Americans for Tax Reform joined a coalition of free-market organizations, led by the National Taxpayers Union, to oppose any congressional effort to suppress credit reporting information in future COVID-19 legislative relief packages.
On March 27, President Trump signed the Coronavirus Aid, Relief and Economic Security Act, otherwise known as the CARES Act, which provided over $2 trillion in relief to Americans and businesses. The bill started as a Senate product under the leadership of Senate Majority Leader Mitch McConnell (R-Ky), before reaching a compromise with the House of Representatives’ legislative product. Before House Speaker Nancy Pelosi (D-Calif) agreed to use McConnell’s legislation to build upon, House Democrats were working on a “relief” bill disguised as a wish-list filled with progressive priorities.
The Pelosi alternative Phase 3 bill, the “Take Responsibility for Workers and Families Act” includes various provisions, such as: investing $35 million on the Kennedy Center and $200 million to require airlines to purchase costly “renewable” jet fuel. Also incorporated into Pelosi’s legislation was the Chairwoman of the Financial Services Committee, Maxine Waters’ (D-Calif), draft legislation that mirrors the Speaker’s Christmas-tree approach of using the healthcare emergency to pass progressive-agenda items. Included in the Speaker’s final draft was a provision that would have prohibited negative consumer information from being included on an individual’s credit score and a moratorium on lenders furnishing adverse information.
Credit reports identify a barrowers payment history, debts incurred and paid, and other financial information that combine to produce a customer’s credit score. The score is a risk indicator for lenders to use and help determine a borrower’s ability to repay a lender, and also impacts the interest rates borrowers pay on a loan or credit card. By proposing to reduce the accuracy of information associated with credit reports, Democrats are effectively punishing borrowers who need access to credit now more than ever in this health emergency, and lenders who will be unable to appropriately measure a barrowers credit standing. During the financial crisis of 2008, it was revealed that excessive loans were made to borrows who had more house than they could afford, which could happen again if progressive ideas move forward into legislation.
Less accurate credit reports can reduce the amount of credit extended or lead to increased interest rates as lenders will become even more cautious when analyzing reports for authenticity. For borrowers, Democrat’s proposals to suppress negative information will create unintended consequences by increasing the cost of credit to account for ambiguity of positive and negative information comprised in the credit score. It can be expected that the unintended consequences will directly impact unbanked and underbanked Americans most.
The current period of economic uncertainty calls for a federal response to be targeted in its efforts to provide immediate relief to assist millions of Americans and small businesses. Congress should not use any relief legislation as an opportunity to advance pet priorities that have nothing to do with directly benefiting Americans.
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