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And that is why we have recently made large investments in technological platforms to automate the re-verification of information. Fifty-two percent of our data providers now participate in the automated process of re-verification, and our goal is 100 percent participation.

We believe this approach will seamlessly resolve most matters quickly and efficiently, but we face a significant challenge from credit repair clinics. If these credit repair clinics are allowed to continue to generate spurious volumes, and they are currently responsible for 35 percent of our total re-verification volume, our ability to deliver fast, accurate resolutions will be hamstrung.

That will bring us to identity theft. We understand the personal nature of an individual's credit information, and have taken substantial steps to protect the integrity of our systems and our information. We are strongly committed to continue to be part of the identity theft solution.

TransUnion led the industry with the creation of a fraud victim assistance center, which has been recognized by law enforcement, as well as the media, for its unprecedented service to identity theft and other credit fraud victims. Our fraud victim assistance experts work with consumers, law enforcement and credit granters to assist victims and aid in the apprehension of perpetrators.

Earlier this year, TransUnion and our competitors announced that we now share information related to fraud identity theft victims. Consumers can now make one call to any of the three national bureaus and be confident that all of us will put the appropriate safeguards in place.

U.S. lenders are purchasing millions of credit reports each day. These reports allow lenders to make decisions that allow consumers to enjoy same-day commitments on home loans, receive instant credit approval at the retail point of purchase and drive off a car lot with the vehicle of their choice in minutes. Lenders are making those decisions based primarily on the information contained in a credit report, because the credit report system works.

This system is critical to our economy. Our economy is driven two-thirds by consumer purchasing, and we believe our system must be maintained.

Thank you again for the opportunity to be here. We at TransUnion are committed to assisting your committee in any way that we can with respect to this important matter.

[The prepared statement of Harry Gambill can be found on page 94 in the appendix.]

Chairman BACHUS. Thank you, Mr. Gambill.

At this time, we are going to have questions from the members of the committee, and I am actually going to waive my questions. I will say that I am sure that Mr. Sanders or someone else will ask, particularly Mr. Gambill, about free credit reports. That is something we are hearing a lot about.

And if that question is asked, I would like you to detail the impact that will have, you know, on your company. I think if we discuss that, we need to know about the impact of it.

Mr. Feeney has no questions.
Mr. Hensarling?
Mr. HENSARLING. Thank you, Mr. Chairman.

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There appear to be some accusations of huge inaccuracies within our credit reporting system. So I guess, Mr. Gambill, my first question would be for you. Can you quantify for me the number of credit records or reports you are responsible for and how often consumers have complained about inaccuracies? How often have records been changed because of inaccuracies in the report?

Mr. GAMBILL. I will give you some of the information, and I would like to have my team be able to work with individually so I can really understand your question.

About 8 million consumers a year avail themselves of the opportunity to get a free credit report from TransUnion. That represents probably about 8 percent of the households in the United States. About half of the consumers that then get a copy of their credit file ask us to re-verify something on it, either because they don't understand it or they may disagree with the rating as provided by one of our data furnishers.

So, the 8 million people, which represents about 2 percent of the files sold, on who we sell files ask us for copies of those in a free manner. Then, about half of those ask us to re-verify something on those files. The average file has about nine trades on it, so now I am getting into math. I had better stop trying to do and have the team work with you on it individual basis.

But 2 percent of the people ask for a copy and then half of those ask us to reverify something.

Mr. HENSARLING. Thank you, that is helpful to me. When I hear about accusations of huge inaccuracies within the system, I am a firm believer that the world works off of incentives. I am trying to figure out who might have an incentive to put inaccurate information into the system in the first place. I am somewhat curious.

I guess my next question would be for Mr. Courson and Mr. Moskowitz, since you both are in the business of extending credit. I assume that to be profitable you would like to make more credit transactions instead of fewer. And to make more transactions, you need accurate information so that you can price the risk premium accordingly. And if that assumption is true, in your observation, who has an incentive to put inaccurate information into this system?

Mr. MOSKOWITZ. I don't think any lender has an incentive to put inaccurate information into this system, including lenders that would like to retain their existing customers. Each lender has a vested interest in the performance of the loan and the success of the consumer who has the loan. And the integrity of that system and the quality of that information is the necessary foundation of that.

If we merely were interested in retaining our own customers, or a lender was merely interested in retaining its own customers, you could argue that. But a company like Wells Fargo has a much larger interest in expanding its customer base and relies on the integrity of the information in the system.

Also, to protect itself from identity theft and from fraud, it relies on the information, corrects erroneous information promptly and would assume that all lenders in that position who have integrity would do the same thing.

Mr. HENSARLING. Mr. Courson?

Mr. COURSON. Our members, obviously, are primarily originating and selling loans, Congressman, into the secondary market, so we have another standard that we have to meet in terms of standing behind the information we have. And there is really, as Mr. Moskowitz says, no incentive for incurate consumer credit reporting.

As a matter of fact, lenders are the ones that are standing behind the loan based on the accuracy of the information that we receive. Lenders are both users and furnishers of information provided through the CRAs as we make our credit decisions.

Mr. HENSARLING. Given that my time is rapidly running out, I would like to ask each of you to just give the briefest of answer to this question. If we did not reauthorize the Fair Credit Reporting Act, would there be more credit offerings or fewer credit offerings to the American people? Would the credit be more expensive or less expensive? Just from left to right.

Mr. COURSON. There clearly would be less credit offerings, particularly because you have to deal with a patchwork of 50 different sets of State laws. Clearly, we have a national mortgage market. The easy and fluid movement of capital across State lines exists because of the seamless ability of mortgage lenders to obtain credit information, make credit decisions and offer products. If Congress starts putting barriers up, and we have to deal with 50 different standards, obviously, some lenders will withdraw, some will not compete, there will be less markets available and, therefore, a higher cost to the consumer.

Mr. MOSKOWITZ. And I would follow up that comment by saying that the current national standard that we have allows lenders like Wells Fargo to make credit more available by innovating products that identify the needs of communities, low-to moderate-income communities, and that the failure to extend FCRA would limit those opportunities because of the impact on liquidity in the marketplace.

Mr. PICKEL. Since we sell to both the companies that MBA represents and Wells Fargo and others like it, we feel like it would increase the cost quite substantially. As a further comment, we feel like it would increase the cost, especially in rural areas, where credit may not be extended as much as often where mortgage brokers really excel, and also when you have a city that is on a State line if the States enact different laws.

Thank you.

Mr. PLUNKETT. As we heard last week, we have a national mortgage and lending market created through joint State and Federal regulation. The Fair Credit Reporting Act is not expiring; some very limited provisions are expiring. If minimal baseline meaningful Federal standards were on the books, you would get a lot of uniformity. And States like Vermont could respond to localized problems and help their citizens after, then Congress would be able to respond.

So I don't see, if that approach were taken, which is the approach we are recommending, I don't see a change in lending at all.

Mr. FISHBEIN. I would agree with Travis on that. I think if we allow the States to be more active players in this process, that could very well improve the level and accuracy of reporting.

Mr. GAMBILL. To try to directly answer your question, there would be more offers to apply for credit, because absent the prescreening preemption provisions of FCRA, lenders would still have to find new cardholders, but they couldn't target their mailings. So, they would have to broad scale mailings to people offering the opportunity for them to apply without having those mailings be pre-approved.

Consumers would then apply, and the turn down rates would go up, of course, because they will have gone to everybody, not only those people that already meet the eligibility standards. So, the ultimate result would be higher costs, probably same amount.

Chairman BACHUS. Okay.
Thank you, Mr. Hensarling.
Mr. Sanders?
Mr. SANDERS. Thank you, Mr. Chairman.

Representatives of the industry have argued that they want to preempt States from passing strong consumer protection legislation. Just to set the record straight, because I hear a lot about concerns about consumer needs today, let's be clear that every major consumer organization in America, including the two that are represented at the panel right now, but U.S. PIRG, Consumer Federation of America, Consumers Union, National Consumers Law Center disagree with industry.

And they believe, as I believe, and I think many, Americans believe, that what we want are high national standards to protect consumers, but we want to allow States to go even further so that they can address their own local needs and become laboratories for democracy.

Second point that I want to make is that in a recent study, Consumers Federation of America examined over 500,000 credit bureau files. And they found, among other things, that 29 percent of the people whose reports that they examined had a range of 50 points or more between the highest and lowest scores. One in 25 of the people whose reports they examined had a range of 100 points or more between the highest and lowest scores.

As everybody here understands, that makes all the difference in the world between whether somebody's going to get reasonable interest rates or very, very high interest rates.

Now, given that reality, what I would like to ask is representatives of the industry, and perhaps everybody on the panel, but we will start with Mr. Gambisl. Given that reality, do you think that these errors could be reduced by allowing consumers to receive free credit reports and free credit scores at least once a year?

In other words, wouldn't the consumer at least have a fighting chance to know why his or her interest rates are escalating, perhaps because of false information, if they, in fact, had a report in their hands?

Why don't we start with Mr. Gambill?

Chairman BACHUS. Without taking the gentleman's time, I mean, just extending your time, you said “errors.” You mean differences in scores?

Mr. SANDERS. Well, I mean that when you have three separate companies coming up with three separate ratings, somebody is making a mistake. "Errors" is the word I would use.

Mr. Gambill?

Mr. GAMBILL. Yes, sir. I think I heard a question about free reports, Congressman, and also a question about accuracy.

Mr. SANDERS. Free reports and free credit scores so consumers could know what is going on in their lives and why they may be paying higher interest rates than they should be paying.

Mr. GAMBILL. Yes sir. Thank you.

You know, when people ask me in my job, What keeps you up at night? one of the things that keeps me up at night is, how in the world will we do it? If Congress decides to pass a law that says that we need to give away credit reports to consumers with 200 million of them likely to ask, here in America, existing law provides free reports to people who have been declined for credit; who are unemployed; who are on welfare; who are or think they have been victims of fraud; or who are or are likely to be seeking employment.

In our case at Trans Union, that represents about 8 percent of the households in America. But we know that that is a relatively consistent percentage of the volume of reports that we sell. And we know how to manage a business and manage our support functions to deal with those 8 million reports or so that we are going to provide on an annual basis.

I don't know how to build a business around the fact that there might be a front page article on USA Today tomorrow suggesting everybody that reads USA Today is now eligible for a free credit report, and they should call.

Mr. SANDERS. Well, my time is limited, and I am gathering that you think that this is not a good idea?

Mr. GAMBILL. Yes sir.
Mr. SANDERS. Okay.

Mr. Plunkett, what do you think? Do you think consumers should have a right to know how their interest rates are determined?

Mr. PLUNKETT. We think it is the best and least expensive way. As Assistant Secretary of Treasury Abernathy said a few weeks ago, Imagine tens of millions of Americans having easy, free access to their credit reports. They can prevent these problems before they occur. It is the most cost effective way to do it.

And in speaking about costs, we need to talk more about cost to consumers if we don't act, not just cost to business if we do act.

Mr. SANDERS. Okay.
Mr. Courson, do you want to give us a view on that?

Mr. COURSON. Mr. Sanders, obviously mortgage lenders are also users of consumer information. I really feel that we are not the appropriate party, however, to respond. As to whether access to credit reports should be free.

Mr. SANDERS. Mr. Moskowitz?

Mr. MOSKOWITZ. As we said, we have a vested interest in the accuracy of the information. And an informed consumer who understands the ramifications of their credit and their performance and their life and how they manage their credit is a benefit to that consumer, and ultimately will increase the likelihood that they will become a homeowner.

Mr. SANDERS. So, do you support the right of consumers to get free

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