credit." The precise meanings of these terms are important because they determine when disclosures mandated by Section 4 are necessary. In the absence of any definition of these terms, Title II might be interpreted to require disclosures each time a consumer requests any change in an existing open-end account, or utilized a continuing line of credit, as well as for every new loan or credit sale. We doubt that such repeated disclosures of identical information would be either necessary or effective. Likewise, Title II fails to define the term "adverse credit decision" which determines rights under Sections 6 and 7 of that title. We recommend that these important terms be clearly defined and that any conflicts with the terminology of the Federal Reserve's Regulation B should be explicitly resolved by the bill. Finally, we believe that Title II may prove troublesome to the Comptroller's Office and other financial institution regulators because it may cast doubt on the authority of the agencies to use relevant consumer information in their supervisory operations. For example, Section 3(a) permits creditors to release data to the government upon request," consistent with existing statutes, without an express requirement that the consumer affected receive prior notice that such disclosure may occur, or the ways the government may use the information. Section 3(b), however, arguably conditions subsequent use by the government on prior notice to the individual. 4." Section 3(b) provides that "Information disclosed under this section may not subsequently be used by the person receiving it... for any purpose other than that which was indicated in the notice to the consumer required by section Section 4 generally requires a creditor to disclose the types of persons to whom, and circumstances under which information may be disclosed without prior authorization. Because such circumstances would not be synonymous with the "purpose" of mandatory or discretionary referral of information among supervisory agencies, it could be argued that such referral by a supervisory agency would not be permitted unless the financial institution has previously notified the consumer of such a specific eventuality. The provisions of Title II do not sufficiently clarify this ambiguity. Accordingly, we recommend that an appropriate provision be added to preserve the authority for federal and state financial supervisors to communicate freely with government agencies and other persons when relevant to the effective discharge of their supervisory duties. CONCLUSION We support the basic purposes of Titles I and II of the proposed Fair Financial Information Practices Act. We recognize that while the routine reporting of credit account data by creditors makes the credit evaluation process more efficient, a free flow of information should be balanced by procedural safeguards to insure complete and accurate reporting of credit information and, more importantly, the individual's reasonable expectation of privacy. We hope our comments will assist the Subcommittee in its deliberations, and that the legislation ultimately enacted will achieve this necessary balance. Statement by Henry B. Schechter Director, AFL-CIO Office of Housing and Monetary Policy on the "Privacy Protection Amendments of 1979" and the "Fair Information Practices Act" April 25, 1980 The AFL-CIO appreciates the opportunity to submit for the record of hearings being held on April 22, 23 and 30 before the Senate Subcommittee on Consumer Affairs, its views on Title I Amendments to the Fair Credit Reporting Act and Fair Credit Information Practices Act of S. 1928, the Fair Financial Information Practices Act. The AFL-CIO supported the original Fair Credit Reporting Act in 1969-70 and is in favor of the updated protection that would be provided by the legislation under consideration. About In an increasingly complex economy, it is almost inevitable that working people will have need to resort to credit financing during their lifetime. three out of four members of AFL-CIO affiliated unions, for example, are homeProbably an even greater proportion are owners of automobiles. owners. Purchases of homes, autos, household appliances and many other modern living necessities very often have to be credit financed. It is of great importance, therefore, that union members and all other consumers should be protected against compilation of inaccurate information and misuse of any information that is made available to a vendor or to a credit reporting agency for a specific purpose. There is also a broader general principle of right of privacy that is involved. The potential for use of misinformation, misuse of information and violation of privacy grows with progress in efficiency of storing computerized information and retrieving and transmitting that information through modern telecommunications. For that reason, the AFL-CIO supports the general thrust of Titles I and II of S. 1928, with particular emphasis on some of the provisions indicated below. Section 3 of the "Privacy Protection Amendments Act" amends Section 604 of the Fair Credit Reporting Act to provide some desirable improvements with respect to distribution of consumer credit reports. It would limit a consumer authorization for release of information for a specified purpose other than credit, insurance or employment to only one year, and stipulate that the information would be used only for the specified purpose. It would also permit reporting agencies to show the consumer his complete file, so that consumers do not have to pay a fee to an intermediary company to see their own file. Section 5 of Title I would greatly strengthen the capability of a consumer to guard against the establishment of a file containing misinformation about him. It would revise Section 606 of the basic Act to require notice to a consumer before an investigative report is begun, exclusive of reports related to insurance claims. The consumer would have to be advised in advance of the types of information to be gathered, that he has the right to withdraw the application causing the investigation to be conducted, and that he can obtain the identity of the investigating agency and copies of forms to be used, sources to be used and questions to be asked. Perhaps the most innovative, feature to advance consumer protection is in Section 8 which requires a reporting agency or authorization service to inform the consumer whether it has a file pertaining to him; permit the consumer to examine and obtain copies of the file; provide the consumer with an explanation of terms used; disclose sources of any information disclosed; identify each recipient of a consumer report; and where an authorization service refuses to authorize, approve or guarantee a transaction, provide the reason for the refusal and the information upon which it was based. |