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Senator TSONGAS. I don't think it makes a bit of difference how hard you work on it. It's simply not conducive to what-this kind of thing, in this particular year, children's television, for example, was just to me astounding. Of course, they don't all have children of that age to be concerned of, but that, I think, is really suggestive of where this Congress is.

I don't mean to belabor that issue. Why don't you finish the statement.

Mr. GELLER. It is important to note that the bills do not impose legal requirements on any class of business that is not already subject to similar provisions. Most notably, the Equal Credit Opportunity Act imposes on all creditors, large and small, the requirements to provide an individual who is the subject of an adverse credit decision with the reason for that decision.

We believe that the costs of fair information practices should be evaluated in the context of the benefits attained. In addition to the direct benefits that this legislation would provide the consumer, it may also have certain economic benefits to the institutions involved.

The Federal Reserve Board recently released a study of the effect of the Equal Credit Opportunity Act's requirements that a creditor supply a rejected credit applicant with the reason for the rejection. The study showed that a majority of those who then supplied additional information were granted credit, suggesting that considerable economic benefits to the creditors as well as social benefits to the broader public accrue from adopting the sort of procedures envisioned by the proposed legislation.

Together, the privacy protection amendment and the Fair Credit Information Practices Act achieve a balanced response to the serious deficiencies in existing law. These measures provide basic fair information protections to consumers while satisfying the credit grantor's need for information on which to base its decisions concerning the individual's creditworthiness.

In an information-dependent industry where decisions are based primarily on recorded information, indeed, in a society which is increasingly information dependent and which will become even more so, the integrity of that recorded information is a thing of value. The ability to insure its integrity must be nothing short of a right. The privacy protection amendments and the Fair Credit Information Practices Act would provide such a right. I urge you to act favorably on this legislation so that these basic protections may, in fact, become a right for all consumers.

That concludes the statement.

[The complete statement of Mr. Geller follows:]

Testimony
of

Henry Geller

Assistant Secretary of Commerce
for Communications and Information
before the

Subcommittee on Consumer Affairs
Committee on Banking, Housing, and Urban Affairs
U.S. Senate

February 21, 1980

INTRODUCTION

Good morning.

Mr. Chairman, thank you for inviting me back to appear before you to discuss the "Privacy Protection Amendments" and the "Fair Credit Information Practices Act" -- the first two titles of S. 1928 now before this Subcommittee. Title I is a series of proposed amendments to the Fair Credit Reporting Act; Title II would establish basic fair information practices for creditors. This legislation would provide critical protections for personal information handled by the consumer reporting and consumer credit industries. I hope that through my remarks today I will convey to you the significance of this legislation, and the need for your favorable consideration of these measures.

Before I begin, I would like to introduce to you again Mr. James Howard, Program Manager of the National Telecommunications and Information Administration's Privacy Program. Mr. Howard and I will be pleased to answer any questions you have following my prepared statement.

I would like to begin with a brief background discussion of the development of the privacy issue. I will then direct my remarks more specifically to the need

for privacy protections in the area of consumer credit. This will include a description

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of the flows of information that characterize the credit industry, and a discussion of the problems in existing law and how Titles I and II will address these problems. Finally, I will describe some of the ways in which we sought to minimize the

costs and burdens of compliance with the legislation. An appendix to my testimony describes the detailed provisions of the two bills under consideration. In addition,

because there are many cross-references between the two bills and Titles III

and IV, the appendix includes a detailed explanation of those bills as well. Mr. Chairman, may I request that the appendix be entered in the record.

Last month, in his testimony before this Subcommittee, Deputy Secretary Hodges described the origins of the Presidential Privacy Initiative. Let me add that the history of the Presidential Privacy Initiative covers but a facet of the development of the privacy issue itself.

On the Federal legislative level this developing concern has resulted in a variety of enactments

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now propose to strengthen.

including the Fair Credit Reporting Act, which we

On the Executive level, the Presidential Privacy Initiative was preceded

by several intensive examinations of the privacy issue. In 1973, after two years
of study, the Secretary's Advisory Committee on Automated Personal Data Systems
headed by former HEW Secretary Richardson, produced a report entitled "Records,
Computers and the Rights of Citizens." This report set out a series of fundamental
privacy goals for the Federal government.

The Domestic Council's Committee on the Right of Privacy focused on

a number of areas related to information privacy and other information policy issues. And, of course, the Privacy Protection Study Commission conducted a

detailed two-year examination of privacy issues as they apply to the private sector, culminating in its report and recommendations entitled "Personal Privacy in an

Information Society."

Finally, as Mr. Hodges stated, the President's Privacy Initiative translated the results of these studies into action: a national information privacy policy and a number of draft bills to implement that policy. It is to address two of those bills that I am before you today.

I would like to mention, too, that in addition to the Congressional and Executive interest, there is strong public concern over privacy matters. A recent survey of attitudes toward privacy, sponsored by the Sentry Insurance Company and conducted by Louis Harris and Associates, documents the dramatic increase in public concern that has taken place in a single year. The survey shows that at the end of 1978 a nearly 2-to-l majority of the public felt a sense of real concern about threats to their personal privacy as compared with just under half the population who held that view at the start of the year. Note that this concern does not appear to be a momentary reaction to an identifiable event, such as Watergate; rather it appears to be the result of a growing awareness of the systemic potential for abuse.

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increased

The changes in society that gave rise to the earliest efforts reliance on records as a basis for decisionmaking, new techniques of decisionmaking,

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are accelerating each year. We believe the extensive examinations that have

taken place, combined with a growing public concern over these trends, present

a clear and compelling mandate for action.

The time has come to put privacy principles into practice.

GENERAL NEED FOR LEGISLATION IN CONSUMER CREDIT

The consumer credit industry has changed significantly in recent years.

It has grown in volume; in the last several years especially, dependence on consumer credit has surged dramatically. For example, in the last decade, the amount

of consumer installment credit extended has increased almost threefold to over $322 billion in 1979. There have been changes in the kinds of credit arrangements available, the credit card being a popular example. There have been changes, too, in the very nature of the credit relationship: personal interaction has declined, supplanted by recorded information as the primary factor in establishing and maintaining the credit relationship. This reliance on recorded information has stimulated more extensive information sharing within the industry; and in this process, the importance of credit bureaus credit and other industries

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clearinghouses of information for

has also grown. And, as in other information-dependent

industries, the process of maintaining and exchanging such quantities of information has been facilitated by advances in computer technology.

Thus, with the increase in dependence on consumer credit has come a decrease in the consumer's contact with the information about him or her on which the credit relationship is based.

As the individual's direct contact with the credit industry decreases, the potential for undetected error increases; and, because of the extensive nature of the information flows within and surrounding the industry, such errors are likely to proliferate.

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General industry practices do not apprise the consumer of the flows of information that result from the credit relationship. Existing laws in part because of inherent weaknesses in the laws themselves, and in part because of

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