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one from being insured at all. In fact, this has stirred complaints across the country, from consumers who feel that the use of credit scoring for services unrelated to credit is both discriminatory and invasive.

The mix of information is used to compile a credit score, which includes much more than just the timeliness of payments. The methodology includes items such as outstanding debt a person has and the number and type of open credit lines. Given the fact that currently 90 percent of property insurers use credit scoring as a determining factor in their approval process and as a means to derive rates, we have an obligation to look at this matter carefully.

A major problem with the use of these scores is the lack of consistency in how scores are established and unwillingness on the part of insurers to reveal publicly how they determine scores. Without a standard to fall back on and without insurance companies being required to reveal how they tabulate score, there is no way to make sure consumers are protected from discrimination.

We should look at, Mr. Chairman, just how it is we have credit scoring and insurance scoring, as one is tied to the other.

I thank the chairman for the timeliness of the hearing and I look forward to the testimony today.

Chairman BACHUS. I thank you.
Go ahead, I am sorry.
Mr. ISRAEL. Thank you, Mr. Chairman. I will be very brief.

One of the principal concerns that I have had with FCRA is, in my view, the unfair and even unpatriotic practice of harassing families of deployed military personnel for late payments or scoring against someone who is sitting in a Humvee in Iraq a late payment.

It seems fundamentally unfair to me that somebody who is willing to lay his or her life on the line for our freedoms today is going to be denied credit tomorrow because they could not make a payment or were late making a payment while being deployed in very dangerous parts of the world.

I have been focusing on this issue with some of my colleagues. And I want to continue focusing on this issue and hope that during questions and answers we can address that critical and very important issue.

And I look forward to working with you, Mr. Chairman, on a bipartisan basis to continue developing a response to what is a very significant problem for our activated military personnel. And I thank the chairman. Chairman BACHUS. Thank you, Mr. Israel. Ms. Hooley, and then Ms. Waters? Ms. HOOLEY. Thank you, Mr. Chairman.

Very briefly, I am glad we are having these hearings. Of hearings, I think it is incredibly important. It is important to consumers, as well as to our credit system and our economy. I do think we have the best credit system in the world, and hopefully we will take positive steps to ensure the supremacy of our credit system, that it continues.

While I am happy having these hearings, I am becoming more and more concerned about the lack of movement from the administration. I know we had the undersecretary here earlier. We have

Thank you.

been told that they would have something ready in June. I have now heard rumors, and I hope they are just rumors, that we won't be ready until mid-July.

I hope we do not delay on this issue. I think, again, it is an issue that we need to deal with, not only for our economy, but for consumers. And I just think this attention deserves attention from the White House, as much as this subcommittee has provided for this issue.

I am looking forward to the rest of our hearings. And, again, I would like to thank the ranking member and the chairman for having these hearings. I think they are incredibly important.

I yield back the remainder of my time.
Chairman BACHUS. Thank you.
Gentlelady from California?
Ms. WATERS. Well, thank you very much, Mr. Chairman.

I would like to thank both you and our ranking member, Congressman Sanders, for this hearing today.

Today we have the opportunity to discuss one of the most important issues facing this subcommittee all year, the ability of consumers to have access to accurate credit information, maintain their privacy and be given the ability to safely conduct their business without having their identity stolen.

The Fair Credit Reporting Act was originally enacted by Congress in 1970 to bring the consumer credit reporting industry under Federal regulation and create certain obligations and rights governing credit reporting transactions. The 1996 amendments to the Fair Credit Reporting Act were designed to address widespread problems experienced by consumers who were going to buy credit are being charged too much for inaccuracies in their credit reports.

We all understand the need to have easy access to credit information and to have a uniform national standard. It is equally important that the information be correct. According to the Consumer Federation of America and the National Credit Reporting Association, who conducted an exhaustive study of over 500,000 credit reports, they found that nearly eight out of 10 files, 78.4 percent, were missing a revolving account in good standing.

In addition, one file out of three, 33.3 percent, was missing a mortgage account that had never been late. And two files out of three, 66.7 percent, were missing another type of installment account that had never been paid late. This includes mistaken identities, misapplied charges, uncorrected errors, misleading information and variation between information reported by the various credit repositories.

Part of the solution to strengthening consumer accuracy and access to their credit report can be found in the State of California. Consumer reporting agencies must disclose the names and addresses of all sources of information used in the consumer's report. California also requires consumer reporting agencies to, with a reasonable degree of certainty, match at least three categories of identifying information within

the consumer's file with the information provided by a retailer. The categories of identifying information may include the consumer's first and last name, month and date of birth, driver's license number, place of employment, current residence, previous residence or Social Security number. This effectively reduces a successful attempt at identity theft, and reduces the chance for mistaken identity.

Also in the California law a consumer has a right to receive his or her credit score, the key factors and any related information. Under new provisions, a consumer would be able to have a security freeze placed on his or her credit report by making a request in writing by certified mail with the consumer credit reporting agency.

A security freeze prohibits the consumer reporting agency from releasing the consumer's credit report, or any information from it, without the expressed authorization of the consumer. Effective July 1, 2003, upon receipt from a victim of identity theft of a police report or a valid investigative report, a consumer reporting agency must provide a victim of identity theft with up to 12 copies of their credit report for the consecutive 12 month period free of charge.

These examples create the opportunity for banks, credit card companies, department stores and auto financing and other furnishers who provide accurate information voluntarily to complete a report, the full scope of information, increasing the likelihood credit bureaus will not miss any negative information. With strong consumer protections, Federal preemption of States would not be necessary because Federal law would be the doer rather than the sell


I yield back the balance of my time. .
Chairman BACHUS. Are there any other opening statements?

Let's first introduce this panel. We have a very, I think, esteemed group of panelists.

John Courson is president and CEO of Central Pacific Mortgage Company, located in Folsom, California. Mr. Courson is also chairman of the Mortgage Bankers Association of America. Prior to that, he was the CEO of Westwood Mortgage Company and president and COO of Fundamental Mortgage Company.

And I note one thing interesting about his resume is that he served as president of the California and the Michigan Mortgage Bankers Association, and as a director of the Texas Mortgage Bankers Association, so quite a few positions in different States.

David Moskowitz is senior vice president, secretary and general counsel for Wells Fargo Home Mortgage. He has been in that position since 1994. Prior to that, he was with Prudential Home Mortgage Company, where he was associate general counsel, and Perpetual Mortgage Company in McLean, Virginia, prior to that as general counsel. Educated at Union College in Schenectady, New York, he has a law degree from Case Western, and admitted to several different State bar associations.

A.W. Pickel III, is currently president and CEO of Leader Mortgage Company, a mortgage banker broker company headquartered in Lenexa, Kansas. He is president-elect of the National Association of Mortgage Brokers. He graduated from the University of Illinois, Urbana-Champaign, in accounting. And as I mentioned to him earlier, he then went to work for an international Christian organization known as the Navigators, where he worked with college students at major universities. And I can personally tell you that the Navigators have been very meaningful to me.

And I know several of folks who do the same thing you do, very dedicated people. I commend you for that work. A long list of different awards, too numerous, really, to mention. But we welcome you to our hearing today.

Travis Plunkett, he serves as the Consumer Federation of America's chief liaison to members of Congress, to Federal regulators and to agency administrators. Consumer Federation of America is a non-profit association of over 300 organizations that advances the consumers' interests through advocacy and education, has a combined membership of 50 million Americans. Its primary focus is on credit reporting, bankruptcy, credit counseling, consumer privacy and insurance. Frequently interviewed by national and news media, written a number of consumer guides. He holds a Bachelor of Arts from the great University of Denver. I noted that you served in the U.S. Army intelligence and security commands. So Mr. Israel, some of his questions might also be something you could shed light on.

Allen Fishbein, general counsel of the Center for Community Change, he specializes in the area of expanding the availability of responsible lending and banking services for the underserved. He testified before our committee before.

And actually, Mr. Fishbein, we are going to have a hearing, I guess, later in the month on the underserved and how to better reach them with banking services, something that I am sure you could assist us with.

Prior to joining the Center, he was senior adviser for government-sponsored enterprise oversight, Fannie Mae and Freddie Mac. He supervised the department rule-making process at HUD for new affordable housing goals for the two enterprises. He has written several books. Past member of the Federal Reserve Board's Consumer Advisory Council. And I close by saying that he has been honored by the District of Columbia Bar as Consumer Lawyer of the Year with a degree from Antioch School of Law, here in Washington, D.C.

Mr. Gambill, present chief executive officer of TransUnion, joined TransUnion in 1985, rose, obviously, up through the ranks to the top position. Prior to joining TransUnion, Mr. Gambill was regional credit manager for Rhodes Furniture in Atlanta, Georgia, and also held management positions at Belth Department stores and Sears Roebuck.

So, you can obviously give us a good view, from your background both from a credit reporting agency and also from a furnisher of information to a Credit Bureau.

He has a Bachelor of Science degree in Business Administration from Arkansas State, and also served in the U.S. Army for six years, and, as I was, he was an enlisted man who rose up through the ranks. That is why I have such fear of generals, even today.

[Laughter.] He became a staff sergeant, which is a very respected position.

An Arkansas native, currently resides in Aurora, Illinois, with your wife, and you have two children.

With that, we will start with Mr. Courson, chairman of the Mortgage Bankers Association, and go just in order.

Thank you.


BANKERS' ASSOCIATION Mr. COURSON. Good morning, Mr. Chairman, and members of the subcommittee.

I want to thank you for inviting MBA to participate in this very important discussion. I am proud to testify this month, in June, which has been designated by the president as Homeownership Month. I applaud the subcommittee for holding these hearings and giving the mortgage finance industry an opportunity to share with you the great success that our nation and its homeowners have experienced as a result of having the American dream met, due in part, to the Fair Credit Reporting Act.

Let me share with you, if I may for just a moment, some of that success. As you know, home ownership brings good things to our citizens and to our economy. In the last 2 years, over $100 billion has been put back into the economy from refinancing of real eState. The real eState sector employs 1.36 million, of which approximately about 500,000 come from our industry, the mortgage lending industry.

FCRA plays an integral role in this success by creating a structure that produces reliable consumer information used to lower the cost of home ownership, offers the dream of home ownership to underserved markets and produces innovative mortgage products.

I am here today to strongly recommend that you reauthorize the preemptions contained in FCRA in their current form and maintain the national standards, uniformity and protections.

Let me emphasize, Mr. Chairman, FCRA has national standards, uniformity and protections, all important for consumers and the mortgage industry because it gives rise to the following benefits.

It enables Americans to move to new States and purchase homes with relative ease. It lowers the cost of credit to consumers, as lenders compete for customers on a national level. It speeds the consumer's access to credit, as mortgage lenders underwrite loans assisted by automated systems that provide a timely response to the consumer's mortgage application. And it permits lenders to evaluate risks more accurately through the analysis of consumer credit data, thereby enabling mortgage lenders to extend credit to Americans who, under traditional evaluation models, were considered too great of a risk.

And it allows for greater innovation in mortgage products, as lenders take a successful product in one State and implement it in another State, allowing those consumers to also benefit.

Seven important Federal preemptions included in FCRA's 1996 amendments provide standards of accuracy, consistency and uniformity among the users of consumer information: those who report consumer information and credit bureaus that collect and distribute information. The preemptions, which Congress included on an experimental basis, also provide for consumer protections, to prevent the misuse and inaccurate reporting of consumer information.

The mortgage lending industry believes FCRA and the preemptions within it have proven to be financial success for consumers and the economy, and should be extended and made permanent.


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