BARNEY FRANK
‘Pleased with bill’

The Fair Credit Reporting Act, which was adopted by Congress in 1970 to ensure fair and accurate credit reporting and to protect consumer privacy, was up for reauthorization this year. A 61-3 vote in the House Committee of Financial Services recently reauthorized the act. The reauthorized act includes a number of new amendments, which financial services industry watchers say were necessary as today’s technology puts new pressures on older privacy policies.

The New England Council’s Financial Committee, along with Congressman Barney Frank, D-Mass., the House Financial Services Committee chairman, executives at the Massachusetts Bankers Association, members of the Federal Trade Commission, and local bankers and financial executives lobbied in Washington especially to reauthorize the FCRA’s data-sharing provisions, which set a national uniform standard for data-sharing rules.

On July 31, the House Financial Services Committee passed legislation (H.R. 2622) to permanently extend the Fair Credit Reporting Act’s federal preemption of state credit-reporting laws. In addition to the preemption aspect of the legislation, the bill also includes several consumer-protection provisions, including those aimed at preventing identity theft. Along with those provisions is a three-tiered standard for victims of identity theft that would place a fraud alert on accounts where the consumer does not want new credit offered unless special permission is sought first.

“I was pleased with the overall bill, but there still needs to be some improvements,” said Frank. “The bill is not the same as it would have been if the Democrats were the majority, but we did pretty well … especially extending the preemptions with some significant consumer protections. There are a couple of tweaks I would make … but I voted for it.”

The last time significant amendments to the FCRA were passed was in 1996 The primary purposes of the FCRA are to ensure fair and accurate credit reporting and to protect consumers’ privacy.

Also, the FCRA imposes certain obligations on consumer reporting agencies, on users of consumer reports, and, since 1996, on furnishers of information. Now, more amendments have been added to the act, mainly aimed at protecting consumers.

“The states are free to regulate the use of credit scoring for insurance. It’s relevant to getting a mortgage, so it’s relevant to homeowners insurance,” said Frank. “Credit scoring for purposes other than the granting of credit and the identity theft provisions and security issues are good … overall, this enhances the system.”

‘Exchange of Information’

Under the FCRA, a person may obtain a consumer’s credit report only if that person has a permissible reason for doing so. The statute specifies the permissible purposes for obtaining a consumer report, which include the intended use of the information from a consumer report for a transaction involving an extension of credit to a consumer and, now, an extension of credit services.

Creditors are not required to obtain consumer reports before making credit decisions, although most creditors rely on consumer reports for risk-management purposes.

Consumer reporting agencies have extensive responsibilities under the FCRA that include maintaining reasonable procedures to ensure that consumer reports are furnished only to persons having a permissible purpose; following reasonable procedures to ensure the maximum possible accuracy of consumer reports; reinvestigating the accuracy or completeness of any disputed information and notifying the consumer of the results of the new investigation; omitting certain obsolete information from consumer reports after specified periods of time; and providing a consumer with a copy of his or her consumer report upon request.

“The real key pieces of the amendments are uniformity and consistency. Credit granting is national in scope … many of your major credit grantors really do need a certain amount of nationality, but more importantly an exchange of information,” said David Floreen, senior vice president of government affairs and trust services for the Massachusetts Bankers Association.

The FCRA contains important consumer rights and protections. A consumer must receive notice if information in a consumer report has resulted in adverse action against the consumer An adverse action notice must inform the consumer of the name, address, and telephone number of the consumer reporting agency that furnished the report, the consumer’s right to obtain a free copy of the consumer report, and the consumer’s right to dispute the accuracy or completeness of any information in the consumer report.

“Under the amendments, there is still a fair amount of obligations in terms of reporting information, and consumers have the right, in Massachusetts, to a free copy of their credit report annually,” said Floreen. “It’s automated and takes 10 to 15 minutes and it’s a great way to check up on your file. The Massachusetts Office of Consumer Affairs and Business Regulations has a whole description on their Web site.”

Other consumer rights and protections are designed to protect consumer privacy. Consumers have a right to be excluded from prescreened solicitation lists.

Consumer privacy is also protected by the limitation of access to consumer reports by persons that have certified a permissible purpose under the FCRA. Additional privacy protections now cover specific circumstances where consumer reports are provided to prospective employers, consumer reports contain medical information, or investigative consumer reports are prepared or obtained.

“We are generally supportive of the amendments of the bill … the real key issues now are continuity. With the preemptions in the amendments, state laws don’t have differences between states in terms of what info is excludable, includable, and the exchange of information between companies,” said Floreen. “[The MBA has] taken an active role really in support of the permanent extension and preemption because it’s important to have consistency; it’s essential for our economy. The economy is dependent on credit and you need a [highly efficient] system, albeit a safe system, to conduct that business.”

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