June 21, 2007 - The FTC and the FED got a grilling from members of Congress this week as they testified at a hearing about enforcement failures of the Fair and Accurate Credit Transactions Act (FACTA). Elected representatives wanted to know why all of the provisions in FACTA, which gives a variety of rights to consumers, have not been implemented. Those asking the questions were especially concerned that provisions of FACTA that are designed to help consumers straighten out errors on their credit reports.
One of the things that FACTA specified was that the CRAs (Experian, Equifax and Trans Union) change their customer support procedures to make it easier for consumers to address issues with their credit reports. Lawmakers at the hearing were concerned that the government was not moving fast enough to implement all of the provisions of FACTA.
Rep. Carolyn Maloney (D-NY) said, "The problem of FED inaction is a consistent theme. So many years to accomplish a congressional task is unacceptable and ridiculous." And Rep. Paul Gillmor (R-OH) said it "was essential that consumers have an effective way to correct or reverse erroneous information."
But if lawmakers thought that a line of hard questions would be enough to get these federal agencies moving forward they were sadly mistaken. Instead, they started finger pointing at each other and at Congress.
Specifically, those testifying said that there were simply too many agencies responsible for various consumer credit regulations and that it was difficult for these various agencies to reach mutual agreements. The FED (Federal Reserve), Office of Thrift Supervision, OCC (Office of the Comptroller of the Currency) and the FTC all regulate various aspects of consumer credit.
Lydia Parnes, the FTC representative that testified at the hearings said that the FTC had implemented 17 out of 20 of the mandates from FACTA but she had no timetable for implementing the remaining three. And she tried to show that the FTC was being effective at enforcement by levying fines against companies that violate consumer credit laws. She specifically mentioned the agencies settlement with ChoicePoint after the company sold consumer data to identity thieves.
Consumer advocates at the hearings were not impressed. Evan Hendricks, publisher of the Privacy Times newsletter pointed out that fines levied against companies who violate the law have all been very small when compared to the profit those companies made through their violations. He also pointed out that the CRAs have been focused on cost cutting measures rather than on customer service. This focus has led to many of the problems consumers face today when they try to address credit report issues.
A staff attorney for the National Consumer Law Center, Chi Chi Wu, told congressional members that the CRAs have virtually no to change their ways and conduct real investigations when consumers file a credit dispute. She said, "They treat disputes as a nuisance, and the investigation of errors as a money drain, devoting as little resources as possible by using automation that produces formalistic results." She went on to say that "ensuring the accuracy of credit reports is ever more critical given the expanding reliance on credit scores in all financial aspects of a consumer's life. For this reason, we urge the Regulatory Agencies to consider the recommendations above and issue guidelines that have meaningful protections for consumers."
But how or if Congress will address these issues again is unknown. The message that the federal agencies testifying were conveying to Congress was "don't hold your breath".