QUESTIONS FOR MR. KENNETH HOERR

1. What information do you send to the reporting agencies? Specifically, is transaction data typically furnished, or only information RE: payments history? Would you supply the tape format for the record?

2. How specific are you when you certify the purpose for which you intend to use consumer information? Could you give us some examples? Do you certify more than one purpose? Is it your understanding that you are not to use the consumer information more than once (assuming that only one purpose was certified)?

3.

Are there problems with the graduated periods for reporting information on overdue payments in section 103 (b)?

What?

4. How important are credit reports for credit scoring purposes-- are they the single most important item?

5. What internal auditing procedures are currently in place to make certain that the information you send to credit bureaus is accurate?

6. What would be the reasons for not responding within 30 days to requests for reinvestigation?

7. What is your procedure for reinvestigating information?

8.

Do you tell consumers when you report negative information to the credit bureau? Why or why not?

9. In your testimony, you indicate that you would support efforts to organize a voluntary program to allow consumers to opt-out of having their information used for prescreening purposes. Would you give us an idea of what such a program might entail?

You

10. You have told us in your testimony (page 7) that you filed Freedom of Information Act requests with the banking or financial institutions agencies of all the states in April in order to determine if consumers "in any numbers" care about credit reporting issues. have gotten 31 responses and your conclusion, based on those responses is that "[0]utside the Beltway, there seems no need for any legislative changes being contemplated by this Subcommittee."

How many responses did you receive of those 31 that indicated you should be contacting a different office? Also, how many of the 31 responses to your survey were you told that the complaints were confidential?

11. On page 12 of your testimony you state your opposition to any requirement that creditors send a notice every time information is reported to a credit bureau. But what about the provision in - a one time notice?

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Answers for Congressman Lehman

Information reported to credit reporting agencies include the following (as applicable):

A more complete list is detailed in the Record Layout
Worksheet which has been attached for your reference.

As a general rule specific reasons are not given each time
a credit bureau file is pulled. Our contracts with the
individual credit reporting agencies clearly specify the
permissible reasons for which a file can be accessed.
Those reasons mirror the permissible purposes of reports
as outlined in Section 604 of The Fair Credit Reporting
Act. The use of credit reports in our company would be
pursuant to Section 604(3)(A), "in connection with a
credit transaction involving the customer on whom the
information is to be furnished." Occasionally we will
pull reports on prospective new employees as provided by
Section 604 (3) (B).

The purpose for pulling a report would relate to the loan or employment application being reviewed at that time and would be singular. I cannot envision why a report would be pulled for "more than one purpose". That credit report would then be filed with that corresponding application as documentation.

The concept of graduated periods for reporting information
on overdue payments would create major problems for
lenders. Credit grantors need the most complete credit
history when determining an applicant's creditworthiness.
Currently, information in the records provide insights to
patterns of payment. Changing this along the lines

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specified in the legislation would result in less information to make a credit decision and require lenders' credit scoring systems to be revalidated at considerable expense.

In addition, our industry is concerned about the impact of the proposal to limit the period of time a bankruptcy plan entered into under Chapter 13 of the Bankruptcy Code would remain on a consumer credit report.

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While the intent to reduce the time from ten to seven may encourage Chapter 13 filing an alternative to straight liquidation our industry has long supported -- there is insufficient data available about the creditworthiness of Chapter 13 bankrupts. For example the 1982 Perdue University Credit Research Center bankruptcy study showed that nine percent of Chapter 7 bankrupts enter into bankruptcy again.

Unfortunately, due to the lack of official statistics, we
do not know how many Chapter 13 bankrupts will file
again. Until there is such data, we believe the
information should remain in the files for the full ten
years.

For

My company uses two scoring systems and they are both
based on application and credit report information.
our systems, credit report information is not necessarily
the most important item.

Characteristics taken from the application provide a
greater contribution to divergence, although each
characteristic is looked at individually. Divergence is
the predictive measure of certain characteristics which
separates the good credit risks from the bad credit
risks. of the ten characteristics reviewed for our
Present Customer/Former Customer Scorecard, only three are
taken from credit reports. Our New Customer Scorecard
assigns three values to credit report information of the
nine that is utilizes. The remaining factors in each
scorecard are taken from the customer's application.

All of our account information is on-line and reported by tape, which minimizes the possibility for error. In the event that a question does arise, procedures are in place to require the reporting branch to review the account for accuracy. If the original information is found to be in error, the branch must forward the correct information, along with an explanation, to the Home Office. The new information is then forwarded to the appropriate credit reporting agency for action.

I cannot see any reason why we would not respond within 30 days to a request for reinvestigation.

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This question was previously addressed in point #5 listed above.

We do not advise customers each time negative information is reported to the credit reporting agencies. We have over 200,000 open customer accounts and our tapes to the respective agencies are provided monthly. The costs to notify customers each time negative information is reported would be tremendous.

Meetings are currently being held between the credit reporting agencies and credit grantors to address the various operational aspects of a voluntary opt-out program. Many questions about responsibility, notification and cost effective administration need to be answered before a specific plan may be developed. AFSA will be an active participant in organizing such a program. I believe it is premature to spell out a voluntary program at this time.

Twelve states suggested contacting other state
departments, attorneys general or the FTC. One state
referred our request to the appropriate agency whose reply
we are awaiting. AFSA is following up with those six
states which suggested contacting another state department
or another method of obtaining desired information.

The five remaining states suggested contacting the FTC
and/or state attorney general. AFSA is currently
reviewing the FTC tape, and has sent its request to three
state attorneys general. I might add that two of the five
states had no record of complaints but suggested
contacting the FTC or the attorneys general anyway.

On the issue of confidentiality, six states responded that such complaints are confidential. However, two of the six states gave or were willing to give AFSA the numbers of complaints but any additional information would remain confidential.

The language in HR 4213 about notice of information to credit bureaus appears ambiguous and needs clarification before credit grantors would be able to support this provision.