Senate Banking Committee Includes ID Theft Provisions In FCRA Reauthorization

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The Senate Banking Committee quickly approved a reauthorization of the Fair Credit Reporting Act last week, sending the bill that preempts state credit laws on to a vote by the full Senate.

The bill approved by the committee would provide a permanent reauthorization of seven federal preemptions of state laws sought by credit unions and includes several provisions aimed at fighting identity theft that are not included in the version of the bill passed by the House earlier this month.

The burden of the identity theft provisions, which are being championed by Sen. Richard Shelby, chairman of the committee, would fall on the three major credit bureaus by requiring them to provide free credit reports annually to allow consumers to review potential errors or fraudulent use of their identities.

But the bill would also require credit unions and other users of credit reports to notify consumers when an adverse action on the material terms of a loan, such as a missed payment, is reported on their credit.

John McKechnie, chief lobbyist for CUNA, said the group is satisfied the Senate's version of the bill proposed to extend the federal preemptions permanently, rather than on a temporary basis, as was first proposed.

But McKechnie said CUNA opposes the adverse actions notification provision, which isn't in the version of the bill passed by the House. "We oppose it and we don't think it belongs in the bill. Hopefully it won't be in the final version of the bill," he said.

The bill passed by the Senate panel last week also waters down a provision restricting sharing of confidential information between affiliates. The bill's language appears to exempt credit union relationships with CUSOs or corporate credit unions, "entities with preexisting customer relationships, affiliates that provide certain servicing functions, and consumer initiated or authorized contacts."

McKechnie said at first glance the language appears to spare credit unions but will require greater study before the bill comes to a final vote by the Senate.

'Not All Sharing Is Bad'

"We're still reviewing the affiliates provision to make sure they don't go too far and restrict a credit unions' ability to serve its members," said McKechnie. "We believe certain information sharing is necessary to serve members ot all information sharing is bad."

Several controversies are expected to arise when the bill is voted by the full Senate, among them whether the new law should preempt the tough new privacy law passed in California earlier this month. Several major national banks are lobbying the Senate for a preemption of the new California law while the two California senators, Barbara Boxer and Diane Feinstein are lobbying their colleagues to prevent them from a preemption.

The bill, dubbed the National Consumer Credit System Improvement Act by the Senate and the Fair and Accurate Credit Transaction Act by the House, would reauthorize the Fair Credit Reporting Act, which expires at the end of the year.

Because the two versions of the bill are different, representatives of the House and Senate would need to meet in a conference to resolve the differences, then the two bodies would vote on the merged bill.

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