A major confrontation is brewing on Capitol Hill over renewal of the Fair Credit Reporting Act, known in the financial services industry by its acronym, FCRA.
The confrontation pits those who want to see reauthorization of the law in order to maintain uniformity on credit reporting and collecting throughout the nation against states rights advocates, who would rather see the individual states set their own standards. The law, which was passed in 1970, is due to expire Dec. 31 unless Congress acts.
Surrounding the issue is the expanding debate over privacy rights and the uses of confidential financial information by credit unions, banks, insurers and others. The privacy issue is emerging again in Capitol Hill, just five years after Congress gave the states wide latitude to set their own privacy laws as part of the Gramm-Leach-Bliley Financial Modernization Act.
The issue is creeping into deliberations on several major pieces of legislation, including the regulatory relief bill that was passed by the House Financial Services Committee last week. Several committee members proposed amendments that would affect the collection and use of financial data only to have their colleagues refer the issue to the effort to reauthorize the FCRA.
One proposal, for instance, would have required financial institutions to notify customers within 30 days any time they report an adverse credit occurrence or allegation of impropriety to a credit agency. The thinking behind that proposal is such referrals are not always disclosed to the customers, preventing the customer from refuting them or, at least, acknowledging their existence when seeking credit later on.
Senate Banking Committee Chairman Richard Shelby (R-AL), one of the leading privacy advocates in Congress, is expected to make a big push to strengthen federal standards on the use of confidential information as part of the reauthorization to renew the FCRA. It is not known yet what vehicle Shelby will use, but the FCRA one is a distinct possibility. One CU lobbyist referred to the brewing confrontation as a "perfect storm" for privacy rights.
Credit unions are hoping to have the reauthorization passed by year-end, asserting that a patchwork system, such as one where every state has its own rules, would be difficult, slow and costly.
The FCRA reauthorization is also seen by lobbyists as a potential vehicle for other financial institution-related issues that may be left off of other bills or have a negligible chance of passing, otherwise. Of course, anything that is attached to the Act must be considered relevant. Relevance, as far as Congress is concerned, is always in the eye of the beholder.