Today, the Consumer Financial Protection Bureau (CFPB) is using its regulatory power to propose that Consumer Reporting Agencies (CRAs) not prevent survivors of human trafficking from accessing the financial independence. The proposed rule would protect survivors of human trafficking by preventing CRAs from including negative information resulting from abuse. Congress has required the CFPB to enact rules under the recently enacted debt bondage relief act.
“As survivors of human trafficking go through the process of recovery, they should not be penalized for the abuse they have suffered,” CFPB Director Rohit Chopra said. “CFPB’s proposal will help ensure that survivors can work to rebuild their lives, including accessing credit, opening a bank account and finding employment.
In December 2021, President Biden signed into law the Bondage Relief Act. The Debt Bondage Relief Act prohibits rating agencies from providing consumers with reports that contain negative information about a trafficking survivor, regardless of how long the survivor was trafficked. Congress required that the CFPB use its rule-making powers to implement the debt bondage relief act by amending the rules in Regulation V, which ensures that consumer credit information is reported fairly by credit rating agencies.
Human trafficking exists across the United States and affects hundreds of thousands of victims and families. Although there are no good estimates of the number of victims of trafficking in the United States, in 2020 alone one victim support organization received over 50,000 contacts.
Victims of trafficking are forced to engage in the sex trade or work in other legal and illicit industries, including hospitality, agriculture, janitorial services, construction, landscaping, restaurants , factories, dependent adults and child care, salon and massage services, retail services, fairs and carnivals, peddling and begging, drug trafficking and distribution, and domestic work.
While being trafficked, many victims suffer financial exploitation, which is a common tactic used by traffickers to further exploit victims. Survivors and support organizations report that traffickers use financial exploitation as a way to earn money and as a method of control. After destroying their victims’ credit histories and racking up charges on their behalf, traffickers know their victims won’t be able to rent an apartment, buy a car to get to work, or even find a job with a living wage.
The consequences of financial abuse often follow survivors as they attempt to rebuild their financial lives. Specific consequences include:
- Unemployment, expensive insurance and limited housing options. Credit rating agencies collect consumer credit information, including payment history, indebtedness, maximum credit limits, names and addresses of current creditors, and other elements of credit relationships. Consumer reports can inform a company’s decision to make a job offer, an insurance company’s decision to provide insurance and at what price, a mortgage from a bank, or a rental decision. a homeowner, and even a utility company’s decision whether or not to require a deposit before turning on the lights. Negative information on credit reports, no matter how valid or accurate, can severely limit survivors’ ability to rebuild their lives.
- Costly bills, fees and lines of credit. Survivors often end up with the bills and fees accumulated by traffickers on behalf of survivors and in their accounts. In addition to having to manage actual bills and fees, if unpaid bills and fees are reported to credit rating agencies, survivors may face prohibitive costs to access credit critical to restoring their financial stability. .
The CFPB is taking action to help survivors regain control of their financial lives and participate in all aspects of the economy through its Notice of Proposed Rulemaking to Implement the Bondage Repair Act for debts. The CFPB is proposing a rule which, if enacted, will include guidelines for:
- Help survivors know how to report that they have been trafficked. Survivors will be able to submit documents to CRAs showing that they are survivors of trafficking. The Office offers a broad definition and seeks input on appropriate forms of documentation to help all survivors benefit from the protections available under the debt bondage relief law. Currently, only surviving victims of overseas trafficking, who are now in the United States, are likely to have a standard form of documentation. The Bureau would like to understand how to authorize multiple types of documents since survivors may receive documents from non-profit organizations, courts, or any level of government (i.e. local, state, tribal, or federal).
- Require rating agencies to block adverse information in consumer statements. CRAs will be required to block adverse information in consumer reports after receiving a survivor’s submission of documentation. Additionally, CRAs will be required to notify a survivor of actions taken in response to a submission, retain evidence of the survivor’s submission for seven years, and establish written policies and procedures to remain in compliance with the rule.
- Make the rules applicable to all rating agencies. All credit rating agencies, regardless of scope or reach, will be covered, including national rating agencies, such as Equifax, Experian and TransUnion, and specialist rating agencies focused on areas such as employment screening, tenant screening, check and bank verification, personal property insurance, medical insurance, low income and subprime, supplementary reports, utilities, retail and gaming.
The notice will be published in the Federal Register Friday, April 8, 2022. The public comment period will end on Monday, May 9, 2022.
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer finance law and ensures that markets for consumer financial products are fair, transparent and competitive. For more information, visit consumerfinance.gov.