FROM THE OFFICE OF PUBLIC AFFAIRS

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Good afternoon, and thanks for joining us at the Treasury.  I’d like to thank the Women in Housing and Finance for their attendance and support today.  I’d also like to thank Treasury Under Secretary Peter Fisher and Assistant Secretary Wayne Abernathy for spearheading our efforts to improve the Fair Credit Reporting Act.
 
The Administration also owes a special thanks to Chairman Oxley, Chairman Bachus, and Ranking Member Frank of the House Financial Services Committee along with Chairman Shelby and Ranking Member Sarbanes of the Senate for their very constructive hearings on the Fair Credit Reporting Act and consumer protections. Since April, Chairman Bachus alone has held 6 hearings and called 75 witnesses before his subcommittee.  We appreciate their attention to this issue.

The uniform national standards in the Fair Credit Reporting Act expire soon.  Since their passage in 1996, these national standards for consumer credit information have become a pillar of our economy.  Millions of Americans have access to credit today because of these standards and millions more get credit on better terms because of them.  They have lead to the democratization of credit and the miracle of modern credit markets, which do so much for average citizens.  The widespread availability of credit on reasonable terms helps to keep this economy strong.  It is important that the uniform national standards of the Fair Credit Reporting Act be extended and made permanent.  The reason for today’s event is to express the Administration’s strong support for doing just that – renewing the standards and strengthening the consumer protections in them. 

A hallmark of our country is readily available credit.  In fact, it would not be too much to say that credit is as American as apple pie.  Great advances in financial services over the past few decades have opened the doors to credit for Americans across the board. It seems so basic that we take it for granted, but as integral part of what makes our economy so successful is our confidence in financial services such as credit cards, mortgages, and auto loans. 

 If there is any question on that score, just consider how all three have helped the American economy withstand the serious shocks we’ve experienced over the last three years – a recession, 9-11, homeland security, war in Iraq and so on. 

The availability of credit improves peoples’ lives greatly and gives them a degree of economic freedom that is otherwise unimaginable.  Because of these credit products, Americans have an unprecedented level of economic freedom and that freedom – the ready availability of credit – depends on business’s instant nationwide access to accurate, reliable consumer information.

The national uniform standards of the Fair Credit Reporting Act serve consumer interests in two ways.  First, they expand the opportunity for every consumer to access credit and financial services – essentially, they make your reputation as a borrower portable, so that you don’t have to establish your good name from scratch in every city you visit, or every store where you shop.  Second, the national uniform standards work to ensure that the consumer’s personal information is more accurate and secure.  The accuracy allows lenders to price credit fairly, and to extend credit to those who might not have been approved in the past.  The security limits the ability of the unscrupulous to abuse private data.

As Congress begins to consider the permanent renewal of the national uniform standards of the Fair Credit Reporting Act, we would like to suggest a few ways to make these standards even stronger.  With the right additions, we can better protect consumer financial data from fraud and abuse, while enhancing the quality and integrity of that information.

The first priority for the renewed national standards is security, because the greatest threat to consumers today is the growing menace of identity theft.  Identity theft is far more insidious and harmful to our national welfare than many realize.  It attacks the trust and confidence that nurture our open economy, even as it destroys individual lives.  Identity thieves routinely prey on the vulnerable – families of the recently deceased, seniors, veterans, and men and women serving our nation overseas. 

The wretched depravity of some identity crimes defies the imagination.  In a ring stretching from New Jersey to California, a healthcare worker in cahoots with bank insiders and mortgage brokers got  the names of terminally ill hospital patients, forged their identities, drained their bank accounts, and then bought houses and cars in their names – stealing their identify and looting their finances.

Another recent case involved a rash of scammers posing in military uniforms who visited the wives of soldiers deployed in Iraq.  They falsely informed the wives that their husbands had been seriously wounded.  The con artists then tried to collect personal information about the soldiers from the distraught wives, to enable the scammers to use the solders’ identities and steal the families’ savings.

In other cases, thieves have impersonated representatives from well-known charities, or used names that sound like well-known charities to collect donor information – all for the purpose of emptying the accounts of the duped donors. 

One of the worst aspects of these crimes is that they are often far-advanced by the time they are discovered – with an unexpected failed charge, a surprising negative bank balance, or a rejected job application – but the consequences of these crimes for the victims can linger for years, or even a lifetime.  Extensive damage to a person’s credit can be as hard to cure as it is to prevent.  How do you prove you are the real you, after someone else has stolen and ruined your name?  Recovering one’s identity is a long, stressful and painful process.  We need to make it more difficult to take one’s identity and much easier to reestablish one’s identity.

It is important to realize that such crimes exact a heavy toll on our economy. Every such crime weighs on our entire system of credit, raising the cost of doing business and subtly but surely impeding economic growth.

Fighting identity theft requires taking the crime as seriously as its consequences.  That is what we hope to achieve with permanent national standards for the Fair Credit Reporting Act.  The reforms we are seeking will give law enforcement more tools to fight identity crimes.  For example, we would direct the bank regulators to be on the watch for patterns followed by identity thieves and alert the banks that they supervise to be on the watch for these patterns.  These reforms will also empower individual consumers to protect themselves, and will help victims rebuild their financial lives more easily.

There are several ways that the renewed Fair Credit Reporting Act standards should go further to protect individuals against identity theft, and help victims of theft rebuild their financial lives.  For one, we recommend that the uniform standards include a national security alert system.  Under such a system we will allow consumers who have been victimized or are in danger of being victimized to put banks and merchants on their guard against any further efforts to impersonate the consumer, thus making it much harder to steal one’s identity.  The Fair Credit Reporting Act should promote best practices for the sharing of credit information – things like blocking fraudulent account information and doing it immediately before bad information becomes built into the system.  And the standards should codify a policy for credit bureaus to share information immediately when a theft is discovered

Another goal of the uniform standards of the Fair Credit Reporting Act is to help consumers learn how to manage their credit to obtain the best outcomes for their personal finances.  In the modern American economy, smart credit management is an elementary lesson in financial literacy.  Every consumer should know the consequences of poor credit scores and how to raise those scores.

A reformed, pro-consumer FCRA will expand consumer access to free annual credit reports upon request.  Consumers should be offered the right to review their credit reports for accuracy and completeness.  Consumers also should be provided more information about their credit scores, and instructed on how they can improve their credit profiles. 

We believe that the FCRA should also be amended to direct the Federal Trade Commission and bank regulators to make it easier for consumers to say no to unsolicited credit offers.  Too often, consumers’ rights are hidden from view, and that should be fixed when Congress reauthorizes the Act. 

Ultimately, these reforms strike a balance between consumer protection and the overall cost of credit to consumers and businesses in our society.  We know that the gains to the economy and to individual consumers are very large because of our uniform national standards.  We need to make sure that we are also providing the maximum consumer protection consistent with achieving those economic gains.   Better, uniform standards for information sharing allow more people to obtain credit when they need it, wherever and whoever they may be. Our goal is to do so while respecting peoples’ privacy and protecting their identity.

For example, more than two-thirds of Americans now own their own home, and 9 out of 10 homes are purchased with a mortgage.  The Council of Economic Advisers estimates that without the national uniform standards of the Fair Credit Reporting Act, 280,000 home mortgage applications that are now approved each year would be denied – that’s $22 billion in new mortgages annually.  Access to financial information that is known to be accurate and reliable is especially important for approving loans to first-time buyers.

The benefits are most pronounced for lower income and minority families, because national standards for credit information give lenders the hard facts they need to make lending decisions they might have walked away otherwise.  The percentage of minorities holding mortgages increased dramatically between 1983 and 2001, at a rate much higher than for families overall.  At the same time the percentage of minority families with credit cards has risen dramatically as well.  One study found that lender utilization of credit scores made possible by national information standards improved minority borrower approval rates by 29%.

With national uniform standards, folks who earn their good reputations can take them along wherever they go.  That’s especially important for immigrants to this country, who are just starting to put down roots.

No other nation compares with the United States in the breadth, diversity and depth of financial services available to the public. 

Secure, reliable information is the lifeblood of all financial services, among which consumer credit is fundamental.  It is not an overstatement to suggest that preserving the integrity and availability of consumer credit in this economy is preserving prosperity itself. 

We urge Congress to enact this package of reforms, to ensure that the Fair Credit Reporting Act becomes an even more effective tool for meeting the financial interests of American consumers.  This proposal is vital to the future of our economy.  With improved national standards, we can make great strides to protect our citizens against identity theft, while holding open the doors of credit to many more American families of every income and background.

Thank you.

Related Documents:

• FCRA Factsheet