-6 Inaccurate information should be corrected on both future reports and on reports issued within the past year. Currently, corrected reports are sent only at the request of The FTC should be granted civil enforcement authority over all parts of the FCRA. Currently the FTC only has the ability to seek criminal penalties or cease & desist orders against violators. This change would allow the FTC to impose civil penalties against violators. Civil penalties are more of a deterrent than cease & desist orders, but do not clog up federal courts with relatively minor cases. The FTC should be granted rulemaking authority to interpret the law. This would allow them to keep pace with a rapidly changing industry without requiring constant changes in the law. All consumer protections and regulations should be extended to third-party providers of consumer credit information, including superbureaus and clearing houses. All credit bureaus including third party providers should be required to register with the relevant enforcement agency in their area and with the FTC. This will help to limit operators who move from place-to-place running businesses that skirt or violate the law. FAIR CREDIT REPORTING ACT AMENDMENTS Thank you for the opportunity to offer the testimony of the U.S. Office of Consumer Affairs in response to amendments to the Fair Credit Reporting Act ("FCRA" or "the Act"). In 1970, Congress concluded that, "[t]here is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumers' privacy." That conclusion is as true now as it was two decades ago. With that in mind, my testimony will focus on four areas: concern for consumer privacy; 1. 2. 3. 4. need to assure the accuracy of credit records; operational fairness to consumers both in the time and need to educate consumers generally about the credit Privacy Consumer information is often gathered by credit bureaus for one purpose and then shared with others for purposes unanticipated by those who offered information about themselves in the first place. The increasing computerization of the industry has caused this practice to proliferate. Nonetheless, consumers who originally provided intimate financial and other details in exchange for specific goods and services should have the right to control the chain of custody of their own information. Thus, we are interested in ensuring that a balancing of consumers' privacy rights and responsibilities is taken into account in the process of amending FCRA some two decades after it was originally written. These privacy issues are of genuine concern to us all. Keeping this general idea in mind, my office has developed a list of five "privacy principles" which we hope will be adopted voluntarily by all marketplace providers of goods and services, including the credit reporting industry. They are: 1. Tell consumers, in language they can understand, when and why certain information is being collected, what is going to be done with it, and who will have access to it. Tell them you plan to protect their privacy, and give them an opportunity to comment on your policy. 2. Collect only that information which is germane to the transaction at hand. Do not allow the information to be used or sold for other purposes without the individual's knowledge. 3. Provide consumers a copy of their files upon request, and make it easy for them to correct errors and include statements of explanation. 4. Allow consumers to opt out of direct marketing or other uses they feel are inappropriate for the information they are providing. 5. Make a concerted effort to educate consumers generally about how information about them is gathered, analyzed, grouped into lists and rented or sold, or otherwise used. Accuracy During the past year, I have learned that inaccuracies in credit records, unknown to consumers, can cause extreme inconvenience, embarrassment and lost opportunities. According to studies by James Williams of Consolidated Information Services (a New Jersey mortgage reporting company), there is a margin of error significant enough in the credit histories on file with the three largest repositories to warrant looking into ways of improving accuracy (see article by Michael G. Riley, Time magazine, April 9, 1990, p. 62). One consumer who wrote to my office after having been denied credit and subsequently discovered numerous errors in her credit report, described her dismay with the credit bureau she dealt with as follows: "I rarely charge anything anymore since I had to work to correct errors made by others. I'm from a time when financial accounts were dependable and the burdan (sic) of correcting any rare errors was assumed by those responsible with apology to all affected. I now worry about errors which may affect my credit without my knowledge." I quote this because her feelings echo those that I have heard from many consumers and consumer protection officials over the last year. In my testimony of last September, I recommended that the Subcommittee consider establishing procedures with ascertainable standards for ensuring accuracy of credit information. I am pleased that Chairman Lehman (H.R. 4213), Representative Schumer (H.R. 4122) and Representative Rinaldo (H.R. 3740) have all addressed this need in their respective bills. Operational Fairness I have spent many hours learning about credit bureau operations in the last year. I have visited an Equifax credit bureau in Maryland and the TRW target marketing division in Texas and I have met with representatives of all three major credit bureaus on numerous occasions. I have come to realize how critically important credit bureaus' work is to over 175 million credit active consumers in the U.S. So many aspects of our lives have been enhanced by the capability credit bureaus have to store credit data, in addition to being able to transfer it to credit grantors. Some examples of these enhancements include cheaper credit because of the avoidance of bad credit risks and faster credit processing. However, I have also met with consumer protectors throughout the nation and have learned that most consumers simply do not understand the operations of the credit bureau system. Nor do I believe that most individuals know how to correct errors in their files in order not to have the same problem recur from a different source in the network. Thus, there is a need to improve communication among the credit bureaus and I believe that the credit bureaus understand that need. I understand that the industry is trying to address the sharing of reinvestigation results among all three major credit bureaus and may be even closer to sharing information about those consumers who wish to opt out of the marketing lists generated by the bureaus. I commend the industry on these initiatives and would urge them to put these systems in place expeditiously. Another issue of operational fairness is the length of time adverse information stays in a consumer's file. I recommended a staggered period of time, based on the severity of the offense. I was pleased to see Chairman Lehman and Representative Rinaldo include this concept in their bills. Education If consumers are to control information about themselves, ensure the accuracy of their reports, and better understand how the credit bureau system works, we must all make a concerted effort to educate them. Requiring credit grantors to notify consumers regarding how they report bill-paying information (especially negative information) will certainly help in this education effort, as will Chairman Lehman and Representative Schumer's suggestion of giving consumers written summaries of their rights and remedies. The following is our section-by-section commentary on the pending proposals: 15 USC 1681a. (603) Definitions & Rules of Construction We support adding a definition for the term "adverse action" by cross-referencing it to the already existing definition of that |