Putting More Teeth in Consumer Rights

`THE revolution in computer technology has made it possible for the major credit bureaus to gather, slice, dice, sort, and resell unprecedented amounts of information about our personal finances,'' says Elgie Holstein, president of Bankcard Holders of America, a nonprofit consumer-education group based in Herndon, Va. Yet the United States Fair Credit Reporting Act, the law that protects the rights and privacy of consumers, hasn't been changed in the 20 years since it was passed.

Last year, when a reporter from Business Week magazine showed how easy it was to get a copy of Vice President Dan Quayle's credit report, the credit industry responded by saying that the reporter had broken the law. Of course the reporter was breaking the law, Mr. Holstein says, but that's not the point: ``The central issue is: Why was it so easy for the person to gain access to the files in the first place?''

Several members of Congress are asking similar questions. Last September, the House subcommittee on Consumer Affairs and Coinage held hearings on the FCRA. In March, the subcommittee's chairman, Richard H. Lehman (D) of California, introduced a bill that would tighten some of the FCRA's provisions. Similar bills have been introduced by congressmen Charles Schumer (D) of New York and Matthew J. Rinaldo (R) of New Jersey.

In addition to restricting access to credit files, the bills would broaden the protections for consumers who are the victims of credit fraud.

All the bills would require companies to settle the reinvestigation of disputed information in a consumer's file within 30 days; the current law requires that reinvestigations be settled in a ``reasonable'' amount of time. The bills would also sharply limit how long some kinds of negative information could be reported on consumers.

``Adverse credit information remains on file for seven years. That's punishment more severe than we reserve for many criminal offenses,'' says Eileen Hemphill, the consumer education and information officer in the Department of Consumer and Regulatory Affairs in Washington.

Under Lehman's bill, the fact that a certain payment on an account was 30 days late would be reportable for only three years.

Both the Schumer and the Rinaldo bills would stamp out the practice of using credit records for marketing by allowing a consumer's records to be examined only when the consumer initiates a transaction or a credit relationship already exists. Lehman's bill would merely require that consumers be allowed to ``opt out'' of target marketing.

Rinaldo's bill would further require a company that rejects somebody because of a credit report to provide the applicant with a copy of that report, a pamphlet telling them their rights under the law, and the names, addresses, and telephone numbers of the three major credit bureaus.

One of the biggest problems consumers face today is that incorrect information in their files is often passed along to other consumer-reporting bureaus.

``There is no guarantee that an incorrect piece of information, once removed from a consumer's file, won't come back to haunt them later,'' says Shirley Rooker, president of Call For Action Inc. in Washington, the umbrella organization for the consumer-help services run by many radio and TV stations around the country.

To address that problem, Rinaldo's bill would require credit bureaus to track down reports that had been issued with incorrect information and correct them.

Realistically, say several Congress-watchers, it may be too late in the legislative session this year for the subcommittee to produce a bill that can be put up for a vote. Many expect the legislation to go through early in the next legislative session, however, because of strong public support for the measures.

``Consumers want stronger privacy laws and corporations don't want them to have them,'' says Evan Hendricks, editor of the Washington-based Privacy Times. ``There is a real crisis brewing in the credit-reporting system. They have run rampant for so long without oversight. Whenever a story runs in the press [about problems], lots of people call in,'' he says.

Representatives of the credit industry say that many of the proposed requirements would be expensive and burdensome. One of the biggest objections is to the requirement that consumers be given a free copy of their credit report each year; currently, there is a $15 fee for each report.

``It is a terribly expensive proposition,'' says Marvin Kaplan, spokesman for the Washington-based Associated Credit Bureaus, the industry's trade group. So many people would ask for their credit reports that the postage alone might run into the millions of dollars a year, Mr. Kaplan says.

Consumer advocates are exasperated by such arguments: ``They should be paying us for performing a quality control, instead of charging us $15 a pop!'' says Jean Ann Fox, president of the Virginia Citizens Consumer Council in Arlington, Va. According to the major credit bureaus, more than 30 percent of consumers who see their reports dispute information the reports contain.

Perhaps the biggest problem is that many consumers do not understand how personal information moves around, and how they can correct information about them that is in error.

``It is important for consumers who are dealing with credit problems and credit bureaus to take extra precautions. They ought not to assume that just because they are in the right their difficulties will be quickly and easily remedied,'' Congressman Schumer says.

``There have been too many instances of inaccurate records, unsatisfactory responses, and invasions of privacy for consumers to trust that the process will necessarily work as it should. Until the proper reforms and safeguards are enacted, those who are faced with credit snafus must exercise an additional measure of diligence in protecting their rights,'' he adds.

To help inform consumers, American Express recently published a pamphlet that shares tips for protecting privacy and credit; TRW, one of the ``big three'' credit bureaus, recently started printing some of its consumer information in Spanish.

But actions like these are only the beginning.

``I suspect there are many people who never find out what TRW is,'' says Massachusetts state senator Lois Pines. Many people who are denied credit never go to the trouble of obtaining their reports, she says: ``The bureaucracy is intimidating to them.''

Previous articles in this series ran on July 18, 25, and Aug. 1.