The failure of Congress to reauthorize the Fair Credit Reporting Act could have dire consequences for consumers and financial institutions alike by wreaking havoc on the credit market, a leading credit union executive warned lawmakers last week.
Mike Vadala, president and CEO of Summit Federal Credit Union in Rochester, N.Y., recently urged members of the House Financial Services Subcommittee on Consumer Credit, to permanently reauthorize the credit law when it expires at year's end in order to provide a blanket of certainty for the credit markets.
Otherwise, he suggested, consumers and lenders alike could be forced to cope with a patchwork of laws from all 50 states.
"Failure to reauthorize these preemptions would drastically change the way a credit union is able to conduct business in today's financial marketplace," said Vadala, speaking on behalf of NAFCU.
"A credit union such as mine, with members in 50 states, could be forced to comply with 50 different state laws," he added.
Vadala was appearing as part of a broad panel that included representatives of both banking and consumer groups, as well as credit agencies, all of whom have a major financial stake in reauthorization of the law.
The Fair Credit Reporting Act, originally passed in 1970 and amended the last time in 1996, sets parameters for the use of credit, sharing, sale and presentation of credit histories.
With the renewal of the controversy over privacy rights the federal statute is coming under new pressures from states seeking their own privacy laws that would circumvent parts of the law.
The efforts to reauthorize the Act in Congress is caught between interests like credit unions and other users and providers of credit data who seek the fewest restrictions and costs on its use; and consumer and pro-privacy groups who want to restrict its use, in some cases.
Vadala told lawmakers the failure to reauthorize the federal preemptions could impose new and costly burdens on providers of credit working in numerous jurisdictions, such as his $275-million credit union.
"Reauthorizing these Fair Credit Reporting Act provisions will give credit unions the ability to continue to offer their members credit in a timely manner at a fair market price," he testified.