Scott, Warner join in introducing NAFCU-backed Credit Score Competition Act
Senate Banking Committee members Tim Scott, R-S.C., and Mark Warner, D-Va., yesterday introduced the NAFCU-supported Credit Score Competition Act, S. 1685.
If enacted, this bill would authorize the Federal Housing Finance Agency to set standards and criteria for any process used by either enterprise to validate and approve credit scoring models. It would not mandate that Fannie and Freddie adopt other scoring models but would allow for consideration of different ones.
Last week, NAFCU and several other trades wrote in support of the legislation, saying the bill "will help consumers by increasing competition among credit score providers in the mortgage market. This legislation will especially help unbanked or under-banked consumers."
Fannie Mae and Freddie Mac require the use of specific scoring models developed using data from 1995 to 2000. "This serves to disqualify, or 'price out' many would-be borrowers whose credit reports cannot generate a credit score or who end up paying significant penalties based on their credit scores," the groups wrote.
Testifying for NAFCU last month before the Senate Banking Committee, Chuck Purvis, president and CEO of Coastal Federal Credit Union in Raleigh, N.C., noted that the FICO scoring models in use are decades old and remain outdated despite some changes.
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