FHFA’s proposed rule misreads the law

Date: January 01, 2019

VantageScore Solutions Issues Statement Reacting to FHFA’s Proposed Rule for Validating and Approving New Credit Scoring Models

Stamford, Conn – VantageScore® Solutions, LLC, the company behind the VantageScore credit scoring models, released today the following statement regarding FHFA’s flawed interpretation of the statutes requiring credit score competition in the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018:

Last year, FICO imposed a historic price increase on mortgage borrowers for a scoring model approaching 20 years old. That is the essence of monopolistic behavior and control.

Director Watt’s proposed rule would perpetuate and strengthen that monopoly by ruling all of FICO’s current competitors “ineligible.” Simply put, the language is not reflective of the intention and desire that Congress had when it passed the credit score competition provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018.

Should the proposed rule stand, the federal government would be picking winners and losers to the detriment of millions of consumers.

We look forward to providing commentary and working with the new incoming Director of FHFA. We presume that the next Director will share Congress’s desire for a competitive and fair credit scoring market.

For over 12 years, VantageScore has competed on a fair playing field in all loan categories except for the mortgage market. This competition has led to more predictive, more consumer-friendly, and more inclusive credit scoring models. Those circumstances refute claims that VantageScore Solutions and/or its owners would gain some type of anticompetitive advantage if VantageScore were to be accepted in the mortgage space.

As VantageScore has stated in the past, the exclusive use of FICO Scores as a gateway to homeownership provides the company a decided competitive advantage. It ensures that FICO has an imprint in almost every depository institution and with almost every institutional investor, regulator, the rating agency, re-seller, and technology vendor. That imprint inhibits competition by raising switching costs and granting the irreplaceable brand value of utter ubiquity. It gives FICO unparalleled and highly controversial negotiating leverage with almost every participant in the industry.

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