The Federal Trade Commission told a House subcommittee that strong enforcement of the Fair Credit Reporting Act (FCRA) remains a top priority for the FTC, and that the agency is committed to educating consumers and businesses about consumer reports, credit scores, and their rights and obligations under the FCRA.
The Commission’s testimony before the House Committee on Financial Services’ Subcommittee on Financial Institutions and Consumer Credit, delivered by Robert Schoshinski, Assistant Director of the Division of Privacy and Identity Protection, states that data compiled and maintained by consumer reporting agencies, or CRAs, is used to make critical decisions about the availability and cost of various products and services, including credit, insurance, employment, and housing.
“Errors in consumer reports, however, can cause consumers to be denied credit or other benefits or pay a higher price for them, and may lead credit issuers to make inaccurate decisions that result in declining credit to a potentially valuable customer or issuing credit to a riskier customer than intended,” the testimony stated.
The FTC, the nation’s consumer protection agency, has played a key role in the implementation, enforcement, and interpretation of the FCRA, which prevents the misuse of sensitive consumer information by limiting recipients who have a legitimate need for it, improves the accuracy and integrity of consumer reports, and promotes the efficiency of the U.S. banking and consumer credit systems, the testimony stated.
The testimony notes that the FCRA imposes a number of obligations on CRAs that compile consumer reports for use by issuers of credit, insurance companies, employers, landlords, and others in making eligibility decisions affecting consumers. The Act also imposes obligations on those who furnish information about consumers to the CRAs, and provides important rights to consumers, such as the right to obtain copies of their files from CRAs, in many instances at no charge; purchase a credit score; and opt-out of pre-screened offers of credit and insurance based on information in their consumer report.
The testimony also outlined the FTC’s recent work to enforce the FCRA – including this summer’s consent orders against two companies that allegedly violated the Act. One consent order imposed an $800,000 civil penalty against the data broker Spokeo, Inc., while another required a CRA providing employment background screening, HireRight Solutions, Inc., to pay civil penalties of $2.6 million. In both cases, the companies were also prohibited from future FCRA violations. During the last 10 years the agency has brought more than 30 enforcement actions protecting consumers from FCRA violations, the testimony noted.
The testimony also highlighted the problems faced by consumers with limited or no credit history, often described as having “thin files.” In 2004, the FTC issued a report on thin files, concluding that there is a sizable consumer population that is difficult to evaluate for credit purposes because they have little or no credit history. This population includes groups such as recent immigrants, young people living on their own for the first time, and people who either do not use credit or rely on alternative credit sources like payday loans. Credit issuers and others have advocated for the inclusion of additional data sources in credit files. The testimony stated that “the Commission remains interested in the various products in the marketplace that currently use alternative data to provide consumers with greater access to credit opportunities.”
In addition, the testimony focused on the impact of medical debt on consumer reports and credit scoring models. “The Commission is keenly aware of the issues presented by the reporting of medical debt to CRAs and how such reporting can impact consumers and their credit scores.” Although the Commission has not taken a position with respect to any federal or state legislation on this issue, it continues to monitor developments in this area, the testimony states.