Congress urged to speed up laws on credit industry
Lawmakers press for easier process to clear errors
WASHINGTON -- Congress may need to fast-track new laws governing the credit rating industry to make it easier for consumers to correct damaging errors in their credit reports, Representative Barney Frank, the House Financial Services chairman, said at a hearing yesterday.
Frank, a Democrat from Newton, said the federal government was not moving quickly enough to regulate the consumer credit bureaus and opened the possibility of new legislation later this year.
The hearing was called in response to a Globe Spotlight report in December that exposed the uphill battle encountered by many consumers when they seek to remove inaccurate information from their credit files.
The report found that some consumers had repeatedly been denied mortgages and car loans because of debts listed on their credit report that they never actually incurred.
Representatives of the credit rating industry testified that error rates in credit reports are declining but that with millions of transactions every month some mistakes are inevitable. "The term accuracy is difficult to define," said Stuart K. Pratt, president of the trade Consumer Data Industry Association, in a statement to the committee.
The three major consumer credit agencies -- Experian, TransUnion, and
"To some extent, the credit rating agencies are taking a hit for the furnishers," Frank said. Enforcement against those who supply credit information, however, has been rare, the committee was told.
An official for the Federal Trade Commission, Lydia Parnes, testified that the FTC had pursued action against about 20 data furnishers over the last decade, and collected about $20 million in penalties. Sandra F. Braunstein, an official at the Federal Reserve, which regulates the banking system, said the agency had never imposed a fine on a bank for providing bad information to credit bureaus.
"We may need to revisit the strength of the sanctions that are imposed," said Representative Al Green, Democrat of Texas, after the hearing. "They have to know there is a price to pay for filing false information."
Braunstein, in response to questions from committee members, cautioned against "overburdening" data furnishers, many of which are small businesses, with too many new rules. More complex regulations might cause some retailers to drop out of the credit rating system completely, she said, which could have the unintended effect of making it more difficult for lower-income consumers to build a good credit history.
Several members of the committee blamed the federal government for its slow implementation of the FACT Act, a law designed to improve the credit reporting system that was passed in 2003 but still has not been fully implemented by federal regulatory agencies. The rule governing how furnishers handle disputes has not been issued.
Frank said the process had been slow because Congress has ordered six different agencies to cooperate on the rule. "We've inadvertently decided to recreate the US Senate in terms of lack of ability to come to a decision," Frank said, jokingly.
Frank said that he hoped the hearing would spur the agencies to finish the rule, but that new legislation may be required to put the FTC in charge of implementation. "If we don't see any progress in three months, I will be pushing for a bill to just give it to the FTC," he said after the hearing.