Smug and stupid

The Biden Administration wants to replace the three major consumer credit reporting agencies with a public agency.

The proposal is still just that—a proposal—and it faces fierce opposition from industry lobbyists. The Consumer Data Industry Association, for example, a trade group that represents the credit bureaus, wrote in a September article that a new credit bureau was “a dangerous idea” and that “a government-owned credit bureau would create a volatile and unstable lending environment, riddled with inconsistent policies, swing back and forth from election to election, leaving consumers with higher prices and limited options for credit” among other criticisms.

That is the least of it. Here are just a few other objections.

1. The credit reporting process works really well. It would cost the taxpayers billions of dollars to set up a government-run system, and then it might be faulty (Obamacare web site rollout? vaccination appointment systems?).

2. The objections of the “consumer credit justice advocates” have more to do with how the credit data is evaluated than with how the data is reported and stored. To get the change that they want, they could have the government develop its own credit scoring system, which would be less risky and much less costly.

3. In fact, those advocates are wrong about credit scoring. Yes, credit scores tend to be lower for disadvantaged populations. But a low credit score is just as predictive of default for a black person as for a white person. You cannot make someone with a low credit score a good risk any more than you can make a person who is under 6 feet tall an NBA superstar.

4. The “consumer credit justice advocates,” if they get there way, will set up more disadvantaged people to fail by taking on too much debt. Then when these loans go bad, these same advocates will blame the banks for “predatory lending.”

5. It’s a darn shame that the money going to these advocacy groups and that is going to pay lobbyists to fend them off could not instead be given to charities that really do help people in need.

Happy Valentine’s Day.