Credit-Reporting Reform Goes Astray in Bill
For four years, Michelle Meier pushed for legislation to tighten the rules in the credit-reporting industry, which has been accused of ruining reputations by failing to correct false and misleading information in some consumer credit files. But when the House Banking Committee recently passed a bill designed to do just that, Meier reversed herself. She vowed to fight the bill rather than support it.
Meier and Consumers Union, the powerful Washington consumer group that she represents, say the bill has changed so drastically as a result of lobbying by banking and credit groups that it’s “worse than nothing.” The bill passed the House Banking Committee earlier this month. Next it goes for a vote in the full House of Representatives.
“Instead of being an improvement, it is a major step backward,” Meier said.
Notably, getting this legislation--called the Consumer Reporting Reform Act of 1994, or HR 1015--passed into law was previously one of Consumers Union’s top priorities for 1994. And even Meier acknowledges that the measure would do some positive things.
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Namely, it would allow consumers to get one free copy of their credit report each year. Most credit bureaus charge about $8 to provide you with a copy of the report. TRW is the one exception. It gives consumers who request it one free copy of their credit report each year.
If you’ve recently been turned down for credit because of negative information in your credit file, all credit-reporting companies are required to provide you with a free copy of their report.
Employers, who occasionally use credit reports in hiring decisions, would not be able to order an applicant’s credit history without getting the applicant’s permission.
The bill would also set a clear time frame for correcting credit-reporting errors. Current law says that inaccurate credit information must be reinvestigated and corrected in a “reasonable” period. The proposed law would require that corrections be made within 30 days.
But in other ways, the bill would seriously undermine some current consumer rights.
For instance, it would make it easier for direct marketers to obtain information from your credit file and use it to market their products and services. It would also preempt many state laws that are tougher on credit abuses, and it would bar states from passing new laws to tighten credit bureau regulations.
Worse still, it would allow something called “affiliate sharing,” in which big companies could compile and disseminate credit information on their customers to affiliated companies. However, these big companies, which would in effect turn themselves into mini credit bureaus, would be exempt from both the consumer-oriented provisions in the new law and the consumer protections currently provided through the Fair Credit Reporting Act.
You currently have the right to get a copy of your credit report and correct any errors in it. If, after reinvestigation, the credit bureau maintains negative information in your file because it is believed to be accurate, you have the right to add up to a 100-word explanation to your credit report.
None of these rights apply to retailers in the Consumer Reporting Reform Act of 1994, even though the act specifically allows them greater abilities to compile and disseminate consumer credit information.
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It’s worth noting that retailers are already setting up their own networks to share consumer credit information, and many believe this is the wave of the future. Some big companies such as Price Club and Toys R Us maintain consumer credit information in their computers. If a customer has bounced a check at one of these companies, for example, subsequent checks may be rejected at the cash register.
These systems have proved so effective that some retailers believe that big companies will have little need for traditional credit bureaus by the end of the decade.
What happens now? Many believe the bill--good parts and bad--will die. The anti-consumer provisions in it were won by hard industry lobbying, but credit card issuers, credit bureaus and banks continue to fight the bill. Since it no longer has strong support from consumer groups, there is no force pushing it forward.
How to Protect Your Credit Record
What should consumers do now that credit-reporting reform appears dead for now? Use the rights you have under current law to protect your credit record, says Michelle Meier of Consumers Union. Specifically:
* Check. Request a copy of your credit record at least every other year from one or all of the big credit-reporting companies--TRW, Trans Union and Equifax. (They’re listed in the Yellow Pages, usually under “credit.”) Most will require that you request the report in writing, including your name, Social Security number, current and past addresses and some other form of identification. Many credit-reporting companies charge an $8 fee.
* Correct. A study by Consumers Union indicates that nearly half of all consumer credit reports have errors either because of merged files, incorrect Social Security numbers or confusion over similar names. About 20% of these errors are serious enough to damage the consumer’s ability to borrow or gain employment, Consumers Union officials say. If your report has errors, correct them following the instructions on the report provided to you.
* Verify. When you send back the corrections, ask the company to provide you with a corrected copy of your report. If they haven’t done so within a month, call them and ask about their progress. Be sure to keep copies of all written communication with the credit bureau and log dates, times and the gist of phone conversations. You may need the information later if the bureau fails to make necessary corrections or if inaccurate information “reappears” on your credit record, as it too frequently does.
* Comment. If a dispute is not resolved in your favor, you have the right to add up to a 100-word statement to your credit file that essentially says you dispute the accuracy of the negative item and why.
