Fair And Accurate Credit Transactions Act Of 2003
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…
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.