Credit Bureau Changes Under Review
House Panel to Scrutinize Practices of Card Issuers
WASHINGTON -- A House banking subcommittee is to begin work today on a measure that could make it more difficult for banks to get lists of the most creditworthy consumers from credit bureaus.
Bankers are hoping that the consumer affairs subcommittee will focus instead on remedies for consumers whose credit files contain mistakes. But an aide to the subcommittee chairman, Rep. Esteban E. Torres, said the California Democrat will almost certainly ask the panel to tackle the issue of "prescreening."
Use in Credit Card Mailings
In the most common use of prescreening, credit card issuers obtain lists of prospects that meet specific criteria and send out preapproved credit card applications.
Another check is usually done on completed applications to make sure the customer's status has not changed significantly, through a job loss, a personal bankruptcy filing, or other occurrence.
Rep. Torres' aide said the congressman is also concerned about the use of credit screening by nonlenders. Employers sometimes use credit records to reject job applicants who have filed claims for worker's compensation, he said.
Debate Expected on Correcting Errors
The subcommittee is expected to hear today from consumer groups, bankers, and credit reporting agencies. Much of the debate will likely center on the difficulties consumers have in removing erroneous information from their credit histories, the aide said.
A second hearing will likely follow next month, after Rep. Torres introduces his own legislation.
So far, four bills have been introduced in the House to update the Fair Credit Reporting Act. Each tackles the issue of screening pools of applicants.
A measure from Rep. Richard Lehman, D-Calif., would permit consumers to prevent their names from being used for screening. Rep. Matthew J. Rinaldo, R-N.J., would ban the practice entirely.
Privacy Issue Raised by Consumer Groups
Consumer groups say privacy is an issue. "We think there's a problem whenever information related to a consumer is dispensed without the consumer's permission," said Michelle Meier, lobbyist for Consumers Union.
But bankers disagree.
Philip Corwin, who oversees consumer issues for the American Bankers Association, said banks getting prescreened lists know nothing about the individuals except that they meet the institution's lending standards. The list often goes directly from the credit bureau to a company that handles the mailing, he said.