FTC, Fed Criticized Over Credit Reports
Wednesday, June 20, 2007
Lawmakers accused federal regulators yesterday of moving too slowly to implement rules to help consumers fix errors on their credit reports.
The Federal Trade Commission and the Federal Reserve were targeted in a House hearing to examine how errors occur on credit reports and how to assist consumers in correcting them. Congress passed legislation in 2003 that protected consumers against credit errors, but neither has been fully implemented by the six regulatory agencies that cooperate to translate laws into industry standards.
"So many years to accomplish a congressional task is unacceptable and ridiculous," Rep. Carolyn B. Maloney (D-N.Y.) said during the House Financial Services Committee hearing. "The problem of Fed inaction is a consistent theme."
Some lawmakers suggested setting a timetable for regulators and naming an agency to oversee legislative implementation.
The Fair Credit Reporting Act requires the three national credit-reporting agencies to investigate a consumer dispute within 30 days and to inform the provider of negative credit information that it could be a mistake. The provider, such as a bank, utility, or landlord, must then conduct its own investigation.
If the credit agency or the provider finds a mistake, it must be removed from the consumer's credit file. Legislation passed in 2003 allows consumers to dispute negative information directly with the provider. Errors on a credit report can harm a consumer's credit score and make loans more expensive or more difficult to obtain.
As many as 79 percent of credit reports may contain an error, and 25 percent of errors lead to a denial of credit, according to a report by the U.S. Public Interest Research Group.
Rep. Gary L. Ackerman (D-N.Y.) said at the hearing that the failure to implement the legislation has condemned consumers to "voice-mail hell" as they try to navigate an opaque system.
Representatives of the credit bureaus disagreed about the severity of the problem. "Many of the disputes are simple, clean and easy," said Stuart Pratt, president and chief executive of the Consumer Data Industry Association, a trade group for credit-reporting agencies.
The FTC and the Fed cited the complicated nature of the regulations and massive bureaucratic hurdles as causing delayed enforcement of the mandates.
The FTC has completed 17 of the 20 tasks required by the 2003 legislation but has no timetable for the rest, said Lydia Parnes, director of the FTC's Bureau of Consumer Protection. The commission has sued more than 20 companies in the past decade for credit-report violations, Parnes said, adding that there have been tens of thousands of complaints.