WASHINGTON -- A banker warned Thursday that proposed amendments to the Fair Credit Reporting Act could increase the risk - and cost - of making consumer loans.

Robert D. Hunter, executive vice president of Chase Manhattan Bank, told the Senate Banking Committee that the bill would severely restrict the information available to lenders.

Help for Borrowers

"This could have an anticompetitive impact that would affect most significantly smaller creditors that are less able to absorb the increased costs," said Mr. Hunter. He was testifying on behalf of the American Bankers Association, the Consumer Bankers Association, Master-Card International, Visa U.S.A., and the American Financial Services Association.

The Senate committee is considering legislation sponsored by Sen. Richard H. Bryan, D-Nev., and Sen. Christopher S. Bond, R-Mo., that is intended to make it easier for consumers to find and correct mistakes in their credit files.

Mr. Hunter acknowledged that the bill would give statutory blessing to "prescreening" practices, in which banks purchase lists of potential credit customers that meet their lending standards.

|Operational Difficulties'

But he said the language would "cause operational difficulties for creditors." Among other things, he said, it would create uncertainly about when a credit offer could be withdrawn.

The Chase executive also criticized a section of the bill that would prohibit creditors from giving disputed information to credit bureaus - unless they note that the borrower has challenged its accuracy. Mr. Hunter argued that banks should be compensated for the burden of complying.

Banks Criticized

Michelle Meier, the banking lobbyist for Consumers Union, argued for the provision, contending that "banks and finance companies are a major part of the problem."

Often, she added, a consumer succeeds in removing errors from a credit file, only to find that they pop up again "because the bank or finance company that originally supplied the false information to the bureau has not deleted the inaccuracy from its reports."

Similar legislation has been introduced in the House. It was considered last year but pulled back after the credit industry won on an amendment that would preempt the right of states to enact tougher laws.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.