The House Financial Services Subcommittee on Financial Institutions, chaired by Rep. Spencer Bachus (R-Ala.), held the third in a series of hearings on the Fair Credit Reporting Act (FCRA) today. The subcommittee heard testimony from a variety of groups involved in the use of the credit reporting system, including several critics of current practice.
“The twin issues of rising consumer debt and shockingly low levels of financial literacy have grave implications to the continued economic well-being of the nation—especially as Americans cope with these increasing perilous economic times,” asserted Prof. Robert Manning, Rochester Institute of Technology.
Manning criticized the credit card industry’s effort to increase its “revolving” debt portfolio by increasing credit card solicitations and aggressively marketing their products and services to “previously neglected, economically marginal consumers in the 1990s” and college students. He also noted that if the bankruptcy reform bill is enacted into law, it will expand the U.S. government’s role as a de facto debt collector and increase the costs assumed by the public in extending consumer credit to the most risky credit card clients. Hence, it will provide a disincentive for the banks to curtail the marketing of high-cost credit to its most marginal clients.
Travis Plunkett, Legislative Director, Consumer Federation of America, testified that some lenders extend credit to subprime borrowers in an abusive and predatory manner, contributing to an unprecedented growth in bad credit card and mortgage debt, home foreclosures and personal bankruptcies. Meanwhile, he argued that the FCRA’s protections to ensure reporting accuracy and consumer privacy, while preventing identity theft, have not kept pace.
Other witnesses from the lending community urged extending the FCRA pre-emption
Congress enacted in 1996. Read the testimony.
This story ran on ABI World Update on 06/12/2003.