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A Uh-huh.

Q and looks at the accuracy requirements,
does not equate accuracy with truthfulness, what it
does is it measures accuracy in terms of whether or
not the data matches between what's in the credit
reporting system and what's in Cap One's computer; is
that a fair statement? ...

A So your, your -- the way the question is
posed to me makes it sound like I have to choose
between whether I'm saying what my associates do is
accurate or truthful but not both.

Q Well, no, what I'm asking is this: Is it
possible, is it possible that Cap One will verify
information that is not, in fact, truthful?

A There's a possibility of that. It certainly would not be done intentionally.

Unfortunately, I have seen several cases in which furnishers “verified” derogatory data about consumers that simply was not true. So far, several of the major credit grantors use a similar, two-dimensional system, and the CRAs appear to encourage them to do so. In the near future, I intend to write a letter to the CRAs advising them that the reinvestigation procedures of several major furnishers do no attend to a sufficiently high standard of care and are not designed to effectuate a true reinvestigation. Similarly, I intend to advise the furnishers that the CRA's, as a matter of course, often fail to forward to them all relevant information provided by the consumer, again, undermining the reinvestigation process.

Other problematic procedures by either the CRAs, fumishers and users include:

Raising interest rates on consumers who were never late, but based on review of their
credit reports
Continuing account reviews well after a consumer has terminated a relationship with
a creditor
Using the national credit reporting system as an arm of debt collection in an unfair


Lack of consistency in issuance of adverse action notices

The Damaging Nature Of Inaccuracy, Non-Responsiveness, Faulty Reinvestigations & Identity Theft

I will try to briefly summarize some of the ways in which consumers are damaged by inaccurate credit reports, non-responsiveness and faulty reinvestigations by CRAs and furnishers.


Inaccurate data can lead to the unjust denial of credit or insurance
In the age, of risk-based pricing, inaccuracies can result in the granting of credit or
insurance on less favorable terms.
Seeking to facilitate correction of inaccuracies can be time-consuming, causing a lost
of time, energy and opportunity.
Often the most profound damage that consumers suffer is the emotional distress that
accompanies: the discovery of inaccuracies in one's credit report; and/or the
frustrating process of trying to correct errors that were to not of one's own making;
and/or the unjust denial of credit; and/or of being told that false information about
you has been "verified," and/or that information that was previously deleted as
inaccurate was reinserted without notice.

It also is distressful not knowing everyone who may have associated you with highly derogatory credit data. It can be difficult to maintain constructive personal relationships under stress. It can be difficult to perform adequately at one's job.

With identity thef, all of the above damages apply, compounded by the fact that a criminal is joyriding on your good credit, ruining your name.

In fact, some of the worst damages resulting from identity theft relate to the consumer's frustrating interaction with the national credit reporting system. As Jodie Berstein, former head of the FTC's Bureau of Consumer Protection testified July 12, 2000 before the Senate Judiciary Subcommittee on Technology, Terrorism and Government Information,

"The leading complaints by identity theft victims against the consumer reporting agencies are that they provide inadequate assistance over the phone, or that they will not reinvestigate or correct an inaccurate entry in the consumer's credit report. In one fairly typical case, a consumer reported that two years after initially notifying the consumer reporting agencies of the identity theft, following up with them numerous times by phone, and sending several copies of documents that they requested, the suspect's address and other inaccurate information continues to appear on her credit report. In another case, although the consumer has sent documents requested by the consumer reporting agency three separate times, the consumer reporting agency involved still claims that it has not received the information."

In her March 7, 2000 testimony before the Subcommittee, Bernstein elaborated further:

A consumer's credit history is frequently scarred, and he or she typically must spend numerous hours sometimes over the course of months or even years contesting bills and straightening out credit reporting errors. In the interim, the consumer victim may be denied loans, mortgages, a driver's license, and employment; a bad credit report may even prevent him or her from something as simple as opening up a new bank account at a time when other accounts are tainted and a new account is essential. Moreover, even after the initial fraudulent bills are resolved, new fraudulent charges may continue to appear, requiring ongoing vigilance and effort by the victimized consumer."...

Identity theft victims continue to face numerous obstacles to resolving the credit problems that frequently result from identity theft. For example, many consumers must contact and re-contact creditors, credit bureaus, and debt collectors, often with frustrating results."

The General Accounting Office wrote in one of if its first reports on identity theft in 1998:

"Identity theft can cause substantial harm to the lives of individual citizens -- potentially severe emotional or other non-monetary harm, as well as economic harm. Even though financial institutions may not hold victims liable for fraudulent debts, victims nonetheless often feel 'personally violated' and have reported spending significant amounts of time trying to resolve the problems caused by identity theft -- problems such as bounced checks, loan denials, credit card application rejections, and debt collection harassment," it wrote. (GAO-02424T, Identity Theft: Available Data Indicate Growth in Prevalence & Cost (

What's at stake here is nothing less than the good name of every American who participates in the economy. The view that one's good name is of paramount importance is supported by FTC complaint statistics. In 1993, the U.S. Public Interest Research Group (USPIRG) issued a report based upon a Freedom of Information Act request to the FTC, which showed that inaccuracies in credit reports was the leading cause of consumer complaints to the FTC. This category led all others, including categories that include outof-pocket losses.

1. Credit bureaus (30,901); 2. Misc. Credit (22, 729); 3. Investment Fraud (12,809); 4. Equal Credit Oppt. (11,634); 5. Automobiles (6,901); 6. Truth-In-Lending (6,303); 7. Household Supplies (5,835);

8. Recreational Goods (5,747);
9. Mail Order (4,687)
10. Food/Beverage (2,738).

Ten years later, FTC complaint statistics confirm that consumers care most about
protecting their good name, well above other categories involving out of pocket losses.
For three years running, identity theft is the leading cause of complaints to the FTC,
These are the numbers from the FTC's January 23, 2002 release

1. Identity Theft (42%);
2. Internet Auctions (10%)
3. Internet Services and Computer Complaints (7%)
4. Shop-at-Home and Catalog Offers (6%)
5. Advance Fee Loans and Credit Protection (5%)
6. Prizes/Sweepstakes/Gifts (4%)
7. Business Opportunities and Work at Home Plans (4%)
8. Foreign Money Offers (4%)
9. Magazines and Buyers Clubs (3%)
10. Telephone Pay-Per-Call/Infomation Services (2%)

This might be surprising to some, but it shouldn't be. Protecting one's good name is so fundamental to mankind that Shakespeare wrote about it some 400 years ago.

Who Steals My Purse steals trash: 'Tis something, nothing;
Twas mine 'tis his and has been slave to thousands.
But he that filches from me my good name
Robs me of that which not enriches him,
And makes me poor indeed.

Because credit-reporting problem can be extremely damaging to consumers, I urge this subcommittee to devote one hearing to taking testimony from victims of credit report inaccuracy and identity theft. In my opinion, only that way will the subcommittee get a full appreciation of how profoundly damaging these problems are, and why stronger measures are needed to prevent them.

The Exemption Provisions

There has been a lot of discussion about the need to reauthorize the FCRA preemption provisions in order to maintain uniform national standards. But in at least in three crucial areas, the preemption provisions either do not set any real national standard or set ones that are so weak and ineffective that they need to be significantly strengthened. Moreover, consumer protection would be advanced by freeing up the States to protect their citizens in this area, particularly if Congress is unable to enact a sufficiently strong national standard.

Duties Oo Furnishers

As a political compromise, Congress in 1996 created a multi-tier system that places only a minimal duty on furnishers to report information accurately to credit bureaus. The first national standard (16818-2(A)) merely requires that creditors not furnish information that they know or consciously avoid knowing is inaccurate. This standard is extremely weak; the American people deserve better. If there is non-compliance with this provision, even after the consumer notifies the credit grantor of the reporting errors, then the only entities that can take enforcement actions are the federal or state agencies with jurisdiction. To my knowledge, there have been no enforcement actions under this section.

Individuals only have the right to enforce their own rights under the second national standard (16815-2(B)) after: (1) they dispute the credit grantors' errors with the CRA, (2) the CRA communicates that dispute to the credit grantor, and, (3) the credit grantor reports the disputed inaccurate information again.

In my opinion, these FCRA “national standards” contribute to inaccuracy because theygive credit grantors much too much leeway to engage in sloppy reporting practices. In practice, they have proven to be ineffective. They create too many hoops for consumer to jump through in order to facilitate simple correction of errors. For instance, if the consumer is not aware that he must dispute a credit grantor error with the CRA, then he cannot get enforcement unless some Federal agency like the OCC is willing to go to bat for him. (You can bet that won't happen.) If he does report it to the CRA and the problem continues, some consumers have found it difficult to prove that the CRA relayed the dispute to the credit grantor. Even when consumers have satisfied these requirements, leading credit grantors, like Sears and MBNA, have argued that S-2(b) doesn't give consumers the right to sue. As Leonard Bennett told you last week, MBNA argues that there is no national standard. I disagree with MBNA on this point, but it is clear that the standard is not sufficient to protect consumers' privacy and promote healthy accuracy throughout the national credit reporting system. Therefore, if the Committee is unable to bolster protections for consumers in this area, it should leave the States free to do so.


Another national standard, relating to pre-screening, requires senders of so-called preapproved credit or insurance offers to “provide with each written solicitation ... a clear and conspicuous statement that” the CRA was the source of the information and that the consumer can opt out. As confirmed by the piles of pre-approved credit offers that most of us receive via the mail, most of the notices in reality are neither clear nor conspicuous. In his testimony last week, U.S. PIRG's Ed Mierzwinski included a typical opt-out notice in his testimony. Most of the notices feature the kind of fine print that consumers typically ignore, mimic the language from the statute itself, and would not score high in readability tests. They usually include subheads that would not attract the reader's eye, like, “Notice Regarding Pre-Screened Offer," or Terms of Pre-Approved Offer," or Fair Credit Reporting Act Notice.”

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