

Reverend Andre Chapple, senior pastor at Faith Church Los Angeles and Chief Executive of the African American Empowerment Coalition:

“Over half of African American families are living pay-check to pay-check, and tend to have higher student loan debt than their white counterparts. African Americans and Hispanic Americans are being unfairly shut out of the credit system. Services provided by credit repair organizations, non-profits, and faith-based organizations are the one tool that consumers have in their arsenal, to level the uneven playing field and fight back against debt collectors.”

Michael Claunch, who advocates on behalf of AACCP members on Capitol Hill, has been discussing the benefits to consumers, industry and regulators of closing the FCRA loophole on Capitol Hill for months. He states, “Legitimate disputes submitted by credit repair companies, nonprofits and other third parties will now require any debt collector or furnisher to fulfill their obligation to investigate the accuracy, substantiation and fairness of consumer disputes, rather than dismissing or ignoring the request because they ‘believe’ it was submitted by a third-party. This bill will play an integral role in helping consumers access affordable credit and bring much needed transparency and responsiveness to the credit reporting system.”

While some Americans can manage to navigate the process for disputing and removing credit report errors on their own, others do not have the time or may not fully understand the procedures and protections available to them. For these millions of Americans, expert help from credit repair professionals and other consumer advocates is a lifeline. 

The AACCP and its coalition partners believe Americans have the right to a credit report that is accurate, fair and backed by evidence. This legislation effectively closes the FCRA loophole and is a win for consumers climbing out of debt or looking to achieve accurate and fair credit reports.