by Ralph Nader
Never try to cut a deal with the lobbyists for the credit and banking industry. Whatever the compromise, they always come back with their hands out for more favors and bigger loopholes to gut protections for consumers and leave them defenseless against both price and privacy exploitation.
They're proving it once again with a massive lobbying campaign to stampede Congress into shutting out state legislatures and attorneys general from any say on key elements of how credit information is gathered, disseminated and used by credit reporting agencies which maintain an estimated 600 million files on American consumers-a gold mine of data for the credit industry and a dangerous minefield for citizens wanting to protect their privacy.
When Congress updated the Fair Credit Reporting Act in 1996, the financial lobbyists made impassioned pleas for a temporary preemption of related state laws until they had a chance to absorb and work with the federal changes. Senator Richard Bryan of Nevada, the lead sponsor of the legislation, reluctantly agreed, but with the firm understanding that the preemption was to be temporary. Ultimately, Congress agreed on January 1, 2004 as the end of the preemption. After that date, states were to be free to adopt stronger protections for their citizens. Now the financial lobbyists have tossed all that legislative history out the window and have descended on Capitol Hill with demands that the preemption of state laws be made permanent in important areas of the credit reporting business such as sharing information with corporate affiliates.
Operating under the euphemistic name of "Partnership to Protect Consumer Credit" the credit bureaus and credit pushers have launched an all out public relations campaign-including full page advertisements in major newspapers plus hundreds of radio spots--claiming that the preemption of state laws is needed to ensure accuracy, fairness and confidentiality for consumers and to "protect the national consumer credit system."
The claim about ensuring "accuracy, fairness and confidentiality" sounds like a bad joke up against the real facts of the credit reporting industry. The Federal Trade Commission issued a report in 1993 saying that the most common type of consumer complaint received was about credit reports with the majority related to accuracy. After the 1996 amendments, FTC revisited the issue in 2000 and found that complaints about credit reports were still among the most numerous with the issue of accuracy leading the pack.
Consumers have a tremendous stake in the accuracy of credit reports. Most of the reports are prepared and maintained by three major firms, Equifax, Experian and Trans Union. The reports contain identifying information, such as name, last known address, marital status, social security number, names of dependents, employment information as well as credit information. These latter include account numbers, the payment history on loans and charge accounts and public information such as court judgments, liens and bankruptcies.
Consider the personal uses of credit reports under the Fair Credit Reporting Act. They include your applications for credit, insurance, and rentals for personal, family or household purposes. The price of credit and insurance often are determined from the data collected in credit reports. They are also used in employment evaluations (with the consent of the applicant) as well as in reviews of existing charge and bank accounts.
Federal, state and municipal agencies can obtain basic identifying information from a consumer reporting agency. The USA Patriot Act, passed in the wake of the September 11, 2001 attacks, deepened access to the reports by law enforcement agencies.
Some parts of an individual's credit report-the so-called "headers" containing the name, address, and telephone and social security number-are not considered "credit information" by FTC. This has allowed consumer reporting agencies to sell this information with no legal protections for individuals. A 1997 report by the Public Interest Research Group (PIRG) described the unrestricted sale of these "credit headers" as one of the main causes of identity theft which leaves 40,000 consumers each year "fighting to clear their names and correct their credit reports after thieves establish fraudulent credit accounts in their names."
Clearly, the credit reporting system remains badly flawed despite the amendments adopted in 1996. States should be allowed to protect their citizens right to fair access to credit and reasonable safeguards of their privacy.
The Congress made it clear in 1996 that preemption of states' rights on regulation of credit reporting was to be temporary. Congress should keep that promise! That can be accomplished by simply letting the sunset date of January 1, 2004 remain on the books. In this case, Congress can help consumers by doing nothing. Even this Congress should be able to manage that task.
Ralph Nader is Americaís leading consumer advocate. He is the founder of numerous public interest groups including Public Citizen, and has twice run for President as a Green Party candidate. His latest book is Crashing the Party: How to Tell the Truth and Still Run for President (St. Martinís Press, 2002)