After the banking industry collapsed back in 2008, the Dodd-Frank Act was passed. The Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into United States federal law by President Barack Obama on July 21, 2010. The Dodd-Frank Act is now in jeopardy, as Congress recently passed a bill called the Economic Growth, Regulatory Relief, and Consumer Protection Act which now awaits the president’s signature. The bill would also amend the Fair Credit Reporting Act (FCRA), which is the federal statute that sets forth the rules – or at least a good majority of them anyway – under which the credit bureaus and their customers must operate.
Some of the changes in this new bill may impact you directly. Here are just a few of the highlights.
No-Cost Credit Freezes (The “effective date” of the following changes will be 120 days after President Trump signs the bill into law.)
Under this measure, consumers would be able to place and remove freezes on their credit files for free. The cost of this today generally runs about $10 per credit bureau. That’s a potential savings of $30. This is good news to you if you were impacted by the 2017 Equifax data breach that affected nearly 148 million U.S. consumers. The legislation also extends fraud alerts from 90 days to a year for consumers who have had their identity stolen. Fraud alerts require businesses to take extra steps before giving out credit in your name.
Child Credit Protections (The “effective date” of the following changes will be 120 days after President Trump signs the bill into law.)
Representatives of children 16 and under (aka, their parents or guardians) will be allowed to freeze the minor’s credit reports. If the minor does not yet have a credit file, the credit bureaus will be required to create a credit file and then freeze it, again for free. New mommies….get those freezes on your babies!
Loosened Mortgage Regulations (The “effective date” of the following changes will be 120 days after President Trump signs the bill into law.)
The legislation would protect banks and credit unions with less than $10 billion in assets — up from the current $2 billion — from some legal liability when writing mortgages, including those for borrowers who carry a high amount of debt or who otherwise wouldn’t meet more stringent borrowing requirements. Typically, financial institutions prefer borrowers whose debt payments make up no more than 43% of their monthly incomes. What does this mean for you? It mean that there will be greater flexibility for borrowers who might have had a hard time qualify for a mortgage due to their debt-to-income ratios, such as folks with student loan debt. And finally, the bill would also allow Fannie Mae and Freddie Mac to use newer-generation credit scores to underwrite residential mortgage loans if the newer score is determined to be reliable and accurate. Today, Fannie Mae and Freddie Mac are required to use much older generations of FICO scores, and have not been allowed to upgrade to newer credit-scoring models like FICO 8, FICO 9, VantageScore 3, or VantageScore 4 This is a big deal for mortgage loan applicants, because the credit scores of lower-risk borrowers trend higher on newer credit score versions, meaning some applicants could qualify for better rates and terms on their mortgages. This simply means that your lender could potentially use the scores you see on the likes of Credit Karma.
Private Student Loans In Default (The “effective date” of the following changes will be 120 days after President Trump signs the bill into law.)
A debtor can request that the lender furnishing information to the credit bureaus remove any record of the default if the lender offers loan rehabilitation programs and the debtor makes enough consecutive on-time payments to demonstrate a renewed ability and willingness to pay the loan on time.
Debt Protections for Veterans (These changes will take effect one year after the bill is signed into law)
Medical debt incurred by a veteran cannot be reported to the credit bureaus for at least one year from the date the medical services were rendered. The current rule is 180 days from the date of the default of medical debt.
Medical debt incurred by a veteran that is in collections must be removed from their credit reports once the debt has been paid or settled. The current rule requires removal after seven years, or immediately after the collection has been paid by an insurance policy.
Medical debt incurred by a veteran that is in collections must be removed from credit reports if the debt is or has been assumed by the Department of Veteran Affairs. No such requirement exists under the current rules. This one will take some time to implement, because the Secretary of Veteran Affairs will have to set up a database so the credit bureaus can verify whether or not a debt reported to them is, in fact, a veteran’s medical debt. The Secretary of Veteran Affairs will have one year to build the database.
Active duty military personnel will be able to sign up for free credit monitoring services from the credit reporting agencies. Currently, there is no requirement for free credit monitoring for military members, although there are a number of websites that already give it away for free to their registered users.