On September 10, Congresswoman Maxine Waters released a draft proposal entitled “Fair Credit Reporting Improvement Act of 2014” that, if passed, could lead to fundamental changes in the credit reporting industry.

According to the published summary of the key provisions of the proposed legislation, the legislation would alter various aspects of credit reporting in favor of borrowers.  For example, the legislation proposes to shorten the amount of time adverse information can remain on a credit report by three years, under the theory that the predictive value of most negative credit information diminishes after two years.  The legislation also would require the Consumer Financial Protection Bureau to establish standards for accuracy and predictive value of credit score algorithms.

The proposed legislation also would impose new obligations on furnishers of information to consumer reporting agencies and employers.  For example, the legislation would require a furnisher of information to maintain sufficient resources and trained staff to conduct investigations and re-investigations of disputed credit information.  With respect to employers, the proposed legislation would restrict the situations in which an employer can use credit reports in making an employment decision.

According to a press release from Congresswoman Waters’ office, the draft legislation is designed to make “sweeping reforms to our nation’s consumer reporting system,” providing additional protections to consumers.  Although the legislation is still in its infancy, consumer reporting agencies, furnishers, and employers alike should closely monitor its progress.