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MONOPOLY POWER
The credit bureau industry has consolidated dramatically in the
past few years, increasing the amount and comprehensiveness of
information held by each of the three major credit bureaus. There
is not even full competition among the big three because each of
the bureaus has a near monopoly on the credit report business in
particular regions.
EXPANDING USES OF CREDIT INFORMATION
Credit files are now regularly used by employers to check up on
their employees, by salespeople at car dealerships and similar
establishments to assess the buying power of customers, and by
marketers to produce mailing lists for everything from credit
cards to time-sharing resort complexes.

These technological advances have increased the availability and usage of credit information at the expense of the right to privacy of consumers. The balance set in the original Act must be redressed to compensate.

There is also evidence that the FCRA has some technical problems, including internal inconsistencies between the permissible uses section and the notification section. These technical problems must also be resolved.

I am particularly troubled that certain credit bureaus have sought to create and exploit possible loopholes in the FCRA to expand the uses to which they can put consumer credit information. Some credit bureaus claim that, under certain circumstances, marketing lists developed from credit databases do not constitute credit reports and, therefore, are not subject to the protections of the FCRA. Business by loophole, particularly in an area as sensitive as the privacy of credit information, is intolerable.

The Congressional Research Service and, in most respects, the Federal Trade Commission agree that the FCRA currently prohibits the use of credit information for marketing purposes. It is somewhat amusing, then, to hear the angry reaction from the credit bureaus to a provision in my bill that restates current laws prohibition. They love their loophole, I suppose.

There is third reason for fixing the system and it is a very human one: consumers are being hurt by the system in its current form. I have received hundreds of personal stories of frustration and, in some cases, financial ruin. Their problems are real and not unique.

They dramatically demonstrate how important credit information is and how crucial it is that the Act designed to protect that information is effective and comprehensive. The potential damage to people is too great. I offer a selection of their stories for your information:

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A New York man with a name similar to that of his father, but with a different social security number and birthdate, has been tagged with the credit problems of his father. The son has been trying unsuccessfully for two years to get TRW to recognize its error. A man living in Hawaii has been tagged with the credit problems of a California man with the same name after Chase Manhattan used the same credit card number for both people. TRW corrected the report after ten months but soon thereafter Chase again reported the incorrect information, damaging the man's credit record, which they have not yet corrected three and one-half years after the man first discovered and reported the error. A New York City man has been unable to have a defaulted loan applied for fraudulently in his name removed from his file. TRW refuses to delete the information even though he has provided substantial and sufficient evidence to prove his case to TRW. Eight credit cards were obtained fraudulently under a California man's name which severely damaged his credit record. Moreover, because of the false information, TRW his employer -- fired him. After extensive effort including investigations by the Secret Service and the California Attorney General's office, his TRW record was cleared and he assumed his credit rating was secure. Later he was denied credit based on the same incorrect information in TransUnion and CBI reports which he is still contesting three and one-half years after initially discovering and reporting the fraudulent accounts. A New York City man lists eighteen inaccuracies on his TRW credit report, which have resulted in repeated refusals of credit. TRW has to date refused to correct the information or to respond meaningfully to his inquiries. A Louisiana man challenged the information in his chilton (now TRW) credit report and provided Chilton with a contact at the credit union in question who would verify that the listed information was not correct. The credit union did inform Chilton of its error, but Chilton never corrected the man's file. Moreover, Chilton apparently suggested that the man would have to pay to have his file reinvestigated. A New York state woman got the run-around from TRW consumer relations people, including numerous unreturned phone calls, long delays and unfulfilled promises, but after two months was able to correct her TRW file. Unfortunately, CBI, TransUnion and two local bureaus also had the same inaccurate information and she has faced the same battles with and had to offer to the same arguments to each to prove her case. TransUnion corrected her file after two months, but CBI has yet to respond three months later, This woman has been unable to speak with a perso (as oppo to a computer answering machine) at CBI. She still has no idea which

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of the many smaller credit bureaus may hold the same incorrect information and how to contact them. She also faces a $10-$15 charge with each bureau just to gain a copy of her report to see if it contains the inaccurate information.

At the beginning of this year, Mr. Chairman, you took the lead in highlighting this important issue. Based on testimony I heard at your hearing and on subsequent investigations, I developed and ultimately introduced legislation to reform the FCRA. Subsequently, the Chairman developed his own legislation and I was honored to be among the original cosponsors.

The protections provided to consuners by those two pieces of legislation say better than I can today what it is I hope that Congress will ultimately pass. Regardless of which vehicle ultimately becomes law, I want to highlight the following issues:

Pre-screening and Target Marketing

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The usage of credit file information to generate mailing lists
presents privacy concerns as significant as those generated when a
full credit report is provided. If we do not restate and enforce
the current apparent prohibition on prescreening and target
marketing, it is imperative that we explicitly ensure that any
alleged loophole is closed. If this information is to be used for
marketing, it must be subject to protections in the FCRA and
consumers must be made aware of how the marketer got their name
and how to prevent further use of his or her credit information.
We must also guarantee that sensitive information is not
distributed to marketers.

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Consumer Credit Bill of Rights
At every possible step in the credit process, consumers must be
made aware of the importance of credit reports and of their rights
and remedies if they have a problem. To this end, an
understandable "Bill of Rights" should be given to consumers each
time they contact a credit bureau. This information must also let
consumers know which State and federal agencies are responsible
for enforcing their rights and how to contact them.
Free Access to your credit Information
Credit bureaus now charge as much as $15 or more for a consumer
to look at his or her credit report. Some bureaus are even
charging $35 or more a year for you to have access to your
information. Each consumer should have the right to examine his
or her credit file at least once each year without charge.
Moreover, if a consumer finds an error in his or her file at one
bureau, he or she should receive free credit reports from any
other bureau which may also contain that erroneous information.

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Disputes
consumers must be guaranteed that disputed information will be
investigated by the credit bureau rapidly within 30 days, that
credit bureaus will be required to take into account information
that the consumer provides, and that the bureaus will follow
established and publicly available procedures in conducting the

investigation.
o Suppliers of Information

often, consumers get information deleted from their file only to have their bank or other creditor simply report it to the credit bureau again. Suppliers of credit information must be asked to exercise every possible effort to ensure the accuracy of the information they provide.

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Too often, when a consumer does pay for his or her credit file all
he or she gets is an unintelligible form filled with codes and
abbreviations that may make sense only to another computer.
Disclosures to consumers must be made in an understandable format.
Inquiries
since creditors often deny credit if a consumer has a large number
of inquiries in his or her credit file, we must ensure that credit
bureaus report to potential creditors only those inquiries for
which the consumer is responsible, i.e. only inquiries
specifically authorized by the consumer. Certainly, it should be
illegal for the credit bureaus to report to creditors inquiries
generated by their target marketing efforts. It should also be
illegal for credit bureaus to report to creditors inquiries that
the consumer knew nothing about (for instance, the automobile
dealer example).

The fact that the credit bureau industry is making hundreds of millions of dollars exploiting the private credit records of consumers to develop mailing lists for junk mail in spite of current law's prohibitions demonstrates that your work to reform this Act, Mr. Chairman, is critical.

Let me also say that I have been disappointed by the lack of willingness on the part of the industry to work with me to craft appropriate and workable amendments to the FCRA. Perhaps, the industry hopes that they can kill any change by ignoring or obstructing efforts to enact it. I would suggest that that is a dangerous and counterproductive approach.

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I perceive problems with how the FCRA is currently operating and so, I think, do many of the members of this Subcommittee. I would rather work with both consumer groups and interested industry parties to develop solutions to these problems which are workable. But I am willing to work without the assistance of the industry as well.

As the author of legislation on the subject and as a member of this Subcommittee, I look forward to the testimony today and to working with you, Mr. Chairman, and the other members of the Subcommittee, as well as any other interested party, to craft responsible reforms to an important consumer protection: the Fair Credit Reporting Act.

Thank you, Mr. Chairman.

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