Chairman Shelby, thank you for holding today's hearing on the Fair Credit Reporting Act. While FCRA is not exactly a household name, our nation's credit-granting system is one of the bright points in our otherwise lackluster economy. Outstanding consumer credit has grown from $556 billion in 1970 when FCRA was enacted to $7 trillion today, accounting for over two-thirds of U.S. gross domestic product. Which is why today's hearing is so timely. Unless we act by the end of the year to reauthorize FCRA's preemption provisions, we risk striking a terrible blow to our economy by our inaction.
As today's witness has noted in his very thoughtful written testimony, "the consumer reporting industry, furnishers, and users can all rely on the uniform framework of the FCRA in what has become a complex, nationwide business of making consumer credit available to a diverse, mobile American public." Yet if we fail to act by January 1, 2004, this uniform reporting system could break into as many as 50 credit reporting systems, all with different standards, different requirements and different procedures.
Most people don=t know much about our credit reporting system because it works so well. It doesn=t occur to people to learn about what goes into a credit report until they get turned down for credit. And under the FCRA, those who do get turned down receive all the protections that come with a so-called Aadverse action.@ They have the right to a free credit report; they have the right to dispute what information is contained in that report; they have the right to a quick investigation of the information; and they have the right to a timely correction. And those rights apply to everyone, regardless of whether they live in South Dakota or Alabama.
Full file credit reports are unique to the United States. Unlike other countries, where only consumers with negative credit history have any kind of record, our system encourages data furnishers to report both negative and positive credit history B all on a voluntary basis. This information allows lenders to make informed decisions about a given consumer=s credit risk and to make better lending decisions.
These decisions are good for consumers in a variety of ways. For some, full file reporting may allow a lender to take a chance on a consumer whose positive credit history may offset a past credit impairment. For others, more complete information may help a lender to decide not to extend more credit than a consumer can handle.
By the same token, full file reporting helps lenders make sensible decisions that keep our financial institutions safe and sound. Poor lending decisions affect all of us through institutional instability and an increased cost of credit.
Other elements of FCRA are also critical to our credit-granting system. For example, in the modern economy, it=s important to maintain a nationwide standard under which corporate affiliates may share information. Experts such as Chairman Greenspan have emphasized the need for national businesses, which serve customers in all 50 states, to have uniform standards across those 50 states. Failure to maintain this uniformity would jeopardize many of the efficiencies gained through information technology and wider consumer choice.
Mr. Chairman, I believe that a uniform national credit reporting system must be maintained, which is why I introduced the Economic Opportunity Protection Act of 2003, S. 660, which would extend the preemption provisions currently contained in FCRA.
At the same time, I commend you for holding the first in what I hope will be a series of hearings on the FCRA. As Congress noted when it created the FCRA, consumer credit "is dependent upon fair and accurate credit reporting." Therefore, it is appropriate for Congress to look at whether the statute is working properly and whether any of the provisions need to be amended to reflect changes in the marketplace.
I understand many on this Committee and in the Administration have a particular interest in identity theft, and I share this concern. In fact, I believe that a uniform national credit reporting system, if used properly, can be one of our most effective weapons to combat this growing problem. I hope as part of this year's discussion about FCRA, we can work together to develop solutions to what is a relatively new, yet extremely damaging, crime.
That said, I am disappointed that the Administration has yet to develop a position on this critical issue. It appears that the Federal Trade Commission is also unwilling to tell this Committee its position on whether it is important to maintain a uniform national standard for our credit reporting system. I would urge the Administration over the coming weeks to devote more attention to the imminent expiration of FCRA preemption provisions and to develop a recommendation that can inform Congress' deliberation on this issue.
Mr. Chairman, I look forward to today's testimony.