The Colorado Legislature, in its recently concluded session, passed and the Governor signed into law HB 21-1134, short-titled ”Rent Reporting For Credit Pilot Program Act.” [here]
It begins with listing credible but isolated from context findings, whether taken individually or in total, fail to make the case for the Pilot Program (PP), much less state underwriting. There are caveats of substance, e.g., [here] and [here], and for the academics, [here], about anecdotal declarations of the law, such as, ”home ownership” as part of a “wealth building” strategy, enough to render this Pilot Program as investment advice (to low-income populations), therefore, subject to DORA (Department of Regulatory Agencies) oversight.
Then there is this
The law declares:
- ”…home ownership is currently the largest single source of wealth building…”
- ”Among Black and Latino households, the most common reason for denial [of mortgage loans nationally] was debt-to-income ratios”
- ”The second most common reason was credit history.”
- ”Communities of color find it difficult to gain access to credit, especially when it comes to mortgages;” ,
- ”…the rental payment is often their single largest…contractual obligation;”
- “Reporting rental payments…even[s] the playing field and enables communities of color, lower-income households, and … rural communities to generate and build credit without taking on additional debt;”
- ”Therefore, the general assembly declares that it is in the best interests of the state to create a Pilot Program whereby participant tenants may elect to have…rent payment information reported to consumer reporting agencies…”
The law imposes restrictions and regulations on tenants:
- ”’Participating Tenant’ means a tenant that has elected to participate…and satisfied requirements…and whose landlord is a participating landlord.”
- ”A tenant may participate…only if the tenant agrees to participate and completes a Financial Education Course”.
There are checks to entry for landlords: ”To the extent practicable, the contractor shall recruit participant landlords who offer:”
- “a variety of dwelling units…of various sizes”;
- ”located in diverse areas of the state; and”
- ”at least five dwelling units for rent”
The law specifies that the field-tested PP be delivered in 2 years to the 2024 General Assembly, followed by an additional 1 year posting for public consumption and then probable enactment, i.e., three (3) years from now.
The law authorizes $205,000 of state funds distributed [thusly].
Spoiler Alert
This is an appeal to Governor Polis to:
- To suspend or rescind the transfer of $205,000 granted to develop a Pilot Program (PP) that, as detailed in the legislation, duplicates multiple, readily-accessible platforms, applications and informational resources currently producing the desired outcome;
- To reallocate the $205,000 to the Colorado Department of Public Safety, Division of Fire Protection and Control, for funding toward Mutual Aid and Large Fire Funding Recommendations, per the 2020 Colorado Fire Commission Annual Report.
There are no preconditions for a person to choose to report their financial information nor are there barriers to do so. Any person, at their discretion and convenience, can self-enroll to report to Consumer Reporting Agencies, for [example]. Articles like [this] and [this] document the prevalence of applications of the concept, the latter referencing more sources; it can be done on a [phone].
No one needs permission from a landlord to enroll themselves. Note that not one of these platforms, sites, or agencies demand additional ”Financial Education” to manage one’s own affairs; in fact, each offers thorough explanations, FAQs, and help resources. The credit-report giant Experian, which appears to be the most engaged with this, has a dedicated, comprehensive [site] to the practice making the Colorado-mandated 3rd party administration redundant.
All the platforms and services within the domain of credit-building-via-rent do the same thing. Distinctions among them are a matter of quality, convenience and price(all reasonable). They all face the same challenge of enrolling landlords which is no obstacle to tenants’ independent action.
This Colorado-funded Pilot Program, 3 years from deployment, offers no innovation to its declared purpose or, critically, leverage state funds in any meaningful way. Tenant-initiated, tenant-authorized credit agency reporting, the Pilot’s defining end product, is established practice and less complicated. In light of the above, a reasonable person thinks: WTF? (not Welcome To Fruita – the other one.)
Credit Invisible
The concept of rent reporting is targeted to affect a definable cohort of working people with stable incomes. It recognizes that their incomes net less than a minimum to provide a basic standard of living, even as adjusted to where they live, i.e., low-income. This demographic are the primary consumers of payday lending – high-interest, immediate cash between paydays. Payday lenders are not in the mainstream of finance, ergo, their regular customers are ”Credit Invisible”.
Recall the Strawman in Oz (not Opportunity Zones – the other one). It took but a diploma to generate deep thoughts. The wizardry here is that the key to wealth is an algorithm – a credit score – discounting the notion of a living wage and the financial breathing room it provides.
Remember that the higher levels of ‘wealth’ of mortgage holders/home owners includes the home. In our society, home equity fuels revolving credit, an ATM, and ”Credit Invisible”people are unexploited assets. The most valuable outcome of this PP is a database of people, cast(e) as low-income, who can be absorbed into a condition of permanent debt, collateralized by the fruit of their labor – their paycheck, and their home, creating a cheap, indentured and immobile workforce manufacturing exceptional customer service. It is a devil’s covenant, a 21st century twist on feudal society with Nobility replaced by legally-unregulated financial ‘services’ entities operating exclusive of and unencumbered by any principles of banking, and whose sole reason for existence is ROI. HB 21-1134 grants it legitimacy and protection.
$150,000 Compensation To Landlord, LLP.(?)
During a hike below the Monument last year, a solid column of smoke was visible to the northeast. Ninety minutes later it was a curtain, eventually birthing into a name, Pine Ridge. A distinct challenge in a state with populations, consequently resources, unevenly dispersed over its land mass is coordination and logistics. Compare the Colorado Fire Commission assessment of conditions and [needs] with the work product of HB 21-1134 above. Then reallocate $205K to where every Colorado dollar sustains a coherent purpose.
The Micropolitan 