Accuracy of credit report information is integral to our reporting process. In fact, the Fair Credit Reporting Act's first finding is that "The banking system is dependent upon fair and accurate credit reporting." The Act goes on to say that "Inaccurate credit reports directly impair the efficiency of the banking system, and unfair credit reporting methods undermine the public confidence which is essential to the continued functioning of the banking system."
And yet, credit report inaccuracies continue to plague consumers. The U.S. Public Interest Research Group has conducted several studies with respect to credit report accuracy, and in their most recent study in 1998, found that 29% of the credit reports they studied contained serious errors that could result in the denial of credit. This morning we will hear from the Consumer Federation of America, who, I understand, examined credit scores and reports from all three major credit repositories, and found that inaccuracies remain a significant problem in consumer credit reports.
The fact is, we need much better information regarding the accuracy of credit reports.
Erroneous negative information on credit reports can often take a significant investment of time and money to remove. They can also be extremely costly to consumers by significantly raising borrower costs. Not only do such inaccuracies raise the cost of borrowing, but they may also actually cost the consumer a loan. Insurers, mortgage banks, and other financial institutions rely heavily on credit scores to make credit decisions. Inaccuracies in the underlying credit reports can therefore make it more difficult and significantly more expensive for Americans to purchase insurance, homes, cars, and other big-ticket items.
Our first witness this morning is Chairman Muris from the FTC. Chairman Muris, as you may know, Mr. Beales, Director of the FTC's Consumer Protection Division, has testified at two of our previous hearings. At our identity theft hearing, I mentioned to him that I considered it essential that we hear some recommendations from the FTC on ways to improve some of the problems that we have been hearing about with respect to the Fair Credit Reporting Act. There are a number of interested parties believe that additional regulatory and enforcement authority is needed by the FTC to administer the FCRA. In addition to credit report accuracy, I hope that you will address this issue, as well as a number of other issues that have been brought to the Committee's attention, including:
Alleged marketing abuses; the prescreening process; lack of financial privacy; risk-based pricing; and the use of credit scores for insurance purposes, among other issues.
I look forward to the testimony of all of our witnesses.