[House Report 108-263]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-263
======================================================================
FAIR AND ACCURATE CREDIT TRANSACTIONS ACT OF 2003
_______
September 4, 2003.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Oxley, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
ADDITIONAL AND SUPPLEMENTAL VIEWS
[To accompany H.R. 2622]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred the
bill (H.R. 2622) to amend the Fair Credit Reporting Act, to
prevent identity theft, improve resolution of consumer
disputes, improve the accuracy of consumer records, make
improvements in the use of, and consumer access to, credit
information, and for other purposes, having considered the
same, report favorably thereon with an amendment and recommend
that the bill as amended do pass.
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 22
Background and Need for Legislation.............................. 23
Hearings......................................................... 27
Committee Consideration.......................................... 28
Committee Votes.................................................. 28
Committee Oversight Findings..................................... 34
Performance Goals and Objectives................................. 34
New Budget Authority, Entitlement Authority, and Tax Expenditures 34
Committee Cost Estimate.......................................... 34
Congressional Budget Office Cost Estimate........................ 34
Federal Mandates Statement....................................... 36
Private Sector Mandates Estimate................................. 36
Advisory Committee Statement..................................... 37
Constitutional Authority Statement............................... 37
Applicability to Legislative Branch.............................. 37
Section-by-Section Analysis...................................... 37
Changes in Existing Law Made by the Bill, as Reported............ 54
Additional and Supplemental Views................................ 79
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Fair and Accurate
Credit Transactions Act of 2003''.
(b) Table of Contents.--The table of contents for this Act are as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Effective dates.
TITLE I--UNIFORM NATIONAL CONSUMER PROTECTION STANDARDS
Sec. 101. Uniform national consumer protection standards made
permanent.
TITLE II--IDENTITY THEFT PREVENTION
Sec. 201. Investigating changes of address and inactive accounts.
Sec. 202. Fraud alerts.
Sec. 203. Truncation of credit card and debit card account numbers.
Sec. 204. Summary of rights of identity theft victims.
Sec. 205. Blocking of information resulting from identity theft.
Sec. 206. Establishment of procedures for depository institutions to
identify possible instances of identity theft.
Sec. 207. Study on the use of technology to combat identity theft.
TITLE III--IMPROVING RESOLUTION OF CONSUMER DISPUTES
Sec. 301. Coordination of consumer complaint investigations.
Sec. 302. Notice of dispute through reseller.
Sec. 303. Reasonable investigation required.
Sec. 304. Duties of furnishers of information.
Sec. 305. Prompt investigation of disputed consumer information.
TITLE IV--IMPROVING ACCURACY OF CONSUMER RECORDS
Sec. 401. Reconciling addresses.
Sec. 402. Prevention of repollution of consumer reports.
Sec. 403. Notice by users with respect to fraudulent information.
Sec. 404. Disclosure to consumers of contact information for users and
furnishers of information in consumer reports.
Sec. 405. FTC study of the accuracy of consumer reports.
TITLE V--IMPROVEMENTS IN USE OF AND CONSUMER ACCESS TO CREDIT
INFORMATION
Sec. 501. Free reports annually.
Sec. 502. Disclosure of credit scores.
Sec. 503. Simpler and easier method for consumers to use notification
system.
Sec. 504. Requirement to disclose communications to a consumer
reporting agency.
Sec. 505. Study of effects of credit scores and credit-based insurance
scores on availability and affordability of financial products.
Sec. 506. GAO study on disparate impact of credit system.
Sec. 507. Analysis of further restrictions on offers of credit or
insurance.
Sec. 508. Study on the need and the means for improving financial
literacy among consumers.
Sec. 509. Disclosure of increase in APR under certain circumstances.
TITLE VI--PROTECTING EMPLOYEE MISCONDUCT INVESTIGATIONS
Sec. 601. Certain employee investigation communications excluded from
definition of consumer report.
TITLE VII--LIMITING THE USE AND SHARING OF MEDICAL INFORMATION IN THE
FINANCIAL SYSTEM
Sec. 701. Protection of medical information in the financial system.
Sec. 702. Confidentiality of medical information in credit reports.
SEC. 2. DEFINITIONS.
Section 603 of the Fair Credit Reporting Act (15 U.S.C. 1681a) is
amended by adding at the end the following new subsections:
``(r) Reseller.--The term `reseller' means a consumer reporting
agency that--
``(1) assembles and merges information contained in the
database of another consumer reporting agency or multiple
consumer reporting agencies concerning any consumer for
purposes of furnishing such information to any third party, to
the extent of such activities; and
``(2) does not maintain a database of the assembled or merged
information from which new consumer reports are produced.
``(s) Other Definitions.--
``(1) Board; credit; creditor, credit card.--The terms
`Board', `credit', `creditor', and `credit card' have the same
meanings as in section 103 of the Truth in Lending Act.
``(2) Commission.--The term `Commission' means the Federal
Trade Commission.
``(3) Debit card.--The term `debit card' means any card
issued by a financial institution to a consumer for use in
initiating electronic fund transfers (as defined in section
903(6) of the Electronic Fund Transfer Act) from the account
(as defined in such Act) of the consumer at such financial
institution for the purpose of transferring money between
accounts or obtaining money, property, labor, or services.
``(4) Electronic fund transfer.--The term `electronic fund
transfer' has the same meaning as in section 903 of the
Electronic Fund Transfer Act.
``(5) Federal banking agency.--The term `Federal banking
agency' has the same meaning as in section 3 of the Federal
Deposit Insurance Act.
``(6) Identity theft.--The term `identity theft' means a
fraud committed using another person's identifying information,
subject to such further definition as the Commission and the
Board may prescribe, jointly, by regulation.
``(7) Police report.--The term `police report' means a copy
of any official valid report filed by a consumer with any
appropriate Federal, State, or local government law enforcement
agency, or any comparable official government document that the
Board and the Commission shall jointly prescribe in
regulations, that is subject to a criminal penalty for false
statements.''.
SEC. 3. EFFECTIVE DATES.
(a) In General.--Except as provided in subsections (b) and (c)--
(1) before the end of the 2-month period beginning on the
date of the enactment of this Act, the Board of Governors of
the Federal Reserve System and the Federal Trade Commission
shall jointly prescribe regulations in final form establishing
effective dates for each provision of this Act (except as
otherwise specified); and
(2) the regulations prescribed under paragraph (1) shall
establish effective dates that are as early as possible while
allowing a reasonable time for the implementation of the
provisions of this Act, but in no case shall the effective date
be later than 10 months after the date of issuance of such
regulations in final form.
(b) Immediate Effective Date.--The following provisions shall take
effect on the date of the enactment of this Act:
(1) Title I.
(2) Section 201.
(3) Section 609(d)(1) of the Fair Credit Reporting Act (as
added by the amendment in section 204(a)).
(4) Section 305.
(5) Section 505.
(6) Section 506.
(7) Title VI.
(c) Effective Date For Protection of Medical Information in the
Financial System.--Section 701 shall take effect at the end of the 180-
day period beginning on the date of the enactment of this Act, except
that paragraph (2) of section 604(g) of the Fair Credit Reporting Act
(as added by section 701) shall take effect on the later of--
(1) the end of the 90-day period beginning on the date the
regulations required under paragraph (5)(B) of such section
604(g) (as added by section 701) are prescribed in final form;
or
(2) the date specified in the regulations referred to in
paragraph (1).
TITLE I--UNIFORM NATIONAL CONSUMER PROTECTION STANDARDS
SEC. 101. UNIFORM NATIONAL CONSUMER PROTECTION STANDARDS MADE
PERMANENT.
Section 624(d) of the Fair Credit Reporting Act (15 U.S.C. 1681t(d))
is amended--
(1) by striking ``Subsections (b) and (c)'' and all that
follows through ``do not affect any settlement,'' and inserting
``Subsections (b) and (c) do not affect any settlement,''; and
(2) by striking ``Consumer Credit Reporting Reform Act of
1996'' and all that follows through the period at the end of
paragraph (2) and inserting ``Consumer Credit Reporting Reform
Act of 1996.''.
TITLE II--IDENTITY THEFT PREVENTION
SEC. 201. INVESTIGATING CHANGES OF ADDRESS AND INACTIVE ACCOUNTS.
(a) In General.--Section 605 of the Fair Credit Reporting Act (15
U.S.C. 1681c) is amended by inserting after subsection (f), the
following new subsection:
``(g) `Red Flag' Patterns of Possible Identity Theft.--
``(1) Investigation of changes of address.--The Federal
banking agencies and the National Credit Union Administration,
in carrying out the responsibilities of such agencies and
Administration under subsection (k), shall jointly prescribe
regulations for credit card and debit card issuers to ensure
that, if any such issuer receives a request for an additional
or replacement card for an existing account within a short
period of time after the issuer has received notification of a
change of address for the same account, the issuer will follow
reasonable policies and procedures that require, as
appropriate, that the issuer not issue the additional or
replacement card unless the issuer--
``(A) notifies the cardholder of the request at the
former address of the cardholder and provides to the
cardholder a means of promptly reporting incorrect
address changes;
``(B) notifies the cardholder of the request by such
other means of communication as the cardholder and the
card issuer previously agreed to; or
``(C) uses other means of assessing the validity of
the change of address, in accordance with reasonable
policies and procedures established by the card issuer
in accordance with the regulations prescribed under
subsection (k).
``(2) Inactive accounts.--The Federal banking agencies and
the National Credit Union Administration, in carrying out the
responsibilities of such agencies and Administration under
subsection (k), shall consider including, as a possible `red
flag' pattern, reasonable guidelines providing that when a
transaction occurs with respect to a credit or deposit account
that has been inactive for more than 2 years, the creditor or
depository institution shall follow reasonable policies and
procedures that provide for notice to be given to a consumer in
a manner reasonably designed to reduce the likelihood of
identity theft with respect to such account.''.
(b) Clerical Amendments.--
(1) The heading for section 605 of the Fair Credit Reporting
Act is amended to read as follows:
``Sec. 605. Requirements relating to information contained in consumer
reports and to identity theft prevention''.
(2) The table of sections for title VI of the Consumer Credit
Protection Act is amended by striking the item relating to
section 605 and inserting the following new item:
``605. Requirements relating to information contained in consumer
reports and to identity theft prevention''.
(3) Section 624(b)(1)(E) of the Fair Credit Reporting Act (15
U.S.C. 1681t(b)(1)(E)) is amended by inserting ``and to
identity theft prevention'' after ``consumer reports''.
SEC. 202. FRAUD ALERTS.
Section 605 of the Fair Credit Reporting Act (15 U.S.C. 1681c) is
amended by adding at the end the following new subsection:
``(i) One-Call Fraud Alerts.--
``(1) Initial alerts.--Upon the direct request of a consumer,
or an individual acting on behalf of or as a personal
representative of a consumer, who asserts, in good faith, a
suspicion that the consumer has been or is about to become a
victim of fraud or related crime, including identity theft, a
consumer reporting agency described in section 603(p) shall, if
the agency maintains a file on the consumer who is making the
request and has a reasonable belief that the agency knows the
identity of the consumer--
``(A) include a fraud alert in the file of that
consumer for a period of not less than 90 days
beginning on the date of such request, unless the
consumer specifically requests that such fraud alert be
removed before the end of such period;
``(B) disclose to the consumer that the consumer may
request a free copy of the file of the consumer and
provide the consumer, upon request, a free disclosure
of the consumer's file (as described in section 609(a))
within 3 business days after such request;
``(C) for 2 years after the date of such request,
exclude the consumer from any list of consumers
prepared by the agency and provided to any third party
to offer credit or insurance to the consumer as part of
a transaction that was not initiated by the consumer,
unless the consumer subsequently requests that such
exclusion be rescinded before the end of such period;
and
``(D) refer the information regarding the fraud alert
to each of the other consumer reporting agencies
described in section 603(p), as required under section
621(f)(1).
``(2) Extended alerts.--Upon the direct request of a
consumer, or an individual acting on behalf of or as a personal
representative of a consumer, who contacts a consumer reporting
agency described in section 603(p) to report details of an
identity theft and submits evidence that provides the agency
with reasonable cause to believe that such identity theft has
occurred, the agency shall, if the agency maintains a file on
the consumer who is making the request and has a reasonable
belief that the agency knows the identity of the consumer--
``(A) include a fraud alert in the file of that
consumer and provide an opportunity for the consumer to
extend the alert for a period of up to 7 years from the
date of such request, unless the consumer subsequently
requests that such fraud alert be removed before the
end of such period;
``(B) provide the consumer with the option of
including more complete information in the consumer's
file, including a telephone number or some other
reasonable means of communication that any person who
requests the consumer's report may utilize for
authorization before establishing a new credit plan in
the name of the consumer; and
``(C) provide the consumer with at least 2 free
disclosures of the information described in section
609(a) during the 12-month period beginning on the date
of such request.
``(3) Active duty alerts.--Upon the direct request of an
active duty military consumer, or an individual acting on
behalf of or as a personal representative of an active duty
military consumer, who contacts a consumer reporting agency
described in section 603(p), the agency shall, if the agency
maintains a file on the consumer who is making the request and
has a reasonable belief that the agency knows the identity of
the consumer--
``(A) include an active duty alert in the file of
that consumer during a period of not less than 12
months beginning on the date of the request, unless the
consumer requests that such active duty alert be
removed before the end of such period;
``(B) for 2 years after the date of such request,
exclude the consumer from any list of consumers
prepared by the agency and provided to any third party
to offer credit or insurance to the consumer as part of
a transaction that was not initiated by the consumer,
unless the consumer subsequently requests that such
exclusion be rescinded before the end of such period;
and
``(C) refer the information regarding the active duty
alert to each of the other consumer reporting agencies
described in section 603(p), as required under section
621(f)(1).
``(4) Procedures.--Each consumer reporting agency described
in section 603(p) shall establish policies and procedures to
comply with the obligations of paragraphs (1), (2), and (3),
including procedures that allow consumers to request initial,
extended, or active duty alerts in a simple and easy manner,
including by telephone.
``(5) Notice to users.--No person who obtains any information
that includes a fraud alert under this section from a file of
any consumer from a consumer reporting agency may establish a
new credit plan in the name of the consumer for a person other
than the consumer without utilizing reasonable policies and
procedures described in paragraph (9).
``(6) Referrals of fraud alerts.--Each consumer reporting
agency described in section 603(p) that receives a referral of
a fraud alert from another such agency pursuant to paragraph
(1)(D) or (3)(C) shall follow the procedures required under
subparagraphs (A), (B), and (C) of paragraph (1), in the case
of a referral under paragraph (1)(D), and subparagraphs (A) and
(B), in the case of a referral under paragraph (3)(C), as if
the agency received the request from the consumer directly.
``(7) Duty of reseller to reconvey alert.--A reseller that is
notified of the existence of a fraud alert in a consumer's
consumer report shall communicate to each person procuring a
consumer report with respect to such consumer the existence of
a fraud alert in effect for such consumer.
``(8) Duty of other consumer reporting agencies to provide
contact information.--If a consumer contacts any consumer
reporting agency that is not a consumer reporting agency
described in section 603(p) to communicate a suspicion that the
consumer has been or is about to become a victim of fraud or
related crime, including identity theft, the agency shall
provide the consumer with information on how to contact the
Commission and the consumer reporting agencies described in
section 603(p) to obtain more detailed information and request
alerts under this subsection.
``(9) Fraud alert.--
``(A) Definition.--For purposes of this subsection,
the term `fraud alert' means, at a minimum, a
statement--
``(i) in the file of a consumer that the
consumer may be a victim of fraud, including
identity theft, or is a consumer described in
paragraph (3); and
``(ii) that is transmitted in a manner that
facilitates a clear and conspicuous view of the
statement by any person requesting such file.
``(B) Other information.--A fraud alert shall include
information that notifies all prospective users of a
consumer report on the consumer to which the alert
relates that the consumer does not authorize
establishing any new credit plan in the name of the
consumer, unless the user utilizes reasonable policies
and procedures to form a reasonable belief that the
user knows the identity of the person for whom such new
plan is established, which may include obtaining
authorization or preauthorization of the consumer at a
telephone number designated by the consumer or by such
other reasonable means agreed to.
``(10) Other definitions.--For purposes of this subsection,
the following definitions shall apply:
``(A) Active duty military consumer.--The term
`active duty military consumer' means a consumer in
military service who--
``(i) is on active duty (as defined in
section 101(d)(1) of title 10, United States
Code) or is a reservist performing duty under a
call or order to active duty under a provision
of law referred to in section 101(a)(13) of
title 10, United States Code; and
``(ii) is assigned to service away from the
consumer's usual duty station.
``(B) New credit plan.--The term `new credit plan'
means a new account under an open end credit plan (as
defined in section 103(i) of this Act) or a new credit
transaction not under an open end credit plan.''.
SEC. 203. TRUNCATION OF CREDIT CARD AND DEBIT CARD ACCOUNT NUMBERS.
(a) In General.--Section 605 of the Fair Credit Reporting Act (15
U.S.C. 1681c) is amended by inserting after subsection (k) (as added by
section 206 of this title) the following new subsection:
``(l) Truncation of Credit Card and Debit Card Account Numbers.--
``(1) In general.--Except as provided in this subsection, no
person that accepts credit cards or debit cards for the
transaction of business shall print the expiration date or more
than the last 5 digits of the card number upon any receipt
provided to the cardholder at the point of the sale or
transaction.
``(2) Limitation.--This section shall apply only to receipts
that are electronically printed, and shall not apply to
transactions in which the sole means of recording the person's
credit card or debit card number is by handwriting or by an
imprint or copy of the card.''.
(b) Effective Date.--The amendments made by subsection (a) shall
apply after the end of--
(1) the 3-year period beginning on the date of the enactment
of this Act, with respect to any cash register or other machine
or device that electronically prints receipts for credit card
or debit card transactions that is in use before January 1,
2005; and
(2) the 1-year period beginning on the date of the enactment
of this Act, with respect to any cash register or other machine
or device that electronically prints receipts for credit card
or debit card transactions that is first put into use on or
after January 1, 2005.
SEC. 204. SUMMARY OF RIGHTS OF IDENTITY THEFT VICTIMS.
(a) In General.--Section 609 of the Fair Credit Reporting Act (15
U.S.C. 1681g) is amended by adding at the end the following new
subsection:
``(d) Summary of Rights of Identity Theft Victims.--
``(1) In general.--The Commission, in consultation with the
Federal banking agencies and the National Credit Union
Administration, shall prepare a model summary of the rights of
consumers under this title with respect to the procedures for
remedying the effects of fraud or identity theft involving
credit, electronic fund transfers, or accounts or transactions
at or with a financial institution.
``(2) Summary of rights and contact information.--If any
consumer contacts a consumer reporting agency and expresses a
belief that the consumer is a victim of fraud or identity theft
involving credit, electronic fund transfers, or accounts or
transactions at or with a financial institution, the consumer
reporting agency shall, in addition to any other action the
agency may take, provide the consumer with the model summary of
rights prepared by the Commission under paragraph (1) and
information on how to contact the Commission to obtain more
detailed information.''.
(b) Technical and Conforming Amendment.--Section 624(b)(3) of the
Fair Credit Reporting Act (15 U.S.C. 1681t(b)(3)) is amended by
striking ``section 609(c)'' and inserting ``subsection (c) or (d) of
section 609''.
SEC. 205. BLOCKING OF INFORMATION RESULTING FROM IDENTITY THEFT.
Section 605 of the Fair Credit Reporting Act (15 U.S.C. 1681c) is
amended by inserting after subsection (i) (as added by section 202 of
this title) the following new subsection:
``(j) Block of Information Resulting From Identity Theft.--
``(1) Block.--Except as provided in paragraph (3), a consumer
reporting agency shall block the reporting of any information
in the file of a consumer that the consumer identifies as
information that resulted from an alleged identity theft and
confirms is not information relating to any transaction by the
consumer not later than 5 business days after the date of
receipt by such agency of--
``(A) appropriate proof of the identity of a
consumer;
``(B) a police report evidencing the claim of the
consumer of identity theft;
``(C) the identification of the information by the
consumer; and
``(D) confirmation by the consumer that the
information is not information relating to any
transaction by the consumer.
``(2) Notification.--A consumer reporting agency shall
promptly notify the furnisher of information identified by the
consumer under paragraph (1)--
``(A) that the information may be a result of
identity theft;
``(B) that a police report has been filed;
``(C) that a block has been requested under this
subsection; and
``(D) of the effective date of the block.
``(3) Authority to decline or rescind.--
``(A) In general.--A consumer reporting agency may
decline to block, or may rescind any block, of consumer
information under this subsection if the consumer
reporting agency reasonably determines that--
``(i) the information was blocked in error or
a block was requested by the consumer in error;
``(ii) the information was blocked, or a
block was requested by the consumer, on the
basis of a misrepresentation of fact by the
consumer relevant to the request to block; or
``(iii) the consumer knowingly obtained
possession of goods, services, or moneys as a
result of the blocked transaction or
transactions, or the consumer should have known
that the consumer obtained possession of goods,
services, or moneys as a result of the blocked
transaction or transactions.
``(B) Notification to consumer.--If the block of
information is declined or rescinded under this
paragraph, the affected consumer shall be notified
promptly, in the same manner as consumers are notified
of the reinsertion of information under section
611(a)(5)(B).
``(C) Significance of block.--For purposes of this
paragraph, if a consumer reporting agency rescinds a
block, the presence of information in the file of a
consumer prior to the blocking of such information is
not evidence of whether the consumer knew or should
have known that the consumer obtained possession of any
goods, services, or monies as a result of the block.
``(4) Exceptions.--
``(A) Verification companies.--This subsection shall
not apply to--
``(i) a check services company, which issues
authorizations for the purpose of approving or
processing negotiable instruments, electronic
funds transfers, or similar methods of
payments; or
``(ii) a deposit account information service
company, which issues reports regarding account
closures due to fraud, substantial overdrafts,
automated teller machine abuse, or similar
negative information regarding a consumer, to
inquiring banks or other financial institutions
for use only in reviewing a consumer request
for a deposit account at the inquiring bank or
financial institution.
``(B) Resellers.--
``(i) No reseller file.--This subsection
shall not apply to a consumer reporting agency
if the consumer reporting agency--
``(I) is a reseller;
``(II) is not, at the time of the
request of the consumer under paragraph
(1), otherwise furnishing or reselling
a consumer report concerning the
information identified by the consumer;
and
``(III) informs the consumer, by any
means, that the consumer may report the
identity theft to the Commission to
obtain consumer information regarding
identity theft.
``(ii) Reseller with file.--The sole
obligation of the consumer reporting agency
under this subsection, with regard to any
request of a consumer under this subsection,
shall be to block the consumer report
maintained by the consumer reporting agency
from any subsequent use if--
``(I) the consumer, in accordance
with the provisions of paragraph (1),
identifies, to a consumer reporting
agency, information in the file of the
consumer that resulted from identity
theft; and
``(II) the consumer reporting agency
is a reseller of the identified
information.
``(iii) Notice.--In carrying out its
obligation under clause (ii), the reseller
shall promptly provide a notice to the consumer
of the decision to block the file. Such notice
shall contain the name, address, and telephone
number of each consumer reporting agency from
which theconsumer information was obtained for
resale.
``(5) Access to blocked information by law enforcement
agencies.--No provision of this subsection shall be construed
as requiring a consumer reporting agency to prevent a Federal,
State, or local law enforcement agency from accessing blocked
information in a consumer file to which the agency could
otherwise obtain access under this title.''.
SEC. 206. ESTABLISHMENT OF PROCEDURES FOR DEPOSITORY INSTITUTIONS TO
IDENTIFY POSSIBLE INSTANCES OF IDENTITY THEFT.
(a) In General.--Section 605 of the Fair Credit Reporting Act (15
U.S.C. 1681c) is amended by inserting after subsection (j) (as added by
section 205 of this title) the following new subsection:
``(k) `Red Flag' Guidelines Required.--
``(1) In general.--The Federal banking agencies and the
National Credit Union Administration, in consultation with the
Commission, shall jointly establish and maintain guidelines for
use by insured depository institutions in identifying patterns,
practices, and specific forms of activity that indicate the
possible existence of identity theft with respect to accounts,
and update such guidelines as often as necessary.
``(2) Regulations.--The Federal banking agencies and the
National Credit Union Administration, in consultation with the
Commission, shall jointly prescribe regulations requiring
insured depository institutions to establish and adhere to
reasonable policies and procedures for implementing the
guidelines established pursuant to paragraph (1) to identify
possible risks to customer accounts or to the safety and
soundness of the institutions.
``(3) Consistency with verification requirements.--Policies
and procedures established pursuant to paragraph (2) shall not
be inconsistent with, or duplicative of, the policies and
procedures required under section 5318(l) of title 31, United
States Code.
``(4) Insured depository institution defined.--For purposes
of this subsection, the term `insured depository institution'--
``(A) has the meaning given to such term in section 3
of the Federal Deposit Insurance Act; and
``(B) includes an insured credit union (as defined in
section 101 of the Federal Credit Union Act).''.
(b) Effective Date.--The amendment made by subsection (a) shall take
effect at the end of the 1-year period beginning the date of the
enactment of this Act.
SEC. 207. STUDY ON THE USE OF TECHNOLOGY TO COMBAT IDENTITY THEFT.
(a) Study Required.--The Secretary of the Treasury shall conduct a
study of the use of biometrics and other similar technologies to reduce
the incidence and costs of identity theft by providing convincing
evidence of who actually performed a given financial transaction.
(b) Consultation.--The Secretary of the Treasury shall consult with
Federal banking agencies, the Federal Trade Commission, and
representatives of financial institutions, credit reporting agencies,
Federal, State, and local government agencies that issue official forms
or means of identification, State prosecutors, law enforcement
agencies, and the biometric industry and other representatives of the
general public, in formulating and conducting the study required by
subsection (a).
(c) Authorization of Appropriations.--There are authorized to be
appropriated to the Secretary of the Treasury for fiscal year 2004 such
sums as may be necessary to carry out the provisions of this section.
(d) Report Required.--Before the end of the 180-day period beginning
on the date of the enactment of this Act, the Secretary shall submit a
report to Congress containing the findings and conclusions of the study
required under subsection (a), together with such recommendations for
legislative or administrative actions as may be appropriate.
TITLE III--IMPROVING RESOLUTION OF CONSUMER DISPUTES
SEC. 301. COORDINATION OF CONSUMER COMPLAINT INVESTIGATIONS.
Section 621 of the Fair Credit Reporting Act (15 U.S.C. 1681s) is
amended by adding at the end the following new subsection:
``(f) Coordination of Consumer Complaint Investigations.--
``(1) In general.--The consumer reporting agencies described
in section 603(p) shall develop and maintain procedures for the
referral, to each such agency, of any consumer complaint
received by any such agency alleging any identity theft or
requesting a block or a fraud alert.
``(2) Model form and procedure for reporting identity
theft.--The Commission, in consultation with the Federal
banking agencies and the National Credit Union Administration,
shall develop a model form and model procedures to be used by
consumers who are victims of identity theft for contacting and
informing creditors and consumer reporting agencies of the
fraud.
``(3) Annual summary reports.--Each consumer reporting agency
described in section 603(p) shall submit an annual summary
report to the Commission on consumer complaints received by the
agency on identity theft or fraud alerts.''.
SEC. 302. NOTICE OF DISPUTE THROUGH RESELLER.
(a) Requirement For Reinvestigation of Disputed Information Upon
Notice From a Reseller.--Section 611(a) of the Fair Credit Reporting
Act (15 U.S.C. 1681i(a)(1)(A)) is amended--
(1) in subparagraph (A) of paragraph (1)--
(A) by striking ``If the completeness'' and inserting
``Subject to subsection (e), if the completeness'';
(B) by inserting ``, or indirectly through a
reseller,'' after ``notifies the agency directly''; and
(C) by inserting ``or reseller'' before the period at
the end of such subparagraph;
(2) in subparagraph (A) of paragraph (2)--
(A) by inserting ``or a reseller'' after ``dispute
from any consumer''; and
(B) by inserting ``or reseller'' before the period at
the end of such subparagraph; and
(3) in subparagraph (B) of paragraph (2), by inserting ``or
the reseller'' after ``from the consumer''.
(b) Reinvestigation Requirement Applicable to Resellers.--Section 611
of the Fair Credit Reporting Act (15 U.S.C. 1681i) is amended by adding
at the end the following new subsection:
``(e) Reinvestigation Requirement Applicable to Resellers.--
``(1) Exemption from general reinvestigation requirement.--
Except as provided in paragraph (2), a reseller shall be exempt
from the requirements of this section.
``(2) Action required upon receiving notice of a dispute.--If
a reseller receives a notice from a consumer of a dispute
concerning the completeness or accuracy of any item of
information contained in a consumer report on such consumer
produced by the reseller, the reseller shall, within 5 business
days of receiving the notice and free of charge--
``(A) determine whether the item of information is
incomplete or inaccurate as a result of an act or
omission of the reseller; and
``(B) if--
``(i) the reseller determines that the item
of information is incomplete or inaccurate as a
result of an act or omission of the reseller,
correct the information in the consumer report
or delete it; or
``(ii) if the reseller determines that the
item of information is not incomplete or
inaccurate as a result of an act or omission of
the reseller, convey the notice of the dispute,
together with all relevant information provided
by the consumer, to each consumer reporting
agency that provided the reseller with the
information that is the subject of the dispute.
``(3) Reseller reinvestigations.--No provision of this
subsection shall be construed as prohibiting a reseller from
conducting a reinvestigation of a consumer dispute directly.''.
(c) Technical and Conforming Amendment.--The heading for paragraph
(2)(B) of section 611(a) of the Fair Credit Reporting Act (15 U.S.C.
1681i(a)(2)(B)) is amended by striking ``from consumer''.
SEC. 303. REASONABLE REINVESTIGATION REQUIRED.
Section 611(a)(1)(A) of the Fair Credit Reporting Act (15 U.S.C.
1681i(a)(1)(A)) is amended by striking ``shall reinvestigate free of
charge'' and inserting ``shall, free of charge, conduct a reasonable
reinvestigation to determine whether the disputed information is
inaccurate''.
SEC. 304. DUTIES OF FURNISHERS OF INFORMATION.
(a) In General.--Section 623(a) of the Fair Credit Reporting Act (15
U.S.C. 1681s-2(a)) is amended--
(1) in paragraph (1)(A), by striking ``knows or consciously
avoids knowing that the information is inaccurate'' and
inserting ``knows or has reasonable cause to believe that the
information is inaccurate'';
(2) in paragraph (1)--
(A) by redesignating subparagraphs (B) and (C) as
subparagraphs (C) and (D), respectively;
(B) by inserting after subparagraph (A), the
following new subparagraph:
``(B) Reasonable procedures to ensure accuracy.--A
person that regularly furnishes information relating to
consumers to a consumer reporting agency described in
section 603(p) shall maintain reasonable procedures
designed to ensure that the information furnished is
accurate.''; and
(C) by adding at the end the following new
subparagraph:
``(F) Definition.--For purposes of subparagraph (A),
the term `reasonable cause to believe that the
information is inaccurate' means, based on the
procedures described in subparagraph (B), has
knowledge, other than solely allegations by the
consumer, that would cause a reasonable person to have
substantial doubts about the accuracy of the
information.''; and
(3) by adding at the end the following new paragraph:
``(6) Ability of consumer to dispute information directly
with furnisher.--
``(A) In general.--A consumer may dispute directly
with a person the accuracy of information that--
``(i) is contained in a consumer report on
the consumer prepared by a consumer reporting
agency described in section 603(p); and
``(ii) was provided by the person to that
consumer reporting agency in accordance with
paragraph (1)(B).
``(B) Submitting a notice of dispute.--A consumer who
seeks to dispute the accuracy of information with a
person under subparagraph (A) shall provide a dispute
notice directly to such person at the address specified
by the person for such notices that--
``(i) identifies the specific information
that is being disputed; and
``(ii) explains the basis for the dispute.
``(C) Duty of person after receiving notice of
dispute.--After receiving a notice of dispute from a
consumer pursuant to subparagraph (B), the person that
provided the information in dispute to a consumer
reporting agency referred to in subparagraph (A)
shall--
``(i) conduct an investigation with respect
to the disputed information;
``(ii) review all relevant information
provided by the consumer with the notice;
``(iii) complete such person's investigation
of the dispute and report the results of the
investigation to the consumer before the
expiration of the period under section
611(a)(1) within which a consumer reporting
agency would be required to complete its action
if the consumer had elected to dispute the
information under that section; and
``(iv) if the investigation finds that the
information reported was inaccurate, promptly
thereafter report correct information to each
consumer reporting agency described in section
603(p) to which the person furnished the
inaccurate information.''.
(b) Technical and Conforming Amendments.--
(1) Section 621(c)(5)(A) of the Fair Credit Reporting Act (15
U.S.C. 1681s(c)(5)(A)) is amended by striking ``section
623(a)(1)'' and inserting ``paragraph (1) or (6) of section
623(a)''.
(2) The heading for section 621(c)(5) of the Fair Credit
Reporting Act (15 U.S.C. 1681s(c)(5)) is amended by striking
``violation of section 623(a)(1)'' and inserting ``certain
violations of section 623(a)''.
SEC. 305. PROMPT INVESTIGATION OF DISPUTED CONSUMER INFORMATION.
(a) Study Required.--The Board of Governors of the Federal Reserve
System and the Federal Trade Commission shall jointly study the extent
to which, and the manner in which, consumer reporting agencies and
furnishers of consumer information to consumer reporting agencies are
complying with the procedures, time lines, and requirements under the
Fair Credit Reporting Act for the prompt investigation of the disputed
accuracy of any consumer information, the completeness of the
information provided to consumer reporting agencies, and the prompt
correction or deletion, in accordance with such Act, of any inaccurate
or incomplete information or information that cannot be verified.
(b) Report Required.--Before the end of the 6-month period beginning
on the date of the enactment of this Act, the Board of Governors of the
Federal Reserve System and the Federal Trade Commission shall jointly
submit a progress report to the Congress on the results of the study
required under subsection (a).
(c) Recommendations.--The report under subsection (b) shall include
such recommendations as the Board and the Commission jointly determine
to be appropriate for legislative or administrative action to ensure
that--
(1) consumer disputes with consumer reporting agencies over
the accuracy or completeness of information in a consumer's
file are promptly and fully investigated and any incorrect,
incomplete, or unverifiable information is corrected or deleted
immediately thereafter;
(2) furnishers of information to consumer reporting agencies
maintain full and prompt compliance with the duties and
responsibilities established under section 623 of the Fair
Credit Reporting Act; and
(3) consumer reporting agencies establish and maintain
appropriate internal controls and management review procedures
for maintaining full and continuous compliance with the
procedures, time lines, and requirements under the Fair Credit
Reporting Act for the prompt investigation of the disputed
accuracy of any consumer information and the prompt correction
or deletion, in accordance with such Act, of any inaccurate or
incomplete information or information that cannot be verified.
(d) Definitions.--For purposes of this section, the terms
``consumer'', ``consumer report'', and ``consumer reporting agency''
have the same meaning as in the Fair Credit Reporting Act.
TITLE IV--IMPROVING ACCURACY OF CONSUMER RECORDS
SEC. 401. RECONCILING ADDRESSES.
Section 605 of the Fair Credit Reporting Act (15 U.S.C. 1681c) is
amended by inserting after subsection (g) (as added by section 201 of
this Act) the following new subsection.
``(h) Notice of Discrepancy.--
``(1) In general.--If a person has requested a consumer
report relating to a consumer from a consumer reporting agency
described in section 603(p), the request includes an address
for the consumer that substantially differs from the addresses
in the file of the consumer, and the agency provides a consumer
report in response to the request, the consumer reporting
agency shall notify the requester of the existence of the
discrepancy.
``(2) Regulations.--
``(A) Regulations required.--The Federal banking
agencies and the National Credit Union Administration
shall jointly prescribe regulations providing guidance
regarding reasonable policies and procedures a user of
a consumer report should employ when such user has
received a notice of discrepancy under paragraph (1).
``(B) Policies and procedures to be included.--The
regulations prescribed under subparagraph (A) shall
describe reasonable policies and procedures for use by
a user of a consumer report--
``(i) to form a reasonable belief that the
user knows the identity of the person to whom
the consumer report pertains; and
``(ii) if the user establishes a continuing
relationship with the consumer, and the user
regularly and in the ordinary course of
business furnishes information to the consumer
reporting agency from which the notice of
discrepancy pertaining to the consumer was
obtained, to reconcile the consumer's address
with the consumer reporting agency by
furnishing such address to such consumer
reporting agency as part of information
regularly furnished by the user for the period
in which the relationship is established.''.
SEC. 402. PREVENTION OF REPOLLUTION OF CONSUMER REPORTS.
Section 623(a)(1) of the Fair Credit Reporting Act (15 U.S.C. 1681s-
2(a)(1)) is amended by inserting after subparagraph (D) (as so
redesignated by section 304(2)(A)) the following new subparagraph:
``(E) Information alleged to result from identity
theft.--If a consumer submits a police report to a
person who furnishes information to a consumer
reporting agency that states that information
maintained by such person that purports to relate to
the consumer resulted from identity theft, the person
may not furnish such information that purports to
relate to the consumer to any consumer reporting
agency, unless the person subsequently knows or is
informed by the consumer that the information is
correct.''.
SEC. 403. NOTICE BY USERS WITH RESPECT TO FRAUDULENT INFORMATION.
Section 615 of the Fair Credit Reporting Act (15 U.S.C. 1681m) is
amended by adding at the end the following new subsection:
``(e) Notice of Fraudulent Information Relating to Identity Theft.--
If an agent acting as a debt collector (as defined in title VIII) of a
person who furnishes information to any consumer reporting agency uses
information contained in a consumer report on any consumer and learns
that any such information so used is the result of identity theft or
otherwise is fraudulent, the agent shall--
``(1) if such information--
``(A) originated from the person for whom the debt
collector is acting as agent, notify the person of the
fraudulent information; or
``(B) originated from a person other than the person
for whom the debt collector is acting as agent, notify
the consumer reporting agency (that provided the
consumer report) of the fraudulent information, either
directly or through the person for whom the debt
collector is acting as agent; and
``(2) upon the request of the consumer, provide the consumer
with all information which the consumer would be entitled to
receive if the information related to the consumer other than
by reason of identity theft.''.
SEC. 404. DISCLOSURE TO CONSUMERS OF CONTACT INFORMATION FOR USERS AND
FURNISHERS OF INFORMATION IN CONSUMER REPORTS.
Section 609(a) of the Fair Credit Reporting Act (15 U.S.C. 1681g(a))
is amended--
(1) in paragraph (2), by inserting ``, including addresses of
the sources, and (if provided by the sources of information)
the telephone numbers identified for customer service for the
sources of information'' after ``sources of information'' the
1st place such term appears in such paragraph; and
(2) in paragraph (3)(B) by striking clause (ii) and inserting
the following new clause:
``(ii) the address and (if provided) the
telephone numbers identified for customer
service of the person.''.
SEC. 405. FTC STUDY OF THE ACCURACY OF CONSUMER REPORTS.
(a) Study Required.--Until the final report is submitted under
subsection (b)(2), the Federal Trade Commission shall conduct an
ongoing study of the accuracy and completeness of information contained
in consumer reports prepared or maintained by consumer reporting
agencies and methods for improving the accuracy and completeness of
such information.
(b) Biennial Reports Required.--
(1) Interim reports.--The Federal Trade Commission shall
submit an interim report to the Congress on the study conducted
under subsection (a) at the end of the 6-month period beginning
on the date of the enactment of this Act and biennially
thereafter for 8 years.
(2) Final report.--The Federal Trade Commission shall submit
a final report to the Congress on the study conducted under
subsection (a) at the end of the 2-year period beginning on the
date the final interim report is submitted to the Congress
under paragraph (1).
(3) Contents.--Each report submitted under this subsection
shall contain a detailed summary of the findings and
conclusions of the Commission with respect to the study
required under subsection (a) and such recommendations for
legislative and administrative action as the Commission may
determine to be appropriate.
TITLE V--IMPROVEMENTS IN USE OF AND CONSUMER ACCESS TO CREDIT
INFORMATION
SEC. 501. FREE REPORTS ANNUALLY.
(a) Free Reports Annually From Nationwide Consumer Reporting
Agencies.--Section 612 of the Fair Credit Reporting Act (15 U.S.C.
1681j) is amended by adding at the end the following new subsection:
``(e) Free Annual Disclosure.--Upon the direct request of the
consumer, a consumer reporting agency described in section 603(p) shall
make all disclosures pursuant to section 609 once during any 12-month
period without charge to the consumer.''.
(b) Technical and Conforming Amendment.--Section 612(c) of the Fair
Credit Reporting Act (15 U.S.C. 1681j(c)) is amended by inserting
``that is not a consumer reporting agency described in section 603(p)''
after ``consumer reporting agency''.
SEC. 502. DISCLOSURE OF CREDIT SCORES.
(a) Statement on Availability of Credit Scores.--Section 609(a) of
the Fair Credit Reporting Act (15 U.S.C. 1681g(a)) is amended by adding
at the end the following new paragraph:
``(6) If the consumer requests the credit file and not the
credit score, a statement that the consumer may request and
obtain a credit score.''.
(b) Disclosure of Credit Scores.--Section 609 of the Fair Credit
Reporting Act (15 U.S.C. 1681g) is amended by inserting after
subsection (d) (as added by section 204 of this Act) the following new
subsection:
``(e) Disclosure of Credit Scores.--
``(1) In general.--Upon the consumer's request for a credit
score, a consumer reporting agency shall supply to a consumer a
statement indicating that the information and credit scoring
model may be different than the credit score that may be used
by the lender, and a notice which shall include the following
information:
``(A) The consumer's current credit score or the
consumer's most recent credit score that was previously
calculated by the credit reporting agency for a purpose
related to the extension of credit.
``(B) The range of possible credit scores under the
model used.
``(C) All the key factors that adversely affected the
consumer's credit score in the model used, the total
number of which shall not exceed four, subject to
paragraph (9).
``(D) The date the credit score was created.
``(E) The name of the person or entity that provided
the credit score or credit file upon which the credit
score was created.
``(2) Definitions.--For purposes of this section, the
following definitions shall apply:
``(A) Credit score.--The term `credit score'--
``(i) means a numerical value or a
categorization derived from a statistical tool
or modeling system used by a person who makes
or arranges a loan to predict the likelihood of
certain credit behaviors, including default
(and the numerical value or the categorization
derived from this analysis may also be referred
to as a `risk predictor' or `risk score'); and
``(ii) does not include--
``(I) any mortgage score or rating of
an automated underwriting system that
considers one or more factors in
addition to credit information,
including the loan to value ratio, the
amount of down payment, or a consumer's
financial assets; or
``(II) any other elements of the
underwriting process or underwriting
decision.
``(B) Key factors.--The term `key factors' means all
relevant elements or reasons adversely affecting the
credit score for the particular individual listed in
the order of their importance based on their effect on
the credit score.
``(3) Timeframe and manner of disclosure.--The information
required by this subsection shall be provided in the same
timeframe and manner as the information described in subsection
(a).
``(4) Applicability to certain uses.--This subsection shall
not be construed so as to compel a consumer reporting agency to
develop or disclose a score if the agency does not--
``(A) distribute scores that are used in connection
with residential real property loans; or
``(B) develop scores that assist credit providers in
understanding a consumer's general credit behavior and
predicting the future credit behavior of the consumer.
``(5) Applicability to credit scores developed by another
person.--
``(A) In general.--This subsection shall not be
construed to require a consumer reporting agency that
distributes credit scores developed by another person
or entity to provide a further explanation of them, or
to process a dispute arising pursuant to section 611,
except that the consumer reporting agency shall provide
the consumer with the name and address and website for
contacting the person or entity who developed the score
or developed the methodology of the score.
``(B) Exception.--This paragraph shall not apply to a
consumer reporting agency that develops or modifies
scores that are developed by another person or entity.
``(6) Maintenance of credit scores not required.--This
subsection shall not be construed to require a consumer
reporting agency to maintain credit scores in its files.
``(7) Compliance in certain cases.--In complying with this
subsection, a consumer reporting agency shall--
``(A) supply the consumer with a credit score that is
derived from a credit scoring model that is widely
distributed to users by that consumer reporting agency
in connection with residential real property loans or
with a credit score that assists the consumer in
understanding the credit scoring assessment of the
credit behavior of the consumer and predictions about
the future credit behavior of the consumer; and
``(B) a statement indicating that the information and
credit scoring model may be different than that used by
the lender.
``(8) Reasonable fee.--A consumer reporting agency may charge
a reasonable fee for providing the information required under
this subsection.
``(9) Use of enquiries as a key factor.--If a key factor that
adversely affects a consumer's credit score consists of the
number of enquiries made with respect to a consumer report,
that factor shall be included in the disclosure pursuant to
paragraph (1)(C) without regard to the numerical limitation in
such paragraph.''.
(c) Disclosure of Credit Scores by Certain Mortgage Lenders.--Section
609 of the Fair Credit Reporting Act (15 U.S.C. 1681g) is amended by
inserting after subsection (e) (as added by subsection (b) of this
section) the following new subsection:
``(f) Disclosure of Credit Scores by Certain Mortgage Lenders.--
``(1) In general.--Any person who makes or arranges loans and
who uses a consumer credit score as defined in subsection (e)
in connection with an application initiated or sought by a
consumer for a closed end loan or establishment of an open end
loan for a consumer purpose that is secured by 1 to 4 units of
residential real property (hereafter in this subsection
referred to as the `lender') shall provide the following to the
consumer as soon as reasonably practicable:
``(A) Information required under subsection(e).--
``(i) In general.--A copy of the information
identified in subsection (e) that was obtained
from a consumer reporting agency or was
developed and used by the user of the
information.
``(ii) Notice under subparagraph (D).--In
addition to the information provided to it by a
third party that provided the credit score or
scores, a lender is only required to provide
the notice contained in subparagraph (D).
``(B) Disclosures in case of automated underwriting
system.--
``(i) In general.--If a person who is subject
to this section uses an automated underwriting
system to underwrite a loan, that person may
satisfy the obligation to provide a credit
score by disclosing a credit score and
associated key factors supplied by a consumer
reporting agency.
``(ii) Numerical credit score.--However, if a
numerical credit score is generated by an
automated underwriting system used by an
enterprise, and that score is disclosed to the
person, the score shall be disclosed to the
consumer consistent with subparagraph (C).
``(iii) Enterprise defined.--For purposes of
this subparagraph, the term `enterprise' shall
have the same meaning as in paragraph (6) of
section 1303 of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992.
``(C) Disclosures of credit scores not obtained from
a consumer reporting agency.--A person subject to the
provisions of this subsection who uses a credit score
other than a credit score provided by a consumer
reporting agency may satisfy the obligation to provide
a credit score by disclosing a credit score and
associated key factors supplied by a consumer reporting
agency.
``(D) Notice to home loan applicants.--A copy of the
following notice, which shall include the name,
address, and telephone number of each consumer
reporting agency providing a credit score that was
used:
`notice to the home loan applicant
`In connection with your application for a home loan, the lender must
disclose to you the score that a consumer reporting agency distributed
to users and the lender used in connection with your home loan, and the
key factors affecting your credit scores.
`The credit score is a computer generated summary calculated at the
time of the request and based on information a consumer reporting
agency or lender has on file. The scores are based on data about your
credit history and payment patterns. Credit scores are important
because they are used to assist the lender in determining whether you
will obtain a loan. They may also be used to determine what interest
rate you may be offered on the mortgage. Credit scores can change over
time, depending on your conduct, how your credit history and payment
patterns change, and how credit scoring technologies change.
`Because the score is based on information in your credit history, it
is very important that you review the credit-related information that
is being furnished to make sure it is accurate. Credit records may vary
from one company to another.
`If you have questions about your credit score or the credit
information that is furnished to you, contact the consumer reporting
agency at the address and telephone number provided with this notice,
or contact the lender, if the lender developed or generated the credit
score. The consumer reporting agency plays no part in the decision to
take any action on the loan application and is unable to provide you
with specific reasons for the decision on a loan application.
`If you have questions concerning the terms of the loan,
contact the lender.'.
``(E) Actions not required under this subsection.--
This subsection shall not require any person to do any
of the following:
``(i) Explain the information provided
pursuant to subsection (e).
``(ii) Disclose any information other than a
credit score or key factor, as defined in
subsection (e).
``(iii) Disclose any credit score or related
information obtained by the user after a loan
has closed.
``(iv) Provide more than 1 disclosure per
loan transaction.
``(v) Provide the disclosure required by this
subsection when another person has made the
disclosure to the consumer for that loan
transaction.
``(F) No obligation for content.--
``(i) In general.--Any person's obligation
pursuant to this subsection shall be limited
solely to providing a copy of the information
that was received from the consumer reporting
agency.
``(ii) Limit on liability.--No person has
liability under this subsection for the content
of that information or for the omission of any
information within the report provided by the
consumer reporting agency.
``(G) Person defined as excluding enterprise.--As
used in this subsection, the term `person' does not
include an enterprise (as defined in paragraph (6) of
section 1303 of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992).
``(2) Prohibition on disclosure clauses null and void.--
``(A) In general.--Any provision in a contract that
prohibits the disclosure of a credit score by a person
who makes or arranges loans or a consumer reporting
agency is void.
``(B) No liability for disclosure under this
subsection.--A lender shall not have liability under
any contractual provision for disclosure of a credit
score pursuant to this subsection.''.
(d) Inclusion of Key Factor in Credit Score Information in Consumer
Report.--Section 605(d) of the Fair Credit Reporting Act (15 U.S.C.
1681c(d)) is amended--
(1) by striking ``Disclosed.--Any consumer reporting agency''
and inserting ``Disclosed.--
``(1) Title 11 information.--Any consumer reporting agency'';
and
(2) by adding at the end the following new paragraph:
``(2) Key factor in credit score information.--Any consumer
reporting agency that furnishes a consumer report that contains
any credit score or any other risk score or predictor on any
consumer shall include in the report a clear and conspicuous
statement that a key factor (as defined in section
609(e)(2)(B)) that adversely affected such score or predictor
was the number of enquiries, if such a predictor was in fact a
key factor that adversely affected such score.''.
SEC. 503. SIMPLER AND EASIER METHOD FOR CONSUMERS TO USE NOTIFICATION
SYSTEM.
(a) In General.--Section 604(e)(5)(A)(i) of the Fair Credit Reporting
Act (15 U.S.C. 1681b(e)(5)(A)(i)) is amended by inserting ``in a simple
and easy manner and'' after ``notify the agency,''.
(b) Simplified Notice and Response Format For Users.--Section 615(d)
of the Fair Credit Reporting Act (15 U.S.C. 1681m(d)) is amended--
(1) by redesignating paragraphs (2), (3), and (4), as
paragraphs (3), (4) and (5); and
(2) by inserting after paragraph (1) the following new
paragraph:
``(2) Simple and easy notification.--Any statement given the
consumer under paragraph (1)(E) shall be in a simple and easy
to understand format and shall describe the simple and easy
method established under section 604(e)(5)(A)(i) for the
consumer to respond.''.
SEC. 504. REQUIREMENT TO DISCLOSE COMMUNICATIONS TO A CONSUMER
REPORTING AGENCY.
(a) In General.--Section 623(a) of the Fair Credit Reporting Act (15
U.S.C. 1681s-2(a)) is amended by inserting after paragraph (6) (as
added by section 304(3)) the following new paragraph:
``(7) Negative Information.--
``(A) Notice to consumer required.--
``(i) In general.--If any financial
institution that extends credit and regularly
and in the ordinary course of business
furnishes information to a consumer reporting
agency described in section 603(p) furnishes
negative information to such an agency
regarding credit extended to a customer, the
financial institution shall provide a notice of
such furnishing of negative information, in
writing, to the customer.
``(ii) Notice effective for subsequent
submissions.--After providing such notice, the
financial institution may submit additional
negative information to a consumer reporting
agency described in section 603(p) with respect
to the same transaction, extension of credit,
account, or customer without providing
additional notice to the customer.
``(B) Time of notice.--
``(i) In general.--The notice required under
subparagraph (A) shall be provided to the
customer prior to, or no later than 30 days
after, furnishing the negative information to a
consumer reporting agency described in section
603(p).
``(ii) Coordination with new account
disclosures.--If the notice is provided to the
customer prior to furnishing the negative
information to a consumer reporting agency, the
notice may not be included in the initial
disclosures provided under section 127(a) of
the Truth in Lending Act.
``(C) Coordination with other disclosures.--The
notice required under subparagraph (A)--
``(i) may be included on or with any notice
of default, any billing statement, or any other
materials provided to the customer; and
``(ii) must be clear and conspicuous.
``(D) Model disclosure.--
``(i) Duty of board to prepare.--The Board
shall prescribe a brief model disclosure a
financial institution may use to comply with
subparagraph (A), which shall not exceed 30
words.
``(ii) Use of model not required.--No
provision of this paragraph shall be construed
as requiring a financial institution to use any
such model form prescribed by the Board.
``(iii) Compliance using model.--A financial
institution shall be deemed to be in compliance
with subparagraph (A) if the financial
institution uses any such model form prescribed
by the Board, or the financial institution uses
any such model form and rearranges its format.
``(E) Use of notice without submitting negative
information.--No provision of this paragraph shall be
construed as requiring a financial institution that has
provided a customer with a notice described in
subparagraph (A) to furnish negative information about
the customer to a consumer reporting agency.
``(F) Safe harbor.--A financial institution shall not
be liable for failure to perform the duties required by
this paragraph if, at the time of the failure, the
financial institution maintained reasonable policies
and procedures to comply with this paragraph.
``(G) Definitions.--For purposes of this paragraph,
the following definitions shall apply:
``(i) Negative information.--The term
`negative information' means information
concerning a customer's delinquencies, late
payments, insolvency, or any form of default.
``(ii) Customer; financial institution.--The
terms `customer' and `financial institution'
have the same meaning as in section 509 of the
Gramm-Leach-Bliley Act.''.
(b) Model Disclosure Form.--Before the end of the 6-month period
beginning on the date of the enactment of this Act, the Board of
Governors of the Federal Reserve System shall adopt the model
disclosure required under the amendment made by subsection (a) after
notice duly given in the Federal Register and an opportunity for public
comment in accordance with section 553 of title 5, United States Code.
SEC. 505. STUDY OF EFFECTS OF CREDIT SCORES AND CREDIT-BASED INSURANCE
SCORES ON AVAILABILITY AND AFFORDABILITY OF
FINANCIAL PRODUCTS.
(a) Study Required.--The Federal Trade Commission, in consultation
with the Office of Fair Housing and Equal Opportunity of the Department
of Housing and Urban Development, shall conduct a study of--
(1) the effects of the use of credit scores and credit-based
insurance scores on the availability and affordability of
financial products and services, including credit cards,
mortgages, auto loans, and property and casualty insurance;
(2) the degree of causality between the factors considered by
credit score systems and the quantifiable risks and actual
losses experienced by businesses, including the extent to
which, if any, each of the factors considered or otherwise
taken into account by such systems are accurate predictors of
risk or loss, and where the means square error of a scoring
model's predictions are considered in the evaluation of
accuracy;
(3) the extent to which, if any, the use of credit scoring
models, credit scores and credit-based insurance scores result
in disparate impact by geography, income, ethnicity, race,
color, religion, national origin, age, sex or marital status,
and creed, including the extent to which the consideration or
lack of consideration of certain factors by credit scoring
systems could result in disparate effects and the extent to
which, if any, the use of underwriting systems relying on these
models could achieve comparable results through the use of
factors with less disparate impact; and
(4) the extent to which credit scoring systems are used by
businesses, the factors considered by such systems, and the
effects of variables which are not considered by such systems.
(b) Public Participation.--The Commission shall seek public input
about the prescribed methodology and research design of the study
required in subsection (a).
(c) Report Required.--
(1) In general.--Before the end of the 18-month period
beginning on the date of the enactment of this Act, the Federal
Trade Commission shall submit a detailed report on the study
conducted pursuant to subsection (a) to the Committee on
Financial Services of the House of Representatives and the
Committee on Banking, Housing, and Urban Affairs of the Senate.
(2) Contents of report.--The report submitted under paragraph
(1) shall include the findings and conclusions of the
Commission, together with such recommendations for legislative
or administrative action as the Commission may determine to be
necessary to ensure that credit and credit-based insurances
score are used appropriately and fairly to avoid disparate
effects.
(d) Credit score defined.--For purposes of this section, the term
``credit score'' means a numerical value or a categorization derived
from a statistical tool or modeling system used to predict the
likelihood of certain credit or insurance behaviors, including default.
SEC. 506. GAO STUDY ON DISPARATE IMPACT OF CREDIT SYSTEM.
(a) Study Required.--The Comptroller General shall conduct a study of
the credit system to determine the extent to which, if any,
discrimination exists with regard to the availability and the terms of
credit which has a disparate impact on the basis of race, color, income
and education level, geographic location, age, sex, sexual orientation,
national origin, or marital status and the nature of any such
discriminatory effect.
(b) Report Required.--Before the end of the 2-year period beginning
on the date of the enactment of this Act, the Comptroller General shall
submit a report to the Congress on the findings and conclusions of the
Comptroller General pursuant to the study conducted under subsection
(a), together with such recommendations for legislative or
administrative action as the Comptroller General may determine to be
appropriate.
SEC. 507. ANALYSIS OF FURTHER RESTRICTIONS ON OFFERS OF CREDIT OR
INSURANCE.
(a) In General.--The Board of Governors of the Federal Reserve System
shall conduct a study of--
(1) the ability of consumers to avoid receiving written
offers of credit or insurance in connection with transactions
not initiated by the consumer; and
(2) the potential impact any further restrictions on
providing consumers with such written offers of credit or
insurance would have on consumers.
(b) Report.--The Board of Governors of the Federal Reserve System
shall submit a report summarizing the results of the study required
under subsection (a) to the Congress no later than 12 months after the
date of the enactment of this Act, together with such recommendatioons
for legislative or administrative action as the Board may determine to
be appropriate.
(c) Content of Report.--The report described in subsection (b) shall
address the following issues:
(1) The current statutory or voluntary mechanisms that are
available to a consumer to notify lenders and insurance
providers that the consumer does not wish to receive written
offers of credit or insurance.
(2) The extent to which consumers are currently utilizing
existing statutory and voluntary mechanisms to avoid receiving
offers of credit or insurance.
(3) The benefits provided to consumers as a result of
receiving written offers of credit or insurance.
(4) Whether consumers incur significant costs or are
otherwise adversely affected by the receipt of written offers
of credit or insurance.
(5) Whether further restricting the ability of lenders and
insurers to provide written offers of credit or insurance to
consumers would affect--
(A) the cost consumers pay to obtain credit or
insurance;
(B) the availability of credit or insurance;
(C) consumers' knowledge about new or alternative
products and services;
(D) the ability of lenders or insurers to compete
with one another; and
(E) the ability to offer credit or insurance products
to consumers who have been traditionally underserved.
SEC. 508. STUDY ON THE NEED AND THE MEANS FOR IMPROVING FINANCIAL
LITERACY AMONG CONSUMERS.
(a) Study Required.--The Comptroller General shall conduct a study to
assess the extent of consumers' knowledge and awareness of credit
reports, credit scores, and the dispute resolution process, and on
methods for improving financial literacy among consumers.
(b) Factors to Be Included.--The study required under subsection (a)
shall include the following issues:
(1) The number of consumers who view their credit reports.
(2) Under what conditions and for what purposes do consumers
primarily obtain a copy of their consumer report (such as for
the purpose of ensuring the completeness and accuracy of the
contents, to protect against fraud, in response to an adverse
action based on the report, or in response to suspected
identity theft) and approximately what percentage of the total
number of consumers who obtain a copy of their consumer report
do so for each such primary purpose.
(3) The extent of consumers' knowledge of the data collection
process.
(4) The extent to which consumers know how to get a copy of a
consumer report.
(5) The extent to which consumers know and understand the
factors that positively or negatively impact credit scores.
(c) Report Required.--Before the end of the 9-month period beginning
on the date of the enactment of this Act, the Comptroller General shall
submit a report to the Congress on the findings and conclusions of the
Comptroller General pursuant to the study conducted under subsection
(a), together with such recommendations for legislative or
administrative action as the Comptroller General may determine to be
appropriate, including recommendations on methods for improving
financial literacy among consumers.
SEC. 509. DISCLOSURE OF INCREASE IN APR UNDER CERTAIN CIRCUMSTANCES.
Section 609 of the Fair Credit Reporting Act (15 U.S.C. 1681m) is
amended by inserting after subsection (f) (as added by section 502(c)
of this title) the following new subsection:
``(g) Disclosure to Consumer.--
``(1) In general.--The ability of a credit card issuer to
increase any annual percentage rate applicable to a credit card
account, or to remove or increase any introductory annual
percentage rate of interest applicable to such account, for
reasons other than actions or omissions of the card holder that
are directly related to such account shall be clearly and
conspicuously disclosed to the consumer by the credit card
issuer in any disclosure or statement required to be made to
the consumer under this title in connection with a credit card
solicitation that is not initiated by the consumer.
``(2) Regulations and model statements.--The Board, in
consultation with the Federal banking agencies and the National
Credit Union Administration, shall develop such guidelines in
regulations as necessary to assure that the information to be
disclosed to consumers pursuant to paragraph (1) is clearly and
conspicuously provided in a prominent location in any credit
card solicitation that is not initiated by the consumer, and
shall include model disclosure statements to be used by credit
card issuers in making the disclosures required to be provided
to the consumer by paragraph (1).''.
TITLE VI--PROTECTING EMPLOYEE MISCONDUCT INVESTIGATIONS
SEC. 601. CERTAIN EMPLOYEE INVESTIGATION COMMUNICATIONS EXCLUDED FROM
DEFINITION OF CONSUMER REPORT.
(a) In General.--Section 603 of the Fair Credit Reporting Act (15
U.S.C. 1681a) is amended by inserting after subsection (p) the
following new subsection:
``(q) Exclusion of Certain Communications for Employee
Investigations.--
``(1) Communications described in this subsection.--A
communication is described in this subsection if--
``(A) but for subsection (d)(2)(D), the communication
would be a consumer report;
``(B) the communication is made to an employer in
connection with an investigation of--
``(i) suspected misconduct relating to
employment; or
``(ii) compliance with Federal, State, or
local laws and regulations, the rules of a
self-regulatory organization, or any
preexisting written policies of the employer;
``(C) the communication is not made for the purpose
of investigating a consumer's credit worthiness, credit
standing, or credit capacity; and
``(D) the communication is not provided to any person
except--
``(i) to the employer or an agent of the
employer;
``(ii) to any Federal or State officer,
agency, or department, or any officer, agency,
or department of a unit of general local
government;
``(iii) to any self-regulatory organization
with regulatory authority over the activities
of the employer or employee;
``(iv) as otherwise required by law; or
``(v) pursuant to section 608.
``(2) Subsequent disclosure.--After taking any adverse action
based in whole or in part on a communication described in
paragraph (1), the employer shall disclose to the consumer a
summary containing the nature and substance of the
communication upon which the adverse action is based, except
that the sources of information acquired solely for use in
preparing what would be but for subsection (d)(2)(D) an
investigative consumer report need not be disclosed.
``(3) Self-regulatory organization defined.--For purposes of
this subsection, the term `self-regulatory organization'
includes any self-regulatory organization (as defined in
section 3(a)(26) of the Securities Exchange Act of 1934), any
entity established under Title I of the Sarbanes-Oxley Act of
2002, any board of trade designated by the Commodity Futures
Trading Commission, and any futures association registered with
such Commission.''.
(b) Technical and Conforming Amendment.--Section 603(d)(2)(D) of the
Fair Credit Reporting Act (15 U.S.C. 1681a(d)(2)(D)) is amended by
inserting ``or (q)'' after ``subsection (o)''.
TITLE VII--LIMITING THE USE AND SHARING OF MEDICAL INFORMATION IN THE
FINANCIAL SYSTEM
SEC. 701. PROTECTION OF MEDICAL INFORMATION IN THE FINANCIAL SYSTEM
(a) In General.--Section 604(g) of the Fair Credit Reporting Act (15
U.S.C. 1681b(g)) is amended to read as follows:
``(g) Protection of Medical Information.--
``(1) Limitation on consumer reporting agencies.--A consumer
reporting agency shall not furnish for employment purposes, or
in connection with a credit or insurance transaction, a
consumer report that contains medical information about a
consumer, unless--
``(A) if furnished in connection with an insurance
transaction, the consumer affirmatively consents to the
furnishing of the report;
``(B) if furnished for employment purposes or in
connection with a credit transaction--
``(i) the information to be furnished is
relevant to process or effect the employment or
credit transaction; and
``(ii) the consumer provides specific written
consent for the furnishing of the report that
describes in clear and conspicuous language the
use for which the information will be
furnished; or
``(C) such information is restricted or reported
using codes that do not identify, or provide
information sufficient to infer, the specific provider
or the nature of such services, products, or devices to
a person other than the consumer, unless the report is
being provided to an insurance company for a purpose
relating to engaging in the business of insurance other
than property and casualty insurance.
``(2) Limitation on creditors.--Except as permitted pursuant
to paragraph (3)(C) or regulations prescribed under paragraph
(5)(A), a creditor shall not obtain or use medical information
pertaining to a consumer in connection with any determination
of the consumer's eligibility, or continued eligibility, for
credit.
``(3) Actions authorized by federal law, insurance activities
and regulatory determinations.--Section 603(d)(3) shall not be
construed so as to treat information or any communication of
information as a consumer report if the information or
communication is disclosed--
``(A) in connection with the business of insurance or
annuities, including the activities described in
section 18B of the model Privacy of Consumer Financial
and Health Information Regulation issued by the
National Association of Insurance Commissioners (as in
effect on January 1, 2003);
``(B) for any purpose permitted without authorization
under the Standards for Individually Identifiable
Health Information promulgated by the Department of
Health and Human Services pursuant to the Health
Insurance Portability and Accountability Act of 1996,
or referred to under section 1179 of such Act, or
described in section 502(e) of Public Law 106-102; or
``(C) as otherwise determined to be necessary and
appropriate, by regulation or order and subject to
paragraph (6), by the Commission, any Federal banking
agency or the National Credit Union Administration
(with respect to any financial institution subject to
the jurisdiction of such agency or Administration under
paragraph (1), (2), or (3) of section 621(b), or the
applicable State insurance authority (with respect to
any person engaged in providing insurance or
annuities).
``(4) Limitation on redisclosure of medical information.--Any
person that receives medical information pursuant to paragraphs
(1) or (3) shall not disclose such information to any other
person except as necessary to carry out the purpose for which
the information was initially disclosed, or as otherwise
permitted by statute, regulation, or order.
``(5) Regulations and effective date for paragraph (2).--
``(A) Regulations required.--Each Federal banking
agency and the National Credit Union Administration
shall, subject to paragraph (6) and after notice and
opportunity for comment, prescribe regulations that
permit transactions under paragraph (2) that are
determined to be necessary and appropriate to protect
legitimate operational, transactional, risk, consumer,
and other needs, consistent with the intent of
paragraph (2) to restrict the use of medical
information for inappropriate purposes.
``(B) Final regulations required.--The Federal
banking agencies and the National Credit Union
Administration shall prescribe the regulations required
under subparagraph (A) in final form before the end of
the 6-month period beginning on the date of the
enactment of the Fair and Accurate Credit Transactions
Act of 2003.
``(6) Coordination with other laws.--No provision of this
subsection shall be construed as altering, affecting, or
superseding the applicability of any other provision of Federal
law relating to medical confidentiality.''.
(b) Restriction on Sharing of Medical Information.--Section 603(d) of
the Fair Credit Reporting Act (15 U.S.C. 1681a(d)) is amended--
(1) in paragraph (2), by striking ``The term'' and inserting
``Except as provided in paragraph (3), the term''; and
(2) by adding at the end the following new paragraph:
``(3) Restriction on sharing of medical information.--Except
for information or any communication of information disclosed
as provided in section 604(g)(3), the exclusions in paragraph
(2) shall not apply with respect to information disclosed to
any person related by common ownership or affiliated by
corporate control if--
``(A) the information is medical information; or
``(B) the information is an individualized list or
description based on a consumer's payment transactions
for medical products or services, or an aggregate list
of identified consumers based on payment transactions
for medical products or services.''.
SEC. 702. CONFIDENTIALITY OF MEDICAL CONTACT INFORMATION IN CREDIT
REPORTS.
(a) Duties of Medical Information Furnishers.--Section 623(a) of the
Fair Credit Reporting Act (15 U.S.C. 1681s-2(a)) is amended by
inserting after paragraph (7) (as added by section 504(a)) the
following new paragraph:
``(8) Duty to provide notice of status as medical information
furnisher.--A person whose primary business is providing
medical services, products, or devices, or the person's agent
or assignee, who furnishes information to a consumer reporting
agency on a consumer shall be considered a medical information
furnisher for the purposes of this title and shall notify the
agency of such status.''.
(b) Restriction of Dissemination of Medical Contact Information.--
Section 605(a) of the Fair Credit Reporting Act (15 U.S.C. 1681c(a)) is
amended by adding the following new paragraph:
``(6) The name, address, and telephone number of any medical
information furnisher that has notified the agency of its
status, unless--
``(A) such name, address, and telephone number are
restricted or reported using codes that do not
identify, or provide information sufficient to infer,
the specific provider or the nature of such services,
products, or devices to a person other than the
consumer; or
``(B) the report is being provided to an insurance
company for a purpose relating to engaging in the
business of insurance other than property and casualty
insurance.''.
(c) No Exceptions Allowed For Dollar Amounts.--Section 605(b) of the
Fair Credit Reporting Act (15 U.S.C. 1681c(b)) is amended by striking
``The provisions of subsection (a)'' and inserting ``The provisions of
paragraphs (1) through (5) of subsection (a)''.
(d) Coordination With Other Laws.--No provision of any amendment made
by this section shall be construed as altering, affecting, or
superseding the applicability of any other provision of Federal law
relating to medical confidentiality.
(e) FTC Regulation of Coding of Trade Names.--Section 621 of the Fair
Credit Reporting Act (15 U.S.C. 1681s) is amended by inserting after
subsection (f) (as added by section 301 of this Act) the following new
subsection:
``(g) FTC Regulation of Coding of Trade Names.--If the Commission
determines that a person described in paragraph (8) of section 623(a)
has not met the requirements of such paragraph, the Commission shall
take action to ensure the person's compliance with such paragraph,
which may include issuing model guidance or prescribing reasonable
policies and procedures as necessary to ensure that such person
complies with such paragraph.''.
(f) Technical and Conforming Amendments.--Section 604(g) of the Fair
Credit Reporting Act (15 U.S.C. 1681b(g)) (as amended by section 701)
is amended--
(1) in paragraph (1) by inserting ``(other than medical
contact information treated in the manner required under
section 605(a)(6))'' after ``a consumer report that contains
medical information''; and
(2) in paragraph (2) by inserting ``(other than medical
information treated in the manner required under section
605(a)(6))'' after ``a creditor shall not obtain or use medical
information''.
(g) Effective Date.--The amendments made by this section shall take
effect at the end of the 15-month period beginning on the date of the
enactment of this Act.
Purpose and Summary
H.R. 2622, the ``Fair and Accurate Credit Transactions Act
of 2003,'' provides consumers with the tools they need to fight
identity theft and to ensure the accuracy of their credit
reports while establishing permanent national credit reporting
standards by removing the sunset from the expiring national
consumer protection standards. H.R. 2622 empowers consumers to
guard against identity theft by increasing the effectiveness of
consumer initiated fraud alerts and enabling consumers to block
fraudulent information in their personal credit records after
filing a police report. The legislation increases consumer
awareness of their rights if they believe they may be victims
of fraud or identity theft by directing the Federal Trade
Commission (FTC or Commission) to prepare, and consumer
reporting agencies to disseminate, a summary of rights of
identity theft victims. The legislation enlists financial
institutions' support in fighting identity theft by requiring
them to develop procedures to ``red flag'' identity theft, and
to investigate certain changes in customer addresses. In
addition, merchants will be required to truncate credit and
debit card information.
H.R. 2622 also improves the accuracy of consumer records
and the resolution of consumer disputes. The legislation
expands consumer access to credit information to ensure
accuracy by giving consumers the right to review their credit
scores and request a free credit report annually. H.R. 2622
provides consumers with important new rights for correcting
inaccurate information on their credit reports and discourages
the reintroduction of fraudulent information into the credit
reporting system. The legislation prohibits furnishers of
information from forwarding information on a consumer to credit
reporting agencies if the furnisher has reasonable cause to
believe the information is inaccurate. In addition, the bill
directs regulators to determine how best to ensure the prompt
investigation and correction of disputed information in a
consumer's credit file.
H.R. 2622 also provides significant new protections of
consumers' medical information by limiting the disclosure of
certain medical information in the preparation and
dissemination of credit reports, prohibiting the use of medical
information in connection with any determination of consumers'
eligibility for credit, and requiring credit reporting agencies
to code certain sensitive medical information to avoid unwanted
disclosure. Other provisions of the bill simplify consumers'
ability to limit unsolicited offers of credit, require credit
card issuers to disclose risk based pricing practices when
making unsolicited offers of credit to consumers, and require
various studies to ensure the fairness of the credit granting
process.
Background and Need for Legislation
One of the hallmarks of the modern U.S. economy is quick
and convenient access to consumer credit. Although it would
have seemed unimaginable a generation ago, consumers can now
qualify for a mortgage over the telephone, walk into a showroom
and finance the purchase of a car in less than an hour, and get
department store credit within minutes. Over the last 30 years,
the availability of non-mortgage credit to households in the
lowest quintile of income has increased by nearly 70 percent--
including a nearly three-fold increase in the number of low-
income households owning credit cards just in the last decade.
American families' ability to buy a home has also increased,
with homeownership levels now approaching 70 percent, again
with the largest gains achieved by lower income and minority
groups. These improvements in the credit and mortgage systems
have saved consumers nearly $100 billion annually, according to
some estimates.
This unprecedented ``democratization'' in the availability
of credit to low- and moderate-income consumers has been made
possible in significant measure by the emergence of a national
credit reporting system. The Federal statute governing the
operation of the national credit reporting system is the Fair
Credit Reporting Act (FCRA), landmark consumer protection
legislation enacted in 1970 to bring the consumer credit
reporting industry under Federal regulation for the first time.
In establishing this statutory framework, Congress recognized
that ``an elaborate mechanism [had] been developed for
investigating and evaluating the credit worthiness, credit
standing, credit capacity, character, and general reputation of
consumers,'' and that ``consumer reporting agencies [had]
assumed a vital role in assembling and evaluating consumer
credit and other information on consumers.'' (15 U.S.C. Sec.
1681.) The stated congressional purpose for the FCRA was ``to
require that consumer reporting agencies adopt reasonable
procedures for meeting the needs of commerce for consumer
credit, personnel, insurance, and other information in a manner
which is fair and equitable to the consumer, with regard to the
confidentiality, accuracy, relevancy, and proper utilization of
such information.'' (Id.)
The FCRA applies to files maintained by consumer reporting
agencies, also commonly referred to as credit bureaus, which
are broadly defined to include anyone in the business of
furnishing reports on the creditworthiness of consumers to
third parties. Credit bureaus collect information voluntarily
supplied by credit grantors, collection agencies, and other
``furnishers,'' as well as information from public records. The
information included in a consumer credit report typically
consists of a consumer's name, Social Security number, address,
telephone number, employment information, credit and payment
history (including credit previously obtained, available, or
outstanding), and other pertinent information (such as arrests,
bankruptcies, and legal judgments).
The FCRA outlines certain ``permissible purposes'' for
which a consumer credit report may be supplied to a requester.
A consumer reporting agency may furnish a copy of a consumer's
report to a person the agency has reason to believe intends to
use the information for the purpose of extending credit or
offering insurance to a consumer who has initiated the
transaction, or for review or collection of the customer's
account. Reports may also be provided in connection with
unsolicited (or ``prescreened'') offers of credit or insurance,
if the consumer has not requested otherwise and certain other
notice and disclosure requirements are met; for determining
eligibility for a government license or benefit; or for
employment purposes (with the consumer's consent).
Any person with information related to consumers' financial
activities or other relevant information may furnish data to a
consumer reporting agency. Reporting is voluntary, but those
who do furnish information have a duty to ensure its accuracy
and to investigate disputes. The most common users and
furnishers of information are credit card issuers, auto
dealers, department and grocery stores, lenders, utilities,
insurers, collection agencies, and government agencies.
In 1996, Congress amended the FCRA to impose new legal
duties on credit bureaus, as well as on furnishers and users of
credit reporting data, and to create a uniform national
standard for consumer protections governing credit
transactions. According to the Congressional Research Service,
the legislative history of the 1996 amendments indicates a
congressional intent to ``establish a national standard for the
consumer credit industry,'' and to create ``operational
efficiency for industry * * * and competitive prices for
consumers in the credit reporting and credit granting
[industries that are] in many aspects, national in scope.'' The
1996 amendments allowed for the continued evolution of a
national credit system by establishing uniform national
standards in a number of key areas, including the form of the
notice that consumers are entitled to receive when adverse
action (such as a denial of credit) is taken against them based
upon credit reporting information; the procedures for consumers
to dispute the accuracy of information on their credit reports
and remove or correct any inaccurate or unverified information;
the obsolescence periods for reporting of negative information,
such as delinquencies and bankruptcies; and the
circumstance under which credit-related information may be
shared among affiliated entities.
Absent congressional action, the uniform national standards
established by the 1996 amendments to the FCRA will sunset on
January 1, 2004, permitting States that are so inclined to
enact differing additional requirements. Numerous witnesses at
hearings on the FCRA held by the Subcommittee on Financial
Institutions and Consumer Credit testified in favor of
extending the statute's uniform national standards. On June 4,
2003, Ms. Dolores Smith, Director of the Federal Reserve
Board's Division of Consumer and Community Affairs, outlined
the benefits of the credit reporting system to lenders and
their customers as follows:
The ready availability of accurate, up-to-date credit
information from consumer reporting agencies benefits
both creditors and consumers. Information from consumer
credit reports gives creditors the ability to make
credit decisions quickly and in a fair, safe and sound,
and cost-effective manner. Consumers benefit from the
access to credit from different sources, vigorous
competition among creditors, quick decisions on credit
applications, and reasonable costs for credit.
In testimony before the full Committee on July 9, 2003,
Treasury Secretary John Snow strongly endorsed making the
FCRA's uniform national standards permanent, characterizing
them as ``essential to the way [that] credit gets made
available in this country,'' and going on to explain: ``[W]e
have the best credit markets and the most available credit and
the lowest cost credit in the world, and that is, in large
part, due to these [national] standards.'' Testifying on April
30, 2003, Federal Reserve Board Chairman Alan Greenspan
stressed the importance of preserving the FCRA's uniform
treatment of key aspects of the credit reporting system:
There is just no question that unless we have some
major sophisticated system of credit evaluation
continuously updated, we will have great difficulty in
maintaining the level of consumer credit currently
available, because clearly without the information that
comes from credit bureaus and other sources, lenders
would have to impose an additional risk premium.
While American consumers have realized undeniable benefits
from the free flow of credit reporting information to lenders
and other financial services providers, they have also become
increasingly concerned about the risk of their personal
financial information falling into the wrong hands. The crime
of identity theft--in which a perpetrator assumes the identity
of a victim in order to obtain financial products and services
or other benefits in the victim's name--has reached almost
epidemic proportions in recent years. A hotline established by
the Federal Trade Commission to field consumer complaints and
questions about identity theft logged over 160,000 calls in
2002 alone.
Although it is the financial institution, and not the
individual victim, that generally absorbs the financial losses
from an identity theft, victims may have to expend considerable
time and energy clearing up their credit histories and other
financial records. Indeed, the Committee heard compelling
testimony from victims of identity theft that they felt, in
some sense, twice victimized--once by the criminal who
fraudulently assumed their identity, and again by a system that
conspired against prompt redress and repair of their damaged
credit history.
The FCRA contains provisions intended to facilitate the
prompt correction of inaccurate or fraudulent information on a
consumer's credit report. For example, any individual who
believes that he or she has been victimized by identity theft
is entitled to obtain a free report from each credit bureau
that maintains a file on the individual. When an individual
discovers that he or she has been victimized and an account
created by an identity thief is being included in the victim's
credit history, the FCRA enables the victim to demand
correction. Once the victim disputes the information with the
credit bureau, the credit bureau must, within 5 business days,
contact the entity that furnished the account information to
the bureau. The entity then must investigate the matter and
report back to the bureau with its findings within 30 days
after the victim's initial complaint. If the entity responds
with a correction, the bureau must promptly delete the
information from the victim's credit history. The information
may not be reinserted in the victim's file unless the entity
furnishing the information certifies that it is correct and the
victim is notified of the reinsertion.
Committee Oversight of the FCRA
The Committee's review of the FCRA's expiring uniform
national standards included extensive consideration of
proposals for assisting consumers in preventing identity theft
and for mitigating its consequences once the crime has
occurred. The starting point for the Committee's analysis was
bipartisan legislation co-authored by Members of the Committee.
H.R. 2035, the ``Identity Theft and Financial Privacy
Protection Act of 2003,'' included provisions imposing new
requirements on credit card issuers and credit bureaus to
identify potential identity theft; codifying the use of ``fraud
alerts'' in credit reports; requiring the truncation of account
numbers and expiration dates on credit and debit card receipts;
and providing consumers with the right to obtain a free credit
report annually from each consumer reporting agency.
The Committee began its series of hearings reviewing the
FCRA and identity theft with a joint hearing of the
Subcommittee on Oversight and Investigations and the
Subcommittee on Financial Institutions and Consumer Credit
entitled ``Fighting Fraud: Improving Information Security''. On
April 3, 2003, the subcommittees heard testimony from witnesses
on three specific case studies to review how credit issuers,
third-party vendors that process transactions, credit bureaus,
and law enforcement coordinate efforts to limit harm to
consumers when data security is breached.
On May 8, 2003, the Subcommittee on Financial Institutions
and Consumer Credit held a hearing on the importance of the
national credit reporting system to consumers and the U.S.
economy. The hearing focused on how a national uniform credit
system in the United States benefits consumers. The
Subcommittee reviewed the economic benefits of a uniform credit
system and current consumer protections under the FCRA, as well
as the importance of a uniform national credit system to the
retail operations of commercial users and furnishers of credit
reporting data.
The Subcommittee took a closer look at the FCRA itself on
June 4, 2003, with a hearing entitled ``Fair Credit Reporting
Act: How it Functions for Consumers and the Economy''. The
hearing reviewed the mechanics of the national credit reporting
system and focused on the role of the States in FCRA; how
credit reports, credit scores, and prescreened information are
used by the lending, mortgage, consumer finance, insurance, and
non-financial industries; the accuracy of credit reports; and
the role of national uniform standards in improving markets for
consumers, including how such uniformity affects the
availability, affordability, and timeliness of products and
services.
The Committee continued its series of hearings on the FCRA
on June 12, 2003, when the Subcommittee on Financial
Institutions and Consumer Credit held a hearing entitled ``The
Role of FCRA in the Credit Granting Process''. The hearing
examined the use of credit reports in the mortgage lending
process as well as other forms of consumer lending, including
credit cards and bank loans.
On June 17, 2003, the Subcommittee on Financial
Institutions and Consumer Credit examined the role of FCRA in
employee background checks and the collection of medical
information. The first panel focused on the application of FCRA
to employee screening and other background checks, while the
second panel examined how medical information is collected and
used for various financial products, including a discussion of
the prohibition on the use of health information in the credit
granting process. Witnesses on the first panel focused on
opinion letters issued in 1999 and 2000 by the staff of the
FTC, which essentially state that if an employer hires outside
organizations to investigate suspected workplace misconduct,
such as sexual or racial harassment or workplace violence, the
investigation is an ``investigative consumer report'' under the
FCRA and the employer and the investigator must therefore
comply with the FCRA's notice and disclosure requirements. even
though the investigation does not pertain to credit or credit
related matters. The panel established that the FTC position
would deter employers from using outside investigators, which,
because of their objectivity and expertise, are generally
preferred, and in many cases, legally required. For example,
the technical nature of the alleged misconduct may require
investigators with particular expertise. Similarly, allegations
of misconduct by high-level officials may require investigators
with outside objectivity. The FTC has acknowledged the issue
created by the letters, but contends that a legislative fix is
necessary.
In the 106th, 107th and 108th congresses, bipartisan
legislation was introduced that would remedy the problems
created by the FTC letters. H.R. 1543, the ``Civil Rights and
Employee Investigation Clarification Act,'' was included as
title VI of H.R. 2622. Title VI addresses the issue created by
the FTC's opinion letters by excluding employment
investigations that are not for the purpose of investigating
the employee's credit worthiness from the FCRA definition of a
consumer report.
The Subcommittee on Financial Institutions and Consumer
Credit held its sixth and final background hearing on the FCRA
on June 24, 2003, when it focused specifically on the issue of
identity theft with a hearing entitled ``Fighting Identity
Theft--The Role of FCRA''. The hearing consisted of three
panels, the first focusing on current enforcement efforts to
apprehend and prosecute identity thieves, the second describing
the experiences of consumers victimized by identity theft, and
the third addressing private sector efforts to prevent identity
theft and assist victims.
Conclusion
As noted above, much of the Nation's economic growth over
the last 20 years has been driven by the wide availability of
credit, and the relative ease with which it can be obtained.
This is due in large part to the existence of the national
credit reporting system which gives the United States firms a
concrete advantage over their competitors in Europe and
elsewhere.
H.R. 2622 ensures that the national credit reporting system
will continue to provide benefits to consumers and the economy,
while adding important consumer protections to ensure that
criminals cannot turn the system's greatest strengths into
weaknesses.
Hearings
The House Committee on Financial Services held a hearing on
Wednesday, July 9, 2003, on H.R. 2622, the ``Fair and Accurate
Credit Transactions Act of 2003''. The Committee received
testimony from: the Honorable John W. Snow, Secretary of the
Treasury; the Honorable Timothy J. Muris, Chairman, Federal
Trade Commission; Mr. Mallory Duncan, Senior Vice President,
General Counsel, National Retail Federation; Mr. Michael F.
McEneney, Partner, Sidley Austin Brown & Wood LLP, on behalf of
the U.S. Chamber of Commerce; Dr. William E. Spriggs, Executive
Director, National Urban League Institute for Opportunity and
Equality; Mr. Stephen Brobeck, Executive Director, Consumer
Federation of America; Mr. John C. Dugan, Partner, Covington &
Burling, on behalf of the Financial Services Coordinating
Council; Mr. Stuart K. Pratt, President, Consumer Data Industry
Association; Mr. Joe Belew, President, Consumer Bankers
Association; Ms. Kayce Bell, Chief Operating Officer, Alabama
Credit Union, on behalf of the Credit Union National
Association; Mr. Hilary O. Shelton, Director, NAACP, Washington
Bureau; Mr. D. Russell Taylor, Chairman, America's Community
Bankers; Mr. Chris Jay Hoofnagle, Deputy Counsel, Electronic
Privacy Information Center; and Mr. L. Richard Fischer, on
behalf of Visa U.S.A.
Committee Consideration
On July 16, 2003, the Subcommittee on Financial
Institutions and Consumer Credit met in open session and
approved H.R. 2622, the Fair and Accurate Credit Transactions
Act of 2003, for full Committee consideration, as amended, by a
record vote of 41 yeas and no nays.
On July 24, 2003, the Committee on Financial Services met
in open session and ordered H.R. 2622 reported to the House
with a favorable recommendation, with an amendment, by a record
vote of 61 yeas and 3 nays.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Oxley to report the bill to the House with a
favorable recommendation, with an amendment, was agreed to by a
record vote of 61 yeas and 3 nays (Record vote no. FC-14). The
names of Members voting for and against follow:
Record vote no. FC-14
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Oxley...................... X ........ ......... Mr. Frank (MA).. X ........ .........
Mr. Leach...................... ........ ........ ......... Mr. Kanjorski... X ........ .........
Mr. Bereuter................... X ........ ......... Ms. Waters...... ........ X .........
Mr. Baker...................... X ........ ......... Mr. Sanders*.... ........ X .........
Mr. Bachus..................... X ........ ......... Mrs. Maloney.... X ........ .........
Mr. Castle..................... X ........ ......... Mr. Gutierrez... X ........ .........
Mr. King....................... X ........ ......... Ms. Velazquez... X ........ .........
Mr. Royce...................... X ........ ......... Mr. Watt........ X ........ .........
Mr. Lucas (OK)................. X ........ ......... Mr. Ackerman.... X ........ .........
Mr. Ney........................ X ........ ......... Ms. Hooley (OR). X ........ .........
Mrs. Kelly..................... X ........ ......... Ms. Carson (IN). X ........ .........
Mr. Paul....................... ........ ........ ......... Mr. Sherman..... X ........ .........
Mr. Gillmor.................... X ........ ......... Mr. Meeks (NY).. X ........ .........
Mr. Ryun (KS).................. X ........ ......... Ms. Lee......... ........ X .........
Mr. LaTourette................. X ........ ......... Mr. Inslee...... X ........ .........
Mr. Manzullo................... X ........ ......... Mr. Moore........ X ........ .........
Mr. Jones (NC)................. X ........ ......... Mr. Gonzalez.... X ........ .........
Mr. Ose........................ X ........ ......... Mr. Capuano..... X ........ .........
Mrs. Biggert................... X ........ ......... Mr. Ford......... X ........ .........
Mr. Green (WI)................. ........ ........ ......... Mr. Hinojosa.... ........ ........ .........
Mr. Toomey..................... X ........ ......... Mr. Lucas (KY).. X ........ .........
Mr. Shays...................... ........ ........ ......... Mr. Crowley..... X ........ .........
Mr. Shadegg.................... X ........ ......... Mr. Clay........ X ........ .........
Mr. Fossella................... X ........ ......... Mr. Israel...... X ........ .........
Mr. Gary G. Miller (CA)........ X ........ ......... Mr. Ross........ X ........ .........
Ms. Hart....................... X ........ ......... Mrs. McCarthy X ........ .........
(NY).
Mrs. Capito.................... X ........ ......... Mr. Baca........ X ........ .........
Mr. Tiberi..................... X ........ ......... Mr. Matheson.... X ........ .........
Mr. Kennedy (MN)............... X ........ ......... Mr. Lynch....... X ........ .........
Mr. Feeney..................... X ........ ......... Mr. Miller (NC). X ........ .........
Mr. Hensarling................. X ........ ......... Mr. Emanuel..... X ........ .........
Mr. Garrett (NJ)............... X ........ ......... Mr. Scott (GA).. X ........ .........
Mr. Murphy..................... X ........ ......... Mr. Davis (AL).. X ........ .........
Ms. Ginny Brown-Waite (FL)..... X ........ ......... ................. ........ ........ .........
Mr. Barrett (SC)............... X ........ ......... ................. ........ ........ .........
Ms. Harris..................... X ........ ......... ................. ........ ........ .........
Mr. Renzi...................... X ........ ......... ................. ........ ........ .........
----------------------------------------------------------------------------------------------------------------
*Mr. Sanders is an independent, but caucuses with the Democratic Caucus.
The following amendments were considered by record votes.
The names of Members voting for and against follow:
An amendment to the amendment in the nature of a
substitute offered by Ms. Waters, no. 1a, striking
uniform national consumer protection standards, was not
agreed to by a record vote of 6 yeas and 56 nays
(Record vote no. FC-11).
Record vote no. FC-11
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Oxley...................... ........ X ......... Mr. Frank (MA).. ........ X .........
Mr. Leach...................... ........ ........ ......... Mr. Kanjorski... ........ X .........
Mr. Bereuter................... ........ X ......... Ms. Waters...... X ........ .........
Mr. Baker...................... ........ X ......... Mr. Sanders*.... X ........ .........
Mr. Bachus..................... ........ X ......... Mrs. Maloney.... ........ X .........
Mr. Castle..................... ........ ........ ......... Mr. Gutierrez... ........ X .........
Mr. King....................... ........ X ......... Ms. Velazquez... ........ X .........
Mr. Royce...................... ........ X ......... Mr. Watt........ X ........ .........
Mr. Lucas (OK)................. ........ X ......... Mr. Ackerman.... ........ X .........
Mr. Ney........................ ........ X ......... Ms. Hooley (OR). ........ X .........
Mrs. Kelly..................... ........ X ......... Ms. Carson (IN). ........ X .........
Mr. Paul....................... X ........ ......... Mr. Sherman..... ........ X .........
Mr. Gillmor.................... ........ X ......... Mr. Meeks (NY).. ........ X .........
Mr. Ryun (KS).................. ........ X ......... Ms. Lee......... X ........ .........
Mr. LaTourette................. ........ X ......... Mr. Inslee...... ........ ........ .........
Mr. Manzullo................... ........ ........ ......... Mr. Moore........ ........ X .........
Mr. Jones (NC)................. ........ X ......... Mr. Gonzalez.... ........ X .........
Mr. Ose........................ ........ X ......... Mr. Capuano..... ........ X .........
Mrs. Biggert................... ........ X ......... Mr. Ford......... ........ ........ .........
Mr. Green (WI)................. ........ X ......... Mr. Hinojosa.... ........ ........ .........
Mr. Toomey..................... ........ X ......... Mr. Lucas (KY).. ........ X .........
Mr. Shays...................... ........ X ......... Mr. Crowley..... ........ X .........
Mr. Shadegg.................... ........ X ......... Mr. Clay........ X ........ .........
Mr. Fossella................... ........ ........ ......... Mr. Israel...... ........ X .........
Mr. Gary G. Miller (CA)........ ........ X ......... Mr. Ross........ ........ X .........
Ms. Hart....................... ........ X ......... Mrs. McCarthy ........ X .........
(NY).
Mrs. Capito.................... ........ X ......... Mr. Baca........ ........ X .........
Mr. Tiberi..................... ........ X ......... Mr. Matheson.... ........ X .........
Mr. Kennedy (MN)............... ........ X ......... Mr. Lynch....... ........ ........ .........
Mr. Feeney..................... ........ X ......... Mr. Miller (NC). ........ X .........
Mr. Hensarling................. ........ X ......... Mr. Emanuel..... ........ X .........
Mr. Garrett (NJ)............... ........ X ......... Mr. Scott (GA).. ........ X .........
Mr. Murphy..................... ........ X ......... Mr. Davis (AL).. ........ X .........
Ms. Ginny Brown-Waite (FL)..... ........ X ......... ................. ........ ........ .........
Mr. Barrett (SC)............... ........ X ......... ................. ........ ........ .........
Ms. Harris..................... ........ X ......... ................. ........ ........ .........
Mr. Renzi...................... ........ X ......... ................. ........ ........ .........
----------------------------------------------------------------------------------------------------------------
*Mr. Sanders is an independent, but caucuses with the Democratic Caucus.
An amendment to the amendment in the nature of a
substitute offered by Mr. Sanders, no. 1c, prohibiting
``bait and switch'' practices, was not agreed to by a
record vote of 22 yeas and 44 nays (Record vote no. FC-
12).
Record vote no. FC-12
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Oxley...................... ........ X ......... Mr. Frank (MA).. ........ X .........
Mr. Leach...................... ........ X ......... Mr. Kanjorski... ........ X .........
Mr. Bereuter................... X ........ ......... Ms. Waters...... X ........ .........
Mr. Baker...................... ........ X ......... Mr. Sanders*.... X ........ .........
Mr. Bachus..................... X ........ ......... Mrs. Maloney.... X ........ .........
Mr. Castle..................... ........ X ......... Mr. Gutierrez... X ........ .........
Mr. King....................... ........ X ......... Ms. Velazquez... X ........ .........
Mr. Royce...................... ........ X ......... Mr. Watt........ X ........ .........
Mr. Lucas (OK)................. ........ X ......... Mr. Ackerman.... X ........ .........
Mr. Ney........................ ........ X ......... Ms. Hooley (OR). ........ X .........
Mrs. Kelly..................... ........ X ......... Ms. Carson (IN). X ........ .........
Mr. Paul....................... ........ X ......... Mr. Sherman..... ........ X .........
Mr. Gillmor.................... ........ X ......... Mr. Meeks (NY).. X ........ .........
Mr. Ryun (KS).................. ........ X ......... Ms. Lee......... X ........ .........
Mr. LaTourette................. X ........ ......... Mr. Inslee...... X ........ .........
Mr. Manzullo................... ........ X ......... Mr. Moore........ ........ X .........
Mr. Jones (NC)................. X ........ ......... Mr. Gonzalez.... X ........ .........
Mr. Ose........................ ........ X ......... Mr. Capuano..... X ........ .........
Mrs. Biggert................... ........ X ......... Mr. Ford......... ........ ........ .........
Mr. Green (WI)................. ........ X ......... Mr. Hinojosa.... ........ ........ .........
Mr. Toomey..................... ........ X ......... Mr. Lucas (KY).. ........ X .........
Mr. Shays...................... X ........ ......... Mr. Crowley..... ........ X .........
Mr. Shadegg.................... X ........ ......... Mr. Clay........ X ........ .........
Mr. Fossella................... ........ ........ ......... Mr. Israel...... ........ X .........
Mr. Gary G. Miller (CA)........ ........ X ......... Mr. Ross........ ........ X .........
Ms. Hart....................... ........ X ......... Mrs. McCarthy ........ X .........
(NY).
Mrs. Capito.................... ........ X ......... Mr. Baca........ ........ X .........
Mr. Tiberi..................... ........ X ......... Mr. Matheson.... ........ X .........
Mr. Kennedy (MN)............... ........ X ......... Mr. Lynch....... ........ ........ .........
Mr. Feeney..................... ........ X ......... Mr. Miller (NC). ........ X .........
Mr. Hensarling................. ........ X ......... Mr. Emanuel..... ........ X .........
Mr. Garrett (NJ)............... ........ X ......... Mr. Scott (GA).. X ........ .........
Mr. Murphy..................... ........ X ......... Mr. Davis (AL).. X ........ .........
Ms. Ginny Brown-Waite (FL)..... ........ X ......... ................. ........ ........ .........
Mr. Barrett (SC)............... ........ X ......... ................. ........ ........ .........
Ms. Harris..................... ........ X ......... ................. ........ ........ .........
Mr. Renzi...................... ........ X ......... ................. ........ ........ .........
----------------------------------------------------------------------------------------------------------------
*Mr. Sanders is an independent, but caucuses with the Democratic Caucus.
An amendment to the amendment in the nature of a
substitute offered by Ms. Lee, no. 1s, prohibiting
credit reporting agencies from treating the number of
enquiries as a negative when calculating the credit
score, was not agreed to by a record vote of 14 yeas
and 48 nays (Record vote no. FC-13).
Record vote no. FC-13
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Oxley...................... ........ X ......... Mr. Frank (MA).. X ........ .........
Mr. Leach...................... ........ ........ ......... Mr. Kanjorski... ........ X .........
Mr. Bereuter................... X ........ ......... Ms. Waters...... X ........ .........
Mr. Baker...................... ........ X ......... Mr. Sanders*.... X ........ .........
Mr. Bachus..................... ........ X ......... Mrs. Maloney.... ........ ........ .........
Mr. Castle..................... ........ ........ ......... Mr. Gutierrez... X ........ .........
Mr. King....................... ........ X ......... Ms. Velazquez... ........ X .........
Mr. Royce...................... ........ X ......... Mr. Watt........ X ........ .........
Mr. Lucas (OK)................. ........ X ......... Mr. Ackerman.... ........ X .........
Mr. Ney........................ ........ X ......... Ms. Hooley (OR). ........ X .........
Mrs. Kelly..................... ........ X ......... Ms. Carson (IN). X ........ .........
Mr. Paul....................... ........ ........ ......... Mr. Sherman..... ........ ........ .........
Mr. Gillmor.................... ........ X ......... Mr. Meeks (NY).. ........ X .........
Mr. Ryun (KS).................. ........ X ......... Ms. Lee......... X ........ .........
Mr. LaTourette................. ........ X ......... Mr. Inslee...... X ........ .........
Mr. Manzullo................... ........ X ......... Mr. Moore........ ........ X .........
Mr. Jones (NC)................. ........ X ......... Mr. Gonzalez.... X ........ .........
Mr. Ose........................ ........ X ......... Mr. Capuano..... ........ X .........
Mrs. Biggert................... ........ X ......... Mr. Ford......... X ........ .........
Mr. Green (WI)................. ........ ........ ......... Mr. Hinojosa.... ........ ........ .........
Mr. Toomey..................... ........ X ......... Mr. Lucas (KY).. ........ X .........
Mr. Shays...................... ........ ........ ......... Mr. Crowley..... ........ X .........
Mr. Shadegg.................... ........ X ......... Mr. Clay........ X ........ .........
Mr. Fossella................... ........ X ......... Mr. Israel...... ........ X .........
Mr. Gary G. Miller (CA)........ ........ X ......... Mr. Ross........ ........ X .........
Ms. Hart....................... ........ X ......... Mrs. McCarthy ........ X .........
(NY).
Mrs. Capito.................... ........ X ......... Mr. Baca........ X ........ .........
Mr. Tiberi..................... ........ X ......... Mr. Matheson.... ........ X .........
Mr. Kennedy (MN)............... ........ X ......... Mr. Lynch....... ........ X .........
Mr. Feeney..................... ........ X ......... Mr. Miller (NC). X ........ .........
Mr. Hensarling................. ........ X ......... Mr. Emanuel..... X ........ .........
Mr. Garrett (NJ)............... ........ X ......... Mr. Scott (GA).. ........ X .........
Mr. Murphy..................... ........ X ......... Mr. Davis (AL).. ........ X .........
Ms. Ginny Brown-Waite (FL)..... ........ X ......... ................. ........ ........ .........
Mr. Barrett (SC)............... ........ X ......... ................. ........ ........ .........
Ms. Harris..................... ........ X ......... ................. ........ ........ .........
Mr. Renzi...................... ........ X ......... ................. ........ ........ .........
----------------------------------------------------------------------------------------------------------------
*Mr. Sanders is an independent, but caucuses with the Democratic Caucus.
The following other amendments were also considered by the
Committee:
An amendment in the nature of a substitute offered by
Mr. Oxley, no.1, limiting the disclosure of certain
medical information, establishing a three-tier system
for victims of identity theft to ensure credit is not
extended to identity thieves, prohibiting a business
from sharing negative information about a consumer if
they have received a copy of a police report indicating
an illegal transaction, and requiring GAO to report on
the role of race and gender in the credit granting
process, was agreed to by a voice vote, as amended.
An amendment to the amendment in the nature of a
substitute offered by Mrs. Biggert, no. 1b, requiring
credit reporting agencies to notify users of consumer
report address discrepancies and directing the Federal
banking regulators to establish guidance regarding
reasonable policies for lenders' use of a consumer
reports when an address discrepancy exists, was agreed
to by a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Mrs. Kelly, no. 1d, requiring
credit reporting agencies to code sensitive medical
information, was agreed to by a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Mr. Frank, 1e, requiring the
credit reporting agencies conduct a reasonable
reinvestigation to determine whether the disputed
information is inaccurate and prohibiting furnishers
from forwarding information to the credit reporting
agencies if the furnisher has substantial doubts as to
its accuracy, was agreed to by a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Mr. Gillmor, no. 1f, requiring
notification of a consumer in the event that the number
of enquires made with respect to the consumer's report
was a key factor that adversely affected a consumer's
credit score, was agreed to by a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Mr. Baker, no. 1g, clarifying
consumers' ability to obtain one free credit report
annually from each of the nationwide consumer credit
reporting agencies, was agreed to by a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Mr. Toomey, no. 1h, requiring the
Treasury Department to conduct a study on the role of
technology in fighting identity theft, was agreed to by
a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Mr. Frank of Massachusetts, no.
1i, requiring implementation of the legislation within
4 months instead of 10 months after the date of
issuance of final regulations, was withdrawn.
An amendment to the amendment in the nature of a
substitute offered by Mr. Frank of Massachusetts, no.
1j, permitting employees against whom an adverse action
has been taken based upon an investigation of workplace
misconduct conducted by an outside third party to
demand a reinvestigation of any information disputed by
the employee, was not agreed to by a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Mr. Meeks of New York, no. 1k,
requiring that the Federal Reserve conduct a study of
further restrictions on offers of credit or insurance
not initiated by consumers, was agreed to by a voice
vote.
An amendment to the amendment in the nature of a
substitute offered by Mr. Meeks of New York, no. 1l,
requiring that a telephone number be included with any
solicitation for a credit transaction not initiated by
the consumer, was withdrawn.
An amendment to the amendment in the nature of a
substitute offered by Ms. Lee, no. 1m, requiring the
Comptroller General conduct a study on methods for
improving consumers' financial literacy, was agreed to
by a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Ms. Carson of Indiana, no. 1n,
protecting consumers' rights to obtain a
reinvestigation of a consumer dispute directly through
resellers of consumer reporting information, was agreed
to by a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Mr. Shadegg, no. 1o, restricting
the display and dissemination of a social security
numbers, was withdrawn.
An amendment to the amendment in the nature of a
substitute offered by Mr. Kanjorski, no. 1p, extending
the uniform national consumer protection standards by 9
years, was not agreed to by a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Mrs. Maloney, no. 1q, requiring
disclosure of an increase in annual percentage rate
under certain circumstances, was agreed to by a voice
vote.
An amendment to the Maloney amendment to the
amendment in the nature of a substitute offered by Mr.
Bachus, no. 1q(1), requiring the disclosure to include
a good faith enumeration, was withdrawn.
An amendment to the amendment in the nature of a
substitute offered by Mr. Davis of Alabama, no. 1r,
requiring furnishers to conduct reinvestigations within
a reasonable time in case of alleged identity theft,
was not agreed to by a voice vote.
An amendment to the amendment in the nature of a
substitute offered by Mrs. Kelly, no. 1t, extending the
phase-in period for credit agencies to provide a free
report, was withdrawn.
An amendment to the amendment in the nature of a
substitute offered by Mr. Inslee, no. 1u, amending
sections 625 and 626 of the Fair Credit Reporting Act,
was ruled nongermane by the Chair.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee made findings that are
reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
The appropriate Federal regulators will use the authority
granted in this bill to combat the growing problem of identity
theft by assisting consumers in preventing identify theft and
in mitigating its consequences once the crime has occurred.
Federal regulators will also make every effort to ensure the
smooth operation of the national uniform credit reporting
system established by the Fair Credit Reporting Act that has
lowered costs and increased choice and convenience for American
consumers and has created operational efficiencies for
industry.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of budget authority, entitlement authority, or
tax expenditures or revenues contained in the cost estimate
prepared by the Director of the Congressional Budget Office
pursuant to section 402 of the Congressional Budget Act of
1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, September 3, 2003.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2622, the Fair and
Accurate Credit Transactions Act of 2003.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susanne S.
Mehlman.
Sincerely,
Douglas Holtz-Eakin,
Director.
Enclosure.
H.R. 2622--Fair and Accurate Credit Transactions Act of 2003
Summary: CBO estimates that implementing this legislation
would cost about $7 million over the next five years, assuming
appropriation of the necessary amounts. The bill could affect
direct spending and revenues, but CBO estimates that any such
impact would not be significant.
H.R. 2622 would provide new consumer protections against
identity theft (that is, fraud committed using another person's
identifying information) and would permanently extend the
provisions in the Fair Credit Reporting Act (FCRA) that prevent
states from imposing new restrictions on how financial
institutions share consumer information. In 1996, FCRA was
amended to create a uniform national standard for consumer
protections governing credit transactions, and it is scheduled
to expire on January 1, 2004. H.R. 2622 also would give
consumers access to certain financial records, ensure the
accuracy of credit reports, and provide protections of
consumers' medical information.
H.R. 2622 contains an intergovernmental mandate as defined
in the Unfunded Mandates Reform Act (UMRA), but CBO estimates
the costs would not exceed the threshold established in UMRA
($59 million in 2003, adjusted annually for inflation).
CBO's assessment of the bill's impact on the private sector
will be provided later in a separate report.
Estimated cost to the Federal Government: CBO estimates
that implementing this legislation would cost about $7 million
over the next five years, assuming appropriation of the
necessary amounts. The bill could affect direct spending and
revenues, but CBO estimates that any such impact would not be
significant.This legislation would require the Federal Trade
Commission (FTC) to prepare a model summary of rights for consumers who
believe that they may be the victims of fraud or identity theft. The
FTC also would be responsible for developing procedures and forms to be
used by consumers to report identity theft to creditors and credit
reporting agencies and for conducting various studies on such topics as
the accuracy of information contained in credit reports and the impact
of credit scores and credit-based insurance scores on the availability
and affordability of financial products.
H.R. 2622 would require the federal banking agencies (which
includes the Office of the Comptroller of the Currency (OGC),
the Federal Deposit Insurance Corporation (FDIC), and the
Office of Thrift Supervision (OTS)) and the National Credit
Union Administration (NCUA) to issue various guidelines and
regulations concerning identity theft, credit reporting, and
use of consumers' medical information by financial
institutions. Finally, this legislation would require the
Federal Reserve to create a disclosure form for financial
companies to use when notifying a consumer that negative
information has been furnished to a credit reporting agency and
to study the ability of consumers to avoid unsolicited offers
of credit and insurance.
Spending subject to appropriation
Based on information from the FTC, CBO estimates that the
studies and additional enforcement effort required under H.R.
2622 would cost that agency $2 million in 2004 and $6 million
over the 2004-2008 period, assuming appropriation of the
necessary amounts. In addition, this legislation would require
the General Accounting Office (GAO) to study the role of
discrimination in obtaining credit and to study methods for
improving financial literacy among consumers. CBO estimates
that the two GAO studies required under the bill would cost
about $1 million in 2004.
Direct spending and revenues
The NCUA, the OTS, and the OGC charge fees to cover all
their administrative costs; therefore, any additional spending
by those agencies to implement the bill would have no net
budgetary effect. That is not the case with FDIC, however,
which uses deposit insurance premiums paid by banks to cover
the expenses it incurs to supervise state-chartered
institutions. (Under current law, CBO estimates that the vast
majority of thrift institutions insured by the FDIC would not
pay any premiums for most of the 2004-2013 period.)
The bill would cause a small increase in FDIC spending but
would not affect its premium income. Based on information from
the FDIC, implementing the bill would have a minor impact on
the agency's workload. Budgetary effects on the Federal Reserve
are recorded as changes in revenues (governmental receipts).
CBO estimates that enacting H.R. 2622 would reduce such
revenues by less than $500,000 a year.
Impact on state, local, and tribal governments: Title I of
H.R. 2622 would permanently prohibit state and local
governments from enacting laws that are different from FCRA in
certain specified cases. Such a preemption of state law is an
intergovernmental mandate as defined in UMRA, but CBO estimates
that it would not impose significant costs on state and local
governments. Therefore, the cost of the preemption would not
exceed the threshold established in UMRA ($59 million in 2003
adjusted for inflation).
Impact on the private sector: CBO's assessment of the
bill's impact on the private sector will be provided later in a
separate report.
Estimate prepared by: Federal Costs: Susanne Mehlman.
Impact on State, Local, and Tribal Governments: Sarah Puro.
Impact on the Private Sector: Paige Piper/Bach.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 424 of the Congressional Budget Act.
Private Sector Mandates Estimate
The estimate of private sector mandates provided by the
Congressional Budget Office pursuant to section 424(b) of the
Congressional Budget Act was not timely filed with the
Committee. Pursuant to section 423(f)(2) of the Congressional
Budget Act, the Chairman of the Committee shall cause the
statement to be published in the Congressional Record in
advance of floor consideration of the bill.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
defense and general welfare of the United States), and clause 3
(relating to the power to regulate foreign and interstate
commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
Section 1. Short title; table of contents
This section establishes the short title of the bill, the
``Fair and Accurate Credit Transactions Act of 2003'' (the FACT
Act), and provides a table of contents.
Section 2. Definitions
This section adds several new defined terms to section 603
of the Fair Credit Reporting Act, including ``reseller,''
``Board,'' ``credit,'' ``creditor,'' ``credit card,''
``Commission,'' ``debit card,'' ``electronic fund transfer,''
``Federal banking agency,'' ``identity theft,'' and ``police
report.''
With respect to the term ``identity theft,'' the section
includes a general definition (i.e., ``a fraud committed using
another person's identifying information'') and gives joint
rulemaking authority to the Federal Reserve Board and the
Federal Trade Commission to further define the term. The
Committee has granted this authority in order to allow for the
Board and the Commission to ensure that the term remains
relevant in light of the continuing evolution of identity theft
as a crime and the wide variety of techniques employed by
identity thieves. The Committee does not intend for the Board
or the Commission to define the term for other purposes.
Further, the Committee does not intend for the term
``consumer report'' to be interpreted to include a report to be
used in the consideration of an individual's purchase of
insurance primarily for business, commercial or agricultural
purposes.
Section 3. Effective dates
This section specifies effective dates for the provisions
of the legislation. Within two months of the date of enactment,
the Federal Reserve and the Federal Trade Commission are
required to jointly prescribe final regulations for each
provision of the bill, except as otherwise specified. In
exercising their authority under this section, the regulators
are directed to establish effective dates that are as early as
possible while also allowing a reasonable time for
implementation of the bill's provisions. No provision of the
bill may take effect later than 10 months after the date that
the regulations required by this section are issued in final
form. The section provides for a separate effective date for
section 701 of the bill, relating to the protection of medical
information in the financial system.
title i--uniform national consumer protection standards
Section 101. Uniform national consumer protection standards made
permanent
This section amends section 624 of the Fair Credit
Reporting Act to remove the January 1, 2004 sunset of the
uniform national consumer protection standards and make them
permanent.
title ii--identity theft prevention
Section 201. Investigating changes of address and inactive accounts
This section amends section 605 of the Fair Credit
Reporting Act to direct the Federal banking agencies and the
National Credit Union Administration (NCUA), as part of their
guidance to depository institutions on identity theft ``red
flags'' (section 206, infra), to jointly prescribe regulations
requiring credit and debit card issuers that receive a request
for additional or replacement cards on an existing account
shortly after receiving a change of address request to notify
the cardholder at the former address or as otherwise agreed to,
or to use other means of validating the address change. The
section outlines three alternative procedures the card issuer
may follow in order to provide the cardholder with the
additional or replacement card if the request for such a card
comes shortly after a change of address. First, the issuer can
notify the cardholder of the request for an additional or
replacement card at the former address and provide the
cardholder a means of promptly reporting incorrect address
changes. Second, the card issuer can notify the cardholder of
the request for additional or replacement cards by other means
of communication to which the cardholder and the card issuer
previously agreed. Third, a card issuer can assess the validity
of the change of address request in accordance with reasonable
policies and procedures established by the card issuer pursuant
to regulations prescribed by the Federal banking agencies and
the NCUA pursuant to section 605(k) of the FCRA (as added by
section 206).
Because the nature of identity theft and credit card fraud
continues to evolve, the Committee believes that responses to
identity theft must be flexible so that they can be modified as
the criminals alter their schemes. Accordingly, the Committee
has declined to specify a period of time between the request
for a new card and a change of address request that would
trigger an issuer's duty to take the steps outlined in this
section. The Committee believes that 30 days would be
appropriate under current circumstances, although the Federal
banking agencies may find evidence suggesting a somewhat
shorter or longer time period is more appropriate in the
future. The Committee does not believe that the card issuer
should be required to take the additional precautions outlined
in this section if, despite receiving a request for an address
change, the issuer did not actually change the cardholder's
address for any reason (e.g. the card issuer had previously
determined that the request for an address change was invalid)
or the issuer did not actually issue a replacement card.
Section 201 also instructs the Federal banking agencies and
the NCUA to consider, as part of their duties under section
605(k) of the FCRA (as added by section 206, infra), whether
transactions on a credit or deposit account that has been
inactive for more than two years present a potential ``red
flag'' for identity theft. Should that activity be deemed to be
a ``red flag,'' the creditor or depository institution will be
required to follow reasonable policies and procedures that
provide for notice to be given to a consumer in a manner
reasonably designed to reduce the likelihood of identity theft
with respect to such account.
Finally, the section amends section 624(b)(1)(E) of the
Fair Credit Reporting Act to clarify that the identity theft
prevention protections added to section 605 of the FCRA by this
bill are preemptive of State law.
Section 202. Fraud alerts
This section amends section 605 of the Fair Credit
Reporting Act to require consumer reporting agencies that
operate on a nationwide basis (as defined in section 603(p) of
the FCRA) to place fraud alerts on consumers' files in the
three circumstances described below. A fraud alert is a
statement in the consumer's file that notifies all users that
the consumer does not want credit extended without special
permission through a preauthorized procedure. Fraud alerts may
be placed on consumer reports in the following three
situations:
(1) Upon the direct request of a consumer who asserts in
good faith a suspicion that the consumer has been or is about
to become a victim of fraud or a related crime, such as
identity theft, a nationwide consumer reporting agency that
maintains a file on the consumer and has a reasonable belief
that it knows the identity of the consumer must: (i) include a
fraud alert in the consumer's file for at least 90 days (unless
the consumer requests that it be removed sooner); (ii) disclose
to the consumer that the consumer may request a free copy of
his or her consumer report within three business days of
requesting the fraud alert; (iii) exclude the consumer from
prescreened offers of credit or insurance for two years (unless
the consumer requests that such exclusion be rescinded sooner);
and (iv) refer the information regarding the fraud alert to
each of the other nationwide consumer reporting agencies, which
must then fulfill the obligations described in (i), (ii), and
(iii) above.
(2) Upon the direct request of a consumer who contacts a
nationwide consumer reporting agency to report details of an
identity theft and submits evidence that provides the agency
with reasonable cause to believe that such identity theft has
occurred, the agency must, if it maintains a file on the
consumer and has a reasonable belief that it knows the identity
of the consumer: (i) include a fraud alert in the file of the
consumer and provide an opportunity for the consumer to extend
the alert for a period of up to seven years (unless the
consumer requests that it be removed sooner); (ii) provide the
consumer with the option of including more complete information
in the consumer's file, including a telephone number or other
reasonable means of communication that any person who requests
the consumer's report may utilize for authorization before
establishing a new credit plan in the name of the consumer; and
(iii) provide the consumer with at least two free disclosures
of his or her consumer report during the 12-month period
beginning on the date of the consumer's request. Or,
(3) Upon the direct request of an active duty military
consumer who contacts a nationwide consumer reporting agency
that maintains a file on the consumer and has a reasonable
belief that it knows the identity of the consumer, the agency
must: (i) include an active duty alert in the consumer's file
for a period of at least 12 months (unless the consumer
requests that it be removed sooner); (ii) exclude the consumer
from prescreened offers of credit or insurance for two years
(unless the consumer requests that such exclusion be rescinded
sooner); and (iii) refer the information regarding the active
duty alert to each of the other nationwide consumer reporting
agencies (which must then fulfill the obligations described in
(i) and (ii) above). An ``active duty military consumer'' is
defined as a consumer in military service who is on active duty
or is a reservist performing duty under a call or order to
active duty, and is assigned to service away from the
consumer's usual duty station.
A request for a fraud alert must be made directly by the
consumer, or directly by an individual acting on behalf of or
as a personal representative of the consumer. The Committee
used the word ``individual'' instead of ``person'' to ensure
that the provision would only apply to specific individuals
such as a consumer's authorized family members or guardians (or
attorneys acting as personal representatives), authorized
representatives from bona fide military service organizations,
and not to companies and entities such as credit repair
clinics.
Each nationwide consumer reporting agency must establish
policies and procedures to comply with the obligations imposed
by this section, including procedures that allow consumers to
request fraud alerts in a simple and easy manner, including by
telephone. The nationwide consumer reporting agencies already
provide many of these services to consumers on a voluntary
basis, and the Committee does not believe that significant
changes, if any, to the current policies and procedures will be
necessary for purposes of complying with this requirement.
Any person who obtains a consumer's consumer report that
includes a fraud alert inserted in the consumer's file pursuant
to section 605(i) of the FCRA (as added by section 202 of this
legislation) may not establish a new credit plan in the name of
the consumer for a person other than the consumer without
utilizing reasonable policies and procedures to form a
reasonable belief that the user of the report knows the
identity of the person for whom such new plan is established,
which may include obtaining authorization or preauthorization
of the consumer at a telephone number designated by the
consumer or by such other reasonable means agreed to. The
Committee does not intend for the presence of a fraud alert to
interfere with transactions on an existing credit account, such
as an authorization request in connection with the consumer's
use of an existing credit card. The Committee notes that it has
specifically declined to specify what a user's reasonable
policies and procedures should be with respect to verifying the
consumer's identity. The Committee expects that, in developing
their policies and procedures, users will examine a variety of
mechanisms, including those required by other existing laws,
such as the relevant portions of the regulations issued under
section 326 of the USA PATRIOT Act, relating to customer
identification programs.
A reseller that is notified of the existence of a fraud
alert in a consumer report must communicate to each person
procuring a consumer report with respect to such consumer the
existence of the fraud alert.
The Committee notes that the obligations described above
apply only to those consumer reporting agencies that compile
and maintain files on consumers on a nationwide basis. However,
if a consumer contacts a consumer reporting agency that does
not maintain files on a nationwide basis to communicate a
suspicion that the consumer has been or is about to become a
victim of fraud or related crime, that agency must provide the
consumer with information on how to contact the Federal Trade
Commission and the nationwide consumer reporting agencies to
obtain more detailed information and request a fraud alert.
Consumer reporting agencies are required to transmit the
fraud alert information to users of consumer reports in a
manner that facilitates clear and conspicuous viewing of the
alert by the user.
Section 203. Truncation of credit card and debit card account numbers
This section amends section 605 of the Fair Credit
Reporting Act to prohibit companies that accept credit or debit
cards from printing expiration dates or more than the last 5
digits of a card number on any electronically printed receipt
provided to the cardholder at the point of sale or transaction,
with certain exceptions. This limitation does not apply to
transactions in which the sole means of recording the person's
credit card or debit card number is by handwriting or by an
imprint or copy of the card. This section becomes effective
three years from the date of enactment with respect to any
device for processing credit and debit card transactions that
is in use before January 1, 2005, and one year from date of
enactment for devices that are first put into use on or after
January 1, 2005. These effective dates are designed to allow
merchants to make an orderly transition to meet the
requirements imposed by this section.
Section 204. Summary of rights of identity theft victims
This section amends section 609 of the Fair Credit
Reporting Act to direct the FTC, in consultation with the
Federal banking agencies and the NCUA, to prepare a model
summary of rights under the FCRA for consumers who believe they
may be victims of fraud or identity theft involving credit,
electronic fund transfers, or accounts or transactions at or
with a financial institution, detailing the procedures for
remedying the effects of the fraud. When a consumer contacts a
consumer reporting agency to report a suspicion of applicable
fraud or identity theft, the consumer reporting agency is
required to provide the consumer with the FTC's model summary
of rights, and information on how to contact the FTC for more
information.
Section 205. Blocking of information resulting from identity theft
This section amends section 605 of the Fair Credit
Reporting Act to require consumer reporting agencies to block
certain information on a consumer credit report resulting from
an alleged identity theft. To obtain a block, a consumer must
provide the consumer reporting agency with appropriate proof of
identity; a police report (as defined in section 2 of the bill)
evidencing the consumer's identity theft claim; an
identification of the information on the consumer credit report
that arises out of the alleged identity theft; and confirmation
that the information is not information relating to any
transaction by the consumer. Within 5 business days of
receiving this information, the consumer reporting agency must
block the information. The consumer reporting agency is also
required to notify promptly the entity that furnished the
blocked information that the information may be the result of
identity theft, that a police report has been filed, that a
block has been requested, and the effective date of the block.
If a consumer reporting agency that has placed a block on a
consumer's file reasonably determines that (1) the information
was blocked in error or a block was requested by the consumer
in error; (2) the information was blocked (or requested to be
blocked) on the basis of a misrepresentation of fact by the
consumer; or (3) the consumer knowingly obtained goods,
services or money as a result of the block, then the consumer
reporting agency may decline to block, or may rescind a block
of the information. If a block is declined or rescinded, the
consumer reporting agency must notify the affected consumer
promptly.
The blocking provisions of this section do not apply to
check services companies, deposit account information service
companies, and resellers of consumer credit reports under
certain conditions.
Nothing in this section requires a consumer reporting
agency to prevent a Federal, State or local law enforcement
agency from accessing blocked information in a consumer credit
file to which the law enforcement agency could otherwise obtain
access under the FCRA.
Section 206. Establishment of procedures for depository institutions to
identify possible instances of identity theft
This section amends section 605 of the Fair Credit
Reporting Act to direct the Federal banking agencies and the
NCUA, in consultation with the FTC, to jointly establish, and
update as necessary, guidelines for insured depository
institutions to identify and ``red flag'' patterns, practices,
and specific forms of activity that indicate the possible
existence of identity theft. The section also directs the same
regulators to jointly prescribe regulations requiring insured
depository institutions to adopt reasonable policies and
procedures for implementing the ``red flag'' guidelines to
identify possible risks to customer accounts or to the
institutions' safety and soundness. Those policies and
procedures may not be inconsistent with, or duplicative of, the
customer identification procedures required under section 326
of the USA PATRIOT Act (31 U.S.C. Sec. 5318(l)).
The Committee intends the guidelines required by this
section to provide flexibility given the ever changing nature
of identity theft and related crimes. The Committee believes
that the Federal banking agencies and the NCUA are equipped to
establish broad parameters for such guidelines, but that
individual insured depository institutions are most
appropriately situated to determine how best to develop and
implement the required policies and procedures. The Committee
believes that, in the case of account opening procedures,
insured depository institution's policies and procedures
pursuant to section 326 of the USA PATRIOT Act should be
sufficient for purposes of this section.
Section 207. Study on the use of technology to combat identity theft
This section directs the Secretary of the Treasury, in
consultation with the Federal banking agencies, the FTC, and
other specified public and private sector entities, to conduct
a study of the use of biometrics and other similar technologies
to reduce the incidence of identity theft. The section includes
a one-year authorization of appropriations needed to carry out
the study, and directs the Treasury Department to submit a
report to Congress within 6 months of the date of enactment of
the legislation containing the findings of the study and any
recommendations for legislative or administrative action.
title iii--improving resolution of consumer disputes
Section 301. Coordination of consumer complaint investigations
This section amends section 621 of the Fair Credit
Reporting Act to direct those consumer reporting agencies that
conduct business on a nationwide basis to develop and maintain
procedures for referring consumer complaints of identity theft
and requests for blocks or fraud alerts to the other nationwide
agencies, and to provide the FTC with an annual summary of this
information. That summary may be a brief description of the
estimated number of calls received pertaining to identity
theft, the number of fraud alerts requested, and other issues
which may be relevant. The FTC, in consultation with the
Federal banking agencies and the NCUA, is directed to develop
model forms and model standards for identity theft victims to
report fraud to creditors and consumer reporting agencies. The
Committee believes that consultations with the Federal banking
agencies and the NCUA in developing the form and procedures is
important in light of the fact that depository institutions
will likely receive the forms from consumers. The Committee
notes that the model form will not be a substitute for a police
report if a police report is required in order for the consumer
to exercise his or her rights under the provisions of this
legislation.
Section 302. Notice of dispute through reseller
This section amends section 611 of the Fair Credit
Reporting Act to require that consumer reporting agencies
reinvestigate consumer disputes forwarded to them by resellers
of credit reports (such as intermediaries who consolidate
reports for mortgage lenders). The Committee notes that a
consumer reporting agency has no obligation to reinvestigate
information if the reseller submitting the request did not
obtain the information in question from the consumer reporting
agency.
Section 302 also imposes a reinvestigation obligation on
resellers. If a reseller receives a notice from a consumer of a
dispute concerning the completeness or accuracy of any item of
information contained in a consumer report on the consumer
produced by the reseller, the reseller must, within 5 business
days and free of charge, determine the completeness or accuracy
of the information in question and either correct it (if the
error is the reseller's), or convey the notice of dispute with
any relevant information to the consumer reporting agency that
provided the information (if the error is not the reseller's).
Section 303. Reasonable reinvestigation required
This section amends section 611 of the Fair Credit
Reporting Act to provide that when a consumer disputes the
accuracy of information contained in a consumer credit report,
the consumer reporting agency that prepared the report must
conduct a reasonable reinvestigation to determine whether the
disputed information is inaccurate.
Section 304. Duties of furnishers of information
This section makes several changes to section 623(a) of the
Fair Credit Reporting Act, which governs the legal duties of
persons that furnish information to consumer reporting
agencies.
First, the section modifies the standard of care applicable
to furnishers of information, to provide that they may not
report information to a consumer reporting agency if they know
or have reasonable cause to believe that the information is
inaccurate. The term ``reasonable cause to believe that the
information is inaccurate'' means, based on the furnisher's
procedures designed to report accurate information, that the
furnisher has actual knowledge, other than solely allegations
by the consumer, which would cause a reasonable person to have
substantial doubts about the accuracy of the information. This
``reasonable cause to believe'' standard is based on actual
knowledge of the furnisher of factual information that would
cause a reasonable person to believe that the information is
not accurate. It is the Committee's view that if a furnisher
has followed reasonable practices to ensure the accuracy of
information, it need take no further action unless the consumer
provides factual information to the furnisher that, upon review
by the furnisher, raise substantial doubt regarding the
information's accuracy.
Second, this section requires a person that regularly
furnishes information to nationwide consumer reporting agencies
to maintain reasonable procedures designed to ensure that the
information furnished is accurate. While this section is
intended to promote the accuracy of information reported to
consumer reporting agencies, it does not require furnishers to
guarantee the accuracy of each piece of information provided to
a nationwide consumer reporting agency. Rather, it requires
that the furnisher have a reasonable belief that the
information is accurate, based on the furnisher's regular
business practices and procedures. This is a similar standard
to that adopted by the Treasury and the Federal banking
agencies for customer identification under section 326 of the
USA PATRIOT Act.
Third, this section provides consumers with the ability to
request a reinvestigation of information contained in a
consumer report directly with the furnisher of information. A
consumer who seeks to dispute the accuracy of information
contained in a report provided by a nationwide consumer
reporting agency directly with a furnisher must provide a
dispute notice to the address specified by the furnisher for
those notices. The furnisher may specify such address in any
materials provided to the consumer in connection with the
consumer's relationship with the furnisher, or upon the request
of the consumer. The notice of dispute must clearly identify
the specific information being disputed and explain the basis
for the dispute. The furnisher must then conduct an
investigation with respect to the disputed information, review
all relevant information provided by the consumer with the
notice of dispute, and complete the investigation and report
the results to the consumer, before the expiration of the
period under section 611(a)(1) within which a consumer
reporting agency would be required to complete its
investigation if the dispute were initiated through such
agency. The furnisher may report the results to the consumer in
writing, orally, or electronically (if the consumer has
provided an electronic address to the furnisher). If the
investigation discloses that the information reported was
inaccurate, the furnisher must promptly thereafter report the
accurate information found as a result of the investigation to
each nationwide consumer reporting agency to which the
furnisher provided the inaccurate information.
The purpose of the provision addressing the ability of a
consumer to dispute information with the furnisher is to permit
a consumer to raise disputes directly with the furnisher with
which the consumer has a relationship, rather than raising
those disputes initially with a consumer reporting agency with
which the consumer does not have an ongoing relationship. A
consumer seeking to dispute the accuracy of information with a
furnisher must ``directly provide a dispute notice to the
address specified by the person for such notices.'' The notice
must be provided by the consumer and not by a third party, such
as a credit repair clinic, and the dispute must be submitted to
the address specified by the furnisher for this purpose.
Nothing in this provision is intended to preclude a consumer's
authorized family member or guardian (or attorneys acting as
personal representatives), or authorized representatives from
bona fide military service organizations, from submitting a
dispute notice on behalf of the consumer, nor is it intended to
preclude a furnisher from using a service organization to
process disputes on the furnisher's behalf.
This section is intended to emphasize the importance of
furnishing accurate information to consumer reporting agencies
without imposing unreasonable burdens on those that furnish
that information. The Committee intends that the new duties
imposed by this section will be interpreted and enforced in a
manner that enhances the accuracy of credit reports but does
not discourage or impede the furnishing of information to
consumer reporting agencies.
Section 305. Prompt investigation of disputed consumer information
This section requires the FTC and the Federal Reserve to
jointly study the performance of consumer reporting agencies
and furnishers of credit reporting information in complying
with the Fair Credit Reporting Act's procedures and timelines
for the prompt investigation and correction of disputed
information in a consumer's credit file, as well as the
completeness of information furnished, and report to Congress
within 6 months of the date of enactment of this legislation
with any appropriate recommendations to ensure promptness and
full compliance.
title iv--improving accuracy of consumer records
Section 401. Reconciling addresses
This section amends section 605 of the Fair Credit
Reporting Act to require a nationwide consumer reporting agency
that receives and processes a request for a consumer credit
report that includes an address for the consumer that
substantially differs from the addresses in the consumer's file
to notify the requester of the discrepancy. The notification
need not include any additional information other than that a
discrepancy exists. Nothing in this section is to be construed
as requiring a requester of a consumer report to provide a
consumer's address to a consumer reporting agency.
The Federal banking agencies and the NCUA are directed to
jointly prescribe regulations providing guidance to users of
consumer credit reports on reasonable policies and procedures
they should follow after receiving a notice of address
discrepancy from a consumer reporting agency. The regulations
must also describe reasonable policies and procedures for use
by a user of a consumer report who receives a notice of
discrepancy if the user establishes a continuing relationship
with the consumer, and the user regularly and in the ordinary
course of business furnishes information to the consumer
reporting agency from which the notice of discrepancy was
obtained, to reconcile the consumer's address with the consumer
reporting agency by furnishing such address to such agency as
part of information regularly furnished by the user for the
period in which the relationship was established. This section
is intended to require consumer reporting agencies to notify a
user of a discrepancy, with a further obligation for that user
to utilize reasonable policies and procedures to resolve those
discrepancies. The Committee does not intend to place an
obligation on consumer reporting agencies to affirmatively
resolve discrepancies directly with the consumers.
Section 402. Prevention of repollution of consumer reports
This section amends section 623 of the Fair Credit
Reporting Act to provide that if a consumer submits a police
report to a person who furnishes information to a consumer
reporting agency, and the consumer states that information
maintained by the furnisher resulted from identity theft, the
furnisher may not furnish the information to any consumer
reporting agency, unless the person subsequently knows or is
informed by the consumer that the information is correct.
Section 403. Notice by users with respect to fraudulent information
This section amends section 615 of the Fair Credit
Reporting Act to require debt collection agents who learn that
information in a consumer credit report is the result of
identity theft or is otherwise fraudulent to either notify its
principal (if the principal is the source of the relevant
information) or, if the information originated from a source
other than the debt collector's principal, the consumer
reporting agency that prepared the report. Upon the request of
the consumer, the debt collector must provide the consumer with
all the information which the consumer would be entitled to
receive if the information related to the consumer other than
by reason of identity theft.
Section 404. Disclosure to consumers of contact information for users
and furnishers of information in consumer reports
This section amends section 609 of the Fair Credit
Reporting Act to require that a credit report provided to a
consumer at the consumer's request include the addresses of
entities that have either furnished information appearing on
the report or have recently requested copies of the consumer's
report, as well as customer service phone numbers if provided
by the entity to the consumer reporting agency.
Section 405. FTC study of the accuracy of consumer reports
This section directs the FTC to conduct an ongoing study of
the accuracy and completeness of information contained in
consumer reports, and to submit biennial reports to Congress on
its findings and conclusions--together with such
recommendations for legislative and administrative action as
the FTC deems appropriate--over an eight-year period, beginning
six months from the date of enactment of this bill. Within two
years of the submission of the final periodic report, the FTC
is required to submit a final report to Congress on the study.
title v--improvements in use of and consumer access to credit
information
Section 501. Free reports annually
This section amends section 612 of the Fair Credit
Reporting Act to allow consumers to request annually a free
copy of their credit report. All consumers may directly request
a free copy of their credit report annually from each consumer
reporting agency that compiles and maintains files on consumers
on a nationwide basis. Consumers who are unemployed, on
welfare, or believe their files contain inaccurate information
due to fraud may request a free credit report once every year
from each regional and local consumer reporting agency in
addition to a credit report from each national consumer
reporting agency.
Section 502. Disclosure of credit scores
This section amends section 609 of the Fair Credit
Reporting Act to require consumer reporting agencies to make
available to consumers (for a reasonable fee) upon request the
consumer's current or most recently calculated credit score, as
well as the range of scores possible, the top 4 negative key
factors used, the date the score was created, and the name of
the company providing the underlying file or score. If a
consumer requests a credit file, then the agency must notify
the consumer that the consumer may request and obtain a credit
score. The disclosure of the key factors is intended to be
consistent with the provisions of the Equal Credit Opportunity
Act (ECOA) requiring a creditor making an adverse action to
disclose the principal reasons in a credit score that most
contributed to the adverse action.
Consumer reporting agencies that do not distribute credit
scores in connection with residential real property loans or
develop scores to assist credit providers in understanding a
consumer's general credit behavior and predicting the future
credit behavior of the consumer are not required to develop or
disclose any scores under this section. Consumer reporting
agencies that distribute scores developed by others are not
required to provide further explanation of them or to process
related disputes, other than by providing the consumer with
contact information regarding the person who developed the
score or its methodology, unless the agency has further
developed or modified the score itself. Consumer reporting
agencies are not required to maintain credit scores in their
files.
The credit score provided to the consumer by the consumer
reporting agency must be derived from a credit scoring model
that is widely distributed by the agency in connection with
mortgage loans or credit risk analysis and the agency must
include a disclosure to the consumer stating that the
information and credit scoring model may be different than that
used by a particular lender.
While the consumer reporting agency may charge a reasonable
fee for the score, the Committee intends that this reasonable
fee not be used to cover profits and costs for developing and
providing the free credit report required to be made available
under section 501. In disclosing the top negative key factors
affecting a consumer's credit score, if a negative key factor
is the number of enquiries made (the number of times the agency
provided the consumer's report to various users), then that
factor must be included in the disclosure even if it is not
among the top 4 negative key factors.
If a consumer applies for a mortgage loan, and the mortgage
lender uses a credit score in connection with an application by
the consumer for a closed end loan or establishment of an open
end consumer loan secured by 1 to 4 units of residential real
property, then the mortgage lender is required to provide the
consumer with a free copy of the consumer's credit score. In
addition, the lender must provide a copy of the information on
the range of scores possible, the top 4 negative key factors
used, the date the score was created, and the name of the
company providing the underlying file or score, to the extent
that the information is obtained from a consumer reporting
agency or developed and used by the lender. Beyond this
information provided to the lender by a third party score
provider, the lender is only required to provide a notice to
the home loan applicant. This notice includes the contact
information of each agency providing the credit score used, and
provides specific language to be disclosed to educate consumers
about the use and meaning of their credit scores and how to
ensure their accuracy.
A mortgage lender that uses an automated underwriting
system to underwrite a loan or otherwise obtains a credit score
from someone other than a consumer reporting agency may satisfy
their obligation to provide the consumer with a credit score by
disclosing a credit score and associated key factors supplied
by a consumer reporting agency. However, if the lender uses a
numerical credit score generated by an automated underwriting
system used by the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation or their affiliates, and
the score is disclosed to the lender, then that score must be
disclosed by the lender to the consumer.
Mortgage lenders are not required by this section to
explain the credit score and the related copy of information
provided to the consumer, to disclose any information other
than the credit score or negative key factor, disclose any
credit score or related information obtained by the lender
after a loan has closed, provide more than 1 disclosure per
loan transaction, or provide an additional score disclosure
when another person has already made the disclosure to the
consumer for that loan transaction.
The only obligation for a mortgage lender providing a
credit score under this section is to provide a copy of the
information used and received from the consumer reporting
agency. A mortgage lender is not liable for the content of that
information or the omission of any information in the report
provided by the agency. This section and the requirement for
mortgage lenders to provide credit scores do not apply to the
Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation or their affiliates.
Any provision in a contract prohibiting the disclosure of
credit scores by a person who makes or arranges loans or a
consumer reporting agency is void, and a lender will not have
liability under any contractual provision for disclosure of a
credit score pursuant to this section.
This section also amends section 605 of the Fair Credit
Reporting Act to provide that if a consumer reporting agency
furnishes a consumer report that contains any credit score or
other risk score or other predictor, the report must include a
clear and conspicuous statement that the number of enquiries
was a key factor (as defined in section 609(e)(2)(B)) that
adversely affected a credit score or other risk score or
predictor if that predictor was in fact one of the key factors
that most adversely affected a credit score. This statement
will be made in those instances in which the number of
enquiries had an influence on the consumers credit score, and
it will thus alert a user of the consumer report when the
number of enquiries has had an adverse effect on the consumer's
credit score.
Section 503. Simpler and easier method for consumers to use
notification system
This section amends the requirements contained in sections
604 and 615 of the Fair Credit Reporting Act that consumer
reporting agencies establish and maintain a notification system
for consumers to exclude themselves from lists used for
unsolicited pre-screened offers or credit or insurance to
require additionally that the notification system be simple and
easy to use. Anyone using a consumer report in connection with
an unsolicited insurance or credit transaction must include, in
the required disclosure statement to the consumer, a
description in a simple and easy to understand format of how
the consumer can prohibit his file from being used for
unsolicited insurance and credit offers including the simple
and easy-to-use method for notifying the consumer reporting
agencies. The Committee believes that most current notification
systems (such as toll-free phone numbers with straightforward
choices) and disclosures permit consumers to notify consumer
reporting agencies of their desire to limit pre-screened offers
in a simple and easy manner. This section is intended to ensure
that as technology evolves and different notification and
disclosure methods are experimented with that consumers will be
protected by a standard requiring that any new system continue
to be simple and easy to understand and use.
Section 504. Requirement to disclose communications to a consumer
reporting agency
This section amends section 623(a) of the Fair Credit
Reporting Act to provide that if any financial institution that
extends credit and regularly and in the ordinary course of
business furnishes information to a nationwide consumer
reporting agency (as described in section 603(p) of the FCRA)
furnishes negative information to a consumer reporting agency
regarding credit extended to the consumer, then the financial
institution must provide a written notice to the consumer that
they have done so. The notice must be provided to the customer
prior to, or no later than 30 days after, furnishing negative
information to the nationwide consumer reporting agency. The
required notice must be clear and conspicuous and may be
included on or with any materials provided to the customer,
including a billing statement or notice of default. If the
notice is provided to the customer prior to the furnishing of
the negative information, the notice may not be included in the
initial disclosures required under section 127(a) of the Truth
in Lending Act, but may be included in other communications
with the customer. Once the financial institution provides a
notice to the customer, the financial institution may submit
additional negative information to a nationwide consumer
reporting agency with respect to the same transaction,
extension of credit, account, or customer without providing an
additional notice to the customer.
The Federal Reserve Board must prescribe a brief model
disclosure, not to exceed 30 words, for financial institutions
to use in their efforts to comply with this requirement. If a
financial institution uses the model developed by the Board it
shall be deemed to be in compliance with the requirement of
this section. However, a financial institution is not required
to use the model disclosure. This section does not require a
financial institution that has provided a customer with a
disclosure to furnish negative information to a consumer
reporting agency.
A financial institution is not liable for failure to
perform the duties required by this section if, at the time of
the failure, the financial institution maintained reasonable
policies and procedures to comply with the requirement. For
example, a financial institution would not be liable for a
failure to provide the disclosure if the financial institution
maintained reasonable policies and procedures to comply, but
was prohibited by law from contacting the consumer.
Section 505. Study of effects of credit scores and credit-based
insurance scores on availability and affordability of financial
products
This section requires the FTC, in consultation with the
Office of Fair Housing and Equal Opportunity of the Department
of Housing and Urban Development, to study the effects of the
use of credit scores and insurance scores on the availability
and affordability of financial products and services, the
accuracy of the causality of the score factors and historical
losses, whether the use of those scores results in any
disparate impact and whether financial underwriting systems
could achieve comparable results through factors with less
disparate impact, the factors used in credit scoring systems,
and the effects of variables that are not considered. The FTC
must seek public participation and report on its study with
legislative recommendations within 18 months of the date of
enactment of this bill. The Committee expects that the
Commission and HUD will seek assistance from the Federal and
State financial regulators that have jurisdiction over
financial services providers and shall take into account
currently existing studies and legal analysis.
Section 506. GAO study on disparate impact of credit system
This section requires the General Accounting Office to
study the credit system to determine the extent to which, if
any, discrimination exists with regard to the availability and
the terms of credit which has a disparate impact on the basis
of race, color, income and education level, geographic
location, age, sex, sexual orientation, national origin, or
marital status and the nature of any discriminatory effect. The
Committee intends that the GAO will seek assistance from the
Board and other Federal and State financial regulators that
have jurisdiction over credit providers for the relevant
portions of the study. The GAO must submit a report to Congress
on the findings of the study before the end of the two-year
period beginning on the date of enactment of this legislation.
Section 507. Analysis of further restrictions on offers of credit or
insurance
This section directs the Federal Reserve Board to study the
ability of consumers to opt out of receiving unsolicited
written offers of credit or insurance and the impact further
restrictions on those offers would have on consumers. The Board
is required to report to Congress within 12 months of the date
of enactment of this legislation on the current statutory or
voluntary mechanisms for consumers to opt out of receiving
unsolicited credit and insurance offers, the extent to which
the mechanisms are being used, the benefits to consumers of
receiving the offers, whether consumers incur significant costs
as a result of the offers and whether further restrictions on
the offers would affect consumers' costs, the availability of
credit or insurance, consumers' knowledge about new products
and services, competition among lenders and insurers, and the
ability of lenders and insurers to offer products to
traditionally underserved consumers.
Section 508. Study on the need and the means for improving financial
literacy among consumers
This section directs the General Accounting Office to study
consumer knowledge of credit reports, credit scores, the credit
dispute resolution process, and methods for improving consumer
financial literacy. The GAO is directed to report its findings
to Congress within 9 months of the date of enactment of this
legislation. The study will examine the number of consumers who
view their credit reports, under what conditions consumers
obtain their reports, the extent of consumer knowledge of the
credit system data collection process and how to obtain a
credit report, and consumer understanding of factors that
positively or negatively affect credit scores.
Section 509. Disclosure of increase in APR under certain circumstances
This section requires that credit card issuers, in any
disclosure or statement required under the Fair Credit
Reporting Act for unsolicited credit card offers (a
prescreening disclosure to a consumer under section 615(d) of
the FCRA), clearly and conspicuously disclose the ability of
the issuer to increase any annual percentage rate applicable to
a credit card account, or to remove or increase any
introductory annual percentage rate applicable to the account,
for reasons other than actions or omissions of the cardholder
that are directly related to such account. The Federal Reserve
Board, in consultation with the other Federal banking agencies
and the NCUA, may develop any guidelines necessary to assure
that the required clear and conspicuous disclosure is provided
in a prominent location and that it includes appropriate model
disclosure statements.
title vi--protecting employee misconduct investigations
Section 601. Certain employee investigation communications excluded
from definition of consumer report
This section amends section 603 of the Fair Credit
Reporting Act to provide that communications to an employer by
outside third parties hired to investigate employee misconduct
or compliance with the employer's preexisting written policies
will not be considered ``consumer reports'' (meaning that
advance notice or permission would be required). If any adverse
action is taken based on the communication, the employer is
required to disclose to the employee a summary containing the
nature and substance of the communication (although certain
sources of information are protected).
title vii--limiting the use and sharing of medical information in the
financial system
Section 701. Protection of medical information in the financial system
This section amends section 604 of the Fair Credit
Reporting Act to generally prohibit a consumer reporting agency
from providing credit reports that contain medical information
for employment purposes or in connection with a credit or
insurance transaction (including annuities). Medical
information may be included in a report as part of an insurance
transaction only with the consumer's affirmative consent.
Medical information may be included in a report for employment
or credit purposes only where the information is relevant for
purposes of processing or approving employment or credit
requested by the consumer and the consumer has provided
specific written consent, or if the information meets certain
specific requirements and is restricted or reported using codes
that do not identify or infer the specific provider or nature
of the services, products, or devices to anyone other than the
consumer (except for certain insurance purposes).
The section establishes that creditors are not allowed to
obtain or use medical information for credit granting purposes.
Certain exceptions are provided where authorized by Federal
law, for insurance activities (including annuities), and where
determined to be necessary and appropriate by the financial
regulators. The Committee recognizes that there are limited
circumstances in which a creditor may require medical
information in determining a consumer's eligibility or
continued eligibility for credit, for example, to confirm the
use of loan proceeds in connection with loans to finance a
specific medical procedure or device, or to verify a consumer's
death or disability in connection with credit-related debt
cancellation agreements, and considers the limited use of
medical information in these circumstances and any similar
circumstances the financial regulators may identify, to be a
necessary and appropriate use of medical information for
purposes of this section.
Additional restrictions are imposed to limit the
redisclosure of any medical information received in connection
with certain insurance or credit transactions furnished by a
consumer reporting agency or authorized under certain laws or
regulations pursuant to the provisions of subsection (g) added
by this section. Companies that receive medical information
through any of the exceptions provided by subsection (g) are
prohibited from further disclosure of the information to any
other person except as necessary to carry out the original
purpose for which the information was initially provided or as
otherwise permitted by statute, regulation, or order.
This section further amends section 603(d) of the Fair
Credit Reporting Act to restrict the disclosure of certain
medical-related information among companies affiliated by
common ownership or corporate control. Except as authorized
under certain Federal law, regulation, or order, or under
certain applicable State insurance authority, the exclusions
permitted in section 603(d)(2) from the definition of a
``consumer report'' shall not apply with respect to information
disclosed among affiliates or companies related by common
ownership if the information is either medical information or
information that is based on payments for medical products or
services, or any aggregate list of identified consumers based
on payment transactions for medical products or services.
Section 702. Confidentiality of medical contact information in credit
reports
This section amends section 623 of the Fair Credit
Reporting Act to establish that companies (including their
agents or assignees) whose primary business is providing
medical services, products, or devices to consumers and who
furnish information to a consumer reporting agency are deemed
to be a ``medical information furnisher''. Medical information
furnishers must identify themselves as such before furnishing
information on a consumer to a consumer reporting agency. If a
medical information furnisher is furnishing information to a
consumer reporting agency on a consumer but not notifying the
agency as required of its status, then the FTC is directed to
take action as necessary, within its jurisdiction, to ensure
the company's compliance.
This section also amends section 605 of the Fair Credit
Reporting Act to provide that where a medical information
furnisher has notified the consumer reporting agency of its
status with respect to a consumer, the consumer reporting
agency may not include in a consumer report on that consumer
the name, address, or telephone number of the furnisher unless
that contact information is encoded in a manner that does not
identify or infer to anyone other than the consumer the
specific company or the nature of the medical services,
products, or devices provided. An exception is provided for
consumer reports provided to insurance companies for insurance
activities (including annuities) other than property and
casualty insurance. The encoding requirement for medical
information furnisher contact information applies regardless of
the dollar amounts involved.
The Committee does not intend to prohibit the inclusion in
a consumer report of information relating to the consumer's
place of employment. Rather, this section is intended to ensure
that consumers who have medical transactions in their credit
files are protected by requiring that the contact information
be encoded so that third parties can not infer any health
implications relating to the consumer.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
CONSUMER CREDIT PROTECTION ACT
* * * * * * *
TITLE VI--CONSUMER CREDIT REPORTING
Sec.
601. Short title.
* * * * * * *
[605. Requirements relating to information contained in consumer
reports.]
605. Requirements relating to information contained in consumer reports
and to identity theft prevention
* * * * * * *
Sec. 601. Short title
This title may be cited as the Fair Credit Reporting Act.
* * * * * * *
Sec. 603. Definitions and rules of construction
(a) * * *
* * * * * * *
(d) Consumer Report.--
(1) * * *
(2) Exclusions.--[The term] Except as provided in
paragraph (3), the term ``consumer report'' does not
include--
(A) * * *
* * * * * * *
(D) a communication described in subsection
(o) or (q).
* * * * * * *
(3) Restriction on sharing of medical information.--
Except for information or any communication of
information disclosed as provided in section 604(g)(3),
the exclusions in paragraph (2) shall not apply with
respect to information disclosed to any person related
by common ownership or affiliated by corporate control
if--
(A) the information is medical information;
or
(B) the information is an individualized list
or description based on a consumer's payment
transactions for medical products or services,
or an aggregate list of identified consumers
based on payment transactions for medical
products or services.
* * * * * * *
(q) Exclusion of Certain Communications for Employee
Investigations.--
(1) Communications described in this subsection.--A
communication is described in this subsection if--
(A) but for subsection (d)(2)(D), the
communication would be a consumer report;
(B) the communication is made to an employer
in connection with an investigation of--
(i) suspected misconduct relating to
employment; or
(ii) compliance with Federal, State,
or local laws and regulations, the
rules of a self-regulatory
organization, or any preexisting
written policies of the employer;
(C) the communication is not made for the
purpose of investigating a consumer's credit
worthiness, credit standing, or credit
capacity; and
(D) the communication is not provided to any
person except--
(i) to the employer or an agent of
the employer;
(ii) to any Federal or State officer,
agency, or department, or any officer,
agency, or department of a unit of
general local government;
(iii) to any self-regulatory
organization with regulatory authority
over the activities of the employer or
employee;
(iv) as otherwise required by law; or
(v) pursuant to section 608.
(2) Subsequent disclosure.--After taking any adverse
action based in whole or in part on a communication
described in paragraph (1), the employer shall disclose
to the consumer a summary containing the nature and
substance of the communication upon which the adverse
action is based, except that the sources of information
acquired solely for use in preparing what would be but
for subsection (d)(2)(D) an investigative consumer
report need not be disclosed.
(3) Self-regulatory organization defined.--For
purposes of this subsection, the term ``self-regulatory
organization'' includes any self-regulatory
organization (as defined in section 3(a)(26) of the
Securities Exchange Act of 1934), any entity
established under Title I of the Sarbanes-Oxley Act of
2002, any board of trade designated by the Commodity
Futures Trading Commission, and any futures association
registered with such Commission.
(r) Reseller.--The term ``reseller'' means a consumer
reporting agency that--
(1) assembles and merges information contained in the
database of another consumer reporting agency or
multiple consumer reporting agencies concerning any
consumer for purposes of furnishing such information to
any third party, to the extent of such activities; and
(2) does not maintain a database of the assembled or
merged information from which new consumer reports are
produced.
(s) Other Definitions.--
(1) Board; credit; creditor, credit card.--The terms
``Board'', ``credit'', ``creditor'', and ``credit
card'' have the same meanings as in section 103 of the
Truth in Lending Act.
(2) Commission.--The term ``Commission'' means the
Federal Trade Commission.
(3) Debit card.--The term ``debit card'' means any
card issued by a financial institution to a consumer
for use in initiating electronic fund transfers (as
defined in section 903(6) of the Electronic Fund
Transfer Act) from the account (as defined in such Act)
of the consumer at such financial institution for the
purpose of transferring money between accounts or
obtaining money, property, labor, or services.
(4) Electronic fund transfer.--The term ``electronic
fund transfer'' has the same meaning as in section 903
of the Electronic Fund Transfer Act.
(5) Federal banking agency.--The term ``Federal
banking agency'' has the same meaning as in section 3
of the Federal Deposit Insurance Act.
(6) Identity theft.--The term ``identity theft''
means a fraud committed using another person's
identifying information, subject to such further
definition as the Commission and the Board may
prescribe, jointly, by regulation.
(7) Police report.--The term ``police report'' means
a copy of any official valid report filed by a consumer
with any appropriate Federal, State, or local
government law enforcement agency, or any comparable
official government document that the Board and the
Commission shall jointly prescribe in regulations, that
is subject to a criminal penalty for false statements.
Sec. 604. Permissible purposes of reports
(a) * * *
* * * * * * *
(e) Election of Consumer To Be Excluded From Lists.--
(1) * * *
* * * * * * *
(5) Notification system.--
(A) In general.--Each consumer reporting
agency that, under subsection (c)(1)(B),
furnishes a consumer report in connection with
a credit or insurance transaction that is not
initiated by a consumer shall--
(i) establish and maintain a
notification system, including a toll-
free telephone number, which permits
any consumer whose consumer report is
maintained by the agency to notify the
agency, in a simple and easy manner and
with appropriate identification, of the
consumer's election to have the
consumer's name and address excluded
from any such list of names and
addresses provided by the agency for
such a transaction; and
* * * * * * *
[(g) Furnishing Reports Containing Medical Information.--A
consumer reporting agency shall not furnish for employment
purposes, or in connection with a credit or insurance
transaction, a consumer report that contains medical
information about a consumer, unless the consumer consents to
the furnishing of the report.]
(g) Protection of Medical Information.--
(1) Limitation on consumer reporting agencies.--A
consumer reporting agency shall not furnish for
employment purposes, or in connection with a credit or
insurance transaction, a consumer report that contains
medical information (other than medical contact
information treated in the manner required under
section 605(a)(6)) about a consumer, unless--
(A) if furnished in connection with an
insurance transaction, the consumer
affirmatively consents to the furnishing of the
report;
(B) if furnished for employment purposes or
in connection with a credit transaction--
(i) the information to be furnished
is relevant to process or effect the
employment or credit transaction; and
(ii) the consumer provides specific
written consent for the furnishing of
the report that describes in clear and
conspicuous language the use for which
the information will be furnished; or
(C) such information is restricted or
reported using codes that do not identify, or
provide information sufficient to infer, the
specific provider or the nature of such
services, products, or devices to a person
other than the consumer, unless the report is
being provided to an insurance company for a
purpose relating to engaging in the business of
insurance other than property and casualty
insurance.
(2) Limitation on creditors.--Except as permitted
pursuant to paragraph (3)(C) or regulations prescribed
under paragraph (5)(A), a creditor shall not obtain or
use medical information (other than medical information
treated in the manner required under section 605(a)(6))
pertaining to a consumer in connection with any
determination of the consumer's eligibility, or
continued eligibility, for credit.
(3) Actions authorized by federal law, insurance
activities and regulatory determinations.--Section
603(d)(3) shall not be construed so as to treat
information or any communication of information as a
consumer report if the information or communication is
disclosed--
(A) in connection with the business of
insurance or annuities, including the
activities described in section 18B of the
model Privacy of Consumer Financial and Health
Information Regulation issued by the National
Association of Insurance Commissioners (as in
effect on January 1, 2003);
(B) for any purpose permitted without
authorization under the Standards for
Individually Identifiable Health Information
promulgated by the Department of Health and
Human Services pursuant to the Health Insurance
Portability and Accountability Act of 1996, or
referred to under section 1179 of such Act, or
described in section 502(e) of Public Law 106-
102; or
(C) as otherwise determined to be necessary
and appropriate, by regulation or order and
subject to paragraph (6), by the Commission,
any Federal banking agency or the National
Credit Union Administration (with respect to
any financial institution subject to the
jurisdiction of such agency or Administration
under paragraph (1), (2), or (3) of section
621(b), or the applicable State insurance
authority (with respect to any person engaged
in providing insurance or annuities).
(4) Limitation on redisclosure of medical
information.--Any person that receives medical
information pursuant to paragraphs (1) or (3) shall not
disclose such information to any other person except as
necessary to carry out the purpose for which the
information was initially disclosed, or as otherwise
permitted by statute, regulation, or order.
(5) Regulations and effective date for paragraph
(2).--
(A) Regulations required.--Each Federal
banking agency and the National Credit Union
Administration shall, subject to paragraph (6)
and after notice and opportunity for comment,
prescribe regulations that permit transactions
under paragraph (2) that are determined to be
necessary and appropriate to protect legitimate
operational, transactional, risk, consumer, and
other needs, consistent with the intent of
paragraph (2) to restrict the use of medical
information for inappropriate purposes.
(B) Final regulations required.--The Federal
banking agencies and the National Credit Union
Administration shall prescribe the regulations
required under subparagraph (A) in final form
before the end of the 6-month period beginning
on the date of the enactment of the Fair and
Accurate Credit Transactions Act of 2003.
(6) Coordination with other laws.--No provision of
this subsection shall be construed as altering,
affecting, or superseding the applicability of any
other provision of Federal law relating to medical
confidentiality.
[Sec. 605. Requirements relating to information contained in consumer
reports]
Sec. 605. Requirements relating to information contained in consumer
reports and to identity theft prevention
(a) Information Excluded From Consumer Reports.--Except as
authorized under subsection (b), no consumer reporting agency
may make any consumer report containing any of the following
items of information:
(1) * * *
* * * * * * *
(6) The name, address, and telephone number of any
medical information furnisher that has notified the
agency of its status, unless--
(A) such name, address, and telephone number
are restricted or reported using codes that do
not identify, or provide information sufficient
to infer, the specific provider or the nature
of such services, products, or devices to a
person other than the consumer; or
(B) the report is being provided to an
insurance company for a purpose relating to
engaging in the business of insurance other
than property and casualty insurance.
(b) [The provisions of subsection (a)] The provisions of
paragraphs (1) through (5) of subsection (a) are not applicable
in the case of any consumer credit report to be used in
connection with--
(1) * * *
* * * * * * *
(d) Information Required To Be [Disclosed.--Any consumer
reporting agency] Disclosed.--
(1) Title 11 information.--Any consumer reporting
agency that furnishes a consumer report that contains
information regarding any case involving the consumer
that arises under title 11, United States Code, shall
include in the report an identification of the chapter
of such title 11 under which such case arises if
provided by the source of the information. If any case
arising or filed under title 11, United States Code, is
withdrawn by the consumer before a final judgment, the
consumer reporting agency shall include in the report
that such case or filing was withdrawn upon receipt of
documentation certifying such withdrawal.
(2) Key factor in credit score information.--Any
consumer reporting agency that furnishes a consumer
report that contains any credit score or any other risk
score or predictor on any consumer shall include in the
report a clear and conspicuous statement that a key
factor (as defined in section 609(e)(2)(B)) that
adversely affected such score or predictor was the
number of enquiries, if such a predictor was in fact a
key factor that adversely affected such score.
* * * * * * *
(g) ``Red Flag'' Patterns of Possible Identity Theft.--
(1) Investigation of changes of address.--The Federal
banking agencies and the National Credit Union
Administration, in carrying out the responsibilities of
such agencies and Administration under subsection (k),
shall jointly prescribe regulations for credit card and
debit card issuers to ensure that, if any such issuer
receives a request for an additional or replacement
card for an existing account within a short period of
time after the issuer has received notification of a
change of address for the same account, the issuer will
follow reasonable policies and procedures that require,
as appropriate, that the issuer not issue the
additional or replacement card unless the issuer--
(A) notifies the cardholder of the request at
the former address of the cardholder and
provides to the cardholder a means of promptly
reporting incorrect address changes;
(B) notifies the cardholder of the request by
such other means of communication as the
cardholder and the card issuer previously
agreed to; or
(C) uses other means of assessing the
validity of the change of address, in
accordance with reasonable policies and
procedures established by the card issuer in
accordance with the regulations prescribed
under subsection (k).
(2) Inactive accounts.--The Federal banking agencies
and the National Credit Union Administration, in
carrying out the responsibilities of such agencies and
Administration under subsection (k), shall consider
including, as a possible ``red flag'' pattern,
reasonable guidelines providing that when a transaction
occurs with respect to a credit or deposit account that
has been inactive for more than 2 years, the creditor
or depository institution shall follow reasonable
policies and procedures that provide for notice to be
given to a consumer in a manner reasonably designed to
reduce the likelihood of identity theft with respect to
such account.
(h) Notice of Discrepancy.--
(1) In general.--If a person has requested a consumer
report relating to a consumer from a consumer reporting
agency described in section 603(p), the request
includes an address for the consumer that substantially
differs from the addresses in the file of the consumer,
and the agency provides a consumer report in response
to the request, the consumer reporting agency shall
notify the requester of the existence of the
discrepancy.
(2) Regulations.--
(A) Regulations required.--The Federal
banking agencies and the National Credit Union
Administration shall jointly prescribe
regulations providing guidance regarding
reasonable policies and procedures a user of a
consumer report should employ when such user
has received a notice of discrepancy under
paragraph (1).
(B) Policies and procedures to be included.--
The regulations prescribed under subparagraph
(A) shall describe reasonable policies and
procedures for use by a user of a consumer
report--
(i) to form a reasonable belief that
the user knows the identity of the
person to whom the consumer report
pertains; and
(ii) if the user establishes a
continuing relationship with the
consumer, and the user regularly and in
the ordinary course of business
furnishes information to the consumer
reporting agency from which the notice
of discrepancy pertaining to the
consumer was obtained, to reconcile the
consumer's address with the consumer
reporting agency by furnishing such
address to such consumer reporting
agency as part of information regularly
furnished by the user for the period in
which the relationship is established.
(i) One-Call Fraud Alerts.--
(1) Initial alerts.--Upon the direct request of a
consumer, or an individual acting on behalf of or as a
personal representative of a consumer, who asserts, in
good faith, a suspicion that the consumer has been or
is about to become a victim of fraud or related crime,
including identity theft, a consumer reporting agency
described in section 603(p) shall, if the agency
maintains a file on the consumer who is making the
request and has a reasonable belief that the agency
knows the identity of the consumer--
(A) include a fraud alert in the file of that
consumer for a period of not less than 90 days
beginning on the date of such request, unless
the consumer specifically requests that such
fraud alert be removed before the end of such
period;
(B) disclose to the consumer that the
consumer may request a free copy of the file of
the consumer and provide the consumer, upon
request, a free disclosure of the consumer's
file (as described in section 609(a)) within 3
business days after such request;
(C) for 2 years after the date of such
request, exclude the consumer from any list of
consumers prepared by the agency and provided
to any third party to offer credit or insurance
to the consumer as part of a transaction that
was not initiated by the consumer, unless the
consumer subsequently requests that such
exclusion be rescinded before the end of such
period; and
(D) refer the information regarding the fraud
alert to each of the other consumer reporting
agencies described in section 603(p), as
required under section 621(f)(1).
(2) Extended alerts.--Upon the direct request of a
consumer, or an individual acting on behalf of or as a
personal representative of a consumer, who contacts a
consumer reporting agency described in section 603(p)
to report details of an identity theft and submits
evidence that provides the agency with reasonable cause
to believe that such identity theft has occurred, the
agency shall, if the agency maintains a file on the
consumer who is making the request and has a reasonable
belief that the agency knows the identity of the
consumer--
(A) include a fraud alert in the file of that
consumer and provide an opportunity for the
consumer to extend the alert for a period of up
to 7 years from the date of such request,
unless the consumer subsequently requests that
such fraud alert be removed before the end of
such period;
(B) provide the consumer with the option of
including more complete information in the
consumer's file, including a telephone number
or some other reasonable means of communication
that any person who requests the consumer's
report may utilize for authorization before
establishing a new credit plan in the name of
the consumer; and
(C) provide the consumer with at least 2 free
disclosures of the information described in
section 609(a) during the 12-month period
beginning on the date of such request.
(3) Active duty alerts.--Upon the direct request of
an active duty military consumer, or an individual
acting on behalf of or as a personal representative of
an active duty military consumer, who contacts a
consumer reporting agency described in section 603(p),
the agency shall, if the agency maintains a file on the
consumer who is making the request and has a reasonable
belief that the agency knows the identity of the
consumer--
(A) include an active duty alert in the file
of that consumer during a period of not less
than 12 months beginning on the date of the
request, unless the consumer requests that such
active duty alert be removed before the end of
such period;
(B) for 2 years after the date of such
request, exclude the consumer from any list of
consumers prepared by the agency and provided
to any third party to offer credit or insurance
to the consumer as part of a transaction that
was not initiated by the consumer, unless the
consumer subsequently requests that such
exclusion be rescinded before the end of such
period; and
(C) refer the information regarding the
active duty alert to each of the other consumer
reporting agencies described in section 603(p),
as required under section 621(f)(1).
(4) Procedures.--Each consumer reporting agency
described in section 603(p) shall establish policies
and procedures to comply with the obligations of
paragraphs (1), (2), and (3), including procedures that
allow consumers to request initial, extended, or active
duty alerts in a simple and easy manner, including by
telephone.
(5) Notice to users.--No person who obtains any
information that includes a fraud alert under this
section from a file of any consumer from a consumer
reporting agency may establish a new credit plan in the
name of the consumer for a person other than the
consumer without utilizing reasonable policies and
procedures described in paragraph (9).
(6) Referrals of fraud alerts.--Each consumer
reporting agency described in section 603(p) that
receives a referral of a fraud alert from another such
agency pursuant to paragraph (1)(D) or (3)(C) shall
follow the procedures required under subparagraphs (A),
(B), and (C) of paragraph (1), in the case of a
referral under paragraph (1)(D), and subparagraphs (A)
and (B), in the case of a referral under paragraph
(3)(C), as if the agency received the request from the
consumer directly.
(7) Duty of reseller to reconvey alert.--A reseller
that is notified of the existence of a fraud alert in a
consumer's consumer report shall communicate to each
person procuring a consumer report with respect to such
consumer the existence of a fraud alert in effect for
such consumer.
(8) Duty of other consumer reporting agencies to
provide contact information.--If a consumer contacts
any consumer reporting agency that is not a consumer
reporting agency described in section 603(p) to
communicate a suspicion that the consumer has been or
is about to become a victim of fraud or related crime,
including identity theft, the agency shall provide the
consumer with information on how to contact the
Commission and the consumer reporting agencies
described in section 603(p) to obtain more detailed
information and request alerts under this subsection.
(9) Fraud alert.--
(A) Definition.--For purposes of this
subsection, the term ``fraud alert'' means, at
a minimum, a statement--
(i) in the file of a consumer that
the consumer may be a victim of fraud,
including identity theft, or is a
consumer described in paragraph (3);
and
(ii) that is transmitted in a manner
that facilitates a clear and
conspicuous view of the statement by
any person requesting such file.
(B) Other information.--A fraud alert shall
include information that notifies all
prospective users of a consumer report on the
consumer to which the alert relates that the
consumer does not authorize establishing any
new credit plan in the name of the consumer,
unless the user utilizes reasonable policies
and procedures to form a reasonable belief that
the user knows the identity of the person for
whom such new plan is established, which may
include obtaining authorization or
preauthorization of the consumer at a telephone
number designated by the consumer or by such
other reasonable means agreed to.
(10) Other definitions.--For purposes of this
subsection, the following definitions shall apply:
(A) Active duty military consumer.--The term
``active duty military consumer'' means a
consumer in military service who--
(i) is on active duty (as defined in
section 101(d)(1) of title 10, United
States Code) or is a reservist
performing duty under a call or order
to active duty under a provision of law
referred to in section 101(a)(13) of
title 10, United States Code; and
(ii) is assigned to service away from
the consumer's usual duty station.
(B) New credit plan.--The term ``new credit
plan'' means a new account under an open end
credit plan (as defined in section 103(i) of
this Act) or a new credit transaction not under
an open end credit plan.
(j) Block of Information Resulting From Identity Theft.--
(1) Block.--Except as provided in paragraph (3), a
consumer reporting agency shall block the reporting of
any information in the file of a consumer that the
consumer identifies as information that resulted from
an alleged identity theft and confirms is not
information relating to any transaction by the consumer
not later than 5 business days after the date of
receipt by such agency of--
(A) appropriate proof of the identity of a
consumer;
(B) a police report evidencing the claim of
the consumer of identity theft;
(C) the identification of the information by
the consumer; and
(D) confirmation by the consumer that the
information is not information relating to any
transaction by the consumer.
(2) Notification.--A consumer reporting agency shall
promptly notify the furnisher of information identified
by the consumer under paragraph (1)--
(A) that the information may be a result of
identity theft;
(B) that a police report has been filed;
(C) that a block has been requested under
this subsection; and
(D) of the effective date of the block.
(3) Authority to decline or rescind.--
(A) In general.--A consumer reporting agency
may decline to block, or may rescind any block,
of consumer information under this subsection
if the consumer reporting agency reasonably
determines that--
(i) the information was blocked in
error or a block was requested by the
consumer in error;
(ii) the information was blocked, or
a block was requested by the consumer,
on the basis of a misrepresentation of
fact by the consumer relevant to the
request to block; or
(iii) the consumer knowingly obtained
possession of goods, services, or
moneys as a result of the blocked
transaction or transactions, or the
consumer should have known that the
consumer obtained possession of goods,
services, or moneys as a result of the
blocked transaction or transactions.
(B) Notification to consumer.--If the block
of information is declined or rescinded under
this paragraph, the affected consumer shall be
notified promptly, in the same manner as
consumers are notified of the reinsertion of
information under section 611(a)(5)(B).
(C) Significance of block.--For purposes of
this paragraph, if a consumer reporting agency
rescinds a block, the presence of information
in the file of a consumer prior to the blocking
of such information is not evidence of whether
the consumer knew or should have known that the
consumer obtained possession of any goods,
services, or monies as a result of the block.
(4) Exceptions.--
(A) Verification companies.--This subsection
shall not apply to--
(i) a check services company, which
issues authorizations for the purpose
of approving or processing negotiable
instruments, electronic funds
transfers, or similar methods of
payments; or
(ii) a deposit account information
service company, which issues reports
regarding account closures due to
fraud, substantial overdrafts,
automated teller machine abuse, or
similar negative information regarding
a consumer, to inquiring banks or other
financial institutions for use only in
reviewing a consumer request for a
deposit account at the inquiring bank
or financial institution.
(B) Resellers.--
(i) No reseller file.--This
subsection shall not apply to a
consumer reporting agency if the
consumer reporting agency--
(I) is a reseller;
(II) is not, at the time of
the request of the consumer
under paragraph (1), otherwise
furnishing or reselling a
consumer report concerning the
information identified by the
consumer; and
(III) informs the consumer,
by any means, that the consumer
may report the identity theft
to the Commission to obtain
consumer information regarding
identity theft.
(ii) Reseller with file.--The sole
obligation of the consumer reporting
agency under this subsection, with
regard to any request of a consumer
under this subsection, shall be to
block the consumer report maintained by
the consumer reporting agency from any
subsequent use if--
(I) the consumer, in
accordance with the provisions
of paragraph (1), identifies,
to a consumer reporting agency,
information in the file of the
consumer that resulted from
identity theft; and
(II) the consumer reporting
agency is a reseller of the
identified information.
(iii) Notice.--In carrying out its
obligation under clause (ii), the
reseller shall promptly provide a
notice to the consumer of the decision
to block the file. Such notice shall
contain the name, address, and
telephone number of each consumer
reporting agency from which theconsumer
information was obtained for resale.
(5) Access to blocked information by law enforcement
agencies.--No provision of this subsection shall be
construed as requiring a consumer reporting agency to
prevent a Federal, State, or local law enforcement
agency from accessing blocked information in a consumer
file to which the agency could otherwise obtain access
under this title.
(k) ``Red Flag'' Guidelines Required.--
(1) In general.--The Federal banking agencies and the
National Credit Union Administration, in consultation
with the Commission, shall jointly establish and
maintain guidelines for use by insured depository
institutions in identifying patterns, practices, and
specific forms of activity that indicate the possible
existence of identity theft with respect to accounts,
and update such guidelines as often as necessary.
(2) Regulations.--The Federal banking agencies and
the National Credit Union Administration, in
consultation with the Commission, shall jointly
prescribe regulations requiring insured depository
institutions to establish and adhere to reasonable
policies and procedures for implementing the guidelines
established pursuant to paragraph (1) to identify
possible risks to customer accounts or to the safety
and soundness of the institutions.
(3) Consistency with verification requirements.--
Policies and procedures established pursuant to
paragraph (2) shall not be inconsistent with, or
duplicative of, the policies and procedures required
under section 5318(l) of title 31, United States Code.
(4) Insured depository institution defined.--For
purposes of this subsection, the term ``insured
depository institution''--
(A) has the meaning given to such term in
section 3 of the Federal Deposit Insurance Act;
and
(B) includes an insured credit union (as
defined in section 101 of the Federal Credit
Union Act).
(l) Truncation of Credit Card and Debit Card Account
Numbers.--
(1) In general.--Except as provided in this
subsection, no person that accepts credit cards or
debit cards for the transaction of business shall print
the expiration date or more than the last 5 digits of
the card number upon any receipt provided to the
cardholder at the point of the sale or transaction.
(2) Limitation.--This section shall apply only to
receipts that are electronically printed, and shall not
apply to transactions in which the sole means of
recording the person's credit card or debit card number
is by handwriting or by an imprint or copy of the card.
* * * * * * *
Sec. 609. Disclosures to consumers
(a) Every consumer reporting agency shall, upon request, and
subject to section 610(a)(1), clearly and accurately disclose
to the consumer:
(1) * * *
(2) The sources of the information, including addresses of
the sources, and (if provided by the sources of information)
the telephone numbers identified for customer service for the
sources of information; except that the sources of information
acquired solely for use in preparing an investigative consumer
report and actually used for no other purpose need not be
disclosed: Provided, That in the event an action is brought
under this title, such sources shall be available to the
plaintiff under appropriate discovery procedures in the court
in which the action is brought.
(3)(A) * * *
(B) An identification of a person under subparagraph
(A) shall include--
(i) * * *
[(ii) upon request of the consumer, the
address and telephone number of the person.]
(ii) the address and (if provided) the
telephone numbers identified for customer
service of the person.
* * * * * * *
(6) If the consumer requests the credit file and not
the credit score, a statement that the consumer may
request and obtain a credit score.
* * * * * * *
(d) Summary of Rights of Identity Theft Victims.--
(1) In general.--The Commission, in consultation with
the Federal banking agencies and the National Credit
Union Administration, shall prepare a model summary of
the rights of consumers under this title with respect
to the procedures for remedying the effects of fraud or
identity theft involving credit, electronic fund
transfers, or accounts or transactions at or with a
financial institution.
(2) Summary of rights and contact information.--If
any consumer contacts a consumer reporting agency and
expresses a belief that the consumer is a victim of
fraud or identity theft involving credit, electronic
fund transfers, or accounts or transactions at or with
a financial institution, the consumer reporting agency
shall, in addition to any other action the agency may
take, provide the consumer with the model summary of
rights prepared by the Commission under paragraph (1)
and information on how to contact the Commission to
obtain more detailed information.
(e) Disclosure of Credit Scores.--
(1) In general.--Upon the consumer's request for a
credit score, a consumer reporting agency shall supply
to a consumer a statement indicating that the
information and credit scoring model may be different
than the credit score that may be used by the lender,
and a notice which shall include the following
information:
(A) The consumer's current credit score or
the consumer's most recent credit score that
was previously calculated by the credit
reporting agency for a purpose related to the
extension of credit.
(B) The range of possible credit scores under
the model used.
(C) All the key factors that adversely
affected the consumer's credit score in the
model used, the total number of which shall not
exceed four, subject to paragraph (9).
(D) The date the credit score was created.
(E) The name of the person or entity that
provided the credit score or credit file upon
which the credit score was created.
(2) Definitions.--For purposes of this section, the
following definitions shall apply:
(A) Credit score.--The term ``credit
score''--
(i) means a numerical value or a
categorization derived from a
statistical tool or modeling system
used by a person who makes or arranges
a loan to predict the likelihood of
certain credit behaviors, including
default (and the numerical value or the
categorization derived from this
analysis may also be referred to as a
``risk predictor'' or ``risk score'');
and
(ii) does not include--
(I) any mortgage score or
rating of an automated
underwriting system that
considers one or more factors
in addition to credit
information, including the loan
to value ratio, the amount of
down payment, or a consumer's
financial assets; or
(II) any other elements of
the underwriting process or
underwriting decision.
(B) Key factors.--The term ``key factors''
means all relevant elements or reasons
adversely affecting the credit score for the
particular individual listed in the order of
their importance based on their effect on the
credit score.
(3) Timeframe and manner of disclosure.--The
information required by this subsection shall be
provided in the same timeframe and manner as the
information described in subsection (a).
(4) Applicability to certain uses.--This subsection
shall not be construed so as to compel a consumer
reporting agency to develop or disclose a score if the
agency does not--
(A) distribute scores that are used in
connection with residential real property
loans; or
(B) develop scores that assist credit
providers in understanding a consumer's general
credit behavior and predicting the future
credit behavior of the consumer.
(5) Applicability to credit scores developed by
another person.--
(A) In general.--This subsection shall not be
construed to require a consumer reporting
agency that distributes credit scores developed
by another person or entity to provide a
further explanation of them, or to process a
dispute arising pursuant to section 611, except
that the consumer reporting agency shall
provide the consumer with the name and address
and website for contacting the person or entity
who developed the score or developed the
methodology of the score.
(B) Exception.--This paragraph shall not
apply to a consumer reporting agency that
develops or modifies scores that are developed
by another person or entity.
(6) Maintenance of credit scores not required.--This
subsection shall not be construed to require a consumer
reporting agency to maintain credit scores in its
files.
(7) Compliance in certain cases.--In complying with
this subsection, a consumer reporting agency shall--
(A) supply the consumer with a credit score
that is derived from a credit scoring model
that is widely distributed to users by that
consumer reporting agency in connection with
residential real property loans or with a
credit score that assists the consumer in
understanding the credit scoring assessment of
the credit behavior of the consumer and
predictions about the future credit behavior of
the consumer; and
(B) a statement indicating that the
information and credit scoring model may be
different than that used by the lender.
(8) Reasonable fee.--A consumer reporting agency may
charge a reasonable fee for providing the information
required under this subsection.
(9) Use of enquiries as a key factor.--If a key
factor that adversely affects a consumer's credit score
consists of the number of enquiries made with respect
to a consumer report, that factor shall be included in
the disclosure pursuant to paragraph (1)(C) without
regard to the numerical limitation in such paragraph.
(f) Disclosure of Credit Scores by Certain Mortgage
Lenders.--
(1) In general.--Any person who makes or arranges
loans and who uses a consumer credit score as defined
in subsection (e) in connection with an application
initiated or sought by a consumer for a closed end loan
or establishment of an open end loan for a consumer
purpose that is secured by 1 to 4 units of residential
real property (hereafter in this subsection referred to
as the ``lender'') shall provide the following to the
consumer as soon as reasonably practicable:
(A) Information required under
subsection(e).--
(i) In general.--A copy of the
information identified in subsection
(e) that was obtained from a consumer
reporting agency or was developed and
used by the user of the information.
(ii) Notice under subparagraph (D).--
In addition to the information provided
to it by a third party that provided
the credit score or scores, a lender is
only required to provide the notice
contained in subparagraph (D).
(B) Disclosures in case of automated
underwriting system.--
(i) In general.--If a person who is
subject to this section uses an
automated underwriting system to
underwrite a loan, that person may
satisfy the obligation to provide a
credit score by disclosing a credit
score and associated key factors
supplied by a consumer reporting
agency.
(ii) Numerical credit score.--
However, if a numerical credit score is
generated by an automated underwriting
system used by an enterprise, and that
score is disclosed to the person, the
score shall be disclosed to the
consumer consistent with subparagraph
(C).
(iii) Enterprise defined.--For
purposes of this subparagraph, the term
``enterprise'' shall have the same
meaning as in paragraph (6) of section
1303 of the Federal Housing Enterprises
Financial Safety and Soundness Act of
1992.
(C) Disclosures of credit scores not obtained
from a consumer reporting agency.--A person
subject to the provisions of this subsection
who uses a credit score other than a credit
score provided by a consumer reporting agency
may satisfy the obligation to provide a credit
score by disclosing a credit score and
associated key factors supplied by a consumer
reporting agency.
(D) Notice to home loan applicants.--A copy
of the following notice, which shall include
the name, address, and telephone number of each
consumer reporting agency providing a credit
score that was used:
``notice to the home loan applicant
``In connection with your application for a home loan, the
lender must disclose to you the score that a consumer reporting
agency distributed to users and the lender used in connection
with your home loan, and the key factors affecting your credit
scores.
``The credit score is a computer generated summary calculated
at the time of the request and based on information a consumer
reporting agency or lender has on file. The scores are based on
data about your credit history and payment patterns. Credit
scores are important because they are used to assist the lender
in determining whether you will obtain a loan. They may also be
used to determine what interest rate you may be offered on the
mortgage. Credit scores can change over time, depending on your
conduct, how your credit history and payment patterns change,
and how credit scoring technologies change.
``Because the score is based on information in your credit
history, it is very important that you review the credit-
related information that is being furnished to make sure it is
accurate. Credit records may vary from one company to another.
``If you have questions about your credit score or the credit
information that is furnished to you, contact the consumer
reporting agency at the address and telephone number provided
with this notice, or contact the lender, if the lender
developed or generated the credit score. The consumer reporting
agency plays no part in the decision to take any action on the
loan application and is unable to provide you with specific
reasons for the decision on a loan application.
``If you have questions concerning the terms of the
loan, contact the lender.''.
(E) Actions not required under this
subsection.--This subsection shall not require
any person to do any of the following:
(i) Explain the information provided
pursuant to subsection (e).
(ii) Disclose any information other
than a credit score or key factor, as
defined in subsection (e).
(iii) Disclose any credit score or
related information obtained by the
user after a loan has closed.
(iv) Provide more than 1 disclosure
per loan transaction.
(v) Provide the disclosure required
by this subsection when another person
has made the disclosure to the consumer
for that loan transaction.
(F) No obligation for content.--
(i) In general.--Any person's
obligation pursuant to this subsection
shall be limited solely to providing a
copy of the information that was
received from the consumer reporting
agency.
(ii) Limit on liability.--No person
has liability under this subsection for
the content of that information or for
the omission of any information within
the report provided by the consumer
reporting agency.
(G) Person defined as excluding enterprise.--
As used in this subsection, the term ``person''
does not include an enterprise (as defined in
paragraph (6) of section 1303 of the Federal
Housing Enterprises Financial Safety and
Soundness Act of 1992).
(2) Prohibition on disclosure clauses null and
void.--
(A) In general.--Any provision in a contract
that prohibits the disclosure of a credit score
by a person who makes or arranges loans or a
consumer reporting agency is void.
(B) No liability for disclosure under this
subsection.--A lender shall not have liability
under any contractual provision for disclosure
of a credit score pursuant to this subsection.
(g) Disclosure to Consumer.--
(1) In general.--The ability of a credit card issuer
to increase any annual percentage rate applicable to a
credit card account, or to remove or increase any
introductory annual percentage rate of interest
applicable to such account, for reasons other than
actions or omissions of the card holder that are
directly related to such account shall be clearly and
conspicuously disclosed to the consumer by the credit
card issuer in any disclosure or statement required to
be made to the consumer under this title in connection
with a credit card solicitation that is not initiated
by the consumer.
(2) Regulations and model statements.--The Board, in
consultation with the Federal banking agencies and the
National Credit Union Administration, shall develop
such guidelines in regulations as necessary to assure
that the information to be disclosed to consumers
pursuant to paragraph (1) is clearly and conspicuously
provided in a prominent location in any credit card
solicitation that is not initiated by the consumer, and
shall include model disclosure statements to be used by
credit card issuers in making the disclosures required
to be provided to the consumer by paragraph (1).
* * * * * * *
Sec. 611. Procedure in case of disputed accuracy
(a) Reinvestigations of Disputed Information.--
(1) Reinvestigation required.--
(A) In general.--[If the completeness]
Subject to subsection (e), if the completeness
or accuracy of any item of information
contained in a consumer's file at a consumer
reporting agency is disputed by the consumer
and the consumer notifies the agency directly,
or indirectly through a reseller, of such
dispute, the agency [shall reinvestigate free
of charge] shall, free of charge, conduct a
reasonable reinvestigation to determine whether
the disputed information is inaccurate and
record the current status of the disputed
information, or delete the item from the file
in accordance with paragraph (5), before the
end of the 30-day period beginning on the date
on which the agency receives the notice of the
dispute from the consumer or reseller.
* * * * * * *
(2) Prompt notice of dispute to furnisher of
information.--
(A) In general.--Before the expiration of the
5-business-day period beginning on the date on
which a consumer reporting agency receives
notice of a dispute from any consumer or a
reseller in accordance with paragraph (1), the
agency shall provide notification of the
dispute to any person who provided any item of
information in dispute, at the address and in
the manner established with the person. The
notice shall include all relevant information
regarding the dispute that the agency has
received from the consumer or reseller.
(B) Provision of other information [from
consumer].--The consumer reporting agency shall
promptly provide to the person who provided the
information in dispute all relevant information
regarding the dispute that is received by the
agency from the consumer or the reseller after
the period referred to in subparagraph (A) and
before the end of the period referred to in
paragraph (1)(A).
* * * * * * *
(e) Reinvestigation Requirement Applicable to Resellers.--
(1) Exemption from general reinvestigation
requirement.--Except as provided in paragraph (2), a
reseller shall be exempt from the requirements of this
section.
(2) Action required upon receiving notice of a
dispute.--If a reseller receives a notice from a
consumer of a dispute concerning the completeness or
accuracy of any item of information contained in a
consumer report on such consumer produced by the
reseller, the reseller shall, within 5 business days of
receiving the notice and free of charge--
(A) determine whether the item of information
is incomplete or inaccurate as a result of an
act or omission of the reseller; and
(B) if--
(i) the reseller determines that the
item of information is incomplete or
inaccurate as a result of an act or
omission of the reseller, correct the
information in the consumer report or
delete it; or
(ii) if the reseller determines that
the item of information is not
incomplete or inaccurate as a result of
an act or omission of the reseller,
convey the notice of the dispute,
together with all relevant information
provided by the consumer, to each
consumer reporting agency that provided
the reseller with the information that
is the subject of the dispute.
(3) Reseller reinvestigations.--No provision of this
subsection shall be construed as prohibiting a reseller
from conducting a reinvestigation of a consumer dispute
directly.
SEC. 612. CHARGES FOR CERTAIN DISCLOSURES.
(a) * * *
* * * * * * *
(c) Free Disclosure Under Certain Other Circumstances.--Upon
the request of the consumer, a consumer reporting agency that
is not a consumer reporting agency described in section 603(p)
shall make all disclosures pursuant to section 609 once during
any 12-month period without charge to that consumer if the
consumer certifies in writing that the consumer--
(1) * * *
* * * * * * *
(e) Free Annual Disclosure.--Upon the direct request of the
consumer, a consumer reporting agency described in section
603(p) shall make all disclosures pursuant to section 609 once
during any 12-month period without charge to the consumer.
* * * * * * *
Sec. 615. Requirements on users of consumer reports
(a) * * *
* * * * * * *
(d) Duties of Users Making Written Credit or Insurance
Solicitations on the Basis of Information Contained in Consumer
Files.--
(1) * * *
(2) Simple and easy notification.--Any statement
given the consumer under paragraph (1)(E) shall be in a
simple and easy to understand format and shall describe
the simple and easy method established under section
604(e)(5)(A)(i) for the consumer to respond.
[(2)] (3) Disclosure of address and telephone
number.--A statement under paragraph (1) shall include
the address and toll-free telephone number of the
appropriate notification system established under
section 604(e).
[(3)] (4) Maintaining criteria on file.--A person who
makes an offer of credit or insurance to a consumer
under a credit or insurance transaction described in
paragraph (1) shall maintain on file the criteria used
to select the consumer to receive the offer, all
criteria bearing on credit worthiness or insurability,
as applicable, that are the basis for determining
whether or not to extend credit or insurance pursuant
to the offer, and any requirement for the furnishing of
collateral as a condition of the extension of credit or
insurance, until the expiration of the 3-year period
beginning on the date on which the offer is made to the
consumer.
[(4)] (5) Authority of federal agencies regarding
unfair or deceptive acts or practices not affected.--
This section is not intended to affect the authority of
any Federal or State agency to enforce a prohibition
against unfair or deceptive acts or practices,
including the making of false or misleading statements
in connection with a credit or insurance transaction
that is not initiated by the consumer.
(e) Notice of Fraudulent Information Relating to Identity
Theft.--If an agent acting as a debt collector (as defined in
title VIII) of a person who furnishes information to any
consumer reporting agency uses information contained in a
consumer report on any consumer and learns that any such
information so used is the result of identity theft or
otherwise is fraudulent, the agent shall--
(1) if such information--
(A) originated from the person for whom the
debt collector is acting as agent, notify the
person of the fraudulent information; or
(B) originated from a person other than the
person for whom the debt collector is acting as
agent, notify the consumer reporting agency
(that provided the consumer report) of the
fraudulent information, either directly or
through the person for whom the debt collector
is acting as agent; and
(2) upon the request of the consumer, provide the
consumer with all information which the consumer would
be entitled to receive if the information related to
the consumer other than by reason of identity theft.
* * * * * * *
Sec. 621. Administrative enforcement
(a) * * *
* * * * * * *
(c) State Action for Violations.--
(1) * * *
* * * * * * *
(5) Limitations on state actions for [violation of
section 623(a)(1)] certain violations of section
623(a).--
(A) Violation of injunction required.--A
State may not bring an action against a person
under paragraph (1)(B) for a violation of
[section 623(a)(1)] paragraph (1) or (6) of
section 623(a), unless--
(i) * * *
* * * * * * *
(f) Coordination of Consumer Complaint Investigations.--
(1) In general.--The consumer reporting agencies
described in section 603(p) shall develop and maintain
procedures for the referral, to each such agency, of
any consumer complaint received by any such agency
alleging any identity theft or requesting a block or a
fraud alert.
(2) Model form and procedure for reporting identity
theft.--The Commission, in consultation with the
Federal banking agencies and the National Credit Union
Administration, shall develop a model form and model
procedures to be used by consumers who are victims of
identity theft for contacting and informing creditors
and consumer reporting agencies of the fraud.
(3) Annual summary reports.--Each consumer reporting
agency described in section 603(p) shall submit an
annual summary report to the Commission on consumer
complaints received by the agency on identity theft or
fraud alerts.
(g) FTC Regulation of Coding of Trade Names.--If the
Commission determines that a person described in paragraph (8)
of section 623(a) has not met the requirements of such
paragraph, the Commission shall take action to ensure the
person's compliance with such paragraph, which may include
issuing model guidance or prescribing reasonable policies and
procedures as necessary to ensure that such person complies
with such paragraph.
* * * * * * *
SEC. 623. RESPONSIBILITIES OF FURNISHERS OF INFORMATION TO CONSUMER
REPORTING AGENCIES.
(a) Duty of Furnishers of Information To Provide Accurate
Information.--
(1) * * *
(A) Reporting information with actual
knowledge of errors.--A person shall not
furnish any information relating to a consumer
to any consumer reporting agency if the person
[knows or consciously avoids knowing that the
information is inaccurate] knows or has
reasonable cause to believe that the
information is inaccurate.
(B) Reasonable procedures to ensure
accuracy.--A person that regularly furnishes
information relating to consumers to a consumer
reporting agency described in section 603(p)
shall maintain reasonable procedures designed
to ensure that the information furnished is
accurate.
[(B)] (C) Reporting information after notice
and confirmation of errors.--A person shall not
furnish information relating to a consumer to
any consumer reporting agency if--
(i) * * *
* * * * * * *
[(C)] (D) No address requirement.--A person
who clearly and conspicuously specifies to the
consumer an address for notices referred to in
subparagraph (B) shall not be subject to
subparagraph (A); however, nothing in
subparagraph (B) shall require a person to
specify such an address.
(E) Information alleged to result from
identity theft.--If a consumer submits a police
report to a person who furnishes information to
a consumer reporting agency that states that
information maintained by such person that
purports to relate to the consumer resulted
from identity theft, the person may not furnish
such information that purports to relate to the
consumer to any consumer reporting agency,
unless the person subsequently knows or is
informed by the consumer that the information
is correct.
(F) Definition.--For purposes of subparagraph
(A), the term ``reasonable cause to believe
that the information is inaccurate'' means,
based on the procedures described in
subparagraph (B), has knowledge, other than
solely allegations by the consumer, that would
cause a reasonable person to have substantial
doubts about the accuracy of the information.
* * * * * * *
(6) Ability of consumer to dispute information
directly with furnisher.--
(A) In general.--A consumer may dispute
directly with a person the accuracy of
information that--
(i) is contained in a consumer report
on the consumer prepared by a consumer
reporting agency described in section
603(p); and
(ii) was provided by the person to
that consumer reporting agency in
accordance with paragraph (1)(B).
(B) Submitting a notice of dispute.--A
consumer who seeks to dispute the accuracy of
information with a person under subparagraph
(A) shall provide a dispute notice directly to
such person at the address specified by the
person for such notices that--
(i) identifies the specific
information that is being disputed; and
(ii) explains the basis for the
dispute.
(C) Duty of person after receiving notice of
dispute.--After receiving a notice of dispute
from a consumer pursuant to subparagraph (B),
the person that provided the information in
dispute to a consumer reporting agency referred
to in subparagraph (A) shall--
(i) conduct an investigation with
respect to the disputed information;
(ii) review all relevant information
provided by the consumer with the
notice;
(iii) complete such person's
investigation of the dispute and report
the results of the investigation to the
consumer before the expiration of the
period under section 611(a)(1) within
which a consumer reporting agency would
be required to complete its action if
the consumer had elected to dispute the
information under that section; and
(iv) if the investigation finds that
the information reported was
inaccurate, promptly thereafter report
correct information to each consumer
reporting agency described in section
603(p) to which the person furnished
the inaccurate information.
(7) Negative Information.--
(A) Notice to consumer required.--
(i) In general.--If any financial
institution that extends credit and
regularly and in the ordinary course of
business furnishes information to a
consumer reporting agency described in
section 603(p) furnishes negative
information to such an agency regarding
credit extended to a customer, the
financial institution shall provide a
notice of such furnishing of negative
information, in writing, to the
customer.
(ii) Notice effective for subsequent
submissions.--After providing such
notice, the financial institution may
submit additional negative information
to a consumer reporting agency
described in section 603(p) with
respect to the same transaction,
extension of credit, account, or
customer without providing additional
notice to the customer.
(B) Time of notice.--
(i) In general.--The notice required
under subparagraph (A) shall be
provided to the customer prior to, or
no later than 30 days after, furnishing
the negative information to a consumer
reporting agency described in section
603(p).
(ii) Coordination with new account
disclosures.--If the notice is provided
to the customer prior to furnishing the
negative information to a consumer
reporting agency, the notice may not be
included in the initial disclosures
provided under section 127(a) of the
Truth in Lending Act.
(C) Coordination with other disclosures.--The
notice required under subparagraph (A)--
(i) may be included on or with any
notice of default, any billing
statement, or any other materials
provided to the customer; and
(ii) must be clear and conspicuous.
(D) Model disclosure.--
(i) Duty of board to prepare.--The
Board shall prescribe a brief model
disclosure a financial institution may
use to comply with subparagraph (A),
which shall not exceed 30 words.
(ii) Use of model not required.--No
provision of this paragraph shall be
construed as requiring a financial
institution to use any such model form
prescribed by the Board.
(iii) Compliance using model.--A
financial institution shall be deemed
to be in compliance with subparagraph
(A) if the financial institution uses
any such model form prescribed by the
Board, or the financial institution
uses any such model form and rearranges
its format.
(E) Use of notice without submitting negative
information.--No provision of this paragraph
shall be construed as requiring a financial
institution that has provided a customer with a
notice described in subparagraph (A) to furnish
negative information about the customer to a
consumer reporting agency.
(F) Safe harbor.--A financial institution
shall not be liable for failure to perform the
duties required by this paragraph if, at the
time of the failure, the financial institution
maintained reasonable policies and procedures
to comply with this paragraph.
(G) Definitions.--For purposes of this
paragraph, the following definitions shall
apply:
(i) Negative information.--The term
``negative information'' means
information concerning a customer's
delinquencies, late payments,
insolvency, or any form of default.
(ii) Customer; financial
institution.--The terms ``customer''
and ``financial institution'' have the
same meaning as in section 509 of the
Gramm-Leach-Bliley Act.
(8) Duty to provide notice of status as medical
information furnisher.--A person whose primary business
is providing medical services, products, or devices, or
the person's agent or assignee, who furnishes
information to a consumer reporting agency on a
consumer shall be considered a medical information
furnisher for the purposes of this title and shall
notify the agency of such status.
* * * * * * *
Sec. 624. Relation to State laws
(a) * * *
* * * * * * *
(b) General Exceptions.--No requirement or prohibition may be
imposed under the laws of any State--
(1) with respect to any subject matter regulated
under--
(A) * * *
* * * * * * *
(E) section 605, relating to information
contained in consumer reports and to identity
theft prevention, except that this subparagraph
shall not apply to any State law in effect on
the date of enactment of the Consumer Credit
Reporting Reform Act of 1996; or
* * * * * * *
(3) with respect to the form and content of any
disclosure required to be made under [section 609(c)]
subsection (c) or (d) of section 609.
* * * * * * *
(d) Limitations.--[Subsections (b) and (c)--
[(1) do not affect any settlement,] Subsections (b)
and (c) do not affect any settlement, agreement, or
consent judgment between any State Attorney General and
any consumer reporting agency in effect on the date of
enactment of the [Consumer Credit Reporting Reform Act
of 1996; and
[(2) do not apply to any provision of State law
(including any provision of a State constitution)
that--
[(A) is enacted after January 1, 2004;
[(B) states explicitly that the provision is
intended to supplement this title; and
[(C) gives greater protection to consumers
than is provided under this title.] Consumer
Credit Reporting Reform Act of 1996.
* * * * * * *
ADDITIONAL VIEWS
I appreciate that this committee has worked very hard to
produce a bill that has garnered support on both sides of the
aisle. Certainly, FCRA reauthorization had the potential to
become a very difficult issue absent the leadership of Chairman
Oxley and the leadership of many others in this committee.
As the bill was put together over the past several weeks,
compromises were made regarding different elements of the bill.
Industry has made many concessions in order to help put strong
consumer protections in the legislation. There are, however,
new consumer protections contained in title V that are likely
to cause lenders and consumer reporting agencies in our country
to have great concern, and which I am concerned provide little
benefit to consumers.
Specifically, I have concerns about section 502 of the
bill. As it is currently drafted, section 502 includes new
requirements on mortgage lenders to disclose credit scores to
borrowers. While I have no problem with the intent of this
provision, I think that this language can be improved so that
it is less burdensome and more workable.
Borrowers should be able to see what scores their loans are
being based off of, however, one problem I have with this
language is that while it sets some clear disclosure standards,
it does not make these standards uniform or national. We could
be placing new disclosure requirements on lenders, but at the
same time allowing states to place duplicative requirements on
those companies. This gives me serious concerns because
borrowers could be faced with a blizzard of duplicate
requirements from both the state and federally governments.
Section 502 must be made a national standard, not a duplicate
mandate on lenders.
I also have concerns that the language in section 502 is
vague concerning when it is appropriate to make the credit
score disclosures. As I said earlier, I have no problem with
these disclosures, they will help prevent fraud, but we should
work to minimize the burden they put on lenders. For example,
one solution would be to allow lenders, when sending these
scores, to do in it a way that minimizes costs, such as mailing
the score with other documents. This could help significantly
reduce costs for lenders and borrowers.
I believe that as it moves forward with this important
legislation, the committee should consider ways to make section
502 more beneficial for consumers so that they get important
information while not imposing new burdens on lenders. At the
same time I think we should look at simplifying the disclosure
that mortgage originators must make to consumers.
Similarly, I have concerns about significant costs being
imposed on consumer reporting agencies under section 501. I am
concerned about he propriety of Congress mandating that any
business give away its products for free. In this instance we
are imposing a significant financial burden on consumer
reporting agencies on the premise that it will provide
increased consumer education. In the absence of a uniform
standard under title V, section 501 could exacerbate the costs
to the consumer reporting agencies. I believe that both
Sections 501 and 502 should serve as a national standard for
these consumer protections in order to assure the costs of
these laws are not increased by virtue of inconsistent or
duplicative State laws regarding reports being furnished.
Robert W. Ney.
SUPPLEMENTAL VIEWS
Section 501 of the legislation requires consumer reporting
agencies that compile and maintain files on consumers on a
nationwide basis, upon direct request of the consumer, to
provide the consumer with a copy of his or her credit report
once annually at no charge. We have concerns about the impact
of this provision as it is currently drafted.
Congress has already provided consumers with complete
access to their credit reports. In fact, consumers can obtain
their credit reports for free, by law, in many instances such
as if they have suffered adverse action as a result of
information in their credit reports, if they are unemployed and
seeking employment, if they are on public assistance, or if
they believe false information may be in their files as a
result of fraud (e.g. identity theft). In all other instances,
the price of a credit report is capped by law--the current cap
is $9 and it is adjusted annually for inflation. We note that
the $9 fee is not prohibitively expensive and is less than what
many public sector entities charge consumers for a copy of
their records. The FBI, for example, charges an individual $18
for a copy of his or her arrest record. The Department of Motor
Vehicles in the District of Columbia charges consumers $13 for
a copy of their 10-year driving record. We will spare the
Committee a laundry list of other examples.
Requiring nationwide credit bureaus to provide their
product for free to consumers may have admirable goals.
However, we fear that Section 501 will actually harm consumers
in the long run. As noted above, consumers already have full
access to their credit reports, and Section 501 does not expand
consumers' rights in that regard. Yet, Section 501 will impose
hundreds of millions of dollars in additional costs on
nationwide consumer reporting agencies. It seems obvious that
at least some of this cost may be passed on to consumers in the
form of higher costs for credit and insurance. We are also
concerned that nationwide credit bureaus will be at the mercy
of unpredictable surges in demand for credit reports. A single
story about "free" credit reports on a national news program,
or a similar front page headline on a national newspaper or
magazine, could result in millions of inquiries to the
nationwide bureaus in a very short period of time. No business
can adequately plan for such uncontrollable and unpredictable
large scale spikes in demand for a product. As a result,
consumers in most need of assistance, such as those seeking a
reinvestigation of information so that they can close on a home
mortgage, will certainly suffer as the credit bureaus shift
resources in order to deal with the unpredictable spikes in
demand for free credit reports. We strongly hope that the final
form of this legislation will include reasonable measures that
allow nationwide credit bureaus to manage the cost impact and
consumer demand appropriately and fairly.
Finally, in light of the burden Section 501 will place on
nationwide credit bureaus, we have asked a noted constitutional
scholar, Professor Douglas W. Kmiec, to apprise us of any
constitutional questions that may arise if Section 501 is
enacted as currently drafted. Judging by Professor Kmiec's
response to us, we are concerned that Section 501 may not be
constitutional. By way of background, Professor Kmiec is former
dean of the Catholic University Law School and is now the
Caruso Chair in Constitutional Law at Pepperdine University.
Professor Kmiec also served President Ronald Reagan as head of
the office of legal counsel in the Department of Justice.
Professor Kmiec's detailed analysis is attached.
Judy Biggert.
Patrick J. Toomey.
Jeb Hensarling.
----------
Pepperdine University School of Law,
Malibu, CA, September 4, 2003.
Re constitutional taking implications of H.R. 2622.
Hon. Judy Biggert,
U.S. Congress, Longworth Building,
Washington, DC.
Dear Congresswoman Biggert: As a professor of
constitutional law and the former head of the Office of Legal
Counsel in the U.S. Department of Justice, I have been asked by
the national consumer reporting agencies to review the
constitutionality of certain proposed amendments to the Fair
Credit Reporting Act, 15 U.S.C. Sec. Sec. 1681 et seq.
(``FCRA'')--specifically, sections 501 and 502 of H.R. 2622,
the Fair and Accurate Credit Transactions Act of 2003. I am
pleased to share this analysis with you.
Section 501 would require Credit Reporting Agencies
(``CRAs'') ``upon the direct request of the consumer'' to
provide each consumer with a copy of his or her credit report
``once during any 12-month period without charge to the
consumer.'' Section 502 would require CRAs to supply the
consumer with his or her credit score and all of the key
factors that adversely affected the credit score.\1\
---------------------------------------------------------------------------
\1\ Section 502 has been modified to permit a reasonable charge for
the provision of credit scores. Unlike the credit reports mandated to
be provided for free under Section 501, this modification should
eliminate any constitutional questions associated with the valuable
property interests associated with credit scores, but of course, this
important recognition of the private property interests at stake does
nothing to address the more pervasive taking of the credit reports,
themselves.
---------------------------------------------------------------------------
While the desire of Congress to assist consumers in this
context is admirable, these proposals, in my judgment, will
likely operate to unconstitutionally deprive CRAs of property
without just compensation in violation of the Fifth Amendment.
In this regard, Justice Holmes admonition of more than three-
quarters of a century ago is apt: ``a strong public desire to
improve the public condition is not enough to warrant achieving
the desire by a shorter cut than the constitutional way of
paying for the change.'' Pennsylvania Coal v. Mahon, 260 U.S.
at 416 (1922).
One final word before sharing with you the analysis in
detail. The concerns like those raised by this letter are of
such serious magnitude that they have merited the special
attention of the Presidency, and an existing Executive Order
(No. 12360) mandates that ``actions,'' including proposed
federal legislation, that have takings implications, must
``account for the obligations imposed by the Just Compensation
Clause of the Fifth Amendment * * * so that they do not result
in the imposition of unanticipated or undue additional burdens
on the public fisc.'' Further, ``executive departments and
agencies shall * * * identify the takings implications of
proposed regulatory actions and address the merits of those
actions in light of the identified takings implications, if
any, in all required submissions made to the Office of
Management and Budget.'' Insofar as the Executive Order directs
the Attorney General, in particular, ``to ensure that the
policies of the Executive Departments and agencies are
consistent with this Order,'' it would certainly be appropriate
before proceeding with the proposed amendments to the FCRA to
seek the Attorney General's guidance on their constitutional
implications.
Analysis
Because of the importance of the legislative object sought
to be achieved by H.R. 2622, I have sought to examine the
question indulging whenever possible those standards of
analysis that give the greatest latitude to Congress'
legislative authority. In this respect, several things should
be noted at the outset: first, there is not abundant judicial
precedent applying the Constitution's protection against
uncompensated regulatory takings in the context of intellectual
property, though what there is (as directed below) is credibly
supportive of the constitutional concerns of the CRAs; and
second, as a matter of constitutional law, should a taking be
found, it does not preclude Congress from acting, but it does
obligate Congress to compensate the CRAs adversely affected.
Of course, current provisions in the FCRA provide for the
free provision of reports, but only under highly limited
circumstances (such as a credit denial or fraud); otherwise,
CRAs obtain the fair market value for their products. The
proposed amendments envision a vastly expanded obligation for
free reports. Should this not be legislatively addressed, the
CRAs have a statutory right under the Tucker Act, 28 U.S.C.
1346(a)(2) (1988) to seek compensation for the property taken--
specifically, for the fair market value of the millions of free
credit reports that would literally be physically taken from
the CRAs pursuant to the proposed language.\2\
---------------------------------------------------------------------------
\2\ The damages suffered by CRAs are discussed more extensively
below, but they consist, at a minimum, of the market value of the free
credit reports that would be mandated as well as the increased
servicing costs--a severe and singular after-investment liability not
wholly dissimilar from the retroactive health insurance liability
imposed and found to be unconstitutional in Eastern Enterprises v.
Apfel, 524 U.S. 498 (1988). While it is true that the members of the
Supreme Court disagreed in Eastern Enterprises over whether the takings
clause or the due process clause was the appropriate source of monetary
remedy, a plurality wrote unambiguously that if a law imposes ``severe
retroactive liability on a limited class of parties that could not have
anticipated the liability, and the extent of that liability is
substantially disproportionate to the parties' experience,'' it
transgresses the Constitution. Concurring in the judgment, Justice
Kennedy relied upon both the severity of the loss and its retroactivity
or unforeseeability to supply relief as a matter of substantive due
process.
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The property at issue
Any taking analysis begins with the Fifth Amendment \3\ and
a careful assessment of the property at issue. Property cannot
be legislatively redefined at will. As the Supreme Court has
held: ``property interests * * * are not created by the
Constitution. Rather, they are created and their dimensions are
defined by existing rules or understandings that stem from an
independent source such as state law--rules or understandings
that secure certain benefits and that support claims of
entitlement to those benefits.'' \4\ Intellectual property
(e.g., patents, copyrightable works or compilations of
information, trade secrets) are clearly of importance to a
modern, 21st century economy and they have not been, and cannot
be, invisible to the Constitution's protections. In this
instance, it is reasonable to conclude that there is a distinct
property interest that is either taken outright or placed at
risk of being taken by the proposed amendments.\5\
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\3\ Nor shall private property be taken for public use without the
payment of just compensation. Amendment V.
\4\ Board of Regents v. Roth, 408 U.S. 564, 577 (1972).
\5\ While the proposal currently allows for a reasonable charge for
credit scores, it is possible that the required score and factor
disclosure could place the underlying proprietary algorithms at risk in
a manner that would implicate the Takings Clause.
---------------------------------------------------------------------------
The credit reports--A distinct property interest
Credit reports are created when CRAs, employing years of
training, labor, skill and judgment, collect and organize
information about consumers and their credit history from
public records, creditors and other reliable sources. Credit
reports are then made available by CRAs to a consumer's current
and prospective creditors and employers as allowed by law.
Specific information contained in a typical credit report
includes:
The consumer's name, current and previous
addresses, phone number, Social Security number, date of birth
and current and previous employers.
Specific information about each credit account
held by the consumer, such as the date opened, credit limit or
loan amount, balance, monthly payment and payment pattern
during the past several years.
Federal district bankruptcy records and state and
county court records of tax liens and monetary judgments.
Statements of dispute, which allow both consumers
and creditors to report the factual history of an account.
This information is obtained from many different sources,
and each CRA may produce a report that varies for any given
consumer, depending on the reporting sources to which it has
access, and the frequency with which those sources provide the
CRA with updated information. It is reasonable to treat the
CRA's property interests in both the credit reports and the
credit score reports as intellectual property interests in the
nature of copyright. See Feist Publ'ns, Inc. v. Rural Tel.
Svcs. Co., 499 U.S. 340, 348 (1991) (``Factual compilations, on
the other hand, may possess the requisite originality [to be
entitled to copyright protection.] The compilation author
typically chooses which facts to include, in what order to
place them, and how to arrange the collected data so that they
may be used effectively by readers. These choices as to
selection and arrangement, as long as they are made
independently by the compiler and entail a minimal degree of
creativity, are sufficiently original that Congress may protect
such compilations through the copyright laws.''). See also CCC
Info. Servs., Inc. v. MacLean Hunter Mkt. Reports, Inc., 44
F.3d 61, 65 (2d Cir. 1994) (noting that ``the protection of
compilations is consistent with the objectives of the copyright
law * * *.'' and further that were a legislature or
administrative body to adopt a rule abrogating by legislative
fiat a party's copyright, it ``would raise very substantial
problems under the Takings Clause of the Constitution.'') CCC
Info. Svcs., 44 F.3d at 74.
I am informed by the CRAs that the costs associated with
the production of a credit report exceed $7.50 per credit
report, and it is fair to surmise that the fair market value
for a report is at least equal to the $9 per report authorized
under the FCRA. The industry has not yet fully monetized the
economic value of the millions of reports that would be taken
or mandated to be provided for free under the proposed
legislation, but it can be readily anticipated to be in the
hundreds of millions of dollars, and if the unforeseen and
imposed cost of servicing these reports are incorporated (see
note 2, supra) and widespread consumer participation assumed,
the ultimate sum may range as high as a billion dollars.
Applying the Fifth Amendment
As noted, the Fifth Amendment forbids the taking of private
property for public use without just compensation. It has long
been recognized that this constitutional guarantee is
``designed to bar Government from forcing some people alone to
bear public burdens, which, in all fairness and justice, should
be borne by the public as a whole.'' \6\ In the instant case,
Congress seeks via the proposed FCRA amendments to ``prevent
identity theft, improve resolution of consumer disputes,
improve the accuracy of consumer records, [and] make
improvements in the use of, and consumer access to, credit
information * * *.'' \7\ These are worthy goals. Rather than
providing for compensation for the property taken to accomplish
these objectives, however, H.R. 2622 seeks to accomplish its
purpose at the sole expense of the CRAs. Under existing law, it
is fair to conclude that this rises to the level of an
impermissible regulatory taking in violation of the Fifth
Amendment.
---------------------------------------------------------------------------
\6\ Palazzolo, 533 U.S. at 633 (2001) (quoting Armstrong v. United
States, 364 U.S. 40, 49 (1960)).
\7\ See Preamble to H.R. 2622.
---------------------------------------------------------------------------
A regulatory taking occurs ``when some significant
restriction is placed upon an owner's use of his property for
which justice and fairness require that compensation be
given.'' \8\ Regulatory takings can be analyzed either as per
se takings, or under the balancing test established by the
Supreme Court in Penn Central, depending on the nature of the
alleged taking. Per se takings tests apply in two principal
contexts: (1) where regulation results in a permanent physical
occupation and thereby a denial of all rights to use, sell, or
exclude others from the property in question;\9\ and (2) where
a regulation denies all economically beneficial or productive
use of land.\10\ It is hard not to understand the mandatory
transfer of the physical credit reports from the CRAs to
individual consumers, without qualification, as not falling
within this per se physical taking standard. While the Supreme
Court has permitted the limitation of the use and enjoyment of
personal property,\11\ there is no precedent sustaining,
without compensation, the outright confiscation of personal
property, itself. Indeed, what little precedent is available
supports the finding of a regulatory taking.\12\
---------------------------------------------------------------------------
\8\ See Philip Morris, 312 F.3d at 33.
\9\ See Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419,
435 (1982).
\10\ See Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992).
\11\ Andrus v. Allard, 444 U.S. 51 (1979).
\12\ Although there is no reported decision finding a per se taking
in the case of abrogated intellectual property rights, Judge Selye,
concurring in the Philip Morris decision, states that there should be
``no principled reason to refrain from extending per se takings
analysis to alleged takings of trade secrets. Indeed, the Supreme Court
hinted at this result when it observed that the term ``property'' in
the Takings Clause is meant in its more accurate sense to denote the
group of rights inhering in the citizen's relation to the physical
thing * * * the value of trade secrets, like the value of land, is
inextricably tied to both the demand of others for access and the legal
enforceability of the owner's right to exclude. In either case, if the
sovereign effectively deprives the owner of the right to exclude, the
value is destroyed--and the Constitution requires just compensation.
Limiting per se taking analysis to cases involving real property is a
crude boundary with no compelling basis in the law.'' See Philip
Morris, 312 F.3d at 51 (Selye, J. concurring). See also Nixon v. United
States, 978 F.2d 1269 (D.C. Cir. 1992) (applying per se takings
analysis to alleged deprivation of presidential papers and finding that
statutory enactment ``completely abrogated Mr. Nixon's right
unilaterally to exclude others from [his presidential papers]--perhaps
the quintessential property right.'').
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Yet, as I indicated at the start, it was my intent in
reviewing this matter to apply the most generous possible
taking standard to afford Congress the widest possible
legislative authority. To that end, it is useful to examine the
issue under the Supreme Court's balancing test articulated in
Penn Central Transp. Co. v. City of New York, 438 U.S. 104
(1978). This is not to suggest that the proposed physical
expropriation of the reports is unrelated to the application of
the Penn Central factors, discussed below. It is not. Supreme
Court jurisprudence suggests that where, as here, a physical
taking is present, the analysis of the ``character of the
government's action'' (discussed below) will be more rigorous
and judges will undertake a ``careful examination and weighing
of all of the relevant circumstances.'' \13\
---------------------------------------------------------------------------
\13\ See Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional
Planning Agency, 532 U.S. 302 (2002).
---------------------------------------------------------------------------
Under Penn Central,\14\ a regulatory taking is analyzed by
examining: (1) What is the economic impact of the regulation;
(2) whether the government action interferes with reasonable
investment-backed expectations; and (3) what is the character
of the government action. Id. Penn Central ``does not supply
mathematically precise variables, but instead provides
important guideposts that lead to the ultimate determination
whether just compensation is required.'' \15\ Let us examine
each individually:
---------------------------------------------------------------------------
\14\ Penn. Central Transp. Co. v. New York City, 438 U.S. 104, 124
(1978).
\15\ See Palazzolo, 533 U.S. at 634.
---------------------------------------------------------------------------
Reasonable investment-backed expectations
There is no clear judicial consensus on what constitutes
``reasonable investment-backed expectations,'' although in at
least one case involving trade secrets, the Supreme Court has
found the force of the deprivation of a party's reasonable
investment-backed expectations to be ``so overwhelming'' as to
be dispositive of the takings issue.\16\ That case, Monsanto,
involved a taking challenge to several provisions of the
Federal Insecticide, Fungicide and Rodenticide Act (``FIFRA''),
which, among other things, required all pesticides sold in
interstate or foreign commerce for use within the United States
to be registered with the Secretary of Agriculture and
appropriately labeled.\17\ FIFRA, first enacted in 1947, also
empowered the Secretary to require applicants for registration
to submit testing data, including pesticide formulae and data
on the pesticide's health, safety and environmental impact.\18\
In 1978, FIFRA was amended to provide ``for disclosure of all
health, safety, and environmental data * * * notwithstanding
the prohibition against disclosure of trade secrets'' found
elsewhere in the statute.\19\
---------------------------------------------------------------------------
\16\ See Monsanto, 467 U.S. at 1005.
\17\ Id. at 991.
\18\ Id.
\19\ Id. at 995-96.
---------------------------------------------------------------------------
Monsanto challenged this amendment, arguing that the forced
disclosure of trade secret information submitted by it to the
Secretary of Agriculture constituted a regulatory taking in
violation of the Fifth Amendment.\20\ The Court agreed in part.
Stating that a reasonable investment-backed expectation must be
more than a ``unilateral expectation than an abstract need,''
the Supreme Court held that as to information submitted by
Monsanto after the 1978 amendment:
---------------------------------------------------------------------------
\20\ Monsanto, 467 U.S. at 998-99.
---------------------------------------------------------------------------
Monsanto could not have had a reasonable, investment-
backed expectation that EPA would keep the data
confidential beyond the limits prescribed in the
amended statute itself. Monsanto was on notice of the
manner in which EPA was authorized to use and disclose
any data turned over to it by an applicant for
registration ***. If Monsanto chose to submit the
requisite data in order to receive a registration, it
can hardly be argued that its reasonable investment-
backed expectations are disturbed when EPA acts to use
or disclose the data in a manner that was authorized by
law at the time of the submission.\21\
---------------------------------------------------------------------------
\21\ Id. at 1006-07. See also Nollan v. Cal. Coastal Comm'n, 483
U.S. 825, 833 n.2 (1987).
---------------------------------------------------------------------------
For information submitted between 1972 and 1978, however,
as to which the then-current FIFRA regulations gave Monsanto
explicit assurances that the EPA was prohibited from disclosing
publicly any data submitted by an applicant, the Court found
that ``this explicit governmental guarantee formed the basis of
a reasonable investment-backed expectation'' that submitted
data, designated as trade secrets, would be protected.\22\ In
rendering its decision, the Court noted that a trade secret's
value lies in the ``right to exclude others.'' \23\ If others
are given the trade secret the ``holder of the trade secret has
lost his property interest,'' and the question becomes whether
the party received adequate compensation for the taking of that
interest.\24\
---------------------------------------------------------------------------
\22\ Monsanto, 467 U.S. at 1101.
\23\ Id.
\24\ Id.
---------------------------------------------------------------------------
Similarly, in Philip Morris, the First Circuit considered
whether Massachusetts' enactment of the Disclosure Act, Mass.
Gen. Laws ch. 94, Sec. 307B, which required cigarette
manufacturers to provide brand-specific ingredient lists in
order to sell cigarettes within Massachusetts, and which
provided that the state of Massachusetts could publicly
disclose the precise formulas for these cigarettes whenever
such disclosure ``could reduce the risks to public health,''
operated to unlawfully deprive cigarette manufacturers of
property in violation of the Fifth Amendment.\25\ In holding
that the Disclosure Act operated to deprive the cigarette
manufacturers of their trade secrets in violation of the
Takings Clause, the Court noted that, unlike Monsanto, the
question before it was whether Massachusetts can force the
tobacco companies to cede their trade secrets in exchange for
doing business within its borders.\26\ Given the protection
afforded trade secrets by the state of Massachusetts, the Court
answered this question in the negative, holding that the
tobacco companies had reasonable, investment-backed
expectations that their trade secrets would remain secret.\27\
---------------------------------------------------------------------------
\25\ Philip Morris,, 312 F.3d at 26.
\26\ Id. at 39.
\27\ Id. at 41.
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Applied to the facts at bar, in my judgment, the conclusion
is inescapable: the CRAs have a colorable argument that the
proposed FCRA amendments operate to deprive CRAs of their
reasonable, investment-backed expectations. That said, and
again to give every possible deference to Congress' authority,
it is possible to argue that in light of the limited right of
free reports under existing federal and state laws,\28\ CRAs no
longer have any reasonable expectation of a return on
investment for even a far broader taking of credit reports. To
state the proposition, however, is to refute it since it defies
economic reality. Moreover, supplying credit reports to a
defined class of individuals denied credit or who have reason
to believe that a report is in error, facilitates legislative
goals that coincide with the best practices of the industry. It
is quite another matter to be treated as the equivalent of a
public utility, except that public utilities are guaranteed a
reasonable rate of return.\29\ The Supreme Court has also made
it clear that a taking claim is not defeated merely because one
invests in property that has already been regulated. See
Palazzolo v. Rhode Island, 533 U.S. 606, 634 (2001)
(hereinafter ``Palazzolo'' (``[T]he state of regulatory affairs
at the time [that the property interest was acquired] is not
the only factor that may determine the state of reasonable
investment-backed expectations ***. Courts instead must attend
to those circumstances which are probative of what fairness
requires in a given case.'').\30\
---------------------------------------------------------------------------
\28\ There are laws in ten states that allow the citizens of those
states to obtain copies of their credit reports for free, or at a
reduced cost, depending on the circumstances. See California, Cal. Civ.
Code Sec. Sec. 1785.11.1, 1785.15, 1785.19 and 1785.19.5; Colorado,
Colo. Rev. Stat. Sec. 12-14.3-104(2)(e); Connecticut, Conn. Gen. Stat.
Sec. 36a-696(b); Georgia, O.C.G.A. Sec. Sec. 10-1-392, 10-393(29);
Maine, Me. Rev. Stat. Ann. tit. 10, Sec. 1316(z); Maryland, Md.
Commercial Law code Ann. Sec. 14-1209(a)(1); Massachusetts, Mass. Gen.
Laws Ann. Ch 93, Sec. 59; Minnesota, Minn. Stat. Sec. 13C.01(a); New
Jersey, N.F. Stat. Ann. Sec. 56:11-37(a); Vermont, Vt. Stat. Ann. tit.
9, Sec. 2480(c). At least two of these states require CRAs to disclose
credit scores if requested by the consumer. See Ca. Civ. Code
Sec. 1785.15.1; Vt. Stat. Ann. tit. 9, Sec. 2480(c). As discussed in
the text, these statutes--passed for different and narrower purposes--
are merely factors in the application of the taking analysis under Penn
Central, as further applied in Palazzolo v. Rhode Island, 533 U.S. 606,
634(2001) (hereinafter ``Palazzolo'').
\29\ See Duquesne Light Co. v. Barasch, 488 U.S. 299, 310 (1989);
FPC v. Hope Natural Gas Co., 320 U.S. 591, 603 (1944).
\30\ Given that CRAs have accepted existing regulation that, in far
less intrusive ways, resembles aspects of the proposed legislation is
thus not dispositive. As the Court explained in Palazzolo at 626-27:
``The theory underlying the argument that postenactment purchasers
cannot challenge a regulation under the Takings Clause seems to run on
these lines: Property rights are created by the State. See, e.g.,
Phillips v. Washington Legal Foundation, 524 U.S. 156, 163, 118 S. Ct.
1925, 141 L.Ed.2d 174 (1998). So, the argument goes, by prospective
legislation the State can shape and define property rights and
reasonable investment-backed expectations, and subsequent owners cannot
claim any injury from lost value. After all, they purchased or took
title with notice of the limitation. The State may not put so potent a
Hobbesian stick into the Lockean bundle. The right to improve property,
of course, is subject to the reasonable exercise of state authority,
including the enforcement of valid zoning and land-use restrictions.
See Pennsylvania Coal Co., 260 U.S., at 413, 43 S. Ct. 158
(``Government hardly could go on if to some extent values incident to
property could not be diminished without paying for every such change
in the general law''). The Takings Clause, however, in certain
circumstances allows a landowner to assert that a particular exercise
of the State's regulatory power is so unreasonable or onerous as to
compel compensation. Just as a prospective enactment, such as a new
zoning ordinance, can limit the value of land without effecting a
taking because it can be understood as reasonable by all concerned,
other enactments are unreasonable and do not become less so through
passage of time or title. Were we to accept the State's rule, the
postenactment transfer of title would absolve the State of its
obligation to defend any action restricting land use, no matter how
extreme or unreasonable. A State would be allowed, in effect, to put an
expiration date on the Takings Clause. This ought not to be the rule.
Future generations, too, have a right to challenge unreasonable
limitations on the use and value of land.''
---------------------------------------------------------------------------
More than once, the Supreme Court has admonished
legislative bodies that the constitutional protection for
property, especially as it relates to a core, inherent aspect
like the right to exclude, cannot simply be redefined away. In
Monsanto, the Court held that disclosure of a trade secret
could be required as a condition for receiving a valuable
governmental benefit (there, a license to sell a pesticide in a
highly regulated environment). However, as Justice Scalia
explained for the Court in the later case of Nollan, v.
California Coastal Commission, ``some core elements of
property--like the right to build on one's own property * * *
cannot remotely be described as a `government benefit.' And
thus the announcement that the application for (or granting of)
the permit will entail the yielding of a property interest
cannot be regarded as establishing the voluntary `exchange'
that we found to have occurred in Monsanto.'' \31\
---------------------------------------------------------------------------
\31\ Nollan, 483 U.S. at 833 n.2.
---------------------------------------------------------------------------
Likewise, the Philip Morris court determined, ``allowing a
manufacturer to simply sell its legal product is more similar
to building on one's land * * *.'' \32\ The sale of credit
reports and the right to maintain the proprietary value of
credit scores and underlying algorithms is much the same. The
dissent in Philip Morris did not dispute the analysis of the
lead opinion, but simply avoided the constitutional
determination of a taking by pointing to available regulatory
means under the Disclosure Act that allowed regulated companies
to pursue a stay prior to disclosure of its valuable trade
secrets. Thus, because of this regulatory escape hatch, the
dissent did not think the Disclosure Act was ``unconstitutional
in every application.'' Congress has not proposed a similarly
tailored means to either compensate CRAs for their property or
preserve it from governmental taking contrary to the
Constitution.
---------------------------------------------------------------------------
\32\ Philip Morris, 312 F.2d at 47.
---------------------------------------------------------------------------
Economic impact
The law regarding economic impact is fairly
straightforward. ``The inquiry is whether the regulation
`impairs the value of use of the property' according to the
owners' general use of their property.'' \33\ As the Philip
Morris court noted, ``not only is the use to which the property
owner puts her property important, but the economic impact
needs to be considered in the context of other laws and
regulatory schemes.'' \34\
---------------------------------------------------------------------------
\33\ Id. (quoting Pruneyard Shopping Ctr. v. Robins, 447 U.S. 74
(1982)).
\34\ Id. See also Connolly v. Pension Benefit Guar. Corp., 475 U.S.
211, 225-26 (1986) (evaluating economic impact of imposing withdrawal
fees on employers who have pension funds within the context of entire
ERISA scheme).
---------------------------------------------------------------------------
In Philip Morris, the Court noted that economic impact was
fairly evident. ``The [tobacco companies] have spent millions
of dollars developing the formulas for different brands. The
evidence shows that public disclosure of the ingredients
lists, even in part, will make it much easier to reverse
engineer those formulas. If competitors can obtain these
formulas, they can replicate [the tobacco companies'] products,
undermining the value of the [tobacco companies'] brands.''
\35\
---------------------------------------------------------------------------
\35\ Philip Morris, 312 F.3d at 41.
---------------------------------------------------------------------------
I believe the argument is similarly straightforward here.
Clearly, the CRAs can establish the fair market value of a
credit report, and that deprivation, multiplied by the millions
that would mandated to be supplied for free under the proposal
yields a substantial sum.\36\
---------------------------------------------------------------------------
\36\ If disclosure of the key factors behind credit scores
foreseeable results in the reverse engineering of those scores, it is
possible that a separate taking related to the underlying property or
trade secrets in the algorithms that give rise to credit scores would
also be presented. This taking of trade secrets would fall squarely
within the reasoning set forth in Philip Morris.
---------------------------------------------------------------------------
Character of the government action
In Penn Central, the Supreme Court offered only one example
of how the character of the governmental action is relevant to
its taking analysis. The one example, however, is manifest
here. Said the Court, if the legislative action results in a
physical invasion then a taking ``may more readily be found * *
* then when interference arises from some public program
adjusting the benefits and burdens of economic life to promote
the common good.'' \37\ Scholarly commentators have noted that
physical invasion or confiscation so resembles eminent domain
that compensation should almost always be forthcoming. In such
instances, the hallmark of property--the very right to
exclude--is at issue.\38\
---------------------------------------------------------------------------
\37\ 438 U.S. at 124.
\38\ Ruckleshaus, 467 U.S. 986, 1011 (1984).
---------------------------------------------------------------------------
Assessing the character of the governmental action may also
require the Court to balance reasonable investment-backed
expectations and economic impact against the purposes sought to
be advanced by the legislation. Justice O'Connor who is
acknowledged to be the lead judicial voice for the Court in
this area, has suggested that assessment of the character of
the government's action includes ``the purposes served, as well
as the effects produced, by a particular regulation * * * [A
regulation] may constitute a `taking' if not reasonably
necessary to the effectuation of a substantial public purpose,
[citations omitted], or perhaps if it has an unduly harsh
impact upon the owner's use of the property.'' Palazzolo, 533
U.S. at 633 (2001) (O'Connor, J., concurring).
Following Justice O'Connor's instruction, the proposed FCRA
amendments must also be balanced against the interests that
Congress seeks to protect--namely, to ``prevent identity theft,
improve resolution of consumer disputes, improve the accuracy
of consumer records, [and] make improvements in the use of, and
consumer access to, credit information * * *.'' \39\ From the
outset of this analysis, these legislative purposes have been
conceded to be meritorious, but as the appellate court's
decision in Philip Morris reveals, this is not sufficient to
dispose of the taking issue.
---------------------------------------------------------------------------
\39\ See Preamble to H.R. 2622.
---------------------------------------------------------------------------
While the state of Massachusetts had in Philip Morris a
compelling interest in protecting the health and welfare of its
citizens, this interest ``must bear some reasonable
relationship to the ends.'' \40\ The court concluded that ``for
a state to be able to completely destroy valuable trade
secrets, it should be required to show more than a possible
beneficial effect.'' \41\ This balance was not found in Philip
Morris, since the Court accepted as paradigmatic the tobacco
companies' assertion that as a result of the Disclosure Act
provisions, ``they [would] lose the right to exclude others
from their trade secrets and, consequently, their trade secrets
would lose all value.'' \42\ The Court noted that in Monsanto,
the ``Supreme Court recognized that if an individual disclosed
his trade secrets to others who are under no obligation to
protect the confidentiality of the information, or otherwise
publicly discloses the secret, his property right is
extinguished.'' \43\ After discussing Armstrong v. United
States,\44\ Andrus v. Allard,\45\ and Hodel v. Irving,\46\ the
appellate court held that while the ``simple loss of economic
value, alone, is probably not enough,'' the fact that the
tobacco companies' rights had not just been devalued, but had
been extinguished, caused the Disclosure Act to be
unconstitutional.\47\ The court concluded by observing that
``the tremendous individual loss is simply not justified by
such a speculative public gain.'' \48\
---------------------------------------------------------------------------
\40\ Id.
\41\ Id.
\42\ Philip Morris, 312 F.3d at 41.
\43\ Id.
\44\ 364 U.S. 40 (1960). As noted by the Philip Morris court, in
Armstrong, ``the Supreme Court considered the implications of
government action that, as a secondary effect, destroyed a private
party's lien. The Court held that this was a taking a not `a mere
consequential incidence of a valid regulatory measure.' '' See Philip
Morris, 312 F.3d at 42. Similarly, the proposed FCRA regulations, which
in part would destroy the proprietary credit score algorithms developed
by the CRAs, cannot be said to have as a ``consequential incidence''
the taking of the CRAs' property.
\45\ 444 U.S. 51 (1979) (upholding government regulation banning
the sale of items containing eagle parts--even though such artifacts
essentially lost all economic value after the regulation as passed).
``While this was a significant restriction, the Court noted that this
destruction of one strand of the bundle of property rights did not
constitute a taking. Rather, the substantial state interest in
preserving eagles justified the regulation.'' Philip Morris, 312 F.3d
at 43. As proposed, the FCRA amendments operate to deprive CRAs of far
more than ``one strand'' of the bundle of their property rights, and
thus the Supreme Court's reasoning in Andrus is not dispositive.
\46\ 481 U.S. 704 (1987) (character of the government action
involved dispositive when the government held that regulation
destroying the rights of descent and devise which had previously
attached to undivided fractionated interests in land created an
unconstitutional taking).
\47\ Philip Morris, 312 F.3d at 44.
\48\Id.
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The credit reports in the present matter are not merely
extinguished, but transferred, and the disclosure of scores and
factor analysis may undermine the value of proprietary
algorithms as well. In light of this, as salutary as the
objectives of the proposed amendments are, they do not
constitutionally excuse placing the disproportionate burden of
meeting them upon the CRAs.
It bears repeating that the Philip Morris analysis does not
second-guess the legislative objective--in that case, public
health. Rather, in light of the totality of the reasonableness
of the investment expectation, the economic impact, and the
character of the government's action (viz., whether there was
some related physical taking or not), the court inquired into
how well-matched the regulatory means were to the presumed-to-
be reasonable legislative end. The lead opinion in Philip
Morris determined that the Disclosure Act ``has not been shown
to further the stated goal of promoting public health in such a
way as to counterbalance the tremendous private loss
involved.''
Even under the most deferential analysis to Congress, the
same is true here. With due respect to the objectives sought to
be achieved and the legislative authority to fashion avenues
for doing so, the conclusion that the proposed sections
implicate the constitutional protections of property is
inescapable.
Respectfully submitted,
Douglas W. Kmiec.