FTC Supports Legislation to Amend the Fair Credit Reporting Act

The Federal Trade Commission recommends changes to the Fair Credit Reporting Act (FCRA) to enhance consumer protection and combat identity theft. In presenting its views before the Senate Committee on Banking, Housing, and Urban Affairs today, Timothy J. Muris, Chairman of the FTC, said that the Commission recommends modifying the FCRA to protect consumers better, while maintaining the existing national framework for credit reporting. “We believe these proposals would ensure the continuing viability of the FCRA’s uniform national framework that has been a cornerstone of our consumer credit-driven economy, and improve the FCRA to the benefit of consumers, especially in preventing and mitigating the ravages of identity theft,” Muris said.

According to the testimony, the FCRA has fostered the development of our modern credit system, which has contributed greatly to making credit more widely, inexpensively, and rapidly available for consumers. “Well-functioning credit markets are an essential component of economic prosperity,” Muris said.

The credit system is based on the flow of information from businesses that voluntarily furnish account histories about their customers to credit reporting agencies (commonly called credit bureaus), which compile the information into reports that are provided to lenders and others with legitimate business needs for that information. This system of information flows, as governed by the FCRA, facilitates more expeditious and accurate credit decisions, according to the testimony. At the same time, the FCRA includes provisions to protect consumers’ rights in the privacy, security, and accuracy of their financial information.

The Commission’s testimony recommends a number of legislative changes, which support and supplement proposals announced by the Department of the Treasury on June 30, 2003.

These include:

• Making the FCRA’s uniform national standards permanent. These standards relate to, among other things, the ability of creditors and insurers to send out prescreened offers, the time within which consumer reporting agencies must reinvestigate consumer disputes, the duties of information furnishers, the age of information allowed in consumer reports, and the ability of affiliated companies to exchange information. “The Commission believes that the national character of our credit markets is a powerful argument for retaining the uniform standards,” the testimony notes.

• Enhancing protections against identity theft by making it easier to detect this fraud, limit the damage it causes, and help victims restore their reputations. These protections would include proposals to establish a national fraud alert system, allow consumers to block accounts caused by identity theft, require truncation of credit card receipts, and require debt collectors and creditors to share information with victims.

• Offering free annual credit reports to consumers, along with information about how credit scores are derived and how they can be improved.

• Tightening the duties of creditors to notify consumers when they offer less desirable credit terms because of information in the consumer report. These “adverse action notices” alert consumers to check the accuracy of information in their reports.

• Improving notices to consumers allowing them to opt out of future prescreened offers. According to the testimony, current notices are often difficult to find and understand.

• Clarifying the reinvestigation duties of consumer reporting agencies that resell consumer reports.

• Requiring furnishers to investigate disputes received directly from consumers.

• Clarifying the duties of employers when they use third parties to investigate possible misconduct by their employees.

The Commission vote authorizing the testimony was 5-0.

Copies of the testimony are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC Matter No. P-034812)