WASHINGTON - Taking another shot at a bill that almost passed last year, Sen. Christopher Bond is sponsoring legislation to revamp credit reporting laws.
The Missouri Republican's bill provides lenders a mixed bag.
By replacing a patchwork of state credit reporting requirements with a uniform federal statute, the legislation would make compliance easier and less expensive. The federal preemption would last eight years after the law was enacted.
However, Lamar Smith, vice president of government relations at Visa USA, said the preemption does not go far enough. The measure does not cover state laws that hold banks liable for mistakes in credit reports.
"Most states do not have legislation in this area right now," Mr. Smith said. "The problem arises when states do start passing stringent liability laws. It remains extremely important to the industry that you get a uniform federal standard in this area."
The Bond bill would hold banks liable for errors in credit information they submit to credit bureaus if a consumer notifies the lender of the mistake and it is not corrected. At that point, the consumer would have the right to sue the creditor.
This standard would suit the industry, but only if states were barred from overriding it with their own liability laws.
William Binzel, director of government relations for Mastercard International, said that potentially harsh state liability laws could have a chilling effect on banks' supplying information to credit bureaus.
"If you change rules that say how banks are going to be held liable for errors in that information, that bank is going to think seriously about whether or not it is going to provide that information," Mr. Binzel said.
Still, industry representatives applauded a provision in the bill that would preempt state laws that prevent holding company subsidiaries from sharing consumer information.
"This would enhance the ability to centralize customer information for marketing purposes," said Nessa Feddis, senior federal counsel for the American Bankers Association.
The Bond bill would provide another plus for the industry by allowing banks to verify credit histories obtained from credit bureaus.
Banks and other credit card issuers frequently obtain lists of potential customers who meet certain criteria from credit bureaus, a process known as prescreening.
By law, credit providers must offer a line of credit to everyone on the list. According to Mr. Binzel, the process of getting the preapproved list and sending out the credit offers takes months, during which time a customer's credit eligibility may change.
The bill solves this problem by allowing credit providers to "postscreen" customers before extending credit.
During the last Congress, Sen. Richard Bryan, D-Nev., introduced a similar bill. It passed the House and Senate but was killed when Sen. Phil Gramm, R-Tex., tacked on a controversial amendment dealing with Texas home equity loans.