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Consumers Union Renews Call for Stronger Credit Reporting Protections

Consumers Union, the advocacy division of Consumer Reports, thanks the Senate Banking Committee for holding this hearing, “An Overview of the Credit Bureaus and the Fair Credit Reporting Act,” to explore issues relating to the credit reporting system. This hearing is incredibly important because of the crucial role that the credit bureaus play in today’s economy. The information collected by the credit bureaus not only affects consumers’ ability to obtain a mortgage, car loan, or credit card, but even to rent an apartment or get a new job. Consumers need robust protections to ensure that the information collected about them is accurate, accessible, and secure.

The importance of maintaining strong data security was highlighted after the Equifax data breach, in which the sensitive information of nearly 150 million consumers was disclosed, leaving them more vulnerable to identity theft and damaged credit. Following the breach, Consumers Union sent a letter to Congress (attached), outlining how it can address the fallout of the breach and prevent others. Nine months later, Congress has yet to take action on the majority of the recommendations in that letter, and Equifax has certainly not been held accountable for its failure to safeguard consumers’ information. We write to call on you with renewed urgency to pass strong legislation to protect consumer data, prevent identity theft, and ensure the accuracy of consumer credit files.

Safeguarding consumer data: The Equifax data breach showed that the credit bureaus need stronger incentives to maintain reasonable security practices. Because credit bureaus collect—and profit from—sensitive information that thieves can easily use to open new, fraudulent accounts, they should be held to a high standard. We support the goals of The Data Breach Prevention and Compensation Act, which seeks to expand federal security requirements for the credit bureaus, with strong penalties for failure to comply. The bill directs the Federal Trade Commission (FTC) to develop cybersecurity regulations and to oversee their implementation by the credit bureaus. Under the bill, credit bureaus that fail to protect consumer data will face tough penalties—and consumers will receive compensation for unauthorized transmission of their data.

Consumer control over credit data: This year, all consumers obtained the right to a free security freeze at the three major bureaus: Equifax, Experian, and TransUnion. While we are pleased that consumers will no longer have to pay to secure their own credit data at the “Big Three” bureaus, it’s still a hassle for consumers to set up freezes, and relatively few consumers take advantage of their right to do so. Much more can be done to strengthen consumers’ control over the use of their own personal data by the credit bureaus. That’s why we’re supporting the Control Your Personal Credit Information Act—the default credit freeze bill—so that consumer data is protected by default, and consumers are given the choice to “opt-in” to share their data in order to open a credit account. Importantly, this bill would also extend protections to smaller credit bureaus, not just Experian, Equifax, and TransUnion. Reportedly, scammers are circumventing security freezes at the major credit bureaus by pulling information from less well-known bureaus, like the NCTUE database, to create fraudulent accounts. By effectively locking down consumer credit data, we believe that this bill will significantly reduce identity theft, which cost consumers nearly $17 billion last year. Moreover, this bill promises to help protect vulnerable consumers from unwanted solicitations for high-interest loans—including through such practices as mass-mailed checks—that they cannot afford and that could lead them deeper into debt.

Ensuring credit accuracy and transparency: Having an accurate credit report is important, because lenders, landlords, employers, and, in many states, insurers, look at credit reports when making important decisions about consumers. According to the FTC, about one in five consumers have a confirmed credit error in at least one of their credit reports, and about 5% of consumers have an error that could cause them to pay more for credit. While credit bureaus are required to maintain the “maximum possible accuracy” of credit information, credit bureaus and furnishers alike do not always take appropriate steps to do so. And too often, identity theft is the cause of these errors. We support legislation, including the Stop Errors in Credit Use and Reporting Act, and the Comprehensive Consumer Credit Reporting Reform Act, both of which would hold credit bureaus and creditors to more extensive accuracy requirements—and improve access to free, reliable credit scores, so that consumers can more accurately understand their creditworthiness.

We urge Congress to act without delay to pass these important bills to protect consumer credit data and to ensure that consumers are judged fairly in the marketplace, or to enact other legislation that achieves these same goals. We look forward to working with you to secure these essential protections.