By Sarah Borchersen-Keto, CCH Washington Staff Writer

By a vote of 95 to 2, the Senate passed legislation November 5, 2003, that permanently reauthorizes the Fair Credit Reporting Act (FCRA). The national credit reporting standards which FCRA created were due to expire on January 1, 2004. The bill must now be reconciled with a House version that passed in September. Meanwhile, the private sector continues its efforts to combat identity theft as well.

Senate Banking Committee chairman Richard Shelby (R-Ala.) said the bill "strikes a careful balance between ensuring the efficient operation of our markets and protecting the rights of consumers." He said he would take steps to ensure the bill is enacted into law this year.

The White House said the legislation "strengthens the national credit reporting system that has proven critical to the resilience of consumer spending and the overall economy." Officials added that the bill incorporates many of the consumer protections proposed by the administration, including new tools to improve the accuracy of credit information and help fight identity theft.

Edward Yingling, executive vice president of the American Bankers Association, said permanent reauthorization of FCRA and continued federal preemption of state law "is critical to our nation's seamless credit reporting system, which is the fairest and most efficient in the world."

Shelby noted that over the 6 years since the FCRA was last amended, significant changes have occurred in the country's credit markets. "These changes have been largely positive," Shelby said, as they have expanded access to credit to more Americans and permitted loan approvals in hours rather than weeks. The downside of this trend, however, has been a sharp rise in identity theft, Shelby noted.

The various provisions of the Senate-passed legislation will:

• Provide consumers with free credit reports annually from national credit bureaus, and provide consumers with an easy method to obtain their reports
• Require a summary of consumers' rights to opt out of prescreened offers
• Require the truncation of credit and debit card account numbers on electronically printed receipts
• Lengthen the statute of limitations for all FCRA violations
• Enhance identity theft penalties
• Prohibit the sale, transfer or collection of identity theft debt
• Provide consumers with the right to opt out of marketing that results from affiliate information-sharing
• Enhance financial literacy

California Democrats Barbara Boxer and Dianne Feinstein were the only two senators to vote against the bill. Feinstein said the bill "reduces the privacy rights of 36 million Californians." An amendment put forward by Boxer and Feinstein, which mirrored legislation passed in California earlier this year that gives consumers the ability to prohibit financial institutions from sharing sensitive personal information with their affiliated companies, was defeated 70 to 24. "Time will show that this was the wrong vote, and I have no doubt that this issue will resurface as consumers learn more about the misuse of their most sensitive personal information," Feinstein said.

Shelley Curran, legislative analyst for Consumers Union, said the Senate "had the opportunity to make it crystal clear that it doesn't want to limit the ability of states like California to enact tougher financial privacy reforms, yet it failed to do so. . .worse yet, it missed an opportunity to extend some of the important protections offered by the California privacy law to consumers throughout the country."

New Private-Sector Identity Theft Protections

The process of reporting instances of identity theft is expected to be dramatically reduced under a new Identity Theft Assistance Center (ITAC) pilot program that should become operational by the second quarter of 2004. Wells Fargo & Co. will conduct the pilot program, with the support of the Financial Services Roundtable and member institutions of BITS, a nonprofit industry consortium.

"Identity theft is the fastest growing type of white-collar crime, and one that currently places too high a burden on our customers both in terms of lost financial identity and the time it can take to restore their good names," said Steve Bartlett, president and CEO of the Financial Services Roundtable.

Once the ITAC is operational, victims of identity theft will only have to contact their primary financial institution to disclose details of the crime. Once issues are resolved with that institution the information will be forwarded to the ITAC, with the customer's consent. In turn, the ITAC will contact all other companies where the individual had an account, and where additional fraud may have occurred.

Dick Kovacevich, chairman and CEO of Wells Fargo, said the mutual goal of the program is "to put a model in place that will help streamline the process for customers simply and quickly as well as help curb this crime in the future."

The Financial Services Roundtable and BITS said they are working closely with the administration, Congress, and law enforcement and regulatory agencies to reduce fraud cases and assist victims.

In September, the Federal Trade Commission released a survey showing that 27.3 million Americans have been victims of identity theft in the last five years, including 9.9 million people in 2002. According to the survey, last year's identity theft losses to businesses and financial institutions totaled nearly $48 billion, while consumer victims reported $5 billion in out-of-pocket expenses.

Related items:

Legislation to Amend Fair Credit Reporting Act Clears House

Congress Likely To Reform National Credit Reporting Systems

Lawmakers Hope To Address ID Theft as Part of FCRA Reauthorization

Lawmakers Back Extension of FCRA Preemption Provisions