WASHINGTON -
In recent years consumers had begun purchasing copies of their once-secretive credit reports from the three credit bureaus; Equifax, TransUnion and Experian. And since passage of the Fair and Accurate Credit Transactions, or FACT Act in 2003, consumers have been able to obtain free copies of their credit reports. This has apparently opened up the whole system of consumer credit to thousands, if not millions of disputes, both large and small, between consumers, their credit bureaus, and providers of credit: credit unions, banks, insurers and others. During last week's hearing before the House Financial Services subcommittee for Financial Institutions, one witness reported that Equifax is now party to more than 2,000 consumer suits over their credit reports, and the other two bureaus have seen a similar wave of litigation.
One member of the subcommittee, Rep. Jeb Hensarling, Republican of Texas, suggested the FACT Act, aimed at protecting consumers from erroneous or inaccurate credit reports, has also contributed to a significant amount of what he called predatory borrowing, in which consumers challenge negative or unflattering information about them that is true.
Rep. Carolyn Maloney, the New York Democrat who chairs the subcommittee, said to help relieve some of the burdens on consumers she was introducing a bill to allow consumers to "freeze" their credit if they believe it is inaccurate or at threat for identity theft. The credit freeze would not affect the ongoing use of credit cards or other existing lines of credit, but would prevent the opening of any new credit lines, according to Maloney.
The credit freeze "should be available to everyone and is the only means available to prevent wrong information from ruining your credit and helps prevent identity theft," Maloney said.
At least a dozen states have already passed legislation providing for credit freezes, Maloney said. Maloney's credit freeze bill was introduced in the last Congress when it was aimed at the growing number of identity fraud, but it was never voted on.
The Maloney bill is one of a number of credit-reform measures introduced by the new Democratic Congress. Others would bar certain credit card practices; expand disclosures on credit cards; and prohibit certain subprime, or predatory mortgage practices.
During recent hearings, the Democrats received strong support for some of their reforms by the Republican minority, strengthening the chances the bills will get voted on.
