Foreword

Article excerpt

This line, delivered by Paul Giamatti in his portrayal of Federal Reserve Chairman Ben Bernanke in the HBO Movie, Too Big To Fail, is just as true about the individual American consumer as it is about the total American economy. A lack of credit or the inability to build a credit history has the ability to destroy an individual's chance at upward financial mobility. Today, a person without good credit gets penalized in almost every aspect of his or her financial existence. The penalties include higher interest rates because these individuals represent an increased risk when borrowing, as well as increased insurance rates, less access to rental housing, and the potential of lost employment opportunities. Worse yet, some will be punished by the inability to even obtain insurance or put a roof over their heads. Without a good credit history, the opportunity to improve one's personal financial standing becomes daunting at best, and sadly, impossible for all too many income-challenged Americans.

Most consumers have brought about their credit problems by their own actions, including nonpayment of their obligations, and it is prudent to document this information for future prospective creditors as a way to protect the system for all Americans. Some consumers, however, are victims of errors in a system seemingly designed to hinder their efforts to make corrections. As you will read in the symposium articles, many consumer advocates believe the system is set up to hold back certain consumers from advancement. These advocates believe the credit scoring system is biased and filled with errors. They believe that the credit reporting system itself is biased by design, promotes disparate impact, and only provides fair representation to those who already have credit. There are certainly elements of the current credit reporting system that prompt debate, especially aspects related to the recent evolution of the system in place today, and we will address these issues.

Conversely, these claims must be balanced in the debate with respect to the rights of all consumers. Access to credit has been essential in building today's economy and is good for all. Disparate impact must be critically weighed, considering that the individual's own actions are documented, and personal responsibility is the key issue. The increased transparency of today's credit system promotes personal responsibility, especially in the credit scoring area. Granted, increased consumer awareness has created some misinformation issues; however, these issues can be corrected and, overall, there has been vast improvement compared to the restrictive policies of a few short years ago.

In this Foreword we will examine the American credit reporting system as it relates to some of the most hotly debated topics of the symposium. We will look at the system from the consumer's perspective and from the view of those within the industry itself, and we will also address the role our government plays in the system. We will look at both the advancements and the failures, more often focusing on the shortcomings, as this writer believes that improvement of the system can only be obtained by better efforts from each group. Because honesty is necessary for improvement, we will need to address where the consumer is at fault as well as the faults of the credit industry. We will also address government's necessary role in mediation, because this system is too crucial to our nation's economic well-being to be left completely reliant upon market forces. All three entities are partners in the system, dependent upon each other for success and inseparable in their existence. Open debate regarding each entity's role, combined with the materials presented in this symposium, will hopefully help develop a better understanding of the credit system and, in turn, its improvement; a healthy credit system is fundamental to a stronger economic tomorrow for both the consumer and the industry, and in turn the nation. …