CRS-3 receiving an application for credit. The potential user does not request a full rert on an individual who has not applied for credit. Rather, the potential user submits a list of names to the consumer reporting agency, and asks the agency to indicate which persons on the list are creditworthy, based on specified criteria. Or the potential user may ask the consumer reporting agency to create its own list of creditworthy individuals, based upon specified criteria. It seems questionable whether prescreening is consistent with the FCRA, as it allows the dissemination of credit reports arguably not in connection with transactions involving the consumers on whom the information is furnished. Consumers who are prescreened have not solicited credit, and some of those who are prescreened will not be offered credit. However, the Federal Trade Commission, which has general enforcement authority with respect to the FCRA (15 U.S.C. § 1681s), has concluded: Prescreening is permissible under the FCRA if the client H.R. 194 would permit prescreening with respect to a particular consumer only if the consumer reporting agency had notified the consumer that information from the consumer's file may be used in connection with transactions not initiated by the consumer, and the consumer reporting agency had given the consumer the opportunity to notify the consumer reporting agency that the consumer did not consent to such use of information from his file. H.R. 421 would effectively prohibit prescreening by providing that no consumer reporting agency could provide information on a consumer unless the recipient "certified that such information will not be used to solicit the consumer." H.R. 670 would change the word "involving" to "initiated by" in paragraph (E) of 15 U.S.C. § 1681b(3). It would not do so in the other paragraphs that use the word. (These paragraphs are set forth in footnote 1 of this report.) This change would effectively prohibit prescreening by a potential user of a consumer report who "otherwise has a legitimate business need for the information in 2 See "Permissible Purposes of Credit Reports Under the Fair Credit Reporting Act" (CRS memorandum, Aug. 3, 1989), reprinted in Fair Credit Reporting Act: Hearing Before the Subcomm. on Consumer Affairs of the House Comm. on Banking, Finance and Urban Affairs, 101st Cong., 1st Seas. 337 (1989). Note, however, that the FTC provision, 16 C.F.R. § 600.5, discussed in the memorandum, has been replaced by 16 C.F.R. Part 600 Appendix, quoted in the text on this page. CRS-4 connection with a business transaction involving [but not initiated by] the consumer." Would it prohibit prescreening for a potential user, for example, specified in paragraph (A), who "intends to use the information in connection with a credit transaction involving [but not initiated by] the consumer"? It must be intended to, for there would seem little point in prohibiting prescreening except in connection with credit transactions, as it is in connection with credit transactions that most prescreening probably occurs. Yet the FTC, as quoted above, has concluded that prescreening in connection with credit transactions does "involve" the consumer on whom the information is furnished, provided only that the user agrees in advance that each consumer whose name appears on the list after prescreening will receive an offer of credit. Therefore, the change that H.R. 670 would make might be construed not to prohibit prescreening in connection with credit transactions. III. Reporting of Obsolete Information The FCRA prohibits consumer reporting agencies from reporting information more than 7 years old, except that information as to bankruptcies may be reported for 10 years, and information may be reported indefinitely if it is to be used in connection with three types of situations: (1) credit transactions involving a principal amount of $50,000 or more, (2) life insurance underwriting in a face amount of $50,000 or more, or (3) employment at a salary of $20,000 or more. 15 U.S.C. § 1681c. H.R. 194 would permit the reporting of chapter 13 bankruptcies for only 7 years. This presumably is to furnish consumers an incentive to opt for chapter 13 "payment plan" bankruptcies instead of chapter 7 "liquidation" bankruptcies. H.R. 194 would also limit the reporting of information relating to overdue payments. Payments not more than 30 days overdue could be reported for only years after they were made. Payments 31-60 days overdue could be reported for only 4 years, and payments 61-90 days overdue could be reported for only 5 years. Payments made more than 90 days late would remain subject to the 7 year limitation. H.R. 194 would also remove the provision that allows credit information to be reported indefinitely for use in connection with three types of situations. H.R. 421 would not amend the FCRA regarding the reporting of obsolete information. H.R. 670 would include the same provision as H.R. 194 concerning the graduated periods of disclosure of information relating to overdue payments. It would also remove two of the three exceptions that allow credit information to be reported indefinitely. Information could still be reported indefinitely if it is to be used connection with life insurance underwriting of $50,000 or more, but information to be used in connection with credit of $50,000 or more or employ CRS-5 ment at a salary of $20,000 or more would be subject to the generally applicable time limits. IV. Compliance Procedures The FCRA requires consumer reporting agencies to "maintain reasonable procedures designed to avoid" the release of obsolete information or of information for impermissible purposes. 15 U.S.C. § 1681e. H.R. 194 would add a provision to prohibit consumer reporting agencies from prohibiting users of consumer reports from disclosing the contents of a report to the consumer on whom it was compiled. It would also impose new record keeping requirements on consumer reporting agencies, and would require that, upon the request of any person, a consumer reporting agency disclose specified information about itself. Neither H.R. 421 nor H.R. 670 would address this matter. V. Consumer Disclosures The FCRA requires that a consumer reporting agency, upon request and proper identification of any consumer, disclose to the consumer (1) the "nature and substance of all information (except medical information) in its files,"3 (2) the sources of information (except the sources of information acquired solely for use in preparing an investigative consumer report, which is a report on a consumer's character, general reputation, and the like, rather than a report on his credit record), and (3) the recipients of any consumer report furnished within specified time periods. 15 U.S.C. §§ 1681g, 1681a(e). H.R. 194 would expand the first disclosure requirement to include all information in a consumer's file. It would expand the third disclosure requirement to include specified details about recipients. It would require that all disclosures be in writing and be accompanied by a written summary of all the consumer's rights and remedies under the FCRA. H.R. 421 would not amend the FCRA regarding consumer disclosures. H.R. 670, like H.R. 194, would expand the first disclosure requirement to include all information in a consumer's file. It would require creditors and charge card issuers, before extending credit or issuing a credit card, to provide the consumer with a written notice containing a description of (1) all the The reasons for the exception for medical information, according to the legislative history as quoted by a federal court, was "in order to protect the traditional relationship between the doctor supplying the information and his patient," and "that raw medical information should only be tendered with the counsel of a physician or other medically trained personnel." Retail Credit Company v. Dade County, Florida, 393 F. Supp. 577 (S.D. Fla. 1975). CRS-6 circumstances under which the creditor will provide any consumer reporting agency with any information concerning the consumer, and (2) the type of information that will be provided to the consumer reporting agency. H.R. 670 would also require creditors and charge card issuers to notify a consumer whenever they furnish information with respect to such consumer to any consumer reporting agency. VI. Charges for Consumer Disclosures The FCRA requires that, whenever credit, insurance, or employment is denied or the charge for credit or insurance is increased because of information contained in a consumer report from a consumer reporting agency, the user of the report shall so advise the consumer and supply the name and address of the consumer reporting agency. If a consumer receives such notification from a user of a report, or receives notification from a debt collection agency stating that the consumer's credit rating may be or has been adversely affected, then, upon request and proper identification of the consumer, the consumer reporting agency must make the required disclosures to the consumer without charge. If the consumer requests information in other circumstances, then the consumer reporting agency may impose a reasonable charge. 15 U.S.C. § 1681j. H.R. 194 would provide that the reasonable charged referred to in the previous sentence be no more than $8, and entitle consumers, upon request, to receive disclosures once a year without charge, regardless of the reason for the request. H.R. 421 would entitle consumers, upon request, to receive disclosures once a year without charge, regardless of the reason for the request. H.R. 670 would not amend the provision regarding charges for consumer disclosures. VII. Procedures in Case of Disputed Accuracy The FCRA provides that, if a consumer notifies a consumer reporting agency that he disputes the completeness or accuracy of any information in his file, the consumer reporting agency shall, within a "reasonable period of time," reinvestigate the information unless it has reasonable grounds to believe that the dispute is frivolous or irrelevant. If after reinvestigation, the consumer reporting agency determines that the information is inaccurate or not verifiable, then it shall delete the information. Otherwise, it shall allow the consumer to file a brief statement setting forth the nature of the dispute, and provide either such statement or a "codification or summary" of it along with future disclosures of the disputed information. The consumer reporting agency shall also, at the request of the consumer, notify persons who within the prior two years received a consumer report containing the disputed information that such information CRS-7 has been deleted, or send them the consumer's statement or a codification or summary of it. 15 U.S.C. § 1681i. H.R. 194 would require that the "reasonable period of time" quoted above within which a consumer reporting agency must reinvestigate disputed information be not more than 30 days, unless 30 days is inadequate "despite reasonable efforts." It would also require the consumer reporting agency to notify the consumer of the results of the reinvestigation within 30 days of completing it, or, if the consumer reporting agency decided not to reinvestigate on the ground that the dispute is frivolous or irrelevant, it would have to notify the consumer "promptly" in writing. H.R. 194 would also amend the FCRA to provide that a codification or summary would no longer be adequate in situations where a consumer reporting agency must now send a consumer's statement setting forth the nature of his dispute or a codification or summary of it. H.R. 421 would require that reinvestigations be completed within 30 days, without exception. It would require the consumer reporting agency to notify the consumer of the results "[u]pon completion" of the reinvestigation. H.R. 421, unlike H.R. 194, would not add a requirement as to notification of the consumer in the event the consumer reporting agency decides not to reinvestigate on the ground that the dispute is frivolous or irrelevant. After reinvestigation, the consumer reporting agency would be required to send a copy of the complete file, as deleted or corrected, or with the consumer's statement, to the consumer and to any person the consumer requests who received a consumer report on the consumer for employment purposes during the prior two years, or who received a report for any other purpose during the prior year. H.R. 421 also provides that, if a consumer disputes the accuracy or completeness of information in his file, the consumer reporting agency shall promptly notify the person who furnished the disputed information, and such person shall reinvestigate the information and report his findings to the consumer reporting agency. If he determines the information to have been inaccurate, then he would have to notify each consumer reporting agency to which he furnished it. H.R. 670 would not amend the FCRA regarding procedures for disputing information in consumer reports. VIII. Requirements on Users of Consumer Reports As noted above in the section on charges for consumer disclosures, the FCRA requires that, whenever credit, insurance, or employment is denied or the. charge for credit or insurance is increased because of information contained in a consumer report from a consumer reporting agency, the user of the report shall so advise the consumer and supply the name and address of the consumer reporting agency. |