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Further Detail on House FCRA Bill Provisions and Implications

In the June edition of PIA Connection, I discussed some of the key issues related to the debate on reauthorization of the Fair Credit...
August 10, 2003

By Peter Bizzozero
Assistant Vice President, Federal Affairs
PIA National

In the June edition of PIA Connection, I discussed some of the key issues related to the debate on reauthorization of the Fair Credit Reporting Act (FCRA). Much has happened since then. The Administration has made its views on FCRA known. A bill - H.R. 2622, the Fair and Accurate Credit Act - was introduced by Representative Spencer Bachus (R-AL). Most recently, the Financial Services Committee passed the legislation by a 61-3 vote.

The bill is the result of six hearings held by the House Financial Services Committee, at which almost 100 witnesses testified. It addresses concerns raised during the hearing process. H.R. 2622 is basically a straight reauthorization of the expiring provisions of the FCRA with identity theft and accuracy of credit report provisions included.

Title I of the bill extends federal preemption creating permanent national uniform consumer protection standards. This is the main purpose of the bill. These provisions must be reauthorized by the end of the year or they will expire.

Identity Theft

Identity theft has been the most talked about issue during the hearing process. It has been called by many the "fastest growing white-collar crime." Title II of H.R. 2622 creates a fraud alert system, whereby a consumer who suspects that he or she has been the victim of identity theft can request a fraud alert be placed in his or her file by the credit reporting agency (CRA). Thus an issuer of credit would not be allowed to provide credit to anyone other than the consumer without first complying with the fraud alert's authorization procedure. CRAs would also be required to provide a notice of rights to victims of identity theft.

Another provision of this title allows a consumer to have fraudulent information blocked from his or her credit report. The consumer must first provide proof of identity and a police report validating proof of identity theft. The CRA then has 30 days to block reporting of information resulting from the identity theft.

Consumer Disputes

The bill requires the Federal Trade Commission (FTC) to establish policies and procedures for consumers to follow when contacting CRAs and creditors on issues related to identity theft. This would allow victims to report identity theft to only one CRA and have that information shared with all CRAs and the FTC.

Also in this title is a provision that requires the Federal Reserve and the FTC to conduct a study to determine if CRAs and furnishers - providers of information to CRAs - are complying with the FCRA rules related to prompt investigation and correction of disputed consumer information.

Consumer Records

According to Title IV of H.R. 2622, a CRA has 30 days in which to notify consumers and resolve discrepancies when the address given on an application for credit does not match the one in the credit report. Furnishers are also prohibited from providing information that they have reason to believe might be fraudulent to CRAs. Finally, the title requires that an assignee or agent, such as a debt collector, of a person who uses consumer reports, must notify the person of any fraudulent information discovered.

Credit Information

The bill allows for consumers to request one free credit report per year. The report would include the consumer's credit score, a summary of how the score was derived and how the consumer might improve the score. This section also requires CRAs to make it easier for consumers to limit pre-screened offers.

Employee Misconduct Investigations

Title VI allows employers more latitude to investigate employees. Communications between an employer and a third party hired to investigate employee misconduct are not considered consumer reports. If an adverse action is taken the employer must notify the employee and provide a summary of the communication.

During the full committee mark-up, eleven amendments were approved. But perhaps the most significant amendment was approved during the Financial Institutions and Consumer Credit Subcommittee mark-up. Representative Luis Gutierrez (D-IL) won approval for a study on the effect of credit scores and insurance scoring on the availability of financial products to be conducted by the Federal Trade Commission (FTC) in consultation with the Department of Housing and Urban Development (HUD).

The Gutierrez amendment is extremely troubling to the insurance industry. First, the industry argues that neither the FTC nor HUD have jurisdiction over insurance. Second, a number of existing studies demonstrate a strong correlation between credit based insurance scores and insurance risk. Finally, the industry argues that the cost of the study would be enormous, especially when one considers everything that would be involved.

Two other studies were included in the bill during the full committee mark-up. One, to be conducted by the General Accounting Office (GAO), would report on the role of race and gender in the credit granting process. The other study, to be conducted by the Federal Reserve, would look at restrictions on offers of credit or insurance not initiated by consumers.

It is the intention of the Financial Services Subcommittee on Financial Institutions and Consumer Credit to have the bill ready for debate on the floor of the House by September. This scenario is very likely to occur. However, the Senate timetable is somewhat different. The Senate Banking Committee held its final hearing on July 31. Legislation will likely be drafted during the August recess to be marked up by the committee in September.

Peter Bizzozero can be reached at or (703) 518-1365.

This article originally appeared in the July/August 2003 PIA Connection.

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