DAVID FLOREEN
‘Significant’ legislation

The Senate Banking Committee has approved legislation that would update the nation’s credit-reporting system and permanently block individual states from changing it.

The Fair and Accurate Credit Transactions Act of 2003 – also known as the FACT Act – would permanently renew the expiring preemption provisions contained in the Fair Credit Reporting Act, which are set to expire in January, and would also add new identity theft protections to consumers.

The legislation received the backing of the Senate committee last week. The House Financial Services Committee approved a similar version on Sept. 10.

Senate Banking Chairman Richard Shelby, R-Ala., said his goal was to strike the proper balance between protecting the rights of consumers and the efficient operation of U.S. markets, but while some banking officials are in strong support of increased consumer protections, others are concerned that additional protection amendments, similar to the Gramm-Leach-Bliley Act, would hinder business.

“We think the permanent reauthorization of the Fair Credit Reporting Act is vitally important to the industry and our customers. The day-to-day business of banks is affected when it comes to extending credit,” said Catherine Pulley, senior manager of public relations at the American Bankers Association. “Customers have become accustomed to walking into an automobile dealership and leaving that day with a car. They are used to doing it easily and not worrying about state laws affecting their transactions. Having 50 different state laws will mess up the system and it will take much longer to get credit. You need to have federal preemption – it creates a seamless system.

“We are completely in support of the identify theft provisions, as well as the other consumer protections in the bill, such as allowing customers to receive a free credit report.”

The Best Defense

Officials at the Massachusetts Bankers Association are in support of making permanent the provisions in the FCRA, but they are also urging Massachusetts residents to take advantage of the state law while it is still in effect.

“We’re supportive of the legislation and making permanent the Fair Credit Reporting Act. The consistency is critical for commerce, consumer credit and general business functions and all of us are looking for ways to deter, prevent and counteract identify theft,” said David Floreen, senior vice president of government affairs and trust services at the MBA. “It’s a widespread problem that can impact almost anybody, and it’s a combination of deterrence and protection and education. We already give a free credit report, so this would extend that protection to everyone else.

“People ought to go and take advantage of Massachusetts’ law now and obtain a copy of their credit report – it’s online and it’s free. It took me less than 10 minutes to get my credit report.”

Officials at the Consumer Federation of America issued a call for the committee to strengthen the proposed legislation and also urged committee members to reject weakening amendments that may be proposed.

The Senate bill offers some substantial steps forward for consumers in providing greater federal oversight of credit report accuracy, medical privacy and identity theft and in enhancing consumer access to credit reports and scores.

On identity theft, the bill would require credit bureaus to place fraud alerts on the accounts of identity theft victims, instruct federal agencies to direct credit bureaus to identify and prevent identity theft and, in many cases, prohibit the sale or transfer of debt associated with identity theft.

But regardless of legislation, Floreen said the best defense against fraud is education.

“You have to keep educating people about being more careful about who they give [information] to and in what form,” said Floreen. “A lot of us are vulnerable and forget things, and you have to constantly remind and educate. This is a significant piece of legislation, and as I understand it, it is going to put more onus and responsibility on credit reporting agencies and those who furnish information.”

Members of the banking industry are also standing in support of increased identity theft protection, as the backlash of identity fraud falls into bank hands.

“To our bankers, identify theft is a serious problem because at the end of the day, banks eat the money. We have to eat the cost and it’s a lot of money – we would like as many tools as possible to fight identity theft and increase consumer protections,” said Pulley.

The bill has passed the Senate committee and members of the banking industry are urging it to go to the floor as soon as possible, which some believe will be as early as the week of Oct. 13.

“We want to see it done this year, because seven provisions of the Fair Credit Reporting Act expire Jan. 1, 2004, and we are concerned,” said Pulley.

Melanie Nayer may be reached at mnayer@thewarrengroup.com.