Members of the House Of Representatives grilled the Federal Trade Commission (FTC) and the Federal Reserve at a hearing over failures to implement laws to help consumers fix errors in their credit reports.
Rep. Paul Gillmor (R-OH) said it "was essential that consumers have an effective way to correct or reverse erroneous information."
The hearing was convened to discuss the progress -- or lack of it -- in improving credit reporting after the passage of the Fair and Accurate Credit Transactions Act (FACT Act or FACTA) in 2003.
The law provided that the major credit bureaus -- Equifax, Experian, and Trans Union -- overhaul their customer support procedures and provide free credit reports each year to consumers who request it.
But according to several of the lawmakers at the hearing, the government is moving too slowly to implement all the mandates passed as part of FACTA.
"The problem of Fed inaction is a consistent theme," said Rep. Carolyn Maloney (D-NY) during the hearing. "So many years to accomplish a congressional task is unacceptable and ridiculous."
Too Many Cooks
Government representatives blamed the delays on multijurisdictional problems -- claiming there are too many agencies governing consumer credit issues.
The FTC, The Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision all handle or govern issues relating to the credit industry. According to the Fed's Sharon Braunstein, getting the many agencies to agree on proposing rules for credit reporting issues "generally is a less efficient way to develop new regulations."
"It can be challenging to achieve a consensus among the different agencies involved in an interagency rulemaking," said Braunstein, the Fed's Director of Consumer and Community Affairs. "As a result, interagency rulemakings can take considerably longer to complete than rulemakings that are assigned to a single agency."
Lydia Parnes, director of the FTC's Consumer Protection Division, said that the FTC had completed 17 of the 20 new mandates given the agency as a result of FACTA, but "had no timetable" to complete the rest. Parnes emphasized the many successes the FTC has had in prosecuting or investigating businesses that violate FACTA, such as its settlement with ChoicePoint over the sale of consumer data to a ring of identity thieves.
"[T]he Commission staff actively monitors compliance with the FACT Act," Parnes said. "[T]he FTC has filed two actions against Consumerinfo.com for allegedly deceiving consumers about its affiliation with the FACT Act free annual credit report program."
Not Impressed
Other witnesses weren't impressed. Evan Hendricks, author of Credit Scores & Credit Reports and the Privacy Times newsletter, criticized the FTC for letting companies like ConsumerInfo.com settle for relatively minor amounts, given the profit they make from selling credit reports.
"I agree with the dissenting opinion of FTC Commissioner Jon Liebowitz from a separate case [when he said] 'I would rather go to trial and risk losing, than settle for a compromise that makes an FTC action just a cost of doing business,'" Hendricks said.
Hendricks also castigated the credit reporting industries for focusing so much on cutting the costs of compliance that they fail to properly vet the reports they sell, leaving them riddled with errors.
"Their resistance to making obviously necessary adjustments [is] at the core of the kinds of maddening inaccuracy problems that consumers continue to experience. Another more recent method of reducing costs is to outsource dispute processing to low-wage countries like the Philippines, Jamaica and Costa Rica," he said in his statement.
Notorious
Credit bureaus are notorious for mixing and matching data from different individuals into credit reports, which leaves individuals with bad credit histories they aren't responsible for and often can cost them new credit or employment. Disputing and updating credit records is a time-consuming and laborious process that involves frequent phone calls and certified mailings to prove someone is a victim of bad data.
Chi Chi Wu, staff attorney for the National Consumer Law Center, testified that credit bureaus "have little incentive to conduct proper disputes or improve their investigations.
"They treat disputes as a nuisance, and the investigation of errors as a money drain, devoting as little resources as possible by using automation that produces formalistic results," wu said. She reiterated the call for stronger and more frequent oversight of the bureaus by Congress and the government, and to fully implement all of the rules under FACTA.
"Ensuring the accuracy of credit reports is ever more critical given the expanding reliance on credit scores in all financial aspects of a consumers life," Wu said. "For this reason, we urge the Regulatory Agencies to consider the recommendations above and issue guidelines that have meaningful protections for consumers."
