Time for Credit Horror Stories to End : House measure, if amended properly, would be a valuable safeguard for consumers

Horror stories of consumers being done in by erroneous credit reports run in the thousands. Loans, homes and even jobs have been denied because of inaccurate information compiled by credit reporting companies. Frustrations run high. Remedies are haphazard.

The need for reform is undeniable and long overdue. The House of Representatives will soon consider a bill that would improve the accuracy and privacy of data in credit reports. But the Consumer Credit Reporting Reform Act contains one provision that is contrary to public interests. A key clause in the bill would allow federal legislation to preempt existing state laws, which in many cases provide greater consumer protection.

Reps. Henry B. Gonzalez (D-Tex.), Esteban E. Torres (D-Pico Rivera) and Charles E. Schumer (D-N.Y.) have wisely introduced an amendment that would delete the provision to override state law.

States traditionally have exercised their authority to enact consumer protections that are stronger than federal law. At least 20 states, including California, have laws that set stricter standards on credit reporting. As many as 30 bills to strengthen existing state laws are pending. The National Assn. of Attorneys General has unanimously opposed the preemption language and is urging the adoption of the amendment to strike the clause.

Freed of that provision, the House legislation deserves passage. It would improve the accuracy of credit reports and ensure greater privacy regarding the use and sale of information gathered by credit reporting bureaus.

Consumers would receive one free copy of their credit report each year upon request. Currently a free report is provided only if a consumer is rejected for credit, insurance or employment. The bill also would set an $8 ceiling on the price of a credit report.

Clearing up erroneous information has been a major headache for those victimized by misleading credit reports. The bill requires the three major credit reporting companies to maintain toll-free 800 numbers. Two have already started offering this service.

Credit reporting companies would be given 30 days to complete an investigation. If the data involved were not verified within that time, it would have to be deleted.

Businesses that want to use credit files for employment purposes would have to secure an applicant’s permission before accessing his or her file. Credit companies could not sell file information to direct marketers if consumers did not want their names used for such a purpose.

The House should delete the preemption clause. Then it should pass this worthwhile consumer legislation.