Today, the Consumer Financial Protection Bureau (CFPB) is using its rulemaking authority to propose that consumer reporting agencies (CRAs) do not prevent survivors of human trafficking from achieving financial independence. The proposed rule would protect survivors of human trafficking by preventing CRAs from including negative information resulting from abuse. Congress required the CFPB to issue rules as part of the recently-enacted Debt Bondage Repair Act.
“As survivors of human trafficking go through the recovery process, they shouldn't be penalized for abuse they have endured,” said CFPB Director Rohit Chopra. “The CFPB's proposal will help ensure that survivors can work to rebuild their lives, including accessing credit, opening a bank account, and finding a job.”
In December 2021, President Biden signed the Debt Bondage Repair Act into law. The Debt Bondage Repair Act prohibits CRAs from providing consumer reports that contain any negative item of information about a survivor of trafficking from any period the survivor was being trafficked. Congress required the CFPB to use its rulemaking authorities to implement the Debt Bondage Repair Act through rule changes to Regulation V, which ensures consumers’ credit information is fairly reported by CRAs.
Human trafficking exists across the U.S. and affects hundreds of thousands of victims and families. While there are no good estimates for the number of victims being trafficked in the U.S., in 2020 alone, one victim support organization received over 50,000 contacts.
Victims of trafficking are forced to engage in commercial sex work or to work in other legal and illicit sectors, including hospitality, agriculture, janitorial services, construction, landscaping, restaurants, factories, adult dependent and child care, salon and massage services, retail services, fairs and carnivals, peddling and begging, drug smuggling and distribution, and domestic work.
While being trafficked, many victims suffer from financial abuse, which is a common tactic used by traffickers to further exploit victims. Survivors and support organizations report that traffickers employ financial abuse as a means to earn money and as a method of control. After destroying their victims’ credit history and racking up charges in their names, traffickers know their victims will be unable to rent an apartment, purchase a car to go 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, costly insurance, and limited housing options. CRAs collect consumers’ credit information, including payment histories, debt loads, maximum credit limits, names and addresses of current creditors, and other elements of credit relationships. Consumer reports can inform a company’s decision about whether to make a job offer, an insurance company’s decision on whether to provide insurance and at what cost, a bank’s mortgage or a landlord’s rental decision, and even a utility company’s decision on whether to require a deposit before turning on the lights. Negative information on credit reports, regardless of validity or accuracy, can severely limit survivors’ abilities to rebuild their lives.
- Bills, charges, and expensive credit lines. Survivors are often left with the bills and charges racked up by traffickers in survivors’ names and on their accounts. In addition to having to manage the actual bills and charges, if outstanding bills and charges are reported to CRAs, survivors can face prohibitively high costs to access the credit essential to restoring their financial stability.
The CFPB is taking steps to help survivors take back control of their financial lives and participate in all aspects of the economy through its Notice of Proposed Rulemaking to implement the Debt Bondage Repair Act. The CFPB is proposing a rule that, if enacted, will include guidelines to:
- Help survivors know how to report their status as having experienced a form of trafficking. Survivors will be able to submit documentation to CRAs showing that they are survivors of trafficking. The Bureau is proposing a broad definition of, and seeking comments on, appropriate forms of documentation to help all survivors receive the protections offered under the Debt Bondage Repair Act. Currently, only survivors trafficked abroad, who are now in the U.S., are likely to have a standard form of documentation. The Bureau is interested in understanding how to allow multiple types of documentation since survivors may receive documentation from nonprofits, courts, or any level of government (i.e. local, state, tribal, or federal).
- Require CRAs to block adverse information in consumer reports. CRAs will need to block adverse information in consumer reports after receiving a survivor’s submission of documentation. In addition, CRAs will need 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 CRAs. All CRAs, regardless of reach or scope, will be covered, including nationwide CRAs, such as Equifax, Experian, and TransUnion, and specialty CRAs focused on areas like employment screening, tenant screening, check and bank screening, personal property insurance, medical, low-income and subprime, supplementary reports, utilities, retail, and gaming.
The Notice is published in the Federal register. The public comment period will close on Monday, May 9, 2022.
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit consumerfinance.gov.