APPENDIX June 12, 1990 HONORABLE RICHARD H. LEHMAN CHAIRMAN SUBCOMMITTEE ON CONSUMER AFFAIRS AND COINAGE HEARING ON LEGISLATION TO AMEND THE FAIR CREDIT REPORTING ACT JUNE 12, 1990 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 HERE KNOWS, THIS SUBCOMMITTEE HELD AN OVERSIGHT HEARING IN SEPTEMBER OF 1989 TO REVIEW THE EFFECTIVENESS OF THE ACT. THIS LAW, TWENTY 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. 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 THREE MONTHS TO GET THE REPORT CORRECTED. THERE WERE 35 ENTRIES ON THE REPORT AND OF THESE 35 ENTRIES THERE WERE 22 MISTAKES." 31-313 0-89--3 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 I FIRST DISCOVERED THIS THEY ARE GIVING OUT INCORRECT INFORMATION. THREE YEARS AGO WHEN I TRIED TO REFINANCE OUR HOUSE TO TAKE ADVANTAGE THE AND FINALLY, A WOMAN 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 USE 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 SIX 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 1953 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'S 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 ONE O'CLOCK. THEREFORE, IT IS IMPERATIVE THAT ORAL TESTIMONY AND QUESTIONS BE LIMITED TO FIVE MINUTES. GIVEN OUR TIME CONSTRAINTS, I HOPE THAT THE WITNESSES WILL BE AMENABLE TO SUBMISSION OF FOLLOW-UP QUESTIONS FOR WRITTEN RESPONSES. Mr. Chairman, I appreciate the opportunity to appear before th Subcommittee this morning in regard to the Fair Credit Reporting Ac (FCRA) and I want to commend you for your leadership in assuring the consumers are given the protections and information necessary in the complex and treacherous world of credit information. In the modern era, one punch of a computer button can instantly deliver to anyone with a terminal more confidential information about an American citizen than a private detective could unearth in a week. As a result of technology, the privacy of American citizens is imperiled more than at any time in our history, making the efforts of Congress to protect those citizens, currently embodied in the FCRA, critical. While the FCRA does provide substantial protections, four changes during the twenty years since its passage have fundamentally altered the balance that was struck between the right to privacy of consumers and the often conflicting needs of business to have access to credit information: • TECHNOLOGY Computerization has enabled credit bureaus to obtain and utilize far greater amounts of sensitive information and to link that information to other databases including the phone books and census records. Confidential information is being used in ways that could never have been anticipated twenty years ago. ARBITRARINESS The granting of consumer credit has become a much more computerized process dependent upon profile "screens" which select good statistical credit risks and reject others. While more efficient, this computerized screening process is also more arbitrary with little if any considered, human judgement. Small errors take on enormous importance when no human being is |