Relating to prohibiting the use of certain credit scores, including environmental, social, or governance scores and social credit scores, by certain financial institutions and other lenders in this state; providing a civil penalty.
Impact
If enacted, HB 709 would significantly change how financial institutions evaluate creditworthiness in Texas. By banning the use of ESG and social credit scores, this bill aims to safeguard consumer rights and prevent discrimination based on non-financial factors. This legislative move highlights an increasing concern over how subjective measures in financial services could unfairly disadvantage individuals and small businesses. The bill's provisions include civil penalties for non-compliance, underscoring the seriousness of its enforcement.
Summary
House Bill 709 aims to prohibit the use of certain credit scores, specifically environmental, social, or governance (ESG) scores and social credit scores, by financial institutions and other lenders in Texas. The bill defines credit scores and emphasizes that financial institutions should not discriminate against customers based on these scores. By restricting the use of subjective criteria for credit assessments, the bill seeks to ensure fair lending practices and protect consumers from potential biases inherent in scoring systems that take into account an individual's social behavior or affiliations.
Sentiment
The sentiment surrounding HB 709 appears to lean towards consumer protection, positioning the bill as a response to growing scrutiny over the adoption of scoring systems that do not solely reflect an individual's financial history. Supporters argue that the bill champions the rights of consumers, while opponents may express concerns over the regulatory constraints it places on financial institutions and their ability to assess risk.
Contention
Notable points of contention regarding HB 709 revolve around the balancing act between ensuring consumer protection and permitting financial institutions the flexibility to assess credit risk efficiently. Proponents of the bill may argue that ESG and social credit scores could lead to ethical dilemmas or violations of privacy, while critics could claim that the bill limits the ability of lenders to utilize comprehensive data for making informed lending decisions.
Texas Constitutional Statutes Affected
Finance Code
Chapter 32. Powers, Organization, And Financial Requirements
Section: New Section
Chapter 62. Organizational And Financial Requirements
Section: New Section
Chapter 92. Organizational And Financial Requirements
Section: New Section
Chapter 122. Organizational And Financial Requirements
Relating to the collection and publication of information regarding the use of environmental, social, or governance scores by certain financial institutions.
To Regulate The Use Of Social Credit Scores Based On Environmental, Social Justice, Or Governance Scores Or Metrics; And To Prohibit A State Agency From Engaging In Discrimination Based On The Use Of A Social Credit System.
To Amend The Law Concerning Environmental, Social Justice, Or Governance Scores; And To Clarify The Sources Of Information Used In Regulating Environmental, Social Justice, Or Governance Scores.