The Financial Fairness and Credit Restoration Act

Economy
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Policy Title: The Financial Fairness and Credit Restoration Act

Executive Summary:

Millions of Americans face financial hardship due to rising healthcare costs, the increased cost of living, and the often unforgiving nature of credit reporting systems. For many, unforeseen medical expenses and other essential debt lead to negative credit scores, which hinder their ability to secure housing, employment, and insurance—locking them into cycles of financial instability. This policy proposes a comprehensive approach to reform credit reporting practices and introduce a pathway for Americans to regain financial stability, including a “Clean Slate Initiative” for credit histories impacted by medical or essential debt.

Policy Objectives:

  1. Implement a Clean Slate Initiative for Essential Debt:
    Establish a federal program to offer credit score relief for Americans with credit histories negatively impacted by medical debt or other essential expenses, allowing them to access housing, jobs, and other financial opportunities previously restricted due to low credit scores.
  2. Mandate Transparency and Fairness in Credit Reporting:
    Require credit reporting agencies to adopt clear, transparent guidelines for evaluating credit scores, focusing on separating essential debt (such as medical expenses) from other forms of credit use.
  3. Create a Pathway for Essential Debt Forgiveness or Restructuring:
    Partner with private financial institutions and healthcare providers to enable Americans burdened by medical debt or other unavoidable costs to restructure or, when appropriate, forgive these debts, giving citizens a fair opportunity to build credit.
  4. Strengthen Consumer Protections in Credit Reporting:
    Enhance regulatory oversight of credit reporting agencies, ensuring that consumers are accurately represented in their credit histories and are given appropriate avenues to dispute inaccuracies without bureaucratic delay or expense.

Background and Rationale:

With an estimated 43 million Americans having unpaid medical debt and nearly one-third of the population experiencing hardship related to healthcare costs, the need for fair credit reporting practices has never been more urgent. Currently, even a single medical emergency can lower an individual’s credit score and affect access to fundamental necessities. This disproportionally impacts low-income Americans, who often face these hardships through no fault of their own, and creates barriers to social mobility, housing, employment, and even insurance.

This policy recognizes that the existing credit system does not account for essential debt’s unique and involuntary nature, like that from medical emergencies, and that this distinction must be addressed to create a fair and equitable financial landscape for all Americans.

Policy Provisions:

  1. Clean Slate Initiative
  • Eligibility: Americans with negative credit impacts stemming primarily from medical or essential debt incurred within the last 10 years.
  • Benefits: Qualified individuals can request the removal of certain essential debt records from their credit history, giving them a “clean slate” to rebuild their financial future.
  • Administration: This initiative will be implemented through the Department of Treasury and supported by partnerships with credit reporting agencies and healthcare providers.
  1. Transparency Requirements for Credit Reporting Agencies
  • Credit agencies must clearly disclose the weight of different types of debt on credit scores, specifically highlighting the distinction between discretionary debt (credit card, personal loans) and essential debt (medical bills, necessary housing loans).
  • Credit agencies must implement standards allowing consumers to address and mitigate credit penalties from essential debt.
  1. Debt Restructuring and Forgiveness Pathway
  • Collaborate with private and public institutions to introduce debt forgiveness programs for low-income individuals with medical debt or other essential expenses.
  • Encourage legislation to incentivize financial institutions and healthcare providers to offer affordable repayment plans and partial debt forgiveness options.
  1. Enhanced Consumer Protection
  • Strengthen regulatory bodies, such as the Consumer Financial Protection Bureau (CFPB), to monitor credit reporting agencies closely.
  • Establish a streamlined system for disputing credit inaccuracies related to essential debt, ensuring disputes are resolved within a mandated time frame and at no cost to consumers.

Conclusion and Call to Action:

The Financial Fairness and Credit Restoration Act reflects our nation’s commitment to ensuring all Americans have a fair shot at economic stability and social mobility. By creating a Clean Slate Initiative and reforming credit reporting practices, we can help millions regain financial footing, break cycles of debt, and participate more fully in our economy. This policy underscores that financial hardships tied to essential needs should not define a person’s financial future, and we can build a fairer system for all by giving Americans a clean slate.

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Can we also add protections for those who have their identities stolen? Mine was stolen 10 years ago, and I have no help. It’s currently on the “dark web”, I have 10 aliases ( not mine, I assure you). I recently filed for unemployment and I was “employed” locally doing construction at four separate companies all at the same time. The Social Security “department” is supposed to help me get a new number with proof. I spent a year begging for help and sending documents and then gave up. No one ever did a thing-- except collect their pay and ignore my pleas for help.

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They need to REDO and UPDATE FICO SCORES. This is baloney that there are three Bureaus and each Bureau has FICO 2- FICO 8 types and categories of Auto, Mortgage and Credit Cards. It is a mess that there are really 8 Ficos X 3 categories x 3 Bureaus.
When you get your Credit Score Fico Score it is different even in one bureau. The auto dealership can pull up one Fico, the banks can pull up another btw the Fico 2-Fico 8. This is unfair and should be illegal. The fairness is not fair. You can have a delta of 100pts and if you are one point off, your interest can be higher.

FICO scores and too many bureaus is set up to protect banks and they find extra ways to give you a higher interest rates to make more money. Also the reporting is BS. If you have paid off loans and they are perfect, it doesnt stay in your history forever. It falls off. That is silly because you can have collections that has been resold many times and it ends up staying on your record forever.

Too many companies are at fault for getting hacked and you as a consumer is penalized for DARK WEB issues.

The entire FICO Score needs to be revamped and just forced banks to use only ONE FICO score for credit cards, loans, homes and auto. There is no reason to have so many.
Add back all the paid loans and there should be no limit on that.
Credit mix is a big factor and Length of Credit is a big factor not just paying on time and Available credit.

The consumer always loses.
No one today is living in the same home past 20yrs.
No one today is working same job for 20yrs
No one today is paying cash, they are using their credit card and paying for it or paying it off. If you dont pay off when they report. The Fico score will hit you for max credit and what if you paid it off the following day missing that reporting. Your Fico score then drops 35%. This is madness. It isnt real time.
WE need a better FICO score system. The current one is so archaic and cumbersome. Data Breach is hurting millions of Americans.

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