Five Questions with Connecticut Congressman Jim Himes (D-CT)
Serving his third term as congressional representative from Connecticut’s 4th District, Jim Himes has worked tirelessly on behalf of his constituents. Whether helping them recover from Superstorm Sandy or as a member of the House Committee on Financial Services, Representative Himes is a key leader in Washington shaping the rules that govern the financial industry. As VantageScore Solutions is based in his district, The Score caught up with Congressman Himes to ask him about his agenda, his thoughts on credit scoring, and the use of alternative data sources in credit score models.
As the 113th Congress gets underway, what would you say are the most important issues Congress has to address?
Although our economy is improving significantly, Congress could still do a number of intelligent things (imagine!) to spur economic recovery. I would favor accelerating investment in the rails, roads, bridges and networks that are the backbone of our economy. Yes, that entails spending; it’s spending that we will do anyway and which has a strong economic return. At this moment, such spending could be financed at interest rates near zero and could put tens of thousands of engineers, tradesmen and laborers to work. Congress must also act to put the country on a sustainable long-term budget path. Despite the noisy debate, this entails something we don’t talk nearly enough about: controlling the rising costs of healthcare. If we can get that right, we will improve the fiscal position of government at every level and of our private sector. All of this, of course, is a means to an end: creating the conditions for innovation, economic leadership and solid employment for every American.
You are a member of the House Financial Services Committee. What will be the committee’s focus this year?
The still aggressive partisanship in Washington makes it hard to gauge what policy advances will actually be achievable. I hope (rather than expect) that we will undertake a comprehensive reform of the government’s presence in the housing market. It is clear in retrospect that Americans were heavily over subsidized into home ownership. I would support reform of the [government-sponsored enterprises] GSEs to make sure they are guaranteeing only well-underwritten stable mortgages and smart multi-family housing in a way that protects taxpayers. I also hope that we will find common ground and a legislative mechanism to improve Dodd-Frank in areas that we have identified as problematic. Dodd-Frank included absolutely critical protections and reforms but also has attributes that should be revisited.
In the last Congress a bill (the “Credit Access and Inclusion Act”) was introduced with bipartisan support to allow positive consumer credit information such as rent payments, utilities, telephone and cable service, etc., to be reported to consumer reporting agencies and was referred to the House Financial Services Committee, but no action was taken on the bill. Do you expect to see that bill reintroduced in this Congress, and do you think its prospects for passage are any different now than last year?
I hope to see this bill introduced in the new Congress. As it stands now, credit reports do not provide a complete picture of an individual’s credit history and thus their ability or likeliness to pay back a loan, especially if that individual lacks significant borrowing history. The more relevant data used to make a prediction, the more accurate the credit score. Lenders will benefit from more accurate risk assessment, and consumers with less credit history will benefit from increased access to capital. This bill would be a good start to increasing access to capital for the consumers who, unfairly so, either have difficulty getting loans or pay a higher interest rate than they deserve.
As we look for creative ways to stimulate the consumer demand we know is critical to a robust economy, creative plans like this should play a part in that effort. While I am hopeful this bill moves forward, I am not certain it will be a top priority this Congress, especially given the many urgent and challenging issues requiring action and attention.
We know that increased financial literacy leads to higher credit scores, especially with low- and moderate-income consumers. What advice would you give your constituents (or consumers in general) in terms of what they can/need to/should do regarding consumer credit education?
Educate yourself. Financial literacy is absolutely essential to financial stability and comfort. Understanding retirement plans, mortgages, and the impact your credit score has on your overall finances—including the cost of car insurance and your ability to rent an apartment—can seem daunting, but there are a range of tools that can help.
This is reflected in savings rates that are way too low, and in the use of risky levels and types of leverage. Unfortunately, financial literacy efforts in our communities are often fragmented, boring or inaccessible. I would favor including financial literacy in grade-school curriculums and would encourage families, faith institutions and community groups to do more to help raise kids to understand the benefits of savings and the need to carefully consider the attributes and risks of any financial product, especially those involving leverage.
Do you think there is need for or a benefit that consumers could derive from competition in the credit scoring marketplace?
In general, competition in any marketplace keeps competitors sharp and singularly focused on serving the needs of their clients. Given how essential credit scoring is to Americans’ ability to finance education, homes, and other needs, it is critical that credit scoring businesses operate in as close to an error free manner as possible. They should also think “outside the box” to create avenues for the traditionally unbanked and lower-income populations to enter the credit world in a safe and responsible way.
I’m proud that VantageScore Solutions, an innovative company headquartered in the 4th Congressional District of Connecticut, which I represent, has made a viable credit scoring alternative available to lenders for a number of years. I am excited by the release of their version 3.0, which I understand is not only more predictive but is able to score millions of people for whom it was previously very difficult to provide credit scores. This could increase access to capital for millions of Americans, which will, in turn, help stimulate the consumer demand we know is essential to a robust economy.
The time and financial burdens to consumers trying to manage their financial history are not insignificant. Increasing competition should encourage companies to provide consumers with their personal data at a lower cost. But many consumers also experience the frustrating consequences of inaccurate financial data being shared with credit scoring agencies. As the intermediary between data providers and individuals, scoring companies have the power to demand better consumer information. As more and more companies demand better data from credit providers, the quality of reporting should improve and reduce the time consumers now spend correcting misinformation about their financial history.