Securities Fraud Deterrence and Investor Restitution Act of 2004

Mr. Chairman, I thank the gentleman for yielding me this time.

Unfortunately, I rise in opposition to this legislation. While this bill does include important consumer protection provisions, such as the provision that I and other members of the committee fought for, which would provide free annual credit reports to consumers who request them, and would also allow consumers to receive more information about their credit scores identical to a very good law in the State of California, there are major flaws in this legislation.

For a start, even in terms of that pro-consumer provision, we are not quite sure when that will go into effect, and I fear it will not go into effect as soon as it should.

Secondly, I think the major concern that I and consumer organizations all across this country have is that this legislation would permanently preempt the States from passing stronger consumer protection laws in order to aggressively punish identity thieves and to improve the accuracy of consumers' credit reports.

I may be the conservative on the committee, but it has long been my belief when we are dealing with an issue of protecting consumer rights, we cannot take away the ability of the States to pass stronger consumer protection laws. I find it very ironic from day one of this discussion that conservatives who have told us over and over again how much they dislike the big bad Federal Government stepping on States' rights, in fact have brought that provision into this legislation.

So if the State of Vermont or the State of California or the State of Ohio wants to go further in this area, well, my goodness, that big bad Federal Government, which we have heard so much about, is able to say sorry, you cannot do it. Attorneys general, governors, State legislators, you cannot do that, and I think that is wrong.

During the course of the debate on the committee, there was a very interesting discussion over an amendment that I and the gentleman from Alabama (Mr. Bachus) brought forth which deals with the issue of what I call credit card switch and bait, and I will be bringing forth an amendment to win support of it. It is not included in this bill, and it should be.

Mr. Chairman, what is going on in this country is that people who pay off their credit card debts on time every single month nonetheless are seeing huge increases in the interest rates that they are paying. How does that happen? It happens because maybe 3 years ago they took out a loan which is still outstanding, or maybe they had an emergency medical bill and they had to borrow money, and arbitrarily the credit card company has determined they are a greater financial risk and their rates can double or triple. I think that is wrong.

This bill has some positive provisions, but we can do much better, and I would urge a ``no'' vote on it.

Mr. Chairman, I thank the gentlewoman for yielding me time.

California may have one-sixth of the Members in this body, Vermont does not. I am it and I rise in strong support of the Waters amendment.

The issue of preemption was hotly debated in the Committee on Financial Services, and on one side of that issue was virtually every consumer organization in America. Groups like the Consumer Federation of America, the U.S. Public Interest Research Group, Consumers Union, and many others. And some of us in the committee supported these consumer organizations, making the point that the gentlewoman from California (Ms. Waters) just made. That in the nature of our government, we are the United States of America, there are 50 States in our country. And sometimes one State does something really good and a whole lot of other States learn from that State. And that is one of the reasons that we have a creative form of government with a lot of ideas that are flowing.

On the other side of that debate, of course, were the credit card companies and the banks. And let us be clear, they do not want strong consumer protection. They are the people who are charging individuals in this country 25 percent interest rates on their credit cards. They do not want to see governors and legislatures and attorneys general stand up strongly and protect consumers. So what ends up happening is that we have a national bill which has admittedly some good provisions in it, but at the same time, it takes away the ability of 50 States to go further.

So the gentlewoman from California (Ms. Waters), the gentlewoman from California (Ms. Lee), and I and many others were fighting for higher Federal standards, more consumer protection, but at the same time, give California the right to go forward.

It is inconvenient. Well, democracy is inconvenient. Alabama does some things. Vermont does some things. We live together. We learn from each other. We argue with each other, but we do not take away, we should not take away the rights of the States to go further. I support this amendment.

Mr. Chairman, I support the amendment offered by Congresswoman Waters. This amendment would simply allow the 7 Fair Credit Reporting Act preemptions to expire, as Congress intended, on January 1, 2004 in order to allow the 50 states of this country to pass stronger consumer protection laws to improve the accuracy of credit reports and to aggressively fight identity theft.

I should note right off the bat that every major national consumer group in this country including the Consumer Federation of America, the U.S. Public Interest Research Group, Consumers Union, and the National Consumer Law Center all vigorously oppose state pre-emption. I would also like to tell you that the National Association of Attorneys General, representing all 50 States of this country, unanimously passed a resolution opposing the 7 FCRA state preemptions.

Mr. Chairman, you know my views on this subject. If my State of Vermont or your State of Ohio wants to pass laws that are stronger than the Federal Government's, we should give States that right. The States are the laboratories of Democracy. You know what happens here. If there is a particular identity theft crisis in Colorado and the Colorado State Legislature passes a law to correct this problem,

and it works, what happens? Pretty soon, California may pass the same law. Then Nebraska. Then Maryland. And, eventually it filters up to the federal government and we have a good national law on the books. But, if this legislation is signed into law, we would permanently prevent the States from taking this action. We hear a lot of talk from conservatives about protecting the States and the American people against the big, bad and instrusive Federal Government. Well, call me a conservative on this issue because I believe that the 50 States in this country should be able to pass their own laws and should not be pre- empted by the Federal Government from passing stronger laws that protect consumers. So, I would say to my conservative friends on the other side of the aisle, vote for my amendment. It is consistent with your philosophy on the role of the government.

And to my Democratic friends on this side of the aisle, I ask all of you to vote for this amendment as well. Let us not forget that just last week, during a recent mark-up of the Securities Fraud Deterrence and Investor Restitution Act (H.R. 2179) in the Capital Markets Subcommittee, virtually every Democrat voted against preempting the states from taking strong enforcement actions against Wall Street firms that defraud investors. I agree. The 50 States of this country should not be prohibited from aggressively punishing corporate wrongdoing.

Today, we are dealing with the exact same issue: state preemption. But, this time it deals with consumer protection. Just like we should not prohibit States from aggressively punishing corporate wrongdoers, to my mind, we should also not permanently bar the states from aggressively punishing identity thieves and improving the accuracy of consumers' credit reports. Therefore, I hope my Democratic friends will vote for this amendment as well.

Mr. Chairman, as we all know, the newspapers are filled with horror stories about the harm being done to consumers by identity thieves. This problem is compounded by the shabby job done by the credit reporting system in ensuring that consumers' credit reports are accurate and up-to-date. States have been at the forefront of the effort to stop identity thieves and to clean up the credit reporting industry. The federal government should be a partner in that effort but should not pull the rug out from under the states. There is no greater impediment to consumer credit than a credit report full of errors. There is no reason to tie the states' hands.

We have heard from the financial services industry and the major credit bureaus that if we don't extend these state preemptions, the entire credit system will collapse. But, let us not forget, we had a national credit system before the 1996 state preemptions were inserted, and it worked well. For example, one of the witnesses that we heard from on this issue from Juniper Bank who supports preemption cited a study that showed ``in 1990, more than 70 percent of credit card balances were being charged more than an 18 percent annual interest rate. By 1993, only 34 percent of credit card balances were being charged more than 18 percent interest.''

Great study. All of the benefits to consumers just happened to be 3 years before the 1996 preemptions were enacted.

Another supporter of state preemption who testified at our first hearing from the Information Policy Institute pointed to another study that showed that credit card prices ``declined by almost 35 percent between the first quarter of 1984, and the fourth quarter of 1996,'' saving consumers ``about $30 billion per year.''

Again, great study. All of the benefits to consumers happended to occur before the 1996 state preemptions were enacted.

In addition, the 1996 FCRA amendments specifically grandfathered stronger consumer protection statutes in California, Massachusetts and Vermont from pre-emption. What have we seen in these 3 states that have stronger consumer protection laws in regards to credit reporting? We have seen that my State of Vermont now has the lowest rate of consumer bankruptcies in this country; the State of Massachusetts has the second lowest consumer bankruptcies in the United States; and California comes in ahead of the median. At a time when the United States as a whole experienced the highest rate of bankruptcy cases in history, increasing by 23 percent since 2000, I would say that these three examples gives us proof that stronger State consumer protection laws work.

What about mortgage rates? Well, the most recent data indicate that the State of California has the lowest effective rate for a conventional mortgage in the nation, and Vermont and Massachusetts were well below the median. Sounds pretty good to me.

In addition, let us not forget why the 1996 FCRA amendments were enacted. While identity theft complaints have been the number one complaint to the FTC each year since 2000, and in fact doubled from 2001 to 2002, it was credit bureau mistakes which were the number one complaint to the FTC 10 years earlier. And it was credit bureau mistakes, and complaints about them, that led Congress to the 1996 FCRA amendments. From 1990-92, according to a study by U.S. PIRG, mistakes in credit reports were the number one complaint to the FTC. What will the new crisis be? We don't know for sure. But, if we permanently preempt the States from acting on future problems, we will do this country a great disservice.

Moreover, if some of the new members don't believe Congress intended these preemptions to sunset, I would refer them to the floor statement of the former Ranking Member of the Banking Committee and former Republican Congressman from California Al McCandless who had this to say during the floor debate on this bill:

``The issue over whether the Fair Credit Reporting Act should preempt more stringent State laws or whether it should permit States to enact tougher credit reporting statutes has been one of the single toughest issues for the Banking Committee to tackle. On the one hand, many of our Members like the idea of a national uniform standard. On the other, we do not want to tie the hands of State legislatures. I think that this compromise bill resolves the issue of preemption to most everyone's satisfaction. The Fair Credit Reporting Act as amended by this compromise bill, will be the law of the land for the next 8 years. It will provide consumers across the country with greater protection than is currently offered by any existing State statute. A uniform national standard will make compliance more straightforward and will facilitate the extension of credit to consumers. States will be able to enact more stringent legislation if necessary after 8 years.''

Let me repeat, ``States will be able to enact more stringent legislation if necessary after 8 years.''

That's what was said by the top Republican on the Banking Committee on the floor of the House when a compromise was reached on this bill. Let's stick to that compromise and support this amendment.

Mr. Chairman, I offer an amendment.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, this amendment is cosponsored by the gentlewoman from California (Ms. Waters) and the gentlewoman from California (Ms. Lee). It is also strongly supported by the Consumer Federation of America, the Consumers Union, the Electronic Privacy Information Center, the National Association of Consumer Advocates, the National Consumer Law Center, the New York Public Interest Research Group, the Privacy Rights Clearinghouse, the Privacy Times, and the U.S. Public Interest Research Group. In other words, almost every major consumer organization in America is supporting this amendment.

Mr. Chairman, this amendment deals with an issue which is of growing concern to millions of credit card holders, and that is that, increasingly, credit card companies are engaging in an outrageous bait and switch practice which is costing consumers hundreds of millions of dollars.

This, Mr. Chairman, is how the scam works: In our country today, credit card companies are sending out over 5 billion solicitations a year. Yes, that is right, 5 billion pieces of mail are being sent to Americans every year in order to purchase this or that credit card. Sometimes I think about half of those solicitations come to my kids. Nonetheless, we are all receiving them. As we all know, these mailings very often have bold headlines stating zero percent interests rates for 6 months, or 2.5 percent interest rates for a year, or whatever. We all receive them.

Now, here, Mr. Chairman, is the scam and the bait and the switch. An individual fills out the form and purchases the credit card, and month after month after month, he or she pays the amount owed to the credit card company faithfully and on time. In other words, the individual consumer has fulfilled his or her end of the contract. But in the midst of this, something strange happens. People are paying up on time, but suddenly the interest rate skyrockets, despite the individual making their payment on time.

Now, how can this happen? How can interest rates double or triple when the individual has fulfilled the obligations of the credit card company and made payments on time and never has gone over the credit card limit?

Well, it happens because the credit card issuers, companies like Chase Manhattan, Citigroup or Bank One, have decided all on their own that the consumer has become a greater financial risk, even when that consumer has in every instance paid their credit card bill on time.

What happens is the company obtains information from their customer's credit report which indicates a late payment on another financial transaction, another transaction. Perhaps the consumer might have been late in paying a student loan or a mortgage payment or a medical bill, and because the individual was late paying off another financial transaction, having nothing to do with the credit card they have from this company, the credit card company raises interest rates on their transaction with that individual.

Even more outrageous, credit card companies are raising interest rates when the consumer has never been late on any payment, and here is the crime there: There is an illness in the family. Somebody borrows money to pay off a medical bill; and, because they have committed that terrible crime of borrowing money for a medical reason, interest rates will go on the credit card, although they have never been late on any payment.

That is absurd, that is unfair, and that is a rip-off of the American people. At a time when the Federal Reserve has lowered short-term interest rates 13 times, why do we have consumers in this country paying 16 percent, 26 percent, even 29 percent APR on their credit cards?

Furthermore, Mr. Chairman, the Committee on Financial Services and my Subcommittee of Financial Institutions, of which I am the ranking member on, have heard from a number of witnesses about the inaccuracies of credit reports. According to freecreditinsight.com, over 70 percent of credit reports contain errors, so the credit reporting agency makes a mistake and your interest rates go zooming up.

By charging higher interest rates, the profits of credit card companies skyrocket and consumers grow deeper and deeper into debt. Is it any wonder why bankruptcies in the U.S. are now at an all time high, increasing by 23 percent since 2000?

Mr. Chairman, this is the issue. This is a very simple issue. It is an issue of fairness. If I take out a credit card and the credit card company says to me you have to pay up at a certain time and your interest rates are such-and-such, and I do that every single month, that is what the deal should be. And, if I am late, if I go above the amount of credit that I agreed to, well, I agree, they have a right to penalize me. They do not have a right to double or triple my interest rates when I pay my bills on time and because I took out a loan because my wife might have been ill.

Mr. Chairman, Congress has a responsibility to stop the credit card industry from ripping off consumers by this deceptive and unfair practice. I urge my colleagues to vote for this amendment to restrict the credit card interest rate bait and switch.

Specifically, this amendment would prohibit credit card issuers from using negative information contained in their customers' credit reports, such as a late payment on a student loan, a lower credit score, a new mortgage or new loan to pay for medical emergency or an error in a credit report, as a reason to double or triple credit card interests rates.

Importantly, as part of a compromise worked out at the committee level, this amendment has been crafted so that if a consumer is at least 60 days delinquent on any other credit card or debt, the credit card company could still use that information to increase the interest rates of their customers.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, my friend from Ohio just said why should people who pay their bill on time every month be penalized? I agree with him. But as the gentleman knows, right now people pay their bills on time every single month and, despite that, they can see a doubling or tripling of their interest rates, and that is precisely what we are trying to prevent.

Mr. Chairman, I yield 2 minutes to the gentlewoman from California (Ms. Lee).

Mr. Chairman, I yield 2 minutes to the gentlewoman from California (Ms. Waters).

Mr. Chairman, I yield 2 minutes to the gentlewoman from New York (Mrs. Maloney), the famous author of the Maloney amendment.

Mr. Chairman, I yield myself such time as I may consume.

The sides on this debate are very clear. One side are the credit card companies and the very large banks who are making huge profits from their consumers and, in some cases in our low-interest moment, right now, who are charging 25 or 29 percent a year interest rates. In other words, they are ripping off the American people.

On the other side of this debate and supporting this amendment, are virtually every major consumer organization in America that is saying enough is enough. If people pay their bills on time every month, they should not see their interest rates double or triple. The chairman mentioned that there was bipartisan opposition to my amendment. He was right. But as he knows, there was bipartisan support for this amendment, including the gentleman from Alabama (Mr. Bachus), who was very articulate and supportive of this amendment as chairman of the relevant subcommittee.

Let me simply conclude by saying this: the American people are sick and tired of being ripped off by credit card companies. When they pay their bills every month on time, they should not see their interest rates soar. I would urge the Members of this body, in a bipartisan way, to support the American consumer and pass the Sanders amendment.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I demand a recorded vote.

Mr. Chairman, I thank the chairman of the committee, the gentleman from Ohio (Mr. Oxley), for yielding me this time and who was certainly instrumental in making this a priority and in allowing the committee to take as much time as it did to consider this issue, because it was an important issue.

We have received a statement from the Executive Office of the President, which arrived here today, concerning this legislation; and I want to read from it. It says the administration strongly supports House passage of H.R. 2622. The bill includes many of the administration's proposed consumer protections, including new tools to help fight identity theft. The national credit reporting system has proven critical to the resilience of consumer spending and the overall economy.

That is one thing we heard over and over, that the national credit reporting system was essential to maintain the overall economy and consumer spending. So I am pleased that Chairman Oxley has received this important endorsement from the President.

It has been said that I was the author of this legislation, and, in fact, I would sort of like to claim that, but it is truly a bipartisan bill. We had a blueprint to start with, however, on our ID theft provision, and I would like to recognize at this time and thank the gentleman from Ohio (Mr. LaTourette) for all his work on identifying the theft provision that needed to be in this legislation.

Actually, he introduced, with the gentlewoman from Oregon (Ms. Hooley), the original number of provisions which were taken and put in this bill verbatim. So we did not have to start from scratch. It was a big help that we had a bipartisan bill that the gentleman from Ohio and the gentlewoman from Oregon had worked on. What he brought to the table from the start was a piece of legislation that has since evolved over time, been updated, and I think improved with the help of consumers and the industries and the administration and Members of this Congress to serve as a valuable protection against identity theft, and I commend him on that.

I want to run over some of those protections if time permits. Here are some of the important consumer protection tools. It allows consumers to place fraud alerts in their credit reports to prevent identity thieves from opening accounts in their names, including a special provision to protect active duty military personnel, who we found, sadly, had been particularly susceptible to ID theft. It allows consumers to block fraudulent information from being given to a credit bureau and from being reported by a credit bureau if that information results from identity theft. It provides ID theft victims with a summary of their rights. It gives consumers the right to see not only their credit reports but their credit scores.

Now, that is an important new right which will help people. And I think there was unanimous agreement on this from industry, from consumers, and Members of Congress. This will actually help people save money with lower interest rates. One estimate I have read is $21 billion in savings in home mortgages alone.

It restricts access to consumer-sensitive health information. That is something people said: we do not want our health information to be shared without our permission. It empowers consumers by making it easier to limit unsolicited marketing offers. And it ensures improved accuracy of credit report procedures. It is very important that the information that is shared between creditors and credit bureaus is accurate. It provides consumers with a one-call-for-all protection by requiring credit bureaus to share consumer calls on ID theft, including reporting fraud alerts with other credit bureaus. One call does it all. Important suggestion.

With that, Mr. Chairman, I would also like to commend Wayne Abernathy, Assistant Secretary of the Treasury, and Secretary of Treasury Snow. And once again, I wish to commend the chairman, the gentleman from Ohio (Mr. LaTourette), the gentleman from Massachusetts (Mr. Frank), and all of the 58 cosponsors of this original legislation.

Mr. Chairman, will the gentleman yield?

Mr. Chairman, I would like to affirm the understanding between the gentleman from Ohio (Mr. Oxley) and the gentleman from Massachusetts (Mr. Frank).

In this bill we built upon the amendments that the gentleman from Ohio (Mr. LaTourette) and the gentlewoman from Oregon (Ms. Hooley) had first offered along with the gentleman from New York (Mr. Ackerman) and also the gentleman from Massachusetts (Mr. Frank) to flesh out existing uniform standards.

The bill of the gentleman from Ohio (Mr. LaTourette) and the gentlewoman from Oregon (Ms. Hooley) that we used as our base text expanded on the uniform standards for identity theft. But in that bill, as in ours, there is no intent to go beyond the specific subjects identified in the bill.

So, for example, we do create uniform standards for opening new credit accounts when there are allegations of potential identity theft under our fraud alert and blocking provisions. Because you need a consistent rule that consumers and businesses can rely on when there has been a fraud alert, when there has been an allegation of identity theft. We do not address other subject matters that are not covered such as limits on Social Security number use or criminal penalties for identifying theft perpetrators.

These are issues that we expect the States to continue to work out solutions to. Hopefully we can return to work on those ourselves with Members like the gentleman from Florida (Mr. Shaw) or the gentleman from Arizona (Mr. Shadegg), the gentleman from California (Mr. Ose), the gentleman from Illinois (Mr. Emanuel). And I think the gentlewoman from Oregon (Ms. Hooley) also wants to address some of those issues. Many of them will have to be addressed either in the Committee on Ways and Means or in the Committee on the Judiciary. And they have valid concerns, but it is just from a jurisdictional standpoint.

Mr. Chairman, just to make a clarification, it has been said that this bill will preempt the new California legislation.

Mr. Chairman, as we have said, we need a national standard just like we need a national interstate highway system or other national uniform standards. California saw fit, when they passed this law, to exempt local statutes.

Mr. Chairman, let me say this. The body just heard from the gentleman from Arizona. He actually introduced in the 104th Congress the very first legislation dealing with identity theft. It was the Identity Theft and Deterrence Act, which had criminal penalties in it. Before most Americans, even most Members of Congress, knew of this problem, he knew about it.

We do have a continuing concern about Social Security numbers. If we are going to truncate them, this is a great example of why we need a uniform standard. We cannot have one

State truncating them into six numbers, another State into five numbers where we could not interchange them. I would encourage the gentleman from Arizona to continue to work with the Committee on Ways and Means in dealing with this problem, because it is something that we need to address in identity theft. I applaud and commend him for his effort and encourage him to continue with it.

Mr. Chairman, I rise in opposition to the amendment, and I yield myself such time as I may consume.

Mr. Chairman, let me first stress that the legislation before us on which we are having an amendment by the gentlewoman from California now, and we will have one from the gentleman from Vermont which will follow that, I first want to say to them that there are many important consumer protections in this bill: free credit report, fraud alerts, the one-call-does-it-all, protecting of health information. And I want to commend both of the gentlewomen for their participation in that. So I do want to say that several of their suggestions, several of the things that they advocated are in this legislation.

To the gentlewoman from California, I rise in opposition to disregarding a national uniform standard in the case of, and this amendment covers two different acts; one of them because the act before us simply does not address a lot of the Gramm-Leach-Bliley things that this legislation did not address. I think this Congress will, at some point, take up a review of those things. The second one does deal with ID theft; it is the California legislation that was just passed.

This legislation before us today, if it passes, Californians will have important new protections in ID theft cases. And I think we all, no matter how we feel about the gentlewoman's amendment, I hope we can all agree on that. We do think that this amendment really strikes at the essence of this bill; and that is a broad, uniform standard where what is done in California meets the test of what is done in Alabama, and what is done in Alabama meets the test of what is done in Ohio. If we apply different standards to fraud alerts, if we require different standards of credit reporting agencies or reports, there is so much interaction here between States. It simply drives up the expense, when California, representing a fourth of this Nation, can impose its own standards on a national issue in which, on a daily basis, millions of transactions are crossing State lines.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, will the gentlewoman yield?

Mr. Chairman, is the gentlewoman talking about cases in identity theft? Is that what we are talking about?

Mr. Chairman, I yield the gentlewoman 1 minute of my remaining time.

As to identity theft?

Well, the amendment deals with two specific acts.

One of those acts was just passed by the California legislature in the past few days.

Mr. Chairman, how much time remains?

Mr. Chairman, I yield myself such time as I may consume.

What this amendment does, first of all, it addresses two things; one is SB1 that was just passed in California. And as to affiliate-sharing, that is what is preempted by this legislation. But the present preemption, what we are doing is, we are taking a preemption that presently exists in the law and we are extending it as of January 1. So SB1 as to affiliate-sharing, you cannot do that today in California. You would be, if FCRA was not renewed.

Now, the second component that you have here is California's version of FCRA. And what that would do, the Waters amendment would not only allow California to change its law on an ongoing basis, but beyond what we grandfathered today, and we are grandfathering some of those protections, but it would also resurrect certain laws that are preempted today.

Now, as to a uniform standard, and I want to go back to what we posed to Treasury and what their response was in testimony before our committee, why should uniform national standards be extended to include matters that are designed to help fight identity theft? Why should not States be able to adopt stricter anti-ID theft measures?

Now, since that time, in the manager's amendment, we have allowed a lot of those as long as they do not affect the operation of the FCRA, and the answer that we got from the Federal Reserve, from the Treasury, from the FTC was that it would literally cost millions of dollars; that it is important to have national uniform standards for identity theft prevention measures.

For example, section 202 of the act calls for the development of a national fraud alert system. This requires the credit reporting agencies that operate on a nationwide basis to allow consumers to place various types of alerts in their credit reports when they are victims of identity theft. Now, we require certain things to go into those alerts. If California requires other things, then a company doing business in Ohio or Alabama or New York would not only have to comply with that law, they would have to comply with the California law if they had customers or consumers in California. Merchants dealing with California consumers would not only have to comply with the national law, they would have to worry about the law in all 50 other States with credit reports.

We would have a gradual erosion and chipping away of our national system. And we took volumes and volumes of testimony how the person most penalized by this would be the consumers in paying higher interest rates, also in being a less effective national standard. We would also discourage people from using the National Uniform Credit System to report and to furnish information if they thought they not only had to comply with a national law but a California law.

Finally, philosophically, when California is able to basically define what FCRA will be, then California imposes its will on the national policy. And we have to have a national policy. We have representatives of California here. In fact, probably one-fifth of this body is made up of California representatives, or one-sixth. They participated in this.

I anticipate that when this final vote is taken, the vast majority, as in committee, of Californians will vote for this legislation. But we simply cannot allow any State to dictate how this system will operate in Alabama, Ohio, New York or to impose additional requirements and costs on consumers in California or Massachusetts or other States. Simply put, this amendment, it sounds good but it strikes at the very efficiency, the cost efficiency, of our national credit reporting system. It bogs it down.

I will conclude with this: California recognized this when they preempted the law of several large cities in California who had attempted to impose their own standards simply by saying we cannot. The cost of cities and counties imposing their own standard would be prohibited. California ought to see that that logic also applies on a national level.

Governor Davis, I believe, initially bought into this. Initially when this legislation, some of this legislation was proposed, he did not sign it. He did not support it. He is now facing a recall in a few weeks, but I am not sure that is the time to judge what ought to be done in the middle of a politically expedient campaign.

Mr. Chairman, I reserve the balance of my time.

I will say this: Yes, there are provisions of California law that were preempted, but they are provision where we established a consumer protection on a national basis. And in almost every one of these cases, we went beyond what most States do.

Mr. Chairman, Members are back in their office and they are listening to this debate, and one of the things that they may or may not have heard, but if they did, is that both gentlewomen from California may have been misled on this legislation into thinking that nothing in this law preempted California.

I, in fact, went back to the debate at the time that the gentlewoman from California (Ms. Waters) offered a similar amendment to what is being offered on the floor today, and I want to read to her just by way of refreshing our memory, not to dispute what she says, and quote what she said.

She said, ``I, in good faith, would not like to preempt the work of the State of California, the legislators who have spent so much time. Nor would I like to be on record preempting them with supporting this legislation, when I know that we are going to have a ballot measure that is going to be passed. The people of the State of California are going to pass this ballot measure that will give them further protections. I do not believe that a ballot measure should be preempted here at the national level.''

She offered this amendment. It was defeated 56 to 6, and then as the legislation passed out of the full committee, the gentlewoman from California (Ms. Lee) and the gentlewoman from California (Ms. Waters) joined the gentleman from Vermont (Mr. Sanders) and voted against the whole thing because, in fact, it did preempt something in California. What is it that it preempts?

The legislation that California just passed did three things. Number one, it required opt-in for third party nonaffiliate sharing. Nothing in this legislation changes that. It had new Gramm-Leach-Bliley privacy notices. Nothing in this legislation affects that. There is only one thing and one thing alone that this legislation ``preempts'' California, and that is the required opt-out for affiliate sharing, and that is also the present law. So what was passed in California, as far as the required opt-out for affiliate sharing, the citizens of California did not get anything because the national law today preempts that. It had no effect.

If our national standards expire January 1, yes, they would, but as the gentleman from Ohio (Mr. Oxley) said, Gramm-Leach-Bliley, we are going to address that next year and look at those affiliate sharing things. In fact, the chairman of the committee in the Senate says he is going to look at them, and I think that he probably will. We may address them in conference, but we did not open up that debate. We did not address it with our hearing.

Mr. Chairman, will the gentleman yield for just a moment, before he yields to the gentleman from Massachusetts, because I think it probably has something to do with it.

Mr. Chairman, the original FCRA that the gentleman from Ohio pointed out was passed in 1996. Right? Not 1776. Is that right?

I will admit to the gentleman from Massachusetts we took absolutely no testimony on the American Revolution and none of our witnesses actually tied that in. But I appreciate his input.

Mr. Chairman, let me reiterate again, because I think it is important that the gentlewoman from California (Ms. Waters) know this, nothing in this legislation will, in any way, stop SB1, the California bill, from requiring opt-in for third-party nonaffiliate sharing, nothing. The gentlewoman mentioned third parties, this was all about allowing institutions to share their privacy or their records with third parties. That is not what this bill is about. This bill does not authorize that. This bill does not permit that. There is nothing that does that. There is nothing in this bill that stops the second component of that new California law, and that is the privacy notices. Nothing in this legislation stops that.

What this legislation does is it continues the present law. Gramm- Leach-Bliley addressed the privacy issues, not fair credit reporting, and we are going to address those issues in hearings next year. As the gentleman from Massachusetts said, the chairman of the Senate has said he may address affiliate sharing in the Senate. That is fine. We may address it in conference. We did not address it in this bill.

We did not do anything not allowed by present law. Currently, the present law does not preempt that.

Finally, we established a high bar wherever we established a bar. The gentleman from California (Mr. Sherman) talked about one of the most important things that they did in California, and that is the telephone numbers, giving the telephone numbers. We put that in this bill over strong industry opposition. It is in there. It is an important new right that everyone in 50 States will have, and it is part of a national standard.

Mr. Chairman, the problem that the gentleman from California has identified is a real problem, and it does need a solution. I want to reiterate what the gentleman from Massachusetts said, because I think there is genuine support for finding a solution to this. The last thing we want is for small- and middle-sized businesses to be burdened down and not to report information to the national credit reporting system because this could actually encourage a situation in which people, knowing that they do not participate because of a liability, target them, do business with them and knowing that they are not part of the national credit reporting system. The more information that goes into that system, the more valuable it is. It is often these small- and middle-sized businesses that in fact do not have the sophistication to collect bad debts or to write off bad debts; and when they take a loss, it is more severe because it reflects a greater percentage. So the very businesses that need to be not only furnishing information but drawing information, we need to do everything we can to encourage those retailers and others to participate in the system.

I fear that unless somewhere in conference or in the Senate, and I would say to the gentleman from California, we just simply have not come up with the right language yet, but I know the gentleman from Ohio is very committed to working on this issue. I want to commend the gentleman from California for working on this issue and identifying it and bringing it to our attention, along with the National Retail Association that has made us very aware that this is a weakness of the bill as it now exists.

Mr. Chairman, I am pleased to yield 2 minutes to the gentleman from the First State of Delaware (Mr. Castle), a valuable member of the Committee on Financial Services.

Mr. Chairman, I yield 2 minutes to the gentleman from Georgia (Mr. Isakson).

Mr. Chairman, I yield 3 minutes to the gentlewoman from New York (Mrs. Kelly), the chairwoman of the Subcommittee on Oversight and Investigations of the Committee on Financial Services.

Mr. Chairman, I am pleased to yield 5 minutes to the gentleman from Alabama (Mr. Bachus), the author of this important legislation and the chairman of the Subcommittee on Financial Institutions and Consumer Credit.

Mr. Chairman, I am pleased to yield 2 minutes to my good friend, the gentleman from the great Buckeye State of Ohio (Mr. LaTourette), a former prosecutor, and one of the real leaders in the identity theft provisions, along with the gentlewoman from Oregon (Ms. Hooley).

(Mr. LaTOURETTE asked and was given permission to revise and extend his remarks.)

Mr. Chairman, will the gentleman yield?

Mr. Chairman, the answer is no. The Member from Massachusetts is correct. The identity theft protections in this bill amend section 605 of the Fair Credit Reporting Act. The uniform standard for section 605 is contained in section 624(b)(1)(e) which states that, ``No requirement or prohibition may be imposed under the laws of any State with respect to any subject matter regulated under section 605.''

The section goes on to describe section 605 saying that it relates to information contained in consumer reports, and now to identity theft prevention. That means that 605 is the section for identity theft protections, but the uniform standard requirement is still limited to the subject matters that our provisions actually address such as investigating address changes, fraud alerts, truncating credit card account numbers, blocking bad credit information, establishing red flag guidelines for identity theft prevention, and reconciling address changes.

State identity theft laws that address different issues such as limiting Social Security number use or criminal penalties on identity theft perpetrators are not preempted. We have agreed with the gentleman from Massachusetts (Mr. Frank) to clarify this in the manager's amendment to underscore in the uniform standards provision that describes section 605 that it only relates to the specific identity theft prevention subjects covered and not to other identity theft issues outside of the subject matters covered in the uniform standard.

Mr. Chairman, I yield 2 minutes to the gentlewoman from Pennsylvania (Ms. Hart), a valuable member of our committee from the Keystone State.

Mr. Chairman, I yield 3 minutes to the gentleman from Arizona (Mr. Shadegg).

Mr. Chairman, I yield 1 minute to the gentleman from Alabama (Mr. Bachus).

Mr. Chairman, I yield myself the balance of my time.

Mr. Chairman, in only 1 minute it will be difficult to thank everybody, but let me try. First, the chairman of the subcommittee, the gentleman from Alabama (Mr. Bachus), who has shown enormous leadership, the main sponsor of this bill. He held over eight hearings with over 100 witnesses. The gentleman from North Carolina is right, everybody who wanted to be heard on this bill was heard, sometimes more than once.

I would like to express thanks to the gentleman from Massachusetts (Mr. Frank) for his leadership and direction and for helping us all along the way; to the gentlewoman from Oregon (Ms. Hooley), and to the gentleman from Ohio (Mr. LaTourette), particularly on their efforts on identity theft; and to the gentlewoman from Illinois (Mrs. Biggert) for her contributions as well. It is a real honor roll of members on our committee.

Frankly, over the last 2\1/2\ years, our committee has established a pretty solid record of bipartisan cooperation and production, whether it was the Sarbanes-Oxley bill, or whether it was tourism risk insurance, and the list goes on. This, I think, is one more addition to that honor roll. For that I am extremely grateful to the members of the committee on both sides of the aisle. We have been clearly blessed with a cooperation, and I think it will be reflected in the final vote.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I offer an amendment.

Mr. Chairman, I am pleased to offer this manager's amendment, which reflects extensive negotiations with the committee's ranking minority member, the gentleman from Massachusetts (Mr. Frank), to resolve issues that arose when the committee marked up this legislation in July. The amendment makes largely technical and conforming changes to legislation that the committee overwhelmingly approved by a vote of 61 to 3.

First, the amendment clarifies that while the new consumer protections against identity theft create uniform standards preempting State laws on the same specific subjects, the bill does not preempt subject matters that are outside the scope of those new provisions, such as limits on Social Security number use or criminal penalties for identity theft perpetrators. This approach assures that the strong new identity theft protections we establish in this legislation are applied uniformly across the country, while leaving undisturbed those State statutes that address subjects not covered by the bill's identity theft provisions.

Second, the amendment includes language responsive to concerns raised by several members at the Committee on Financial Services's markup of the FACT Act relating to the new furnisher reinvestigation duties imposed by section 304 of the bill.

Specifically, the manager's amendment gives furnishers the same right to reject frivolous or irrelevant disputes brought by consumers that credit bureaus have under existing law, including disputes already submitted to and resolved by the furnisher or a credit bureau. The furnisher is required to provide the consumer whose dispute it rejects as frivolous or irrelevant with a notice stating the reasons for that determination and identifying any information required to investigate the disputed information.

Third, the manager's amendment gives direction to the Federal regulators who are required to promulgate regulations establishing effective dates for various provisions of the bill to take into account the need for an orderly transition to a system in which consumers will be able to request a free credit report annually, to avoid overwhelming the credit bureaus and impeding their ability to satisfy time-sensitive requests for reports within the 2- to 12-month effective date provided in the legislation.

Let me again thank the ranking member, the gentleman from Massachusetts (Mr. Frank), for the cooperative spirit in which he and his staff have worked with us since the committee's markup to make these important improvements to what was an already outstanding piece of legislation. I urge all of my colleagues to support the amendment.

Mr. Chairman, I ask unanimous consent that debate on this amendment and any amendments thereto be limited to 20 minutes, equally divided and controlled by the proponent and opponent.

Mr. Chairman, if the gentleman will yield, yes.

Mr. Chairman, if the gentleman will yield, that is fine with me.

Mr. Chairman, I designate the gentleman from Alabama (Mr. Bachus) to control the 10 minutes on this side.

Mr. Chairman, I ask unanimous consent that debate on the following amendments, and any amendments thereto, be limited to the time specified equally divided and controlled by the proponent and opponent as follows:

The amendments numbered 2, 5, 7, 9, and 10 in the Congressional Record shall be debatable for 10 minutes;

The amendments numbered 1, 6, 11, 12, and 16 in the Congressional Record shall be debatable for 20 minutes;

And the amendments numbered 15 and 4 in the Congressional Record shall be debatable for 30 minutes.

Thirty minutes, Mr. Chairman.

What number is that?

Number 15? I would give it 35 minutes. How is that for a compromise?

Mr. Chairman, I amend my unanimous consent request to make the amendment number 15 debatable for 35 minutes.

Yes, Mr. Chairman.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, I rise in opposition to the amendment and this really strikes at the heart of what we are trying to do in this legislation to provide national uniformity of our credit system. The Lee amendment would destroy the national uniformity with respect of the ability of the financial institutions and others to share information among affiliated entities.

The Lee amendment does not affect only Californians. Would that be the case, I would not be as particularly concerned, but by grandfathering the California law with respect to affiliate sharing, the Congress would actually abdicate its obligations by allowing California to set the national standard with respect to affiliate sharing. I suggest to my colleagues that that is the responsibility of the national legislature, indeed the Congress.

In essence, many financial institutions will not be able to adhere to multiple sets of rules with respect to affiliate sharing. Then what happens? Some or many will simply adopt the California requirements as the national standard, and ultimately, it becomes California setting national standards, and while I have a great deal of respect for my colleagues from California and the Golden State, I do not think it is a responsible position for the Congress to abdicate that responsibility to the Golden State.

So the question is not necessarily whether there will be a national standard but, in fact, who will set it, and ultimately, the Constitution provides the ability of the Congress to set those national standards.

The Lee amendment also would allow any other State to adopt its own laws with respect to affiliate sharing. Therefore, financial institutions and consumers could find themselves attempting to understand dozens of State laws pertaining to affiliate sharing. The actions dealing with privacy in California should not impact the Federal debate on FCRA, and this is important to understand. The affiliate sharing provisions in the California law are preempted by the existing provisions of FCRA today. So they will be essentially null and void whether Congress reauthorizes the FCRA or whether it does not.

The understanding among all parties in California was that the affiliate sharing provisions would be invalidated under the existing FCRA national standard. The negotiations on the California law and the shift of several companies positions in opposition to neutral was based on opposition to a State-wide referendum and was part of the negotiations that went on in the California legislature. That is not unusual in today's making of laws in any particular State.

In short, grandfathering California law and future laws in other States guts our national uniform standards and harms consumers across the country, could cause an increase in interest rates, inability to get credit, precisely the opposite of what we are trying to do in this legislation. That is why this legislation passed 61 to 3 in the Committee on Financial Services. That is why we have a broad base of support for this legislation across the aisle, among all sections of the country, why we have had strong leadership from both sides of the aisle on this important legislation.

We do not need at this point to get in a situation where we have a rush by other States to simply gut our national standards. That is not what we are about in this body, and all of us who have supported this legislation, who probably cosponsored and voted for it in committee and sent letters, Dear Colleagues, out supporting this legislation need to understand that this is a killer amendment to what we are trying to do in the underlying legislation, and that is why this amendment should be defeated.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, may I inquire as to the time left?

Mr. Chairman, I yield 3 minutes to the gentleman from Alabama (Mr. Bachus).

Mr. Chairman, I yield 3 minutes to the gentleman from Delaware (Mr. Castle).

Mr. Chairman, I yield myself such time as I may consume, as I feel compelled to respond to my good friend from Massachusetts in his somewhat overheated rhetoric regarding the revolution, which I know started in his district. And I am also sorry that we did not hear the famous story about his local banker, Mr. Wentworth. I am sure the other Members, who were not on the committee, have not had an opportunity to hear about it. I also am concerned that the gentleman was unable to hear 100 witnesses in eight separate hearings chaired by our good friend, the gentleman from Alabama.

Regulatory black hole? I would invite my good friend from Massachusetts to read this piece of legislation. This is the strongest piece of privacy legislation I would say ever passed, certainly in recent Congresses. That is why we had 61 members of our committee vote for the final product when it came to the final vote.

So I would say to my good friend, this really is crunch time as far as whether we are going to have a uniform standard that can protect consumers, can set out the rights that they have to protect their privacy, to protect their ability to fight off the horrible crime of identity theft, which affects 10 million Americans. That is what this bill is all about.

And we are dedicated to this national standard that has had so much success since the 1996 act. My friend from Delaware points it out so well, of the progress that we have made. We simply cannot allow ourselves to slip back and allow for States to start to move the goal post and to essentially lower those standards so that we end up with the system that we had before 1996, which would result in higher interest rates, less access to credit, and longer waits for credit. We do not want to go back to the bad old days; we want to move forward. And so I would suggest to the Members that that is what this bill is all about.

So, Mr. Chairman, I have great respect for my friend from Massachusetts, and am actually going to yield some of my time to him, since I miss him so much.

I yield to the gentleman from Alabama.

I would be pleased to yield to my good friend, the gentleman from Massachusetts.

Mr. Chairman, I yield 2 minutes to the gentleman from Alabama (Mr. Bachus).

Mr. Chairman, let me indicate my support for the gentleman's purposes here. I think he makes an excellent point. We had some good debate in the committee as well as here on the floor. As we work toward, hopefully, the conference committee, I pledge my support for trying to find an answer to this difficult problem.

Mr. Chairman, I claim the time in opposition to the Sanders amendment.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, this amendment, first of all, was defeated on a bipartisan vote of 44 to 22 in the Committee on Financial Services.

Chairman Greenspan has raised serious concerns about this amendment. Let me quote, if I may, from a letter from Chairman Greenspan to the gentleman from Delaware (Mr. Castle) who had requested the response from the Fed, and specifically Chairman Greenspan, regarding the amendment offered by the gentleman from Vermont.

He says in part, ``The information gathered by credit reporting companies on the borrowing and payment experiences of consumers is a cornerstone of the consumer credit system in this country. Experience indicates that access to the information assembled by these companies and credit evaluation systems based on that information have improved the overall quality and reduced the cost of credit decisions while expanding the availability of credit.''

He goes on to end in this way: ``In sum, in deciding whether to restrict the use of certain information in credit evaluations, the Congress should be aware that such restrictions are likely to diminish the effectiveness of statistical systems that have played a significant role in reducing the overall cost of credit and widening its availability.''

So what we have here is the chairman of the Fed saying that the Sanders amendment is going to have a chilling effect on the availability of credit, and could drive up the cost of credit at the same time, basically saying to those of us who are good credit risks, we will be asked to pay for those who are less responsible in paying back those credit card debts.

Now, the committee did adopt an amendment offered by the gentlewoman from New York (Mrs. Maloney) that specifically addresses the issue raised by the gentleman from Vermont. It requires any preapproved credit card solicitation to disclose the credit card issuer's ability to adjust the interest rate for reasons other than delinquencies on the credit card account. The notice will educate the consumer and allow him or her to act accordingly.

So in place of this rather draconian approach by the gentleman from Vermont, we have the gentlewoman from New York's amendment, which is part of this bill that we are debating now, adopted in the committee unanimously, that would provide more information, more notice to the consumer, to make certain that they are aware that, should a delinquency occur, it is a possibility that the interest rate could go up.

Essentially, this is an overkill amendment, and the committee found by a two-to-one margin that indeed that was the case. Nothing has changed from the time that the committee adopted the bill to today on the floor.

So the amendment would clearly increase the cost, and probably decrease

the availability of credit for credit card borrowers. Lenders must have the ability to adjust the interest rate on a loan in order to adequately price for that borrower's risk.

It seems obvious that those who are good credit risks are able to obtain credit at lower costs. That is how our system works. If someone who is a good credit risk suddenly imposes additional risk to the lender, the lender should be able to adjust for this increased risk. The amendment would prohibit a credit card issuer from doing this in many circumstances, and what the likely impact of this Sanders amendment would be lenders would be forced to offer credit card accounts at higher interest rates in order to buffer against any potential future risk that any borrower may present.

Frankly, for those of us, the vast majority of us, those who pay their credit card bills monthly and are responsible, why should we be faced with a potential for higher interest rates and less available on that score? Adjusting the price of credit to match the level of risk imposed by the customer is not a bait-and-switch tactic, it is simply good, common sense, and such adjustments are already adequately addressed by existing law, particularly in regard to the Maloney amendment.

To that extent, I oppose the Sanders amendment.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield 2 minutes to the gentleman from Virginia (Mr. Cantor).

Mr. Chairman, I am pleased to yield 3 minutes to the gentleman from Delaware (Mr. Castle).

Mr. Chairman, I am pleased to yield 2 minutes to the gentlewoman from Florida (Ms. Ginny Brown-Waite).

Mr. Chairman, I yield 5 minutes to the gentleman from Pennsylvania (Mr. Kanjorski), the second-ranking member of the committee, the ranking member of our Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, and one of the leaders in shaping this legislation.

(Mr. KANJORSKI asked and was given permission to revise and extend his remarks.)

Mr. Chairman, I yield 3 minutes to the gentleman from Texas (Mr. Hinojosa), another diligent member of the committee who made a great contribution to this bill.

Mr. Chairman, I yield myself such time as I may consume to engage in a colloquy with the chairmen of the full committee and the subcommittee.

Mr. Chairman, as part of this colloquy, I would say to my friends the chairmen of the full committee and subcommittee that many Members are concerned about the scope of the preemption that was just referred to, particularly with regards to identity theft.

So I want to clarify with the author of the bill, the committee chairman, what we are intending and how we have underscored that intention in the manager's amendment which will be coming forward.

Does this bill or this amendment allow the preemption of any State law on identity theft, such as limits on Social Security number use, criminal penalties for identity theft perpetrators, or other identity theft protections that are not specific subject matters addressed by this bill.

I yield to the gentleman from Ohio.

I yield to the gentleman from Alabama.

Reclaiming my time, I thank the gentleman from Alabama (Mr. Bachus). Let me say I appreciate the affirmations from both gentlemen.

Mr. Chairman, let me say now, I want to transition from the colloquy where we were in agreement as to what it says to express my view that I think even with these agreements the bill is, with regard to some existing law in California and elsewhere, more preemptive than it needs to be.

I recognize the value of this colloquy in making clear what those limits are. The gentlewoman from California (Ms. Waters) who has been very concerned about this and who, indeed, alerted me to it earlier, and I unfortunately did not pay as much attention as I should have at the time, she is concerned and I share her concerns, so she will be pursuing this further.

So I just want to say while I am pleased to have this colloquy and to have these understandings, my own personal view, which I realize is not shared by the gentleman of Ohio (Mr. Oxley) and the gentleman from Alabama (Mr. Bachus) is that even with these understandings, there is more preemptive language here than need be. I intend to work with the gentleman from California and other Californians in various ways to try and further reduce that preemption.

Mr. Chairman, let me take back my time. There were two different California issues here. Of course, one would not expect California to settle for only one controversy. The gentleman from Alabama (Mr. Bachus) is correctly alluding to the future issue of so-called SB1. But what the gentleman from California had identified to me before that had passed was preemption of existing California where it predates the recent enactment. And that is the concern that I was alluding to.

Mr. Chairman, I will have to take back my time. I have one more speaker. The gentleman is again talking about the language going forward in SB1. The gentlewoman from Los Angeles and I are now addressing a different set of laws, laws that had already been on the books prior to that, laws passed subsequent to 1996, some of which I think are unnecessarily preempted, although this colloquy has helped.

Mr. Chairman, I yield 3 minutes to the gentleman from Vermont (Mr. Sanders), the ranking member of the subcommittee who worked very hard to make the bill better, but still obviously has some concerns with it. But from the consumer standpoint, the gentleman worked as hard as anyone.

Mr. Chairman, I yield 2 minutes to the gentleman from New York (Mr. Crowley), one of those who had a major input into this bill.

Mr. Chairman, I want to thank the gentleman from North Carolina for taking over for me temporarily and for his very effective leadership throughout the deliberations on this bill.

Mr. Chairman, I rise in support of the amendment.

Mr. Chairman, I support this amendment. It is better than we got. It is not all I want, but it improves the bill, as is appropriate for this particular form of a non-controversial amendment in a technical way. It embodies some improvement in the situation vis-a-vis the retroactive California preemption that was embodied in the colloquy.

The colloquy that the gentleman from Alabama and the gentleman from Ohio and I had is really an explanation of what is in this particular manager's amendment, I think it will improve the bill, and I urge it be adopted.

Mr. Chairman, reserving the right to object, because this came afterwards, what happens to the 5 minutes just used? Is it subsequent to the 5 minutes the gentlewoman just used?

Mr. Chairman, I withdraw my reservation of objection.

Mr. Chairman, I want to acknowledge that the gentlewoman from California is absolutely correct. She did call to my attention during this discussion on this bill the potential problem that she learned about of a retroactive preemption. I missed it. I made a mistake in this case. She was correct and we should have spotted it. I think it is incorrect.

I want to make clear we are talking about two separate issues here on the preemption. There is the preemption prospectively of what is known as SB1. That is not what is at issue here. There will be a second amendment on that.

This has to do with laws that were passed by California subsequent to 1996 that were not subject to preemption at the time that would now be retroactively preempted. I think that is a mistake.

I should note that the gentlewoman read a list of preemptions. In many of the cases I acknowledge what is preemptive does provide some protection. In other words, it is not a case where there is a preemption, all protections are wiped out. In some cases, the protections are functionally equal. In other cases, they may be somewhat different. But these are laws that had been on the books in California. My view was that this bill ought to go forward with the existing preemptions, with some new consumer protections. It was not my intention to extend the preemptions. Through failure to spot

the meaning of some particular words, I must concede that this happened.

I regret that. We have tried in conversations to undo it. We have in the manager's amendment undone some of it, but not enough of it. But as I said, there are still some of the sections preempted and are replaced by other protections, so it is not a case where there will be no protections at all; but it does seem to me still that there are some rollbacks of California law that were unnecessary.

So as a matter of fairness to California, I do not think we should have been preempting without full knowledge.

Now, I do not mean to say that anybody did anything inappropriate. I should have been clearer about what was happening and we simply failed to spot the meaning of four words; that sometimes happens. I support the gentlewoman's amendment. I think the California laws are substantively wise, but that is not the primary point. My primary point is that we should not be here retroactively preempting what a State has done. That is very different than the future of SB1. We will talk about that later.

So I strongly support the gentlewoman's amendment; and throughout this process, because this bill is a long way from being sent to the President, I will continue to do what I can. She is correct, she and the other gentlewoman from California who serves on the committee called this to our attention, they deserved a better response than they got; and I will do everything I can now to correct the error that we made.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, the crux of this is that by this amendment, the gentleman from Ohio (Mr. Ney) seeks to extend preemption beyond where it is under current law. I believe what we attempted to do, with a great deal of success, we made a mistake with regard to California, was to go forward with existing preemptions, to bring them forward, while we added some consumer protections. It is not contested. This amendment would preempt State activity that is not now preempted.

If we simply extended the Fair Credit Reporting Act without this amendment, there are things that the States could do that this amendment will prevent them from doing. Yes, the bill does make some improvements with regard to credit scores and with regard to credit reports. But as an example, and I recognize that the gentleman's amendment does grandfather current State law that goes beyond what the Federal law does, but I cite these two States not because they are going to be preempted, but because they are an example of the kind of actions that States have taken in the past that would be preempted in the future.

Two of our more radical States have taken actions in the past that would be preempted in the future, Colorado and Georgia. What this amendment says is no other State should be as radical and as anti free market and as populist as those two places, Colorado and Georgia. Colorado and Georgia have both seen fit in their legislative processes to extend to their citizens rights with regard to credit scores and credit reports that no other State will be allowed to do if this amendment is adopted.

Now credit scores, in particular, are very important. Members should check with their own constituents and their own State governments. Credit scoring is spreading. People are now finding that credit scoring is being used not simply to give them a loan, but to give them insurance. It has become a very controversial subject. Indeed, one of the things that is in this bill, and I appreciate the chairman having agreed with us that it should be there, is a study that we have commissioned about the legitimacy of using credit scoring as a standard in areas outside the granting of credit.

Should consumers be denied insurance because there was a past credit problem if those consumers are being given insurance that does not involve credit, insurance which needs to be paid for currently?

The gentleman's amendment would prevent States in the future from going beyond where we are with regard to credit scoring. I agree there is need for uniformity in some things, but insurance has always been a State matter. I do not believe we need a national policy with regard to the regulation of insurance. If we do, then we have to change a lot more than simply preempt this because we have left insurance there.

I want to emphasize at this point, I understand this does not preempt what is currently around in some States, but it says in an area that is of growing concern to the States, credit scoring and that has particular concern for members of ethnic minority communities, you may not do anything in credit scoring that we have not done.

We do good things in this bill, but I do not think that it is perfect. I do not think it explores and occupies the entire universe of consumer protections. I believe there are things that the States could do that would be relative to that State that would not impinge on others.

I do not think the Colorado and Georgia rules interfere elsewhere. For instance, in Colorado it says as I said it, that if you are going to be treated negatively because there have been too many inquiries on your credit report, the credit agency has to tell you that so you can take some action to protect yourself. I think that is a reasonable

thing for a State to be able to do. I am glad Colorado has done it. I do not think Colorado ought to be, as it would be under this amendment, the last State to be able to make that protection. I hope that we will stick with what I thought was the outlines of what we were agreeing to here which was to preserve the existing preemptions, but not to extend them.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield myself the balance of my time.

Mr. Chairman, I want to just stress again, and I was reminded by one of our able staff members, in the case of credit scoring, we have in our legislation emulated what California did to some extent.

I will be prepared to agree to a unanimous consent request that subsequently no one will be allowed to mention California in this debate. I would be ready to agree to that. But I will take my one last reference to it and say we have benefited from what the States do. Even if you believe in preemption, this is the wrong time in the evolution of national policy to lock in a preemption with regard to credit scoring. I warn Members, credit scoring is an explosive issue in some areas. It is one which is being expanded beyond the granting of credit. Do not vote for an amendment that will limit your State's ability to respond to what consumers will feel is very important in the area of credit scoring, and that is what this amendment would do. Even if you believe in an ultimate preemption, it is at a very premature stage. Credit scoring is a relatively new issue in terms of its being extended to other areas. I do not see any reason why we should go beyond the existing preemptions. Everyone has said they work very well. All the studies have been of the existing preemptions.

I want to be very clear once again, this is a new preemption. This would have the States lose the right that they now have, and have under the Fair Credit Reporting Act, to protect their citizens, particularly with regard to the area of credit scoring. I think it would be very unwise. I urge the Members to stay with the committee position here and defeat this amendment.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

This is a difficult issue. Let me say first, I very much agree with the gentleman, and this is something that I want us to return to; and I hope the chairman will do this. The credit repair agencies, I agree, are a problem. Whatever system we have, I think there is an abusive practice there. I think the gentleman is right to point to it. I myself check my voice mail when I am down here. I called my Massachusetts voice mail where my phone is listed, and I have a man telling me that he has got my credit records in front of him and he can help me with my debts. Since I pay up pretty regularly, I thought maybe this was identity theft. I called him up, and it was one of these phoney credit repair agencies. I called just to do that.

Let me say to the gentleman, I would be glad to work with him to do legislation, because whatever we do, whatever remedy we give, we are going to have the problem of credit repair. I think he has pointed to a very good problem. I would just say to the gentleman that I look forward to working with him. I cannot support this particular amendment, but I would be glad to work with our chairman on dealing with the credit repair issue.

I yield to the gentleman from California.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, will the gentleman yield?

Mr. Chairman, I would say, particularly with regard to protecting legitimate merchants against abusive credit repair companies, I would be glad to work with the gentleman.

Mr. Chairman, I claim the time in opposition to the amendment.

The gentlewoman correctly described what happened when the gentlewoman raised this issue in committee and we had a discussion of it and I agreed to the substance in the first year. And yes, in the manager's amendment we have, I think, a very good version of the amendment that she had introduced in committee because when you are doing something like this, there is often a problem in the transition. And the gentlewoman is correct that her initiative, we have managed the problem of the transition, namely, we have given to the regulators, in this case, primarily the Federal Trade Commission, with some participation from the Federal Reserve, the ability to do it within the first year.

But I could not agree to making that a permanent feature in the way in which we now have because, for instance, some of the credit reporting agencies might be responsible and gear up for this. I do not want to reward those that might not do it. I think it is very reasonable to say in the first year, and it is also the case when you go from not having this right to having the right, yes, you can expect there to be a slew of first-time requests. But

after the first year there is no reason to think that there is going to be this kind of backlog and a reasonable company ought to be able to manage that.

If something should turn out later down the road to be an unanticipated problem, we have the capacity to deal with it, but I think it would weaken this if we were now to say to the regulators, in effect, on an ongoing basis, they could suspend this indefinitely, suspend this right for a lot of people. So while I supported and was glad to the 1-year transition issue, it does seem to me to go much further and we had and this was a process of give and take, we had agreed I thought on free credit reports as a basic rule. I must say that on our side and in many other places, giving the regulators an ongoing right to suspend what we have advertised as a new right beyond the transition year is very troubling and I would find it very difficult if this were to be included.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield myself 1 minute.

One point, I recognize there could be a spike problem in the beginning. We should underline with regard to these requests, we are talking here about the problem of sending it out. Nobody has to send out a report that does not exist.

In other words, we are not imposing on the credit reporting agencies the duty of compiling the report anew. And I think that is something we ought to take into account. The question is simply whether after that first year they will be flooded, and the request is to simply send a report that exists. If no report exists, no obligation exists. And I do not think that the problem after the first year at this point is going to be so clearly a problem that we ought to write in this suspension. I am prepared to look at it later, but I think it would be a serious error at this point.

Mr. Chairman, I reserve the balance of my time.

Just myself to close, as we have the right to do.

Reserving the right to object, I would point out to the gentlewoman, the last time she and I had this conversation the result was a pretty good amendment to the manager's. I think we have a pretty good track record of working together.

Mr. Chairman, I withdraw my reservation of objection.

Mr. Chairman, I thank the distinguished chairman of the committee and both the ranking member from Massachusetts for this good piece of legislation. Obviously I support the bill before us.

This bipartisan legislation passed the House Committee on Financial Services by a vote of 61 to 3 in July of this year. We do not have a lot of votes with those kinds of numbers in it, an overwhelming endorsement which should obviously be noted by all of us.

The legislation is a good, bipartisan bill. It is a result of six hearings, nearly 100 witnesses and months of deliberations. Through this very thorough process, the Committee on Financial Services has produced a bill that will protect the financial privacy and access to credit for all consumers, and it will help our economic recovery by ensuring businesses have access to accurate information which provides prompt credit to American consumers.

As my colleagues know, one of the forces that has helped sustain our economy in recent years is consumer spending. A critical factor in enabling American consumers to purchase products when they need them and want them is our strong system of consumer credit. That system is supported by the Fair Credit Reporting Act which ensures the factual information is available on which to base the extension of credit. Virtually every business in this Nation and every consumer that has ever used credit depends on this system.

One of my constituents, Michael Uffner, president, chairman and CEO of AutoTeam Delaware, testified before the committee this year. Mike Uffner stressed the importance of access to accurate credit information to serve customers in a timely and fair manner. Americans want to be able to walk into an automobile showroom and purchase an automobile that day based on a prompt approval of a loan based on their credit.

In December, the national uniform consumer protection standards in the Fair Credit Reporting Act will expire. Without this legislation, there would be no national standards for consumer protections and credit availability. This will negatively affect consumer access to credit and the economy as a whole. A failure to pass this legislation would mean higher costs to consumers, who will be paying more for their credit without this legislation. In today's economy, in which we rely on instant credit available to us across the country, we need to have this legislation. This is uniformity, not a state-by-sate issue; and as Congress we must protect the consumers.

Mr. Chairman, again, I want to express my strong support for this bill and urge my colleagues on both sides of the aisle to join the 63 bipartisan members of the House Committee on Financial Services who worked together to craft the bill to protect consumers and give confidence to businesses. This is a proper step to ensure that all of our constituents have access to fair and reasonable credit information.

Mr. Chairman, I rise today to express my strong support for the Fair and Accurate Credit Transactions Act of 2003. This bipartisan legislation passed the House Financial Services Committee by a vote of 61-3 in July 2003. An overwhelming endorsement which should be noted today.

This legislation is a good bipartisan bill, it is the result of six hearings, nearly 100 witnesses, and months of deliberations. Through this very thorough process, the Financial Services Committee has produced a bill that will protect the financial privacy and access to credit for all consumers. Furthermore, it will help our economic recovery by ensuring that businesses have access to accurate information which provides prompt credit to American consumers.

As my colleagues know, one of the forces that has helped sustain our economy in recent years is consumer spending. A critical factor in enabling American consumers to purchase products when they need them and want them, is our strong system of consumer credit. That system is supported by the Fair Credit Reporting Act, which insures that factual information is available on which to base the extension of credit. Virtually every business in this Nation, and every consumer that has ever used credit, depends on this system.

One of my constituents, Michael Uffner, President, Chairman and CEO, of Auto Team Delaware, testified before the House Financial Services Committee this year. Mike Uffner stressed importance of access to accurate credit information to serve customers in a timely and fair manner. Americans want to be able to walk into an automobile showroom and purchase an automobile that day based on a prompt approval of a loan based on their credit.

In December, the national uniform consumer protection standards in the Fair Credit Reporting Act will expire. Without this legislation, there would be no national standards for consumer protections and credit availability. This will negatively affect consumer access to credit and the economy as a whole. A failure to pass this legislation means higher costs to consumers, who will be paying more for their credit without this legislation. In today's economy, rely on instant credit, available to us across the country. There is uniformity, this is not a state by state issue, as Congress we must protect consumers.

This legislation has a number of consumer protections, it helps protect consumer credit while providing access to greater opportunities of credit nationwide. This legislation provides consumers with the tools they need to fight identity theft and to ensure the accuracy of their credit reports.

Mr. Chairman, again, I want to express my strong support for this bill and urge my colleagues on both sides of the aisle to join the 61 bipartisan members of the House Financial Services Committee who worked together to craft this bill to protect consumers and give confidence to businesses. This is a proper step to ensure that all of our constituents have access to fair and reasonable credit and information.

Mr. Chairman, I just think we really need to go back historically in this discussion and take a look at what we were dealing with. I actually hate to say it, but I remember what it was like back before we dealt with uniform standards on credit back when we first started this in 1970. Then in 1996 we went to pure uniformity.

I remember trying to get credit and being told you are going to have to wait for a while before we can do that. I was not the only consumer. Probably 100 percent of Americans or probably 98 or 99 percent were being told they had to wait in order to establish whatever the credit was. Every place you went it was handled separately or differently or whatever.

Congress did something right. Congress did something extraordinarily right when they passed the act initially and then went to the uniform standards with the usurpation of some of the State laws in 1996. I think that is one thing we simply do not want to back off of. Regardless of what is in the California statute, California is the most significant State we have in terms of people and in terms of financial interests, but the bottom line is that to impose the California standards basically on this country could be a problem.

I might also note another reason to vote against this amendment to this legislation is that it states at the end of it: ``or the law of any other State that is similar to the California Financial Information Privacy Act.'' That is a damaging statement because I don't know how you measure ``similar to.''

Other States could come in and try to do something that would upset the uniformity of what we are doing at the Federal Government level.

What we have done now here in Washington is given every single consumer in this country the opportunity to have a uniform plan so that we know how to get information right away. And with the use of technology that can be done. You can buy a car instantaneously, much less establish credit of a lesser nature some place else.

I think California's attempt to impose restrictions in an area that is completely, totally governed by the FCRA's uniform national standards would be a tremendous error.

We had extensive hearings. I think we need to remember that, too, as we make our decision on how to vote on this amendment. We had over 100 witnesses in very expensive hearings. The chairman and the subcommittee chairman did a wonderful job working with the majority party and our own majority party in terms of developing this legislation.

It did pass overwhelmingly in our committee as everybody understood exactly what we are dealing with. In fact, at that committee another member from California offered an amendment to sunset FCRA's uniform national standards at the end of this

year. And during that debate, a specific appeal to give California the ability to establish its own standards either through action by the State legislature or statewide ballot initiative came up. That amendment was defeated 56 to 6.

So, clearly, the individuals in this body who have looked at this issue carefully understand that to undermine it by allowing States to start to opt out and to have different provisions with respect to the fair credit reporting that we have in the country would be an error.

I would encourage everybody in this body to look at this carefully and to vote ``no'' on this amendment to make sure that we protect a very good piece of legislation.

Mr. Chairman, I thank the chairman for yielding me this time.

We had this discussion on this amendment before the Committee on Financial Services, and it did not make a lot of sense then; and, frankly, it does not make a lot of sense now, that we would even consider this amendment.

Essentially, those who are issuing credit, particularly credit cards, that is their business, that is their product, that is what they do. And what they have to look to is the creditworthiness of any of us. We probably all in this room and most people in this country today are carrying some sort of credit card, and probably multiple credit cards in the cases of most individuals. And that is based on one's ability to be

able to pay their debts and be able to manage their accounts. Obviously, the one account is not necessarily the whole answer. The whole answer is exactly where you are financially. They make a decision with respect to where you are in a circumstance, and they issue the credit based on that. With the Maloney amendment, we have a circumstance in which people will be informed that if, indeed, their creditworthiness is challenged, they may have to pay higher interest rates.

The chairman cited a letter which I received on July 22, 2003, from Chairman Greenspan with respect to this issue, and I would just like to read a little further from that beyond what he had read. He said, ``Consumers' performance on credit accounts as well as the number and recency of certain types of inquiries to credit reporting companies are credit criteria that are statistically associated with creditworthiness in evaluative systems that are used for credit granting and pricing. Records of consumers' usage of, and payment performance on, credit accounts with other creditors are fundamental building blocks for evaluations of creditworthiness. For example, where a creditor commits to allow a consumer to make purchases or obtain cash advances from time to time on a revolving line of credit, the consumer's performance on other credit accounts can well presage the credit risk outlook for the creditor's own account,'' and it goes on from there.

It is relatively simple. You are in a situation in which an individual has taken credit based on the circumstances of their own creditworthiness and then has gone out and established their creditworthiness as not what it should be. There are problems or circumstances. Frankly, the credit card companies and others dealing with this do not want to have to do this if they can avoid it because it is easier for them to deal with it on the levels on which it is issued; but there are circumstances in which this happens, or perhaps this discourages it from happening, that is your interest rates might be increased.

So I think for all of these reasons, while this amendment sounds to be well-intended, ultimately would be extremely counterproductive in that I think a lot of the credit which is issued now, because people realize that this may be an outlet in order to make sure that people do not extend their credit otherwise, might in the future not be able to be granted, simply because the credit issuers are going to say this person has sort of a spotty history and yes, we would have done it if we had known we could have increased the interest rate if necessary, but in this circumstance we are not going to issue it. I think you are going to find a lot of people who marginally might have been able to receive credit before are not going to be able to receive it if this amendment were to be adopted. So I encourage the defeat of the amendment.

Board of Governors of the Federal Reserve System,

Washington, DC, July 22, 2003.

Hon. Michael N. Castle,

House of Representatives, Washington, DC.

Dear Congressman: This letter responds to your request of

July 18, 2003, seeking my views as to whether proposed

changes to the Fair Credit Reporting Act might affect the

pricing of credit based upon risk or might potentially bear

upon the safety and soundness of creditors. The proposed

amendments referred to in your letter would limit use in

credit evaluation systems of certain types of information,

such as information regarding the number of inquiries about

the consumer made to a credit reporting company, and would

also restrict consideration of other types of information,

such as information about the consumer's personal credit

experiences with other creditors in credit decisions that

involve the interest rate on an account.

The information gathered by credit reporting companies on

the borrowing and payment experiences of consumers is a

cornerstone of the consumer credit system in this country.

Experience indicates that access to the information assembled

by these companies and credit evaluation systems based on

that information have improved the overall quality and

reduced the cost of credit decisions while expanding the

availability of credit.

Credit evaluation systems rely on information to measure

the credit risk posed by current and prospective borrowers.

In the process of credit evaluation, creditors seek to use

information that helps them better distinguish between good

and bad credit risks. The information items that receive

positive and negative weights in credit evaluation systems

are those that have demonstrated statistical usefulness in

this process.

Consumers' performance on credit accounts as well as the

number and recency of certain types of inquiries to credit

reporting companies are credit criteria that are

statistically associated with creditworthiness in evaluative

systems that are used for credit granting and pricing.

Records of consumers' usage of, and payment performance on,

credit accounts with other creditors are fundamental building

blocks for evaluations of creditworthiness. For example,

where a creditor commits to allow a consumer to make

purchases or obtain cash advances from time to time on a

revolving line of credit, the consumer's performance on other

credit accounts can well presage the credit risk outlook for

the creditor's own account. Similarly, an upsurge in recent

inquiries could indicate that a borrow in financial distress

is seeking to gain access to more credit. Thus, restrictions

on the use of information about certain inquiries or

restrictions on considering the experience of consumers in

using their credit accounts will likely increase overall risk

in the credit system, potentially leading to higher levels of

default and higher prices for consumers. Even with higher

prices for credit, elevated levels of default may raise risk

levels for credit-granting institutions.

In sum, in deciding whether to restrict the use of certain

information in credit evaluations, the Congress should be

aware that such restrictions are likely to diminish the

effectiveness of statistical systems that have played a

significant role in reducing the overall costs of credit and

widening its availability.

I hope these comments are useful.

Sincerely,

Alan Greenspan.