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Comptroller of the Currency, statement .

Computer Professionals for Social Responsibility, statement.

Consumers Union, questions with response to Mr. Lehman

Deluxe Corporation, statement.....

Direct Marketing Association, statement and pamplets entitled "Mailing List

Practices" and "Personal Information Protection"

Equifax, Inc., report on Consumers in the Information Age.

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Goldman, Janlori, questions with response to Mr. Lehman
Government National Mortgage Association, statement.
Guiton, Bonnie, questions with response to Mr. Lehman
Holstein, Elgie, questions with response to Mr. Lehman..
Hoerr, Kenneth E., questions with response to Mr. Lehman.
Kurth, Walter R., questions with response to Mr. Lehman
Lehman, Hon. Richard, miscellaneous letters of correspondence
MasterCard International, Inc., and VISA U.S.A. Inc.
Letter to Mr. Lehman dated June 27, 1990..

Mierzwinski, Edmund, questions with response to Mr. Lehman..
Miscellaneous newspaper articles.....























Montgomery County Government, letter dated June 27, 1990
Mortgage Bankers Association of America, statement..



National Taxpayers Union, letter dated June 19, 1990.


Noonan, Jean, questions with response to Mr. Lehman
Office of Thrift Supervision, statement....



Sovran Financial Corporation, statement.


State of Minnesota, Hubert H. Humphrey, III, letter to Mr. Lehman dated
June 7, 1990.....


Sullivan, Marcia Z., questions with response to Mr. Lehman.

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The Attorney General of Texas, letter to Mr. Lehman dated June 7, 1990
The Attorneys General of Texas, Massachusetts, West Virginia, Vermont and
California, letter to Mr. Lehman dated July 2, 1990....

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TRW, booklet entitled "You and TRW's Credit Reporting Service"


TRW Target Marketing Services, booklet entitled "The Perfect Match"
United States League of Savings Institutions, statement.....





Tuesday, June 12, 1990


Washington, DC.

The subcommittee met, pursuant to call, at 9:30 a.m., in room 2322, Rayburn House Office Building, Hon. Richard Lehman [chairman of the subcommittee] presiding.

Present: Chairman Lehman, Representatives Hubbard, Barnard, Schumer, Price and Hiler.

Chairman LEHMAN. Good morning. Today the Subcommittee on Consumer Affairs and Coinage convenes to hear testimony on legislation to amend the Fair Credit Reporting Act.

As everyone knows, this subcommittee held an oversight hearing in September 1989 to review the effectiveness of the act. This law, 20 years old this year, was intended to guarantee that as credit reporting agencies work to provide consumer information to businesses, they would also work to ensure the confidentiality, accuracy, relevancy, and proper use of such information.

Three bills were introduced subsequent to the hearing—H.R. 3740, Mr. Rinaldo's bill; H.R. 4122, Mr. Schumer's bill; and my bill, H.R. 4213. Each shares some provisions as we all incorporated at least some of the many amendments suggested at the hearing. [The text of the bills can be found in the appendix.]

Chairman LEHMAN. My bill, H.R. 4213, is a comprehensive bill that would amend the law in a number of ways. The purpose is to give consumers a better understanding of how to use the rights they have under the law, and to involve them more in the reporting process. It seems to me, too, that with an educated, involved consumer population, creditors could count on more accurate and up to date reports.

Briefly, my bill would require reporting agencies to investigate inaccuracies and make a good faith effort to correct them within 30 days of a consumer's request to do so. It would require that reporting agencies send consumers written notice when they have finished investigating so that the consumer can know the outcome. My bill would place a requirement on persons who furnish information to reporting agencies to establish procedures in order to ensure that the information they supply is as accurate as possible. Under my bill, consumers would have the right to one free copy of their report a year, if they request it, which should make it easier


to periodically check for accuracy. Also, my bill would prohibit reporting agencies from using consumer files to develop lists for solicitation purposes unless the consumer has been given notice of the right to protect his or her file from such use.

I am eager to hear the comments of our witnesses on the legislation. It will take some time to craft the appropriate amendments, and we need the input of all affected parties, so I am grateful to have the collected expertise of our witnesses.

Let me close by reading to you from a few of the letters I have received from consumers in support of amending the law.

A gentleman from Louisville, Kentucky, wrote: "In 1988 I had a horrifying experience with Trans Union Credit Information Company. I was denied credit due to a "delinquent credit history". It took my wife and I some 3 months to get the report corrected. There were 35 entries on the report and of these 35 entries there were 22 mistakes."

From a constituent of mine in Fresno, California, I heard: "I want you to know that I am very aware that credit bureaus are giving out financial information about my credit across this state and that they are giving out incorrect information. I first discovered this 3 years ago when I tried to refinance our house to take advantage of the lower interest rates. Due to the mix-up of our son's credit being listed as ours, we were turned down for the loan, we lost valuable time in straightening this out, and lost quite a bit of money because the rates on the loan went back up in the meantime. The reaction of the credit bureaus and the bank was "tough luck".

And finally, a women here in the metropolitan Washington area wrote me last month that: "My husband and I are living through a nightmare situation right now." She went on to recount how she and her husband returned from six years abroad with the Foreign Service only to find, upon a first visit to Sears to replace carpeting damaged by their renters, that they could no longer used their card and were told they would never get credit again with their credit history. These people had no debts and had never even bounced a check-and hadn't even lived in the country for 6 years. After being given telephone numbers for CBI and TRW, they obtained copies of their reports. On the CBI report the only correct information was the address and social security number, and the address had just been given to the reporting agency by the couple. The woman's husband's TRW report included both a 1930 and a 1950 birthdate. She wondered, justifiably, who was responsible for the accuracy of this information and why no red flag had been raised. The reporting agencies told us in September that consumers already know their Fair Credit Reporting Act rights and that "less than a half of one percent of the reports sold annually" had changes made to them as a result of reinvestigation. If 450 million reports are sold annually, then that must mean that somewhere around two and a quarter million reports are changed. That strikes me as a lot of inaccuracies. And that is only out of nine million consumers actually reviewed. A recent Time magazine article quoted an inaccuracy rate of 40 percent.

We owe it not only to consumers but also to the creditors of this country to make this law fulfill its intended purpose.

Before I turn to the ranking minority Member, Mr. Hiler, I want everyone to be on notice at the outset that unfortunately we only have this room until 1 p.m. Therefore, it is imperative that oral testimony and questions be limited to 5 minutes. Given our time constraints, I hope that the witnesses will be amenable to submission of follow-up questions for written responses.

We have a big agenda today. I am going to be very strict with the five minute rule so we can give everybody a chance to be heard.

Does the gentleman from Georgia have any opening remarks?

Mr. BARNARD. Thank you. I will ask my opening remarks be included as part of the record.

Chairman LEHMAN. Without objection. Thank you.

[The information referred to can be found in the appendix.]

Chairman LEHMAN. With that, we have our first witness here for today, a person who has been involved in this issue for some time, has a bill before the committee. We appreciate his good work and his presence here today. Congressman Matthew Rinaldo, the gentleman from New Jersey is recognized.


Mr. RINALDO. I would like to request unanimous consent that my statement be inserted in the record in its entirety. I will try to limit my oral remarks to 5 minutes and will be amenable to submitting written responses to any questions whatsoever that the committee would desire to ask of me in addition to questions they may want to ask on the record.

Chairman LEHMAN. Thank you, very much. Proceed.

Mr. RINALDO. First of all, Mr. Chairman, I want to commend you because without your leadership, the ability of business to use personal credit records as they please and the safeguards consumers have against their misuse would not be under consideration today. I would like to express my appreciation to the other Members of the committee both for the opportunity to work with you and for the courtesy and cooperation, Mr. Chairman, that your staff has extended to mine.

As you know, the Fair Credit Reporting Act was passed 20 years ago when credit bureaus kept their records on file cards. The advent of computers has made collecting and manipulating credit records very easy. The law has not kept pace. There are increasing reports of abuses. Last fall a Business Week reporter examined the credit files of Vice President Dan Quayle and one of our House colleagues. The Washington Post reports that a woman's unlisted phone number was taken from her credit records by a man who wanted to date her.

The Wall Street Journal recently reported that employers are beginning to use credit reports to screen job applicants. According to the story, many employers appear to violate even the existing disclosure requirements, by not explicitly informing rejected applicants that their credit records had been used.

Credit records are more than just account numbers. They are a consumer's reputation.

All of us have had our credit records checked without our knowledge or consent. As an example, the bank that offers a consumer a pre-approved line of credit has examined the credit file before writing to the person.

There are minimal restrictions on what credit records can be used for. A credit bureau's imagination is the only real limit on what it can do with the information. It really makes no difference whether credit records are checked by computer or by hand. A consumer's privacy has been violated regardless of the method used. Credit information can easily be combined with demographic data and other information to create a complete picture of an individual's life. One credit bureau proudly states that it keeps credit information in a different state from other types of data. However, even my small congressional office has a computer that can transfer data between Washington and New Jersey.

While banks that issue credit cards get most of the attention, the company requesting such a list could be a realtor specializing in time-share vacation homes, or a mail order clothing retailer.

Since credit bureaus make huge profits by finding new ways to sell personal credit records, they have shown no interest in seriously protecting a consumer's privacy. These records are valuable to anyone, including swindlers and unscrupulous business people, who want to find out about a person's financial status or lifestyle. As the Business Week story showed, it is only too easy to get this type of information. Mr. Chairman, it is time to stop this practice now. Many of these personal credit histories are not accurate, and even if a consumer does find out that his credit record has false or inaccurate information, it can be very difficult for the consumer to have errors corrected.

Corrections can take moths. Credit bureaus collect information by computer, but corrections have to be done by hand. Believe me when I tell you, they are reluctant to make changes and to put down the accurate information. There are three different national data bases, and each must be correct separately. Meanwhile, consumers suffer embarrassment and could be unjustly denied jobs, apartments, credit purchases, and so forth. Let me conclude by going through what I think the final bill should include in order to give consumers the kind of privacy and the kind of protections that they need.

First of all, there should be disclosure to consumers. Creditors should be required to inform consumers in writing at the beginning of a credit relationship what information will be forwarded to a credit bureau in the event of late payments.

Creditors should be required to inform consumers when they have been reported to a credit bureau by placing a notation on their next account statement.

Credit bureaus should be required to provide consumers on demand with a free copy of their credit record. Consumers will then be able to check the accuracy of their records. This will also eliminate a provision that allows credit bureaus to provide only the "nature and substance" of the report instead of an actual copy.

All disclosures that a consumer has been denied a transaction based on credit records should be in writing, and include a copy of

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