GEC S.B. 27 75(R) BILL ANALYSIS BUSINESS & INDUSTRY S.B. 27 By: Harris (Van de Putte) 5-20-97 Committee Report (Unamended) BACKGROUND Currently, the use of consumer reporting agencies is expanding quickly as consumer credit transactions become the rule rather than the exception in consumer purchasing. Consumer credit reports by consumer reporting agencies include certain credit information used to establish a consumer's eligibility for credit, insurance, or employment. There are concerns that there is a need to ensure that consumer reporting agencies exercise their responsibilities with impartiality, fairness, and consideration. This bill set forth regulations for consumer reporting agencies and provides civil penalties. PURPOSE As proposed, S.B. 27 sets forth regulations for consumer reporting agencies and provides civil penalties. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Title 2 of the Business and Commerce Code by adding Chapter 20. CHAPTER 20. REGULATION OF CONSUMER CREDIT REPORTING AGENCIES. Sec. 20.01. DEFINITIONS. Defines "adverse action," "consumer," "consumer file," "consumer report," "consumer reporting agency," "investigative consumer report." Sec. 20.02. PERMISSIBLE PURPOSES; PROHIBITION; USE OF CONSUMER'S SOCIAL SECURITY NUMBER. (a) An agency can furnish a report only for court orders, upon written request of the reported, or to persons doing credit reviews for transactions extending credit, for employment purposes specified by state law, for licensure by a governmental entity, for legitimate business needs, and for any purpose authorized by federal statute. (b) The agency may not prohibit the user of either a consumer report or an investigative consumer report from disclosing the contents of either report to the reported at their request if adverse action has been taken or is contemplated by the user of the report. The disclosure or copying of a report does not make the user a reporting agency and the user is not liable for the information in the report. (c) If a consumer provides a social security number (SSN) to a person to obtain a report the person shall include in all future requests for that report shall include the SSN unless the person believes that the SSN is not correct. Sec. 20.03. DISCLOSURES TO CONSUMERS. (a) On request and with proper identification a consumer reporting agency shall provide to the consumer in writing all information pertaining to the consumer in the consumer's files at the time of the request including name of each request for credit information through the last 6 months, instructions on the use of the form, and a toll-free number for the agencies dispute resolution mechanism. (b) The information must be clear and accurate and understandable to the consumer. (c) The agency shall provide the consumer with a copy of their own report at their request with identification as directed by the US Fair Credit Reporting Act. Sec. 20.04. CHARGES FOR CERTAIN DISCLOSURES. (a) The agency may charge the consumer up to $8.00 for the information except as defined in (b) in the report and that charge may increase annually based on the Consumer Price Index for All Urban Consumers as determined by the US Department of Labor rounded to the nearest $.50. (b) The agency may not charge a fee for a copy of the report requested within 60 days after an adverse action taken based on the report, for notification of deletion of inaccurate information from the record, instructions for interpreting the report, or for a toll free phone number for additional assistance with the report. Sec. 20.05. REPORTING OF INFORMATION PROHIBITED. (a) Except as defined in (b) the agency may not report information on a case under Title 11 of the US Bankruptcy Act after 10 years, a suit or judgement after 7 years or the statute of limitations whichever is longer, a tax lien after 7 years, an arrest or indictment or conviction of a crime after 7 years following the disposition of the case or parole, or another item that predates the request by 7 years. (b) The information described in (a) can be provided in connection with credit transactions over $150,000 or more, underwriting life insurance of over $150,000, or for employment with a salary expected to be more than $75,000. (c) Medical information can not be released in a consumer report unless the consumer consents. Sec. 20.06. DISPUTE PROCEDURE. (a) If there is inaccurate or incomplete information in a consumers report and the agency is notified of that error the agency has 30 days to fix the error. Notification can be by phone to a representative of the agency. (b) The agency shall notify within five days those parties that provided information relating to the dispute. (c) The agency may terminate a dispute investigation if the dispute is frivolous or irrelevant and the agency shall notify the consumer of the termination and the reasons for the termination by mail or phone as authorized by the consumer. The presence of contradictory information in a file does not constitute grounds for this section. (d) If the disputed information is found to be inaccurate or is not verified then the agency shall revise the consumers file, and provide the revised information to the consumer at their request and to each requestor of the information that the consumer requests that it be sent. That information can not be reported thereafter. (e) Deleted information can not be reinserted into the consumers file unless the provider of the information reinvestigates the information and states in writing or electronically that the information is correct and accurate. (f) The agency shall notify the consumer of the determination made by the investigation within five days of the completion of the investigation and provide certain information on the statement of notification. (g) This does not direct any person who obtains a report for resale to another person to correct information in a report that they did not prepare. Sec. 20.07. CORRECTION OF INACCURATE INFORMATION. (a) The credit reporting agency can allow that a person correcting information that they have submitted for a consumers report that has been corrects can provide that information by fax, electronically, or in writing. (b) The agency that received corrected information shall have reasonable procedures for correcting previously reported but inaccurate information. Sec. 20.08. CONSUMER'S RIGHT TO FILE ACTION IN COURT OR ARBITRATE DISPUTES. (a) An action to enforce an obligation of an agency can be brought in any court authorized by the US Fair Credit Reporting Act or if both parties agree to binding arbitration. (b) The decision of the arbitrator does not negate any debt or obligation owed by the consumer. (c) The prevailing party in the arbitration shall be paid for their attorney fees and other costs of the proceedings as determined by the court or arbitration. (d) A consumer is limited to one action of arbitration per consumer reporting agency for any 120 days. (e) The results of the arbitration shall be reported to the other reporting agencies in a timely manner to doing business in this state. (f) If a determination is made in the consumers favor and the information is not removed in a timely manner then the consumer can bring action against the agency regardless of the 120 time line. Sec. 20.09. CIVIL LIABILITY. (a) The agency is liable for three times the damage cause by the information determined to be wilfully inaccurate or for $1,000 plus fees and costs which ever is greater. (b) An agency that negligently violates this chapter is liable for actual damages or $500 plus fees and costs. The agency is not negligent if the agency completes the investigation within 30 days of the dispute and clearly informs the consumer of the investigation results. (c) The agency should correct any inaccurate information in the consumers file within 10 days of the judgement or they are liable for $1,000 until the information is corrected. Sec. 20.10. REMEDIES CUMULATIVE. Actions taken under this Chapter do not limit any other actions available by law to the consumer except that once arbitration is undertaken a court action can not be brought for the same case. SECTION 2. EFFECTIVE DATE. October 1, 1997. SECTION 3. EMERGENCY CLAUSE.