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So, I have a hard time seeing it myself. Senator SARBANES. That is a very helpful chart. Senator BENNETT. Yes, very helpful. (Laughter.] You can see the top bars going up and that is the total amount of household credit. And in 1960, it was just under 60 percent. Now it is over 100 percent.

However, the lighter area underneath shows the amount of consumer credit. The darker part of the bar is mortgage credit. And the consumer credit has remained relatively stable in that period.

In 1960, it was at the lowest percentage of household income. Looking at this, I would say it was probably at about 16 percent. It went up maybe to 17 or 18 percent in 1970 and stayed there all the way through.

But now, it has gone up in 2002, a 12-year period, from 1990 to 2002, to just over 20 percent.

But mortgage, which is the top part of the bar, has gone up very dramatically. In 1960, mortgage credit as a percentage of disposable income was less than 40 percent and now it is more than 80 percent. So the mortgage portion of household credit has gone up enormously.

Now, I am not suggesting there is a cause-and-effect relationship here with the Fair Credit Reporting Act just because this is done during that period. We get into trouble with that around here because we put up charts that show cause-and-effect relationship depending upon what point we want to make on the floor.

However, the final question I would ask you is whether or not the ability to get a mortgage in a timely fashion would be affected adversely if we did not renew the preemption part of this bill?

Mr. BEALES. I think it depends. It depends in part on what states do. It depends, in part, on the kind of a consumer you are.

If you have never moved and you have lived in one area your whole life, then even a completely State-specific system is not necessarily going to make much difference to you.

If you have lived in 20 different places in the last 20 years, and your credit history is scattered all over across lots of different States, and is not accessible across State lines because of different State restrictions, it is going to have a much more dramatic impact in that circumstance.

I think what may be the most important part of the statute in terms of how it is impacted minority credit in particular, or credit at lower incomes, is prescreening that lets creditors identify consumers who are good risks and compete for that business.

Senator BENNETT. I see my time is expired. But I had exactly the experience that Mr. Beales is discussing, Mr. Chairman.

I bought a house in California, having lived in California previously, and it was approved virtually in an afternoon.

Then I had reason to move to the State of Utah, and it took me close to 60 days to get this thing approved in the State of Utah. And I finally had to have my father go down and wave his credit record, which was sterling compared to mine, and cosign the loan before we got it taken care of.

That was before we had the legislation that we are all living under.

So, I have had personal experience with how difficult this can be.
Senator SARBANES. They are very careful there in Utah.
Chairman SHELBY. Very careful.
Senator BENNETT. Well, they were.
Chairman SHELBY. Senator Miller.

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Senator MILLER. Thank you, Mr. Chairman.
Thank you, Mr. Beales.
This is something that I should know, but I do not.
There is a lot of things like that.

But this is one. And I may be the only one in this room that doesn't.

What I am asking is, what exactly is the jurisdiction that the FTC—I know what it stands for, Federal Trade Commission-but what jurisdiction do you have over the Fair Credit Reporting Act?

I know people can call up and get answers to questions and that you provide education on the FCRA. I know that you can give guidance and advice.

I assume that somewhere in there, there is also some enforcement jurisdiction.

Is that correct?
Mr. BEALES. That is correct.
Senator MILLER. And if so, talk to me a little bit about that.

Mr. BEALES. We are, I would say, the principal enforcement agency under the Fair Credit Reporting Act. The credit reporting agencies themselves are subject to our jurisdiction.

Banks that are regulated by other agencies are regulated under the Fair Credit Report by those other agencies. But for other creditors, we are the chief enforcement agency and the chief regulatory agency.

Senator MILLER. And I think you answered this question a while ago. You say that you have no legislative remedy that you would recommend to the Senate Banking Committee when it comes to looking at the FCRA bill.

Mr. BEALES. The Commission has not made any recommendations at this point.

That is correct.
Senator MILLER. Thank you.
Chairman SHELBY. Senator Dodd.


STATEMENT OF SENATOR CHRISTOPHER J. DODD Senator DODD. Thank you, Mr. Chairman. And thank you for holding this hearing. And I support the notion that Senator Sarbanes raised and we are going to hear some more later on. But I think this is very helpful.

And I want to commend Mr. Beales, too. Your testimony is very, very good, very helpful as well. And I am quite confident that we can craft a good piece of legislation.

On balance, Mr. Chairman, the FCRA has done much to improve a formerly fragmented situation that was basically a regional system, but now, of course, a national system of credit reporting.

But like several of my colleagues, we have some concerns about how consumers are treated under this regime.

And at least I hope that the Committee will closely examine how to better protect consumers as part of this and any discussion of reauthorization.

I am going to send around to my colleagues, the major newspaper in my State, the Hartford Courant, has just run a series of articles, Mr. Chairman, on the whole credit question.

I do not know if you have seen these or not at all. Have you seen them?

Mr. BEALES. I have, yes.
Senator DODD. They are rather good articles, I thought.

I would be interested, at some point, in your response to the suggestions in them, the comments in them. They are rather comprehensive.

Two reporters spent months looking at the issue of fair credit reporting, a 4-month investigation, culminating in the series I mentioned, which detailed the day-to-day problems that consumers face with the current system.

I am going to send around a package of these articles for my colleagues to look at.

Chairman SHELBY. Good.

Senator DODD. The articles focus on the devastating effects that inaccurate information in credit reports can have on the lives of millions of people. Individuals are finding that it can take years of time and money to clear the mistakes that credit reporting agencies are making. And after finally improving the inaccuracy of their reports, many consumers are then left footing the bill in recovering from the damages caused from their records.

As America's financial consumers have more credit options available to them, and as the mass of improvements in technology have occurred, I am concerned that the credit reporting system and the regulations that govern it may not have kept pace to ensure a corresponding level of accuracy.

I think we can do a better job ensuring the consumer's financial picture is more accurately kept and that the process to correct mistakes is faster and easier for consumers.

Additionally, I think that we can improve the current privacy protections available to consumers.

Consumers are concerned that no significant changes will be made to the current system. According to the same article that I mentioned, cracks in the system continue to put millions at risk.

We need to fill those cracks. I think we all want to do that, with the national credit reporting system, and shore up its foundation.

I thank the Chairman again for holding the hearing.

Let me ask, if I can, a couple of things. One is, in response to Senator Miller and I guess previous questions, you have indicated that you do not believe there is any greater statutory needs that you would have to address the inaccuracy issue.

Is that correct?

Mr. BEALES. I think the fundamental accuracy mechanisms in the statute have, by and large, worked pretty well. I think it is just in the processes, as many transactions as the credit reporting system does, is almost inevitably going to sometimes make mistakes. And what is really important is to have a mechanism to correct those mistakes when they occur.

I think the mechanism that is there, by and large, works pretty well, although, it doesn't work perfectly in every instance.

Senator DODD. How many complaints does the FTC get a month, roughly, of this kind?

Mr. BEALES. I do not have a specific number. We get probablywell, this is probably annual. We probably get several thousand complaints about each of the three credit bureaus.

Senator DODD. On a monthly basis?
Mr. BEALES. That is probably annual.
Senator DODD. Several thousand.
Mr. BEALES. Yes.

Senator DODD. What categories do they fall into, roughly speaking? Identity theft? Credit card? Inaccuracies?

Mr. BEALES. Those are accuracy complaints.

What you have to understand in thinking about the accuracy complaints that we get, and we do not have any independent assessment of whether the information is really accurate about who's right in this dispute. We know there is a dispute.

And we do know because we get complaints from them, that there are some consumers who do not understand the way the system works. They think that if they were behind on their payments and that was reported, but they are now current, that the fact that they were behind should go away.

But that is not inaccurate. They were, in fact, behind. That information is part of the credit report, and stays there, but it sometimes leads to disputes because consumers do not understand that that is the way the system works, and is designed to work.

Senator DODD. Is there a breakdown between credit furnishers and the reporting agencies themselves? Do you see any evidence of that?

Mr. BEALES. We have been very interested in what the furnishers are doing. We have brought the first furnisher cases that are based on furnisher liability, in order to assure that furnishers are providing accurate information.

Where we, frankly, have seen the most difficulties is with the information reported by debt collectors, rather than the information reported by other kinds of creditors.

But we are quite interested in furnisher issues across the board as an enforcement priority.

Senator DODD. And you say that you have had a chance to look at those articles in the Hartford Courant.

What is your reaction to them?

Mr. BEALES. The potential consequences of mistakes in credit reports are very severe. I think that is why this statute is important and why the set of statutory protections to correct mistakes is very important.

It is why we have made the enforcement of those mechanisms, both furnisher liability and of the adverse action notices, why we have made those key priorities in our FCRA enforcement efforts.

I think that is the main point, that the accuracy is really a critical issues.

Senator DODD. I appreciate that. I might, Mr. Chairman ask if maybe we could get some numbers, if you could. I would just be curious about the number of complaints you get and if you could give a little more accurate breakdown of what categories they'd fall, it might be helpful to the Committee.

Mr. BEALES. Sure. We would be happy to do that.
Chairman SHELBY. I think that is an excellent suggestion.
Senator DODD. Thank you. .
Thank you very much, Mr. Chairman.
Chairman SHELBY. Senator Stabenow.



First, I do have an opening statement that I would appreciate be made a part of the record.

Chairman SHELBY. It will be made a part of the record in its entirety, without objection. Senator STABENOW. Thank you very much for holding this hear

And thank you, Mr. Beales. It is an important topic. I wonder if I might just follow up on the questions as it relates to consumers. Earlier, Senator Bunning was asking you for the tollfree number.

I am wondering, that really leads me to a question concerning the opt out provisions. And we know, for every prescreened credit offer, there has to be a notice of the consumer's right to opt out.

Could you speak a little bit about how that is working? Do people understand it? Do others, other than Senators, not know the tollfree number?

I did not know it, either.

But, also, do they understand how to do it correctly? How is this working, overall?

Mr. BEALES. We do not have any systematic assessment of how many consumers know or do not know. Or how much they know about exactly how to go about it.

There are disclosures that are supposed to be provided with every prescreened offer that you get of how to do it and what number to call. But there is a lot of information there, and a lot of other information about the offer and the terms of the offer that probably makes it hard to find in a great many circumstances.

It is not something where we get a lot of complaints, I do not believe. From that perspective, the system seems to be working.

But I am sure there are consumers who do not know that they can opt out, some of whom may prefer to opt out.

Senator STABENOW. And what percentage of consumers are opting out?

Mr. BEALES. That I do not know.

Senator STABENOW. So, you do not have any way of tracking this point, how many opt out, what percentage?

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