As ordered reported by the House Committee on Financial Services on July 16, 2019
Under H.R. 3629, the Consumer Financial Protection Bureau (CFPB) would establish standards for validating the accuracy and predictive value of credit scoring models. The bill would require the CFPB to conduct a biannual review of credit scoring models and would authorize the agency to prohibit the use of certain of those models. H.R. 3629 also would require the CFPB to study and report to the Congress about the effects of using traditional versus alternative modeling techniques to analyze nontraditional consumer report data as defined in the bill. Finally the bill would require the CFPB to assess the effects of including nontraditional data in consumer reports.
Using information from the CFPB, CBO estimates that enacting H.R. 3629 would increase direct spending by $10 million over the 2020-2029 period. The cost of the legislation, detailed in Table 1, falls within budget function 370 (advancement of commerce).
CFPB is permanently authorized to request and receive funding from the Federal Reserve in an amount necessary to carry out its operations and can spend those amounts without further appropriation. CBO estimates that the CFPB would need about a dozen employees in 2020 to complete a final rule on credit scoring models and to carry out the study. CBO expects that biannual reviews would begin in 2021 and would require six employees for each review. CBO estimates that the cost for each additional CFPB employee would be $200,000 in 2020.
H.R. 3629 would impose private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) by:
- Requiring developers of credit scoring models to comply with new standards for validating the accuracy and predictive value of their models, and
- Prohibiting, in some circumstances, developers from considering or including factors that the agency deems inappropriate in a credit scoring model.
Regulations established by the CFPB to implement those provisions would apply to any person creating, maintaining, using, or purchasing credit scoring models.
The mandates’ costs would be the expenses incurred to comply with the new CFPB regulations. Because the agency has not yet issued those regulations, CBO cannot determine whether the cost of the mandates would exceed the private-sector threshold established in UMRA ($164 million in 2019, adjusted annually for inflation).
H.R. 3629 contains no intergovernmental mandates as defined in UMRA.