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term in the "Equal Credit Opportunity Act" at 15 U.S.c. Sec. 1691(d) (6) as well as some additional inclusions. This amendment provides clarity which is lacking in the current law.
15 USC § 168lb. (604)
Permissible Purposes of consumer Reports
We are pleased to see the division of this section into two parts: those initiated by the consumer and those not initiated by the consumer. With one stipulation, we agree with the clarifying text in subsection (a) (3) (A-E), which limits authority for obtaining consumer reports to "only" those instances in connection with a credit transaction, employment, underwriting of insurance, eligibility for a license or other legitimate business needs in connection with a business transaction. Although Chairman Lehman's bill adds a new subsection (b) related to "transactions not initiated by the consumer" (which implies that everything in subsection (a) is predicated on being initiated by the consumer), we would still like to see the phrase "involving the consumer" changed to "initiated by the consumer" in (a) (3) (E). This is because we believe that the interpretation of the phrase "legitimate business need" has been construed to refer to the business objectives of the person or group to whom the report is furnished, rather than focused on the needs of the person about whom it is furnished. What the mailing list and telemarketing industries maintain are "legitimate business needs" may differ considerably from the needs of the individual consumer. Further, also under (E) of that subsection, we strongly support the clarification made to the existing FCRA by the addition of rental applications to the partial list of business transactions covered by this provision. We understand that a number of tenant screening services have begun serving certain areas of the country. These services have databases of consumers' names and information about their past rental history which is obtained from a variety of sources. While these services are regulated in some States, they are not in others. Our concern parallels that of other databases: consumers need to know these databases exist; what kinds of information may be included in them; and that they may be used by prospective landlords to make financially-related decisions about tenant applicants. We also believe consumers should be able to see their file upon request, should it be kept in such a database, to easily correct any errors they find therein.
We laud the general concept of the new subsection (b) which would offer notice to consumers of their ability to "opt out" of allowing use of their personal information for prescreening and other marketing purposes. Although all three major credit bureaus currently subscribe to the "preference services provided by the Direct Marketing Association, the fact that credit bureau data
bases are used for marketing is not generally known to the average consumer.
However, we do not wish to impose an onerous burden on credit reporting agencies. Therefore, we do have some concerns about exactly what procedures this new text would require of the consumer reporting industry. Would the reporting agency have to receive permission on every instance where customer information was to be furnished to a third party? Would they be required to contact by letter or postcard every consumer on which they hold a file (to cover upwards of 500 million credit files in the three major repositories)? Or would the Subcommittee require a broad range of multimedia public service announcements informing consumers of their opportunity to "opt out?" Although I would be willing to consider creative alternatives, at this point, I believe that an "opt out" notice should be sent to the consumer when an offer of credit is made, or to require credit grantors (who usually have a monthly communication with their customers) to be responsible for an annual notification. Whatever mechanism of notification evolves, the logistics are probably best addressed in a meeting of the minds among industry, the Federal Trade Commission ("FTC") and consumers. Additionally, when consumers choose to opt out, this information should be shared among bureaus. I urge the industry to continue to develop a mechanism to accomplish this.
15 USC ( 1681c. (605)
Reporting of Obsolete Information Prohibited
We agree with the distinction the Subcommittee is making between the different forms of "bankruptcy." Clearly, a "Chapter 13" (for adjustment of debts of an individual with regular income) should not be treated with equal severity as, for example, a Chapter 7 (total liquidation) or a Chapter il (reorganization). We believe that this bifurcation in retention periods would give consumers incentive to try to reduce their liabilities, thereby distinguishing between consumers who are paying off their debts and others who do not. We are pleased to see that consideration was given to modifying the length of time during which overdue payment information is reported and that both chairman Lehman and Representative Rinaldo adopted the scheme we suggested last Fall. One of the most common complaints we heard from consumers regarding FCRA concerned the length of time "miscellaneous" adverse information stays in one's file (seven years). 15 USC 1 168le. (607) Compliance Procedures Another common consumer complaint is that credit reports are frequently wrong, or at least incomplete. Even though FCRA requires that credit bureaus "follow reasonable procedures to
assure maximum possible accuracy of the information concerning the individual about whom the report relates," the statute does not require accurate reports per se and does not currently specify what procedures are reasonable. Despite twenty years of experience with implementation of FCRA and long and complex algorithms developed by the industry to insure accuracy, the credit reporting industry often fails to achieve the required "maximum possible accuracy. Thus, we are very supportive of Chairman Lehman's proposal to require each credit bureau to have in place records of procedures for ensuring accuracy of fundamental credit information about consumers.
We do not think that records of these procedures should be available to "any person." Credit bureaus tell us that some of the procedures they use to test the accuracy of the credit information which their databanks contain quite often are proprietary to their operations and thus, should not be exposed to their competitors. Also, credit bureaus note that their "procedures" include algorithms akin to trade secrets, which are so complicated as to make them meaningless to the average consumer. Certainly the simple steps taken by credit bureaus in reinvestigations should be available. For example, how soon they investigate, who they routinely contact (only the creditor or others), how they contact them (mail, phone, computer), and what they ask, should not be secret. Chairman Lehman has proposed throughout his bill to require industry to make various procedures and records available to "any person." Availability of this type of information should be limited to the Federal government agency which enforces this Act and to the individual consumer disputing accuracy. We are still troubled, however, because Chairman Lehman's goal is not to require burdensome recordkeeping, but instead, is to ensure credit reports with maximum possible accuracy. While I am deeply concerned about the lack of accuracy in credit reports, pages of written procedures presented to the Federal government or to the consumer will probably not alleviate this problem. I recommend that the Subcommittee consider a results-oriented approach which has been used by other Federal agencies. Examples include the U.S. Department of Transportation publicly announcing the on-time arrivals and complaint records of airlines; the u.s. Department of Health and Human Services recording and publishing hospital death rates; and the U.S. Department of Education announcing the competency test scores measuring student performance. The theory is that the government has no right to micromanage an organizational entity, but it can and should provide incentives for improved performance which benefit the public. Perhaps this type of results-oriented system could be set up whereby the actual accuracy of an annual random sampling
of credit bureau files would be measured and analyzed, and the aggregate results made available to credit bureau subscribers as an incentive for improving the overall accuracy of credit bureau files. This benefits subscribers, directly, and consumers, indirectly. We support, as a concept, Chairman Lehman's amendment to require credit bureaus to keep records of the certified purposes cited by users of consumer reports, but only if this could be accomplished with a minimum of burden, perhaps through the addition of a simple code. Currently, those who have access to credit reports must certify through written contracts that they have a permissible purpose for the information. Yet, despite that safeguard, some with no right to the information still access it. It would no more difficult for these individuals to misrepresent the purpose for accessing information than it would be to violate their contract. A simple code could be used by enforcement agencies, however, to check on those who may be illegally accessing credit records instead of requiring detailed recordkeeping systems which might ultimately lead to higher prices for credit reports. Further, we would have serious privacy concerns about allowing this information to be made available to "any person" because there may be instances when information why a credit report is accessed could be personally identifiable. Therefore, we believe access should be limited to the consumer to whom it pertains or to the relevant enforcement agency involved.
15 USC_$ 1681g. (609)
Disclosures to consumers
We concur with the action taken by the Chairman to amend FCRA to reflect what some states (such as Maryland) have already mandated - to uniformly require the credit bureaus to provide in writing "all the information in the consumer's file at the time of the request" rather than just the "nature and substance" of the file. Recognizing that this is the current practice of the three largest credit bureaus, this addition would simply formalize the procedure. We also laud the Chairman's and Representative Schumer's explicit "statement of rights and remedies" which would be required to be included with any disclosure made to consumers.
15 USC ( 1681i. (611)
Procedure in case of Disputed Accuracy
We certainly agree with the Chairman's amendment to change the vague language "within a reasonable period of time" for completion of reinvestigations and the insertion of the specific statutory period of no longer than thirty days. That time period seems appropriate given that representatives of the credit
industry have told us thirty days is long enough for a reinvestigation in most cases. Inserting a deadline for credit bureaus requires closure of contested matters and thus encourages prompt action on the part of credit bureaus, rather than leaving the consumer in limbo. We also would support statutory language to bring credit grantors under the Act and as an integral part of the chain of events that must occur during the reinvestigation process. Credit grantors must aid the credit bureaus to meet their deadline by reverifying disputed items as quickly as possible. We would hope that the FTC would provide regulatory incentives that would encourage credit bureaus and creditors to complete all of their investigations within 30 days, thereby obviating the need for "interim written notices" altogether.
15 USC / 1681). (612) Charges for Disclosures We disagree with the Chairman's amendment to limit the charge for consumer reports to $8 (the same as currently required by California law). We believe that credit bureaus have the right to charge any reasonable fee for their services and that the Federal government should not decide what private industry will charge for its services. We also believe that setting a specific charge is not wise in a piece of legislation that is expected to stand the test of time. Nor are we in favor of requiring credit bureaus to provide a free credit report "at least annually.' There is no such thing as a "free" credit report. The costs will be passed along to all consumers. We would instead urge a higher degree of accuracy, thereby eliminating the constant need to check credit records.
15 USC i 168lk. (613)
Public Record Information for Employment
We agree with the additional requirement placed on credit bureaus to include both the source and date for public record information put in consumer's files. This will help consumers track down any errors in this information culled from public records.
15 USC 1681m. (615)
Requirements on Users of Consumer
Because no specific means of communication is currently specified in the Act regarding adverse action letters, we agree with the Chairman's amendment to require mandatory written disclosure of the adverse action, the name and address of the credit bureau which furnished the relevant report, and the name and address of