Washington, D.C.–As the Senate Banking Committee prepared to mark up a crucial credit reporting bill this afternoon, the Consumer Federation of America issued a call for the Committee to strengthen the proposed legislation. CFA also urged committee members to reject weakening amendments that may be proposed.
“The Senate needs to toughen up this bill to protect consumers, not gut it” said Travis Plunkett, CFA’s Legislative Director. “More needs to be done to protect consumers’ financial privacy, fight identity theft and improve the accuracy of credit reports.”
The Senate Credit Reporting Bill
The Senate bill offers some substantial steps forward for consumers in providing greater federal oversight of credit report accuracy, medical privacy, 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. Mortgage lenders would also have to provide credit scores to consumers applying for mortgage loans. Some credit bureaus would have to make free credit reports available to consumers once a year upon request. To improve credit report accuracy, federal agencies would have to issue regulations requiring credit bureaus to maintain accurate and complete credit reports, to conduct audits of report accuracy and to track accuracy complaints. Credit bureaus and creditors would also have to comply with a number of medical privacy restrictions on the sharing of credit reports.
Needed Improvements to the Senate Bill
In a letter sent to members of the Senate Banking Committee on September 17th, consumer groups called on Senators Shelby and Sarbanes to take a number of steps to fix several serious shortcomings in the legislation ).
On financial privacy, the bill should allow consumers to control the sharing of financial information between corporate affiliates. Right now, the bill does nothing to allow consumers to review or dispute affiliate-shared information, or to even know that if this information was used to deny them credit. Even worse, the bill’s extremely weak provision on affiliate information could be used to strike down or stop enactment of more protective state laws.
On accuracy of credit reports, the bill should confront a fundamental problem that causes inaccuracy and contributes to identity theft – namely, the weak duties on creditors to report information accurately and to be accountable if they fail to do so. Senator John Corzine has proposed an amendment to require that creditors meet a higher standard of accuracy when submitting credit reporting information. The bill should also ensure that all consumers who receive offers of credit on less than favorable terms receive a notice informing them of this fact, allowing them to immediately get a free copy of their credit report to check for errors.
On identity theft, the bill allows debt associated with identity theft to be securitized and sold. This will allow creditors to easily dump bad debt and will decrease the incentive for creditors to quickly identify debt associated with identity theft. Also, the bill should mandate that creditors cooperate with identity theft victims and direct credit bureaus to forward a fraud alert on an account when only a credit score is requested by a creditor. Without this fraud alert requirement, a department store deciding whether to offer “instant credit” might not learn that they are about to offer credit to an identity thief. Several serious loopholes on the distribution of free credit reports are also in the bill. The bill specifically bans consumers from using the single most convenient method to request a credit report: the telephone. Instead, consumers must are use the Internet or mail a request. The bill only requires the three largest national credit reporting agencies to provide free reports to consumers, exempting a range of credit bureaus that collect credit information for insurance, tenant screening and medical purposes.
Special Interest Amendments
In preparation for the mark-up, Senators filed more than three dozen amendments to the bill. Most of these amendments were instigated by special interests attempting to further weaken the bill, such as debt collectors, credit bureaus, and credit card issuers and other creditors. Some of these weakening amendments have already been incorporated into the bill that will be voted on. Others may be offered separately at the committee mark-up.
“Today’s vote provides a real test of the willingness of Senators on the Banking Committee to stand up to special interests,” said Plunkett. “Are they going to fight to improve this bill and fix our nation’s flawed credit reporting system, or are let special interests continue to eviscerate bill?”
CFA is a federation of some 300 pro-consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy.