Consumers Union and California Association of REALTORS Work Together to Remove the Veil of Secrecy Surrounding Credit Scoring.

Business/News Editors

SACRAMENTO, Calif.--(BUSINESS WIRE)--May 2, 2000

Senator Liz Figueroa leads the legislative effort to give

consumers the "Right to Know" their credit scores

Senator Liz Figueroa (D-Fremont), Gail Hillebrand, Senior Attorney with Consumers Union, and George Duarte, Chairman of the State Legislative Committee for the California Association of Mortgage Brokers, joined Jim Hamilton, Legislative Chair for the California Association of REALTORS(R), to discuss legislative remedies to remove the veil of secrecy surrounding credit scoring.

Industry and consumer advocates launched a statewide effort supporting the passage of SB 1607 (Figueroa).

"This bill is a national landmark. California's consumers will no longer be kept in the dark about key financial information they need when purchasing a home," said Senator Figueroa. "Homebuyers deserve to know how their loan applications are being evaluated."

Sponsored by the California Association of REALTORS(R) and Consumers Union, SB 1607 has the statewide bipartisan support of 14 co-authors including Senators Ross Johnson (R-Irvine), Deborah Ortiz (D-Sacramento), Hilda Solis (D-El Monte) and Assemblymembers Dion Aroner (D-Berkeley), John Longville (D-San Bernardino) and Lynn Leach (R-Walnut Creek). SB 1607 will be debated Tuesday, May 2, during the Senate Judiciary Committee hearing. (To find out the results of the hearing, contact Liz Fenton at 916/445-6671 or email: [e-mail].)

"At a time when our personal information and records are readily available to anyone with a computer, it does not make sense that consumers do not have access to their credit score. Consumers have a right to know their credit score," said Hillebrand, senior attorney for Consumers Union. "Consumers will be better equipped to manage their debt and minimize their cost for borrowing money if they understand what their credit score is and how that score affects their cost of borrowing."

SB 1607 would:

--  Require lenders to provide consumers with their specific credit
    score, the credit information used to compile the score, and an
    explanation of how credit scores work in the loan approval
    process.
--  Compel reporting agencies to correct inaccurate information in a
    timely manner.
--  Provide consumers additional legal recourse when credit-reporting
    agencies continue to report inaccuracies.

Unlike the law governing credit reports, lenders are not required to disclose "credit scores" to prospective borrowers. A credit score is derived from information contained in a credit report, but it is not the report itself. SB 1607 is necessary because current law does not provide consumers the right to know what information is used to compile their credit score and how this impacts their ability to secure a loan. For instance, a homebuyer may lose points on their score for not having enough bankcards or having paid off a loan too quickly. However, the problems are not reflected in any obvious way on their credit report. This means that consumers may end up paying higher loan interest rates or be denied loans altogether based on information on their credit reports that may appear to be neutral, if not positive.

"Buying a home is the most expensive, complicated and intimidating financial transaction many Californians ever make," noted Jim Hamilton, Legislative Chair for the California Association of REALTORS(R). "We are pleased to work with Senator Figueroa and Consumers Union to demystify the home buying process, so we can transform homeownership from a distant dream into a reality for more families. SB 1607 will help consumers understand the fundamental information used in the lending process."

Other organizations supporting the passage of SB 1607 include: E-Loan, Inc., Attorney General Bill Lockyer, Privacy Rights Clearinghouse, Consumer Federation of California, Consumer Action, CalPIRG, Neighbor to Neighbor, Fair Housing of Marin, and California Professional Firefighters.