Economic Opportunity Protection Act of 2003

Mr. President, on behalf of Senator Boxer and myself, as well as Senators Harkin, Feingold, Durbin, Lautenberg, and Nelson, I send an amendment to the desk.

Mr. President, the bill before the Senate in its current form allows huge conglomerates, with just limited restrictions on marketing, to freely share vast quantities of personal customer information with commonly owned companies even if a consumer asks that the information not be shared.

Let me list the types of information we believe could be shared among companies that have common ownership--called affiliates--under the bill: Information mined from your check and credit card payments such as your political or charitable contributions, your magazine subscriptions, your liquor purchases, the location and identity of stores you frequent; the stocks you own and stock trading patterns; the cash you have in the bank; when your certificates of deposit mature; how much you owe on a credit card and what rate you get; your insurance claims history such as whether you pay your premiums on time, how many claims you have made and whether claims were paid out; how many times a consumer called the company's call center or complained about the company's service; an employee's work history, including performance ratings, use of sick days, vacation, and salary.

To make matters worse, the bill permanently preempts States from taking stronger action.

What we have before the Senate today is a weak privacy standard built for businesses at the expense of consumers which legislatures in all 50 States are forever barred from improving.

I am particularly concerned that financial institutions in California, with the lone exception of the California Credit Union, negotiated and signed off on State legislation resolving this issue, and now the same financial institutions are trying to eliminate the California law with national legislation.

I will spend just a moment on that because it is important. Essentially, the banks and financial institutions in California worked with the State legislature in crafting the Californlia law that has an opt-out for affiliate sharing. The reason they did so was because waiting in the wings was a well-funded initiative to pass an even stronger privacy law. They knew the people of California would pass that privacy law.

Senator Jackie Speier, who was the author of the California privacy bill, has sent Senator Boxer and I a letter. I will read two paragraphs from the letter.

``It has recently come to my attention that the financial services industry has been criticizing the contents of your amendment to S. 1753, substituting the newly-enacted and stronger California privacy standard on affiliate sharing in the `corporate family of companies,' as unworkable and unreasonable. This same industry recently called my California bill `workable and reasonable,' specifically removing their opposition to my measure and lavishing praise upon it, even helping to gather votes. Industry made it clear that my bill met their workability concerns, progress made with their active participation. If my bill was workable for industry in California, then why shouldn't it be the national standard?''

``One industry representative stood with me on that day and said my bill `encompasses all aspects of the workability needed to ensure protection of consumers' privacy,' while another called it `a balanced measure that will provide meaningful privacy protections to consumers while also addressing the workability concerns.' . . . Now the story is different, as industry sees a political opportunity to preempt California's standard on affiliate sharing with a weaker one.''

I ask unanimous consent the entire letter be printed in the Record.

Mr. President, while I was in California, I met with the CEOs of the major banks. It became very clear to me at that time what they were going to do. They were going to come back here and they were going to get a national standard that clearly preempted the California opt-out.

Incidentally, we have modified the amendment I have sent to the desk. I know there was some criticisms of the amendment. We have tightened it up. I think it will stand the test of scrutiny. This amendment protects American consumers' basic privacy rights. It creates a national opt-out standard for affiliate sharing. This would give consumers the choice of whether their personal information can be shared among unrelated companies in a corporate family of companies.

Under the amendment, a company would have to notify a consumer that it intended to share the consumer's information with unrelated affiliates and give the consumer the opportunity to opt out of this sharing. If the consumer does nothing, the institution is perfectly free to share the information.

This amendment is fully sensitive to the real-life demands of business. Where there is a legitimate business need for the information, this amendment provides exceptions to the opt-out.

First and foremost, related affiliates--which are defined as affiliates in the same line of business with the same functional regulator and with the same brand name--are exempt from the opt-out.

Second, the amendment does not affect the ability of companies to have common databases with their affiliates so long as the information is not accessed, disclosed, or used by the affiliate. This is one of the arguments they have raised that this exception is a big loophole. Answer, untrue. While a common database can exist, the amendment explicitly states that an affiliate cannot access or use the information in a manner inconsistent with the consumer's opt-out.

Third, to use consumer information to complete transactions; fourth, to protect against or prevent actual or potential fraud or identity; next, to comply with Federal, State, or local laws and to do data processing, billing, or mailing. This amendment does not affect the ability of affiliated companies to do any of these six things. There are a number of other standard exceptions.

Before I go into detail describing the amendment. I will spend some time talking about the shortcomings of the ``National Consumer Credit Reporting System Improvement Act'' with respect to a person's natural privacy and why this amendment is needed.

At the outset, I recognize the author of the bill, Chairman Richard Shelby. He has met with me and I am grateful for that meeting. He has listened to my concerns. He has made longstanding efforts to balance the rights of individual privacy with legitimate business needs. I deeply respect the commitment of Senator Shelby to consumer privacy. It is well known. He deserves recognition for his work to strengthen the privacy provisions of the Driver's Privacy Presentation Act and for introducing legislation to require an opt-in for affiliate sharing in the 106th Congress.

In the 107th Congress, he joined me as a cosponsor of the Identity Theft Prevention Act. Many of these provisions he has incorporated in the bill on the floor today, and I thank him.

I also thank Senator Sarbanes. I think his record on privacy is equally impressive. He fought hard to create the opt-out standards for nonaffiliated third parties during enactment of the Gramm-Leach-Bliley financial services modernization law. I have the utmost respect for his work on privacy legislation. He is a champion of consumer privacy.

The American people should know this about both of these Senators. It is just that Senator Boxer and I have a very strong view on the need to give consumers this opt-out on affiliates.

I also recognize this bill has a number of provisions I strongly support. It entitles every consumer to a free credit report. That is great. It creates fraud alerts. Great. It creates a national standard for truncating credit card numbers on store receipts. That is great.

I was delighted, because when I introduced identity theft legislation earlier this Congress, the chairman and CEO of Visa, Carl Pascarella, came and held a press conference and indicated that Visa was not going to wait for the bill, they were going to go ahead and truncate all but the last four digits, in any event, on their credit cards. As of June, all the new merchant terminals using the VISA system--affecting tens of millions of Visa credit cardholders--do have that truncation. Shortly, Visa will have all other stations truncating as well.

This morning Senator Kyl and I held a hearing on hackers getting into data bases and how you prevent that from happening. Visa testified, and it is clear they have taken this very seriously with a very elaborate system to get at the problem and to use technology to solve it.

So all these provisions were included in legislation that I have offered over the last 4 years, and I am very grateful to both the chairman and ranking member, who are here on the floor, that they have been incorporated into this bill. So I say, thank you, Senator Shelby; thank you, Senator Sarbanes.

Now, I think, though, that some of these needed provisions just become window dressing, if you really can't protect a person's privacy. The affiliate sharing provisions of the legislation would set that back because the information age is going to move ahead rapidly. That is one of the problems: Technology finds a way of moving ahead so fast before we have a chance to see that there is an appropriate regulatory system in place.

So the debate today over this bill is really part of a great struggle over whether Americans--ordinary Americans--will have basic control over the most elemental parts of their identity, and whether we can stop the misuse and commercialization of their most personal information.

Most Americans, I believe, consider their personal information their private property. I do. I consider my health data my personal data, my financial data my personal data. When I do business with a bank, I do not expect to see my mortgages purchasable on the Internet for $15 or $20. I do not expect somebody to buy my Social Security number over the Internet, or anything of that kind. Nor do I expect the bank with which I do business to give my data to a thousand--and it can be a thousand-- of their affiliates so their affiliates can contact me about traveling with them, investing with them, that they have a better scheme than my checking account. I do not expect that, and guess what. I do not think the majority of Americans do, either.

To give you a sense of the groundswell of public support for privacy, I would like to mention a survey of California voters by Fingerhut Granados Opinion Research on February 7 of this year.

The statewide survey found that by a massive 91-to-7 percent margin, California voters would favor a ballot proposition--and let me quote what it would say--that ``would require a bank, a credit card company, insurance company, or other financial institution to notify a customer and receive a customer's permission before selling any financial information to any separate financial or non-financial company.''

Mr. President, 91 percent would support an initiative to do just that. So they are supporting not opt-out, which is a lower, lesser standard, but they are supporting opt-in when it comes to affiliate sharing. Similar polls across this great land have reflected a landslide of support by Americans for stronger privacy laws.

In my 10 years in this Senate, I have never seen anything like it. There is a groundswell out there, let there be no doubt.

Here in the Senate we have taken some strong action to protect privacy in recent months. In one day, the Senate drafted and passed a bill upholding the ``National Do Not Call'' list. Recently, we passed legislation limiting e-mail spam. In each of these cases, Congress accepted the near unanimous will of the public that there should be limits on when and how commercial entities can invade ordinary Americans' privacy--be it at their homes from telemarketing calls or on their computers from endless e-mail spam.

These concerns are equally present in the debate over affiliate sharing, except the dangers to privacy are so much more insidious. Americans are fully aware of telemarketing calls because their dinners and evenings at home are interrupted by them. Americans are fully aware of spam because their e-mail is clogged with them. In the case of affiliate sharing, most Americans are not aware that their personal information travels from their bank to hundreds or even thousands of other companies.

What is an affiliate and why should we be concerned about the sharing of information among affiliates?

Affiliates are companies related by common ownership. As one example, Travelers Insurance, Diners Club International, Citi Financial, and Salomon Smith Barney are all affiliated companies owned by Citigroup. So the types of businesses that financial institutions can be affiliated with run the gambit: insurance companies, so you can be bugged by insurance companies; securities brokerages; mortgage lenders; travel agencies; retailers; automobile dealers; collection agencies; financial advisers; tax preparation firms. I even think they buy them just for this reason.

In 1999, Congress passed the Gramm-Leach-Bliley Act, which repealed portions of the Glass-Steagall Act that prohibited banks from entering into affiliations with other lines of business. So it became fair game. These financial institutions have moved, in a major way, to affiliate themselves with a tremendous array of businesses. These include insurance and securities brokerages, as I said, mortgage lenders, ``pay day'' lenders, finance companies, and on and on and on.

It could include investment advisers who are not required to register with the Securities and Exchange Commission. These are not mom-and-pop companies. The top dozen U.S. banks and financial institutions alone control thousands of health and life insurance companies, home mortgage companies, car loan lenders, housing developments, securities brokers, and other businesses.

Take a look at this. Citibank alone has 1,736 affiliates which they own. They own a mortgage company, an insurance company, a student loan corporation, Travelers Life and Annuity, Diners Club International, and Salomon Smith Barney holdings. This becomes a veritable goldmine of information trading for them, and the information that is traded is your personal information that lets an insurance company, or a mortgage company, or an investment banking company know where to go to get business.

Morgan Stanley has 628 affiliates, including the Discover Card, Dean Witter Realty, Southeastern Energy Corporation, and a number of insurance companies.

Wells Fargo, headquartered in my city of San Francisco, has 777 affiliates, including, again, a mortgage company, Advance Mortgage, Dial Finance Company, Pacific Rim Health Care Solutions, Tower Specialists, Norwest Auto Finance, and Auto Risk Managers. Again, a veritable treasure trove, a goldmine for the sharing of private, personal information.

Bank of America has 815 affiliates, including T-Oak Apartments, Stanton Road Housing, NationsBanc Insurance Agency, and General and Fidelity Life Insurance. By mining data from their affiliates, these corporations can compile vast dossiers on consumers to use to their commercial advantage. An affiliated company can call you up with full knowledge of your financial history and offer you credit cards, securities, loan consolidation, whether you need it or not, and you have no way to prevent the company from using your most intimate personal information.

Consider the following case: Several years ago, Nationsbank paid fines of $7 million to the Securities and Exchange Commission and other agencies over its sharing of confidential customer financial statements and account balances with affiliated securities firms. Nationssecurities used the account information to identify those bank customers who had expiring certificates of deposit. Sales representatives then marketed to these customers highly leveraged investments, mischaracteriz- ing them as straightforward U.S. Government bond funds. Investors, 65 percent of whom were over 60 years old, lost millions of dollars from this practice.

While Nationsbank paid a fine for its false and misleading sales practices, its sharing of customer information was perfectly legal under existing law. We need stronger laws to protect us from the potential predations of affiliate sharing. Unfortunately, the Senate bill does not rise to this test.

The 1996 Fair Credit Reporting Act standard on affiliate sharing, which is, for the most part, preserved in S. 1753, is not a strong national standard. The 1996 act permits financial institutions to share ``transaction and experience'' information with affiliates without restrictions. This experimental standard has proven vague and unworkable. Even though the 1996 act has been in effect for 7 years, no one can definitively say what the terms ``transaction and experience'' information mean.

When I asked the CRS to explain the FCRA standard, here is what they said:

The [Fair Credit Reporting Act] does not offer a definition

of a phrase, nor does the act provide any guidance with

respect to what types of information may be included.

Furthermore, none of the Federal bank regulators, nor the

Federal Trade Commission, have promulgated regulations

regarding the definition of ``information solely as to

transactions or experiences'' or what information may be

included in such.

Finally, discussions with industry representatives did

articulate a consistently used definition of what constitutes

a ``transaction or experience'' information.

In essence, both the House bill and the Senate bill maintain an exemption for the sharing of personal information, which nobody has defined.

Seven years after passage of the 1996 FCRA amendments, neither Congress, nor the Federal Trade Commission, nor any other agency has defined the term. An empty standard is a nonenforceable standard. I think America's personal privacy deserves better protection.

Consider again the sensitive information which could be shared among unrelated corporate affiliates if we allow the current standard to stand. This

chart refers to the information I have just been over: an employee's work history, including performance ratings, sick and vacation days, safety, whether the consumer is a complainer or not, can go out to all affiliates, your certificates of deposit maturity dates, so somebody can contact you when that certificate matures; stocks you own, so others can approach you. Then there are the personal things, such as political contributions, charitable contributions, your magazine subscriptions.

Think about that. These companies develop a personal profile on who you are and what you like, and then tell other companies about you. Today, I heard testimony at a Senate Judiciary Committee hearing about someone who shopped at Victoria's Secret who had their personal information used in that way. That is what this allows.

The collection of this information is not hypothetical. In Great Britain, unlike the United States, companies are required by law to file a report with the Government on the type of information they collect about consumers.

Here is what Citibank reported to the British Government about the type of information it was collecting about British citizens for marketing purposes. I think it is likely they collect the same information about United States customers. This information includes: personal identifiers, financial identifiers, identifiers issued by public bodies, personal details, habits, current marriage or partnerships, details of other family, household members, other social contacts, accommodations or housing, travel movement details, lifestyle, academic record, membership of professional bodies, publications, current employment, career history.

Mr. President, I am not aware of a time limitation.

Mr. President, I ask unanimous consent that I might be permitted to continue when the Senate resumes.

I thank the Chair.

Mr. President, I am pleased to join this morning in bringing to the floor of the Senate, along with my able colleague from Alabama, the distinguished chairman of the Senate Banking, Housing, and Urban Affairs Committee, S. 1753, the National Consumer Credit Reporting System Improvement Act of 2003.

This legislation is important to millions of Americans as we work to ensure fair, accurate, and effective credit reporting practices, and this legislation is designed to accomplish that objective.

First, I acknowledge and actually commend the distinguished chairman for the comprehensive series of six hearings on this legislation that were held in the Banking Committee. Chairman Shelby structured extremely productive hearings. There was a systematic approach to examining all aspects of this issue, and we heard from a broad range of interests in the witnesses who came before the committee. I think it is fair to say we covered all the bases.

Not all the bases got what they wanted. It never quite works that way when you do legislation. But I think we had a very open, transparent process, with people having an opportunity to present their positions. They were very carefully and thoughtfully considered. In the end, the legislation was reported out of the committee, on a voice vote, unanimously on September 23. I think that vote reflects the response to the chairman's willingness to work with all members of the committee.

Now, it goes without saying, each of us, if we could write the bill by ourselves, would have somewhat different aspects to the bill. There are areas where I would have sought to do more with respect to some consumer issues. But I think we sought to craft a balanced package here. We understand the need for a national credit reporting system for Americans all across the country. It means an opportunity to carry out their economic transactions swiftly, efficiently, and effectively. At the same time, of course, you have to be very alert to ensuring there are protections so people cannot be abused or taken advantage of in the process.

One of the things this legislation does--and I am going to refer to it in some detail very shortly--is it really seeks to address this issue of identity theft which has provoked so much misery and grief for people who are hit by it. It is really the central focus of people's attention now when they consider problems they are having with consumer financial matters. This legislation has some very significant provisions in that regard, and we were able to move those forward with the strong support of the members of the committee.

The Fair Credit Reporting Act, which this legislation, of course, affects provides for the ways in which credit information is gathered, disseminated, and used.

During the hearings, we received a number of recommendations for improving the operation of the act.

Among other things, the suggestions addressed: combating fraud and identity theft, protecting consumers' financial privacy, clarifying the credit scoring process and the use of credit scores, enhancing regulatory and enforcement authority, improving the accuracy of credit reports, improving consumers' understanding of the credit reporting process, combating abusive marketing practices, and finding ways to improve the financial literacy and education of all consumers.

I believe we have taken important steps to address all of these issues. The Senate bill includes a number of provisions that will result in enhanced consumer protections by helping to ensure accuracy of credit report information and fair practices in the collection and use of credit information and in the granting of credit.

Among other things this legislation will: provide consumers with free credit reports annually from the national credit bureaus and provide consumers with an easy method to obtain their free credit reports. This has heretofore not been available. It will require a summary of consumers' rights to opt out of prescreened offers; provide for accuracy guidelines; lengthen the statute of limitations for all FCRA violations; enhance identity theft penalties; extend the situations in which adverse action notices are provided to consumers; prohibit the sale, transfer, or collection of identity theft debt, so that such bad debt will not be perpetuated in the credit system; provide consumers with the right to opt out of marketing that results from affiliate information sharing, with certain exceptions to that right. Finally, of course, it will help enhance the financial literacy of all Americans.

Let me discuss some of these items in a little more detail.

First, accuracy. I don't think it needs much elaboration for people to understand that accuracy of credit reporting information is integral to our reporting process. Erroneous information on credit reports can often take a significant investment of time and money to remove. They can be extremely costly to consumers by significantly raising borrowing costs. Insurers, mortgage banks, and other financial institutions rely significantly on credit scores to make credit decisions. Therefore, inaccuracies in the underlying credit reports can make it more difficult and more expensive for Americans seeking to make major purchases. Yet we heard testimony in those extensive hearings, to which I referred earlier, that credit report inaccuracies is one of the major problems that plague consumers. This legislation addresses that with substantial measures in that regard.

In order to enhance the accuracy of credit reports, the bill directs the Federal banking agencies, the National Credit Union Association, and the Federal Trade Commission to issue guidelines and promulgate regulations with respect to the accuracy and completeness of credit report information.

Second, free credit reports. The bill allows consumers to receive a free credit report annually from each of the three national credit reporting agencies. The bill also requires the FTC to take steps to make it easier for consumers to obtain their free report, including: setting out rules requiring that a centralized, streamlined method be established so consumers can easily obtain free reports, and actively publicizing and conspicuously posting on its Web site--the FTC Web site--the rights available to consumers under the FCRA, including the consumer's right to a free report.

The provision of free credit reports is a significant step in helping consumers

to ensure the accuracy of their credit report information, and helping them identify possible instances of identity theft.

As to prescreening, under the FCRA, credit reporting agencies may generate for creditors prescreened lists of individuals with certain credit characteristics to be targeted to receive a direct mailing. This prescreening process results in much of the unsolicited mail credit offers that consumers receive and about which they often complain.

The success of the FTC's Do Not Call Registry has highlighted the frustration of Americans with unsolicited telephone offers. Under the Senate bill, creditors making such unsolicited offers of credit to consumers by mail will be required to include a summary of the consumers' rights to opt out of prescreening in their offers to consumers. In addition, this Senate bill increases the effective period of the telephone opt-out of prescreening from 2 to 7 years.

With regard to adverse action notices, under the current law, the FCRA, a consumer receives an adverse action notice after denial or cancellation of insurance, a denial of credit, or a denial of employment, based on information in the consumer's credit report. This adverse action notice then triggers a consumer's right to a free credit report and other of CRA disclosures.

Those are the provisions that have heretofore been in the law. What has happened, of course, is that, as the industry has grown more sophisticated in the technology, we are having a move to risk-based pricing. So there are many circumstances in which a consumer may apply for credit, but rather than receiving an outright denial, which is what happened in earlier days, which then was an adverse action and gave the consumer certain rights, the consumer may receive credit at an elevated rate or cost because of information on the consumer's credit report. In these situations, because a consumer has received credit, albeit at more rigorous terms, the consumer is not considered to have experienced an adverse action. Therefore, no FCRA rights are triggered.

This legislation now before us incorporates a recommendation made to us by the Federal Trade Commission to update the provision of adverse action notices so consumers are aware that information in their credit report is negatively affecting the rates they are paying for credit. Therefore, because they become aware of it, it gives them an opportunity to examine that information and to correct it if, in fact, it should be inaccurate.

Finally, in addition, the Senate bill takes important steps to improve the financial literacy of consumers by establishing a financial literacy and education commission within the Federal Government, which will coordinate the promotion of Federal financial literacy efforts, and will develop a national strategy to promote financial literacy and education.

I commend Senators Enzi and Stabenow, along with Senators Corzine and Akaka, and many others, for their leadership in this important area of financial literacy. Senator Enzi and Senator Stabenow and Senator Corzine and Senator Akaka, for a long time--really, since I have known them--have been interested in this issue. We are pleased there is a title in the bill that carries forward important efforts in this regard.

Let me turn to identity theft. I indicated at the outset that this was an issue of increasing concern across the country. Before I do that, I will simply mention a step that we took in this legislation with respect to affiliate sharing. This legislation contains provisions relating to the ability of financial companies to market to their customers based on private financial information of the customer that has been shared among affiliates.

The bill would require affiliates who share customer information for solicitation or marketing purposes--and most of the concern we have heard in this area has been with the use of this information for solicitation or marketing purposes--to disclose such sharing to consumers and to provide them with an opportunity to opt out of the marketing resulting from such sharing of information.

There are exceptions in the legislation with respect to this provision for preexisting customers, for service providers, and for the institutions responding to a consumer request. So on the solicitation for marketing, we are trying to address much of the concern that has been expressed to us, but we have been trying to do it in a very careful way so that the basic purposes of the legislation can be carried forward.

I want to spend just a few moments on identity theft because it is such an important issue now. We heard some absolute horror stories before the committee from witnesses who had experienced identity theft and what it has done to their lives--virtually destroyed their lives. Obviously, we have to deal in every way that is reasonably possible with this issue. It has become an increasing problem in recent years.

The Federal Trade Commission reported that the number of identity theft complaints it received last year far exceeded complaints about any other type of consumer fraud. Americans have serious concerns about this issue. Businesses incur significant costs dealing with identity theft. Honest citizens who are victims of identity theft incur very high costs in money, in time, in anxiety, and in an effort to correct and restore their spoiled credit histories and good names. Someone steals their identity and then uses it, and their whole credit record is being destroyed. Then it is almost impossible for them to function in a normal economic way in our society.

This bill contains a number of important provisions that will address identity theft, and I commend not only the chairman but the members of the committee--all of the members of the committee--who were prepared to focus on this issue and give it a very high priority as we sought to move this legislation forward.

The bill will allow consumers to place fraud alerts on their consumer reports. It will allow military personnel to place alerts on their reports indicating their active duty status. So there is a special concern for our men and women in the military.

The bill provides for free credit reports after a fraud alert. Consumers will be able to get two free credit reports in the year after a fraud alert is placed in their file, as they seek to clean up the situation and to remedy it.

As to account blocking, the bill will allow identity theft victims to direct consumer reporting agencies to stop furnishing information regarding the accounts associated with identity theft.

``One call'' policy: The bill will require that the national credit reporting agencies that receive consumer calls about identity theft direct the complaint to the other national agencies so that identity theft victims need not contact each agency separately. They can make one contact, and then the information is disseminated on identity theft.

With regard to notification of fraudulent information, the bill will require debt collectors who learn that information in a consumer report is fraudulent, maybe the result of identity theft, to notify the creditor of the fraudulent information.

On truncation of account numbers, the bill will require that businesses truncate credit or debit card numbers on electronic receipts.

And on prohibition of the sale of identity theft, the bill protects consumers by prohibiting the sale, transfer, or collection of a debt where a consumer is an identity theft victim with respect to that debt. This will help to prevent identity theft debt from being perpetuated within the credit system.

I want particularly to note the leadership of Senator Cantwell with respect to identity theft. Her identity theft legislation actually passed on the floor of the Senate last year, and this bill incorporates many of the provisions that were in her legislation, including an extension of the statute of limitations and the blocking provisions. I know she has worked closely with Senator Enzi in that regard in trying to address this identity theft issue.

I also want to acknowledge the work that Senator Feinstein has also done on the identity theft question. We are most appreciative of her efforts in this regard as well.

This is just a summary of a number of the provisions of this legislation

which I think extends important protections to consumers. The bill provides a number of important improvements in the credit reporting system.

As I mentioned earlier, this legislation was voted out of the committee on a voice vote. There are certain provisions of the existing legislation that will expire on January 1, 2004. Therefore, it is important this legislation be enacted before the end of this session.

I close by again thanking the chairman for the very fair and balanced way in which the hearings were conducted and in which the markup took place. We sometimes put down or minimize the importance of process. It is not a very catchy word, ``process,'' but a good deal of what we try to do here and when you try to make this democratic process work involves process. It involves how you go about considering issues and how open and fair you are in doing it; how the majority treats the minority and how the minority responds to the treatment it receives from the majority. I believe a good process contributes to good legislation, that it is an important part of formulating legislation and arriving at the building of a consensus to address important problems.

I simply want to say to my colleagues that I think the process that was followed in this instance was as it should have been, and I think the fact we bring this legislation to the floor out of the committee with a unanimous vote is, in part, a consequence of that process. I again thank and commend the chairman in that regard.

I yield the floor.

Mr. President, I thank the leadership for moving to floor consideration of S. 1753, which amends the Fair Credit Reporting Act.

This bill, which was approved unanimously by the Senate Banking Committee, will ensure that millions of Americans continue to have access to affordable credit under a uniform national standard that includes significant new consumer protections.

Similar legislation was passed out of the House of Representatives recently by an overwhelmingly bipartisan vote of 392 to 30. Only occasionally do we have the chance to vote for a bipartisan bill that so ably balances the needs of consumers and business.

Under the leadership of Chairman Shelby and ranking member Sarbanes, we have achieved a product that is good for everyone. In the area of consumer credit, we have a rare convergence of interests. What is good for consumers helps business to expand, which in turn helps to give consumers more choice. The end result is a stronger economy.

I urge my colleagues not to squander this opportunity to send a decisive message that we are committed to protecting and improving a pillar of this Nation's economy, and that is the consumer credit market.

It is a testament to the success of our national credit reporting system that few people have heard of the Fair Credit Reporting Act or FCRA. FCRA is the statute that governs the collection and use of personal credit data that make up an individual's credit report. That credit history, in turn, allows Americans to access the credit markets in whatever form meets their needs. For example, millions of Americans have refinanced their mortgages over the past year to take advantage of historically low interest rates. Others have applied for low-cost auto financing. Most Americans have some form of revolving credit line that helps them to meet certain payment needs.

Very rarely do we stop to ask ourselves why is it that we can walk into a bank, walk into a store or credit union, or apply over the phone or the Internet for credit with a mortgage broker and a few minutes later get approval. These people do not know us, they have never seen us, and yet they have the information they need to make an objective and sound credit-granting decision.

When I was growing up, if you needed a loan, you had to walk down the street to the local banker, who had probably known you your whole life. He lent you money because he knew your family, he knew you were a hard worker, and he trusted you to make a good loan. Or maybe because the banker had certain preconceived notions about you or your family, you did not get credit that you deserved.

Today, that has all changed. Today, the national marketplace for credit has transformed this loan-granting process. Uniform credit information allows lenders, big or small, to make sound lending decisions based on an objective evaluation of past credit performance. These objective indicators are critical to the safety and soundness of our financial institutions.

Poor lending decisions affect all of us through institutional instability and an increased cost of credit.

The FCRA, which was passed in 1970 and amended in 1996, has created a national credit marketplace based on standardized information related to consumer credit histories for all of us, regardless from which state we come. That same statute has standardized consumer rights related to accuracy and access. And the reason we are here today on the floor of the Senate is to improve and to protect this system.

Unless Congress acts, important preemption provisions of the FCRA will expire on January 1, 2004. Under the pressure of that deadline, Banking Committee Chairman Shelby and Ranking Member Sarbanes have done an extraordinary job of creating an exhaustive hearing record on this law, and putting together a bill that both enhances the underlying statute and also permanently extends the preemption provisions to guarantee uniformity, to the benefit of consumers and businesses alike. When I introduced the first reauthorization bill, S. 660, back in March, I had no idea the process would move forward with such bipartisan spirit, with unanimous approval from the Senate Banking Committee, and a 392-30 vote out of the House. But these votes are testament to the critical importance: the urgency of this legislation.

The United States is unique in having what is known as ``full file'' credit reporting. Unlike in other countries, where only consumers with negative credit history have any kind of record, our system encourages data furnishers to report both negative and positive credit history-- all on a voluntary basis. This information allows lenders to make informed decisions about a given consumers credit risk, and to make better, safer, and more objective lending decisions.

This means that when you pay on time, this positive payment history gets reported to centralized credit bureaus. Of course, of you're late or you miss payments, that information goes into your file as well. But unlike the ``no news is good news'' system that exists in so many countries, our full-file reporting system means that consumers can build up a solid credit history through on-time and responsible payments, and that history will follow us wherever we go. So when the time comes to apply for a mortgage or other loan, a lender can see that you know how to handle your finances.

This full-file reporting system has led to another critical development in our credit markets, and that is risk-based pricing. Until fairly recently, credit granting was a binary business. In other words, either you qualified for credit or you didn't. Now, lenders can take a chance on a borrower by charging a higher interest rate to account for that risk instead of simply rejecting a loan application. This type of pricing has helped to fuel America's small businesses. It has also helped those with impaired credit histories or with little history at all to enter the mainstream credit markets, opening up new opportunities.

I would like to spend just a few minutes highlighting the magnitude of what's at stake today with some statistics.

A recent study of the consumer credit marketplace shows the growth of credit card access over the last 30 years, and the results are striking. In 1970, only 2 percent of families in the lowest income bracket had a credit card. In 2001, that number stood at 38 percent. In the highest bracket, the 33 percent of households that had at least one credit card in 1970 had risen to 95 percent.

Even more striking are the statistics related to access to credit by race. Between 1983 and 2001, the number of white families who held credit cards increased by 69 percent. During the same period, the number of Hispanic families increased by 85 percent, and the number of African-American families increased by 137 percent.

It is worth noting the significance of these figures extends far beyond simple borrowing power. Today, you can't rent a car without a credit card. You can't buy movie tickets over the phone without a credit card. And with only a few exceptions, you can't shop on the Internet without a credit card.

The results are just as noteworthy in the area of mortgage lending. Over the last three decades, white non-Hispanic families experienced a 20 percent increase in access to mortgage loans, while minority groups experienced a 65 percent increase over the same period. Those rates coincided, not surprisingly, with a parallel increase in homeownership rates. I think we all understand the important social and economic benefits of homeownership.

The study also notes the critical role that automated underwriting has played in democratizing our credit markets. Automated underwriting, which would be next-to-impossible without a uniform national credit standard, now accounts for over 90 percent of mortgage lending, up from 25 percent in 1996. According to this report, and this is an astonishing statistic:

Before the advent of automated underwriting, approving a

loan application took close to three weeks; in 2002, over 75%

of all loan applications received approval in two or three

minutes.

Even more important, the automated underwriting systems greatly reduce racial and gender bias that in the past resulted in redlining, which unfairly prevented certain groups from owning homes, and which kept too many financial services companies out of markets inaccurately and unfairly deemed to be high risk.

This study also concludes that certain changes to FCRA, and in particular restrictions on the type of data

that might be reported about a consumer, would be especially harmful to consumers at the lower end of the credit spectrum. In particular, minority, lower-income and younger borrowers would be the hardest hit. This conclusion is critical, and gets to the heart of what a uniform national credit reporting system is about. The last thing we want is to reintroduce discrimination into the lending system, which would mean that minorities and low-income people would be forced to high-cost unregulated lenders for credit.

Failure to maintain a uniform national standard would also have a staggering impact on the cost of credit. Even credit cards, which often carry higher interest rates than other types of non-revolving lines, have seen significant decreases in cost, which the study attributes largely to the competition in the market and to prescreening, which is made possible on a large-scale basis by the FCRA. For example, in 1990, only 6 percent of all credit card balances paid interest rates under 16.5 percent. By 2002, 15 percent of all card balances paid rates below 5.5 percent, and 71 percent of all credit card balances carried interest rates under 16.5 percent. In 1990, while more than 93 percent of all credit card balances paid interest rates over 16.5 percent, that number had plummeted to 29 percent in 2002.

I note here that consumers who do wish to receive pre-screened offers have the right to opt out of the system. In fact, S. 1753 makes that opt-out even easier and long-lasting.

While some of these interest rate declines may be due to a general drop in interest rates, much absolutely has to do with companies' ability to differentiate risk among borrowers and to price credit accordingly. Credit scoring models have increased in their predictive power and one result is increasingly competitive cost of credit. Any reduction in the type of information available to lenders would significantly degrade the predictive power of most models.

The study further indicates an increasingly efficient marketplace, leaving aside the role of interest rates. One chart shows mortgage rates back in the early 1980s hovering around 3.5 percentage points above the 10-year Treasury bill. In the last few years, spreads have closed to about 2.5 percentage points. The national credit marketplace has increased competition, with all the positive effects we learned in Economics 101. One of the main reasons we have a competitive national marketplace is because we have a national credit reporting standard that permits consumers, no matter where they live, no matter where they move, to apply for credit and to receive an answer in a matter of minutes. America is the envy of the world in terms of immediate access to credit for all of our citizens.

There are ongoing attempts to mischaracterize the fundamental nature of the FCRA as a privacy statute. And while there are certainly important privacy components to this statute, components which the Banking Committee bill strengthens significantly, the FCRA fundamentally is about the economy. And all too many of us know firsthand that the last thing our economy needs now is an attack on the consumer credit markets.

Under the able leadership of Senators Shelby and Sarbanes, the Banking Committee's bipartisan legislation takes groundbreaking new steps to give consumers greater control over their financial lives; fight the growing crime of identity theft; and promote much needed financial literacy and education efforts. Under the act, every American will be able to get one free credit report a year--a significant milestone. The public will also know that their private medical information will never be used inappropriately in making credit- granting decisions. And the act takes important new steps to empower consumers to reduce unwanted credit solicitations.

It is my understanding that some Members may be offering amendments that include wholesale replacement of significant portions of this carefully-crafted bill with a substitute proposal that has moved through a State legislature under a highly charged and political atmosphere. While I look forward to discussing these proposals, I am frankly very concerned that we not get into a situation where we are playing politics with access to credit. One of these amendments in particular is drafted in such a way that we would end up catching labor unions, churches, universities, charities, and a host of other groups in the FCRA net, a consequence that is clearly unacceptable.

As we move forward with this legislation to strengthen and protect our consumer credit markets,I would urge my Senate colleagues to look to the model of bipartisan lawmaking that has surrounded reauthorization of key provisions of the Fair Credit Reporting Act: a unanimous vote out of the Banking Committee and an overwhelming House vote of 392-30 on final passage. We owe it to our constituents to continue working together to secure final passage of this critical economic bill. I urge my colleagues to join me in supporting this legislation, which is so important to America's consumers and businesses alike.

Mr. President, I send a substitute amendment to the desk and ask for its immediate consideration.

It is our intention to adopt the substitute and ask it be treated as original text but we will wait for the other side before we adopt the amendment.

Mr. President, I am pleased to bring before the Senate S. 1753, the National Consumer Credit System Improvement Act of 2003. This bill was unanimously approved by the Senate Banking Committee on September 23 of this year by a voice vote.

The Fair Credit Reporting Act, is a very important, highly complex law that governs crucial aspects of the consumer credit system. This national system is huge--involving trillions of dollars and millions of people, and is at the heart of the economic well being of this country. The bipartisan bill before the Senate is the product of extensive hearings and deliberations by the Senate Banking Committee. Over the course of the past 5 months, the Banking Committee held six hearings related to the reauthorization of the seven expiring FCRA national standards as well as the effectiveness and efficacy of the FCRA as a whole.

The committee's process helped us identify key areas that required reform or improvement, while at the same time, reinforcing the importance of our national credit reporting system to the operation of our financial markets and economy as a whole. The committee bill incorporates many important reforms while creating permanent national standards. This bill reflects a

careful balance between ensuring the efficient operation of our markets and protecting the rights of consumers.

Over the 6 years since the FCRA was last amended, significant changes have occurred in our credit markets. There are now participants, new technologies, new underwriting practices, and new products. Indeed, there is more that has changed than has remained the same in the operation of the credit markets since the last time Congress considered the FCRA. These changes have been largely positive. They have expanded access to credit to more Americans and permitted loan approvals in hours rather than weeks.

However, these new developments have had some unintended consequences.

Identity theft. As our economy has grown more automated, more electronic transactions occur without the lender and borrower ever meeting face to face. As a result, the transfer of information has become much more pervasive, and a new crime has emerged that takes advantage of this flow of information. This crime is called identity theft, and the incidence of this crime has grown geometrically in recent years.

Identity theft involves a person using someone else's personal information without their knowledge to commit fraud or theft. Practically speaking, the crime involves misappropriation of such personal information as a victim's name, date of birth, and social security number. Identity thieves then use this information to open new credit card accounts, to divert current accounts from victims to themselves, and to open bank accounts in victims' names, among other things. The bad charges and the hot checks usually happen while the victims, banks, credit card companies and other firms are unaware that something is amiss.

In the wake of unauthorized activity and skipped payments, the creditor usually takes action and ultimately cuts the thief off. At this point, the creditor's losses are curtailed, but the nightmare is just beginning for the ultimate victim of identity theft--the individual whose identity the thief assumed. In most instances, the victims first become aware of the fact that they have been targeted when the creditor seeks payment. It is also when they begin to experience the negative consequences--dealing with law enforcement and the collection agencies.

Thereafter, when the results of the criminals' handiwork shows up on their credit reports, they face the considerable task of restoring their good name and credit rating.

This bill attempts to combat this growing crime while also helping consumers restore their credit standing and give victims assistance. The bill contains a number of provisions that deal with identity theft:

S. 1753 directs Federal banking regulators, the National Credit Union Administration and the Federal Trade Commission to develop guidelines and regulations to identify and prevent identity theft;

The bill mandates the inclusion of fraud alerts in credit files, to notify users of credit reports that a consumer could be a victim of identity theft;

The bill will restrict the amount of information available to identity thieves, by requiring the truncation of credit and debit card account numbers on electronically printed receipts; and

S. 1753 increases the punishment of identity theft crimes.

S. 1753 also provides victims of identity theft with meaningful assistance something they do not really have today:

The bill requires the FTC to prepare a summary of rights of identity theft victims;

S. 1753 establishes procedures to block the reporting of and the refurnishing of identity theft-related activities; and it requires the national credit reporting agencies to coordinate and share identity theft complaints.

Another aspect of this bill is accuracy. The committee also focused its attention on how best to ensure the accuracy of credit information. Accurate credit reports are absolutely crucial to the efficient operation of our credit market. Indeed, the changing nature of our credit markets has made accuracy more important than ever. Credit report information is increasingly used as the key determinant of the cost of credit and insurance in this country.

In addition, technology has permitted lenders to use credit information to more precisely assess risks posed by borrowers. Gone are the day when lenders merely stamped loans as ``approved'' or ``not approved.'' Today, the lenders employing credit history data, use mathematical models to analyze credit risk and create risk-based prices for credit cards, mortgages and other products. Use of risk-based pricing allows lenders to extend credit to a broader range of borrowers on credit terms, which match the credit risk they pose. Additionally, its use results in very few credit applicants being rejected. Again this is a very positive development, but not one without a cost.

Currently, credit applicants who are rejected received adverse action notices and access to a free credit reports. This allows such consumers to review the accuracy of their credit report information. Due to risk- based pricing, consumers are often not given the adverse action notice when information contained in their credit report significantly impacts the cost of the credit offer. Rather, they receive a counteroffer with credit offered at a higher price or with more restricted terms.

This development presents a huge concern. The adverse action notice is the primary tool in the FCRA to ensure mistakes in credit reports are discovered. To address this situation, the committee bill requires regulators to promulgate rules to provide consumers notice when, because of information contained in a consumer's credit report, the creditor makes a counter offer to the consumer on terms that are materially less favorable than the most favorable terms available to a substantial portion of consumers.

These notices will make consumers aware of the need to check their reports to ensure their accuracy. The need for ensuring the greatest possible accuracy in credit information does not end with these new notices. For example, in large credit transactions, such as mortgages, rate differences, as the Presiding Officer knows, can translate into hundreds of thousands of dollars over the course of a loan. Even in smaller dollar credit transactions, such as credit cards, rate differences can mean large amounts of money.

With the practice of credit card companies reviewing credit reports and adjusting rates in real time becoming more prevalent, the application of risk-based pricing to consumer finances is practically an everyday event.

Credit reporting information is increasingly used as the key determinant of the cost of credit or insurance. With the rewards for good credit so meaningful in this country, and the penalties for bad credit so costly, it is more critical than ever before that credit reports accurately portray consumers' credit histories.

The committee bill addresses this in several ways. One, the bill provides consumers the right to obtain a free copy of their credit report annually through a centralized system and request of their credit scores or information about credit scores in certain circumstances. This is a big change.

S. 1753 directs the Federal banking regulators, the National Credit Union Administration, and the Federal Trade Commission to develop guidelines to ensure greater accuracy and completeness of information in credit reports.

Furthermore, it directs the Federal Trade Commission and the Federal Reserve to conduct ongoing studies on the accuracy of consumer reports and the resolution of consumer complaints.

Privacy protections are addressed in this bill. S. 1753, the bill before us, contains a number of important new privacy protections for consumers. The committee-designed protections are based on our extensive deliberations and focus on core areas of concern in the privacy arena; namely, direct marketing and medical information.

The bill contains important new medical information protections which significantly limit creditors' use of consumer medical information and restrict the dissemination of medical information in credit reports. These provisions require the coding of medical information that is included in credit reports and prohibits creditors from obtaining or using medical information in determining a consumer's eligibility for credit.

S. 1753 also requires affiliated companies to give consumers notice and an

opportunity to opt out of direct marketing. In addition, the bill requires the regulators to study information-sharing practices of affiliated companies and the level of consumer understanding.

Financial literacy was another topic of our committee deliberations. The committee understands that informed, knowledgeable consumers are best positioned to take advantage of new credit products and to reduce the likelihood of falling prey to negative developments, such as identity theft. Financial education is crucial to the effective operation of our credit markets since the Fair Credit Reporting Act places significant responsibility on the consumer to ensure the accuracy of their credit reports. For these reasons, the bill establishes the Financial Literacy and Education Commission to review and create Federal programs and coordinate the existing financial literacy efforts already established.

The committee has devoted a significant amount of time and energy in this bill to build a complete and thorough record on the highly complex issues involved with the Fair Credit Reporting Act. The legislation we are considering today, which was passed unanimously out of the Banking Committee, reflects the time and consensus achieved during that process.

It contains language that was developed by a number of my colleagues on both sides of the aisle, and I thank all of them for their efforts. I also particularly thank the ranking member and former chairman, Senator Sarbanes, for his insight and the significant contributions he and his staff have added as we have moved through this process over the course of the year.

I believe we have achieved the difficult objective of striking the proper balance between enhancing the rights of consumers and improving the efficient operation of our credit markets.

Mr. President, I now yield the floor to my distinguished colleague from Maryland, the ranking Democrat.

Mr. President, I thank the Senator from South Dakota for permitting me to do this. I ask unanimous consent that the substitute amendment be adopted and considered original text for the purposes of further amendment and that no points of order be waived by this agreement.

Mr. President, I rise in support of the legislation currently being considered, ``The National Consumer Credit Reporting System Improvement Act of 2003.''

Before I get into the substance of the legislation, I would like to acknowledge the stewardship and leadership of Banking Committee Chairman Shelby and Ranking Member Sarbanes in developing this bipartisan proposal--which passed unanimously out of the Senate Banking Committee. Their efforts, and the work of their respective staff, are to be commended.

Through a series of six hearings they took a thoughtful, deliberative approach toward the myriad issues involved in fashioning this legislative proposal. In those hearings we heard from a variety of sources--regulators, industry participants, consumer advocates, and most importantly consumers themselves. Those hearings proved an invaluable tutorial to me and I imagine all the other members of the Banking Committee. More importantly, those efforts, and the comity shown by Senator Shelby, created an environment of bipartisanship in the effort to enhance our national consumer credit reporting system-- which is embodied in the bill now before the full Senate.

The Fair Credit Report Act has been central to the provision of credit in America. It has improved access to credit, and enhanced the security and accuracy of consumer financial information used in assessing creditworthiness. The expansion of our credit system, which the FCRA has helped drive, has proved enormously beneficial to our nation and our economy. It provides consumers with the ability to finance purchases of a car, pay a child's college tuition, purchase a new home, open up a new business or pursue some other lifelong dream.

Credit is the grease that makes the wheels of the economy turn-- particularly our consumer-oriented economy which accounts for nearly 10 percent of our overall GDP. And the FCRA has provided millions more Americans, many of whom lacked the financial resources to pursue their dreams and those who historically have been shut out, with access to our credit system--particularly minority and low-income households.

But we should not lose sight of the fact there's a great deal more that we can do before we claim that the playing field is truly level. With several of its provisions set to expire at the end of this year, it is imperative that Congress act now to reauthorize the FCRA, lest we risk a severe disruption to our economy that could result from a breakdown in our national credit system.

This legislation does that. In fact, it does more than just reauthorize the FCRA--a worthy objective in its own right. It enhances the obligations of those who use and store consumer credit information, it strengthens consumer control over their personal financial and medical information, it strengthens consumer protections against identity theft, and importantly it promotes consumer financial literacy. And this legislation includes important provisions that will strengthen consumer protections against the serious, and growing, threat of identity theft.

It's a serious crime and is rapidly becoming an epidemic. In fact, identity theft is the single largest consumer crime in America, as reported by the Federal Trade Commission. People whose identities have been stolen can spend months or years, at considerable cost, cleaning up the mess thieves have made of their good name and credit record. And while doing so, victims lose employment opportunities, can be refused loans, education, or even be arrested for crimes they didn't commit.

This bill directs federal banking regulators to develop guidelines and regulations to fight identity theft. It allows consumers who have, or may have, been a victim of identity theft to put banks and others on notice to guard against the continued use of their stolen identity through the use of ``fraud alerts.'' It prohibits debts resulting from identity theft from being sold or transferred for collection, and it enhances criminal penalties for identity theft. It requires financial institutions to disclose when their customer data systems have been compromised. And the bill provides consumers with access to one free credit report per year from the credit reporting bureaus.

This access will allow consumers to monitor the accuracy of the information contained in their credit files and ensure that information resulting from identity theft does not end up destroying their financial reputation. These are all important provisions, and they are sorely needed.

I also want to speak to an element of this bill that has received little public attention, but will, I believe, be particularly beneficial in the long run--that is the provisions of the bill which promote consumer financial literacy. The Chairman and Ranking Member of

the Banking Committee noted the importance of the financial literacy provisions in their opening statements. They, and others, including Senators Stabenow, Akaka and Enzi, deserve recognition for their commitment to improving the financial literacy of Americans young and old.

This bill seeks to harmonize the currently fragmented approach the federal government has taken towards promoting financial literacy. It establishes a Financial Literacy and Education Commission to streamline and improve financial literacy and education programs of the Federal Government, including curriculum development, for the benefits of all Americans.

And by providing consumers with a free credit report, and access to the information used by creditors to judge their creditworthiness, this bill equips consumers with the tools to competitively shop for sources of financing and will lead consumers to make better informed, more judicious, credit-related decisions. And, I might add, improved financial literacy will also help consumers protect themselves against identity theft.

The various elements of this legislative proposal that I've just outlined will prove beneficial to consumers, our credit system and our economy. It's a bipartisan bill that does a lot of very good things, and was put together in a balanced manner. Is it a good piece of legislation? Yes. Is it perfect to me? Certainly not. I personally think more can be done to give consumers greater control over the ways in which financial institutions share their personal information with their affiliates, for marketing, solicitations and other purposes. And I think we will need to revisit FCRA at some point to look at issues related to the increased use of credit scores as a determinant of one's suitability to gain employment, obtain car or medical insurance or rent an apartment.

In that regard, I want to thank Chairman Shelby for graciously incorporating into this bill language I offered in committee that calls for a study of the impact credit scores and credit-based insurance score have on the availability and affordability of financial products so that we can explore this issue more broadly as we move forward.

But whatever issues I, or other members, may wish to raise with regard to S. 1753, there is no doubt that this legislation makes significant improvements to current accuracy and security standards of our consumer credit reporting system and our efforts to fight identity theft.

The standards contained in the legislation will make our credit system more robust and provide access to credit to even more Americans who seek it. In doing so, this legislation will prove beneficial not only to consumers, but also more broadly to our nation's economy.

I urge my colleagues to support S. 1753 when it comes up for final passage.