How ‘The FREE Act’ Could ‘Freeze’ The Credit Industry

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Between May and July, hackers breached the cybersecurity of Equifax, a company that provides consumer credit scores, exposing the personal details of up to 143 million U.S. consumers. This information included names, driver’s license numbers, and Social Security numbers.

Democrats immediately jumped at the chance to regulate the credit industry. Sen. Elizabeth Warren (D-MA) and Sen. Brian Schatz (D-HI) proposed the Freedom from Equifax Exploitation Act (FREE Act), a panicked, overreaching response to an event that doesn’t define or represent the credit industry.

The FREE Act would ultimately enable the excessive and unnecessary regulation of a credit industry that provides critical services across the market. In an article for Fortune Magazine, Sen. Warren wrote, “The FREE Act allows every consumer to freeze and unfreeze their credit file for free.”

In addition, the bill would give consumers access to a free credit report if they request a credit freeze, and would force credit-reporting agencies like Equifax to give consumers access to fraud alerts.

According to Sen. Warren at a hearing, “Equifax and this whole industry should be completely transformed.”

While these changes seem nice on the surface, they would ultimately lay the groundwork for a regulatory power grab by the Consumer Financial Protection Bureau (CFPB), a body of uncertain constitutionality.

In Oct. 2016, for example, the bureau’s structure was declared unconstitutional. Created by the 2011 Dodd-Frank reforms, the CFPB is unaccountable to Congress or the President, as it receives funds directly from the Federal Reserve, and is controlled solely by CFPB Director Richard Cordray.

As Sen. Mike Lee (R-UT) and Sen Ben Sasse (R-NE) put it, the CFPB is the “single-most egregious example” of a “headless fourth branch” of unaccountable independent agencies.

Credit freezes themselves create market disruptions that, when occurring in great numbers, could harm both business and the consumer. The FREE Act would not only delay the ability of consumers to get credit, it would increase costs for consumers based on the labor involved in credit freezes.

Clearly, the FREE Act is an inappropriate response, and could ultimately “freeze” the entire credit industry. Of course, in the wake of the Equifax breach, something must be done. Fortunately, we can look to Pennsylvania lawmakers for a solution instead of regulation-happy liberal democrats.

Meet House Bill 1847 (H.B. 1847), a balanced approach by State Rep. Mike Driscoll (R-PA) introduced in Harrisburg that can easily serve as a model for federal legislation.

Firstly, H.B. 1847 would waive current credit freeze fees, which charge up to $10 per account. In addition, in the instance of a data breach, consumers would receive three months of credit monitoring free of charge, along with three free credit reports in the year after the breach is reported.

Perhaps most important to retaining a functioning credit industry, H.B. 1847 would exempt credit agencies from these measures if they had not experienced a breach.

As critics have suggested, the breach is not proof of a “fundamentally broken” credit industry. The Equifax breach was the result of mistakes that can be addressed through better monitoring, enforcing the existing laws, and balanced legislative approaches, not overreach by liberal Democrats and unconstitutional agencies.

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