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Jan 1st expiration of Fair Credit Act (long)


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I found this article in my daily newspaper and wondered how this will affect us for diputing and clearing up credit. It seems to me, that it might be great if each state's laws prevent CR from OC but--I feel our rights would suffer....any opinions??


If the Fair Credit Reporting Act is allowed to expire in January, credit checks for large purchases could become a difficult process and negatively affect the economy, officials say

Web Posted : 07/15/2003 12:00 AM

For 33 years, consumers have been able to walk onto a car lot or into an appliance store, fill out a little paperwork and walk out with a high-dollar item and a new debt load. In fact, computers have squeezed the credit approval process down to less than five minutes.

Steven Smith and Joanie Goodson listen to General Sales Manager Cade Farber inside the Tom Benson Chevrolet-Isuzu showroom. The couple were considering a car purchase Saturday. Buying a car could become difficult if the Fair Credit Reporting Act is allowed to expire in January.

Tom Reel/Express-News

All this is possible thanks to the Fair Credit Reporting Act. But the system that provides the basis for the easy purchase of most consumer goods, including houses, is in jeopardy because the act expires Jan. 1 unless Congress reauthorizes it with a new bill.

The law is what allows companies issuing credit to a buyer to run a credit check on customers to determine if they are a good risk. Credit information clearinghouses such as Equifax, TransUnion and Experian provide the information at the authorization of the consumer.

If the law lapses, checking credit would become a laborious process and possibly slow the economy.

"If we could not run credit reports, we would have to shop out the loan to lenders, and who knows what would happen," said Paul Henneke, general sales manager of Ancira Pontiac Buick GMC in Boerne. "It would be very bad for our industry."

Nine out of 10 houses are purchased with a mortgage, and most of the 17 million automobiles purchased a year are sold on credit, according to the U.S. Treasury Department.

Treasury Secretary John Snow testified before a congressional committee last week that "it is not too much to say that ready access to credit on competitive terms is an integral part of the economic security and well-being of American families."

Snow said the "democratization" of credit under the FCRA has made it possible for low- and middle-income families, particularly minorities, to get a mortgage if they have trustworthy credit.

Support to reauthorize the FCRA seems fairly universal, but Congress is working through ways of protecting consumers from identity theft, giving people access to one free credit report to check for accuracy and making unsolicited credit offers more transparent.

A bill by U.S. Rep. Spencer Bachus, R-Ala., and Democratic Rep. Darlene Hooley of Oregon is expected to pass out of the House Financial Services Committee on Wednesday after six hearings.

The bill has 14 Democrat co-sponsors and is expected to face little opposition after minor points in the language are hashed out.

Brad Rich, executive vice president and general counsel for insurance giant USAA, said firms operating nationwide fear that a lapse in the law would open the door for each state to write its own rules. Some states already have laws ready to kick in if the control returns to the states.

That lack of a national standard, Rich said, would create confusion in the marketplace and make it difficult to offer credit readily.

The Council of Economic Advisers estimates that if states adopted their own credit reporting laws, at least 3.5 percent of loans now approved would be denied to keep an even level of credit risk. Snow said that means about $270 billion of the $8 trillion of outstanding consumer credit would be in jeopardy.

Cade Farber, general sales manager at San Antonio's Tom Benson Chevrolet-Isuzu, said state-by-state rules would have the effect of making credit issuers less likely to file data with the credit reporting services, which is voluntary.

"That would degrade the quality of the data and make it tough to get an accurate picture" of how good a buyer's credit is, Farber said.



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