Q&A; : What Credit Report Law Will Mean for Consumers
A measure that would make it easier and less expensive to check and correct consumer credit reports is now set to become law, following a hard-fought, four-year battle.
The bill, called the Consumer Reporting Reform Act of 1994, passed the House last week and is expected to sail through the Senate. While there is always the chance of a change, legislators say the “bill has legs” and should be signed into law by President Clinton before year’s end.
Consumer advocates are hailing the measure as a major consumer victory because it will reduce the cost of consumer credit reports, make it easier to delete inaccurate information, provide greater privacy protections and impose stiff penalties on companies that give out error-ridden information.
“This will bring the (Fair Credit Reporting) law up to modern times,” said Sen. Christopher S. Bond (R-Missouri). “We certainly hope it doesn’t get bogged down, because consumers really need to have these protections.”
What exactly will the bill do? Here’s a look:
Q. How much will it cost to get a copy of my credit report when the law goes into effect? A. That will depend why you’re requesting the report.
Generally, you are entitled to one copy annually for a maximum of $3. Credit bureaus could charge up to $8 per report for additional copies in the same year.
But, as under current law, if you’ve been turned down for a bank account, an apartment a job or for credit within the past 60 days, you are entitled to a free copy. If you make corrections on the report, the new law says the credit bureau must also provide you with a second free copy to show the corrections have been made.
Q. Does the law make it easier to dispute inaccurate information?
A. Mainly it sets time limits. Current law says disputed information must be deleted from your file “within a reasonable period of time.” The new law defines “reasonable” as 30 days.
Additionally, the law requires all credit bureaus to operate toll-free phone numbers.
Q. What happens if deleted information is reinserted into my credit report?
A. Under the proposed law, credit bureaus must maintain procedures to prevent accidental reinsertion of inaccurate information. If a creditor certifies the accuracy of previously deleted information, it can be reinserted into your report. But the bureau must advise you if and when this happens. And it must consider “all relevant information” provided by the consumer when examining disputed information.
Q. Who can look at my credit report?
A. Under both current and proposed law, there are four purposes for which a consumer’s credit report can be obtained: to grant a person credit, to consider the person for employment, to consider him or her for insurance, and for other “legitimate business initiated by the consumer.” If you were buying a business, for example, the current business owners may want to look at your credit report before selling.
Q. So any prospective employer can get a copy of my credit report?
A. The proposed law would narrow the instances when prospective employers could look at your credit report, by requiring that the employer get your permission. Additionally, permission could only be requested of applicants for certain types of jobs--mainly managerial positions and those where the individual would be handling large sums of money or items of great value.
If you were denied employment or promotion because of information in your credit report, the employer would have to provide you with a copy of the report, a description of your rights and an opportunity to respond.
Q. What happens if a merchant or credit bureau violates the law?
A. The first step is to notify the credit bureau or credit grantor of the violation. They are given the right to “cure” the problem. If the violator refuses to do so, it faces a series of procedures and penalties written into the bill. They vary depending on which regulatory body--state attorney generals, the Federal Trade Commission or banking regulators--has jurisdiction.
In some egregious cases, regulatory penalties could amount to $10,000 per violation, says Maggie Fisher, a legislative attorney who helped draft the bill.
If a bank or merchant has willfully provided inaccurate and damaging information--and refuses to correct it--consumers can sue separately for civil penalties ranging from $100 to $1,000.
Q. Does the proposed law do anything to stop unsolicited offers of credit from people who are getting “pre-screened” mailing lists?
A. Yes. It says that merchants and banks can use these lists only when they provide a firm offer of credit and when they tell the consumers how they got their names and addresses.
The vendor will also have to provide information about how consumers can have their names removed from these lists.
Other direct-mail solicitors are barred from using pre-screened credit information to sell you goods and services, says Michelle Meier, counsel for government affairs at Consumers Union in Washington. That doesn’t mean they’ll no longer send you mail. They just can’t get information on your spending habits from a credit bureau.
Q. If this bill is passed, when will it go into effect?
A. One year from the day it is signed into law.
Q. Why so long?
A. Credit bureaus and credit grantors will have to alter their procedures and formulate and print a variety of new disclosures. Legislators wanted to give industry adequate time to comply.
