Small businesses may need the same type of legislative protection from errors by credit reporting companies that Congress already has extended to individuals, a Federal Trade Commission member said yesterday.
Patricia P. Bailey said the commission has received complaints from small businesses about problems in credit reporting -- including the use of reports by competitors -- that suggest legislation may be in order.
Bailey offered the Senate Select Committee on Small Business an FTC draft of a bill that would require notifying companies that are denied credit or other benefits based on unfavorable reports and giving business operators a chance to correct wrong information.
The survival of a small business frequently hinges on credit reports, said Sen Lowell Weicker Jr. (R-Conn.). "Despite the importance of these reports, there are presently no safeguards to ensure their accuracy," he said.
However Sen Rudy Boschwitz (R-Minn.) pointed out that the FTC has received only 37 complaints about the effects of commercial credit reporting on small businesses.
Representatives of several small businesses told the committee of losing credit through inaccurate reports and of the difficulty of correcting information that was in error.
Jo Goff, who operates a ready-to-wear women's clothing shop in Knoxville, Iowa, said she had discovered that a credit reporting firm was telling suppliers inaccurately that all of the company's assets were pledged against an outstanding bank note.
"Only a portion of my assets were pledged toward the note, and at that time my assets were approximately three times the size of the note," she said.
Goff said that her husband and his brother, who are auto parts jobbers, once placed an order with a supplier who was told that the reporting company had no record of the auto parts company. The name accidently had been left off a list of firms, she said.
Another operator of a small business, Martin Zanger, who ran two Massachusetts bookstores, said that Dun & Bradstreet, which controls about 80 percent of the commercial credit reporting business, once reported his sales as $80,000 when they were $800,000.