This Title provides deposit accounts in financial institutions with protections against improper disclosure parallel to those provided in Title II for credit accounts. The Title does not, however, include the other consumer protection provisions relating to access, correction and adverse decisions which are part of a comprehensive information privacy policy. Current law and practice already provide these aspects of information privacy protection in what appears to be an effective and workable manner. Provisions regarding customer disputes and correction of account information already exist under the Uniform Commercial Code and various other State laws. Access to depository account information is routinely provided in monthly balance statements and in the return of. canceled checks. Copies of little else besides balance data, checks and original signature cards are maintained in the depository account records of a financial institution. In addition, financial institutions customarily provide customers with copies of checks and account balance information when they misplace their own records. This pattern of legal and customary protections for consumer interests exists largely because deposit accounts have been around for many years; provisions such as those in the Uniform Commercial Code reflect the efforts of past generations to solve some of the same problems addressed by current information privacy and related consumer protection legislation.

Unfortunately, a crucial area of privacy protections is absent from the current legal underpinnings of the relationship between depositors and financial institutions in this country. With few limitations, banks, savings and loan associations and other depository institutions may legally disclose customer account information as they see fit. One of the few limitations is the recently enacted Right to Financial Privacy Act of 1978 (12 U.S.C. Section 3401 et seq). That Act was passed in response to perhaps the greatest problem raised by this lack of enforceable protections against inappropriate disclosure--unrestricted government access to depository account records, particularly

checking account records. The Right to Financial Privacy Act, however, governs only disclosures to Federal agencies. Both State and local government agencies and private parties remain free to obtain whatever records they may want; and, financial institutions remain free to give them those records at their sole discretion. The confidentiality section and related provisions of this Title seek to remedy this situation (1) by imposing limits on when and to whom financial institutions may disclose account information and (2) by restricting the manner in which both private parties and State and local governments may gain access to account information.

Section 2 incorporates by reference the definitions in Title II of the bill (the Fair Credit Information Practices Act) and adds definitions of two terms unique to this Title-"depository institution" and "customer". The term "depository institution" includes banks, savings and loan associations, credit unions, and other such institutions that accept funds and hold them on behalf of consumers. These institutions are specifically named, rather than described functionally, to avoid unintentional coverage of hotel safes, credit accounts with positive balances, and other entities that may incidentally hold items or funds on deposit.

Section 3, the heart of the Act, parallels the provisions of Section 3 of Title II. In combination with Section 4, the provisions of this Section impose limits on when and to whom depository institutions may disclose information. Section 4 ensures that customers will be informed of the disclosure patterns of their bank and restricts the bank's permissible disclosures of account information to those which it informed its customers of and which are permitted by Section 3.

Sections 5-8 show the enforcement scheme, which is like earlier Titles.

Section 10 provides the necessary complement to Section 3, outlining the restrictions which will be imposed when private parties seek a customer's records through legal process. Access by Federal agencies and State and local governments is restricted by existing law, including the Right to Financial Privacy Act.

The section-by-section analysis for Title II should be referred to for details.

Senator TSONGAS. There seems to be some dispute about whether credit card companies are as aggressive as they were. You suggest that they are not. We suggest that they are. But isn't prescreening going to be an increasingly important practice? Doesn't the bill, in essence, endorse the practice?

Mr. GELLER. No, it doesn't endorse it. We simply leave it where it is. It is very widespread. It is a very useful marketing tool. We have let it be.

What we have said is that we would like to begin an examination of it, by at least opening it up to the public. And we have done that by saying that people can learn about it, can learn what a company has ordered a list, what criteria were used. We have not disapproved of it, but, in doing so, I don't think we are approving it. We are simply starting the process of opening it up to sunshine.

OPPOSITION FROM REPORTING INDUSTRY

Senator TSONGAS. Let me go through a couple of questions that have been prepared here.

We can expect to hear some opposition from the consumer reporting industry to the requirements in title II that creditors provide an applicant with a copy of whatever the creditor receives from the reporting agency. Just how important to the viability of this legislation do you believe this requirement to be?

Mr. GELLER. We think that's fundamental to the legislation, as I mentioned. The right to get that information and to get it speedily and without fuss is the foundation of it. As it is today, the consumer's shunted back and forth. All he gets is the nature and substance. He has to go to the consumer reporting agency to get it; he has to go there in person. And it's too difficult.

What we would do is this: He can write instead of visit; there is a time limit; there has to be a response in writing. The foundation of what we're doing in the amendments is that information be made available, and be made available from the creditor, not necessarily by going to the consumer reporting agency. The creditor had it before him when he granted or denied it. He knows what's in it, and he can supply it, and he ought to supply it promptly.

Senator TSONGAS. Well, what percentage of people who are turned down for credit pursue the avenue of information seeking? Mr. GELLER. The Federal Reserve study I mentioned may have some statistics on this.

Senator TSONGAS. Do you have any idea?

Mr. GELLER. I would think it's a very small percentage.
Senator TSONGAS. I would think it would be quite small.

Mr. GELLER. Yes, I would think so, but we don't know. Most people just take it, so to speak. They don't pursue rights. Nevertheless, even though it's small, those who want to should have the right to do it.

Senator TSONGAS. What about the issue of credit voids where someone is denied credit because there is insufficient information about him. They may live in a rural area——

Mr. GELLER. The Federal Reserve has a regulation that is helpful there, and says that if the creditor supplies that type of informa

tion to the credit bureau, that the credit bureau has the right to verify-but it's easily verifiable-and then should factor it in.

Our bill also has a provision along the same lines, the one that you have before you, that would factor that in. And if it was easily verifiable and supplied by the consumer, then the credit bureau should then make it available and should not simply rely on the fact that there is no-

Senator TSONGAS. Let me supply the rest of these to you in writing, if you could respond for the record.

[The following was received for the record:]

ENCLOSURE

Answers to Questions Asked by Senator Paul E. Tsongas in his February 27, 1980,
Letter to Assistant Secretary of Commerce Henry Geller

1. Do you see any possibility that prescreening may constitute an invasion of privacy?

The Privacy Protection Study Commission addressed the issue of the invasiveness or intrusiveness of information practices by recommending that there be a governmental mechanism to hear consumer complaints and deal with overly intrusive practices. The Administration rejected this approach as out of keeping with its policy of imposing as little government regulation as possible on credit information practices. The Administration's approach has been instead to open those practices to public scrutiny and allow the public and market forces to decide whether they are unduly intrusive.

2. Is there any reason why individuals should not be given the right to prohibit credit reporting services from submitting their individual files to prescreening?

It has been our intent to disrupt current industry practices as little as possible; thus we did not provide such a right.

3. The definitions of Consumer Report and Consumer Reporting Agency in the Fair Credit Reporting Act have been the source of considerable misunderstandings over the past decade. For the record, would you outline any improvements you may have made to these definitions under this legislation?

One of the most important improvements we propose in the definition of "consumer report" is to provide that a consumer report does not cease to be a consumer report when it is obtained or used for a non-permissible purpose. There have been several cases wherein remedies available in connection with the misuse of a consumer report were declared inapplicable because the report had been obtained for a purpose for which consumer reports could not be obtained. Title I would specifically eliminate that loophole.

Another important improvement in that definition would be the explicit inclusion of insurance claim investigation reports prepared by a consumer reporting agency. Courts have differed as to whether claims reports are subject to the FCRA. Title I would clarify that they are in general, but would exclude them from certain provisions that are inappropriate to claims investigations, such as prior notification that an investigation would be performed.

Several other types of information that we propose to add to the specific definition of what constitutes a consumer report include: medical information; information obtained by surveillance or by polygraph or other truth-verification devices; information obtained by investigators over the telephone (the FCRA now says only "through personal interviews"); and information to be used only as a lead.

The major change that Title I would make in the definition of "consumer reporting agency" is to add a separate exclusive definition of "independent authorization service," and make it clear that these services include check authorization and guarantee services as well as independent credit card and debit card authorization services. These services are then explicitly included in the sections of Title I that would apply to them.