By:  Harris                                             S.B. No. 27

                                A BILL TO BE ENTITLED

                                       AN ACT

 1-1     relating to the regulation of persons that provide consumer credit

 1-2     information to third parties; providing a civil penalty.

 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-4           SECTION 1.  Title 2, Business & Commerce Code, is amended by

 1-5     adding Chapter 20 to read as follows:

 1-6        CHAPTER 20.  REGULATION OF CONSUMER CREDIT REPORTING AGENCIES

 1-7           Sec. 20.01.  DEFINITIONS.  In this chapter:

 1-8                 (1)  "Adverse action" includes:

 1-9                       (A)  the denial of, increase in a charge for, or

1-10     reduction in the amount of insurance for personal, family, or

1-11     household purposes;

1-12                       (B)  the denial of employment or other decision

1-13     made for employment purposes that adversely affects a current or

1-14     prospective employee; or

1-15                       (C)  an action or determination with respect to a

1-16     consumer's application for credit that is adverse to the consumer's

1-17     interests.

1-18                 (2)  "Consumer" means an individual who resides in this

1-19     state.

1-20                 (3)  "Consumer file" means all of the information about

1-21     a consumer that is recorded and retained by a consumer reporting

1-22     agency regardless of how the information is stored.

1-23                 (4)  "Consumer report" means a communication or other

 2-1     information by a consumer reporting agency relating to the credit

 2-2     worthiness, credit standing, credit capacity, debts, character,

 2-3     general reputation, personal characteristics, or mode of living of

 2-4     a consumer that is used or expected to be used or collected, wholly

 2-5     or partly, as a factor in establishing the consumer's eligibility

 2-6     for credit or insurance for personal, family, or household

 2-7     purposes, employment purposes, or other purpose authorized under

 2-8     Sections 603 and 604 of the Fair Credit Reporting Act (15 U.S.C.

 2-9     Sections 1681a and 1681b), as amended.  The term does not include:

2-10                       (A)  a report containing information solely on a

2-11     transaction between the consumer and the person making the report;

2-12                       (B)  an authorization or approval of a specific

2-13     extension of credit directly or indirectly by the issuer of a

2-14     credit card or similar device;

2-15                       (C)  a report in which a person who has been

2-16     requested by a third party to make a specific extension of credit

2-17     directly or indirectly to a consumer makes a decision with respect

2-18     to the request, if the third party advises the consumer of the name

2-19     and address of the person to whom the request was made and the

2-20     person makes the disclosures that must be made under Section 615 of

2-21     the Fair Credit Reporting Act (15 U.S.C. Section 1681m), as

2-22     amended, to the consumer in the event of adverse action against the

2-23     consumer;

2-24                       (D)  any communication of information described

2-25     in this subdivision among persons related by common ownership or

 3-1     affiliated by corporate control; or

 3-2                       (E)  any communication of other information among

 3-3     persons related by common ownership or affiliated by corporate

 3-4     control, if it is clearly and conspicuously disclosed to the

 3-5     consumer that the information may be communicated among such

 3-6     persons and the consumer is given the opportunity before the time

 3-7     that the information is initially communicated to direct that such

 3-8     information not be communicated among such persons.

 3-9                 (5)  "Consumer reporting agency" means a person that

3-10     regularly engages wholly or partly in the practice of assembling or

3-11     evaluating consumer credit information or other information on

3-12     consumers to furnish consumer reports to third parties for monetary

3-13     fees, for dues, or on a cooperative nonprofit basis.  The term does

3-14     not include a business entity that provides only check verification

3-15     or check guarantee services.

3-16                 (6)  "Investigative consumer report" means all or part

3-17     of a consumer report in which information on the character, general

3-18     reputation, personal characteristics, or mode of living of a

3-19     consumer is obtained through a personal interview with a neighbor,

3-20     friend, or associate of the consumer or others with whom the

3-21     consumer is acquainted or who may have knowledge concerning any

3-22     such information.  The term does not include specific factual

3-23     information on a consumer's credit record obtained directly from a

3-24     creditor of the consumer or from a consumer reporting agency when

3-25     the information was obtained directly from a creditor of the

 4-1     consumer or from the consumer.

 4-2           Sec. 20.02.  PERMISSIBLE PURPOSES; PROHIBITION; USE OF

 4-3     CONSUMER'S SOCIAL SECURITY NUMBER.  (a)  A consumer reporting

 4-4     agency may furnish a consumer report only:

 4-5                 (1)  in response to a court order issued by a court

 4-6     with proper jurisdiction;

 4-7                 (2)  in accordance with the written instructions of the

 4-8     consumer to whom the report relates; or

 4-9                 (3)  to a person the agency has reason to believe:

4-10                       (A)  intends to use the information in connection

4-11     with a transaction involving the extension of credit to, or review

4-12     or collection of an account of, the consumer to whom the report

4-13     relates;

4-14                       (B)  intends to use the information for

4-15     employment purposes as authorized under the Fair Credit Reporting

4-16     Act (15 U.S.C. Section 1681 et seq.), as amended, and regulations

4-17     adopted under that Act;

4-18                       (C)  intends to use the information in connection

4-19     with the underwriting of insurance involving the consumer as

4-20     authorized under the Fair Credit Reporting Act (15 U.S.C. Section

4-21     1681 et seq.), as amended, and regulations adopted under that Act;

4-22                       (D)  intends to use the information in connection

4-23     with a determination of the consumer's eligibility for a license or

4-24     other benefit granted by a governmental entity required by law to

4-25     consider an applicant's financial responsibility or status;

 5-1                       (E)  has a legitimate business need for the

 5-2     information in connection with a business transaction involving the

 5-3     consumer; or

 5-4                       (F)  intends to use the information for any

 5-5     purpose authorized under the Fair Credit Reporting Act (15 U.S.C.

 5-6     Section 1681 et seq.), as amended, and regulations adopted under

 5-7     that Act.

 5-8           (b)  A consumer reporting agency may not prohibit a user of a

 5-9     consumer report or investigative consumer report from disclosing

5-10     the contents of the report or providing a copy of the report to the

5-11     consumer to whom it relates at the consumer's request if adverse

5-12     action against the consumer based wholly or partly on the report

5-13     has been taken or is contemplated by the user of the report.  A

5-14     user of a consumer report or a consumer reporting agency may not be

5-15     found liable or otherwise held responsible for a disclosed or

5-16     copied report when acting under this subsection.  The disclosure or

5-17     copy of the report, by itself, does not make a user of the report a

5-18     consumer reporting agency.

5-19           (c)  If a consumer furnishes the consumer's social security

5-20     number to a person for use in obtaining a consumer report, the

5-21     person shall include the consumer's social security number with the

5-22     request for the consumer report and shall include the social

5-23     security number with all future reports of information regarding

5-24     the consumer made by the person to a consumer reporting agency

5-25     unless the person has reason to believe that the social security

 6-1     number is inaccurate.

 6-2           Sec. 20.03.  DISCLOSURES TO CONSUMERS.  (a)  On request and

 6-3     proper identification provided by a consumer, a consumer reporting

 6-4     agency shall disclose to the consumer in writing all information

 6-5     pertaining to the consumer in the consumer reporting agency's files

 6-6     at the time of the request, including:

 6-7                 (1)  the name of each person requesting credit

 6-8     information about the consumer during the preceding six months and

 6-9     the date of each request;

6-10                 (2)  a set of instructions describing how information

6-11     is presented on the consumer reporting agency's written disclosure

6-12     of the consumer file; and

6-13                 (3)  if the consumer reporting agency compiles and

6-14     maintains files on a nationwide basis, a toll-free number at which

6-15     personnel are available to consumers during normal business hours

6-16     for use in resolving a dispute if the consumer submits a written

6-17     dispute to the consumer reporting agency.

6-18           (b)  The information must be disclosed in a clear, accurate

6-19     manner that is understandable to a consumer.

6-20           (c)  A consumer reporting agency shall provide a copy of the

6-21     consumer's file  to the consumer on the request of the consumer and

6-22     on evidence of proper identification, as directed by the Fair

6-23     Credit Reporting Act (15 U.S.C. Section 1681 et seq.), as amended,

6-24     and regulations adopted under that Act.

6-25           Sec. 20.04.  CHARGES FOR CERTAIN DISCLOSURES.  (a)  Except as

 7-1     provided by Subsection (b), a consumer reporting agency may impose

 7-2     a reasonable charge on a consumer for the disclosure of information

 7-3     pertaining to the consumer.  The amount of the charge may not

 7-4     exceed $8.  On January 1 of each year, a consumer reporting agency

 7-5     may increase the charge for disclosure to a consumer.  The

 7-6     increase, if any, must be based proportionally on changes to the

 7-7     Consumer Price Index for All Urban Consumers as determined by the

 7-8     United States Department of Labor with fractional changes rounded

 7-9     to the nearest 50 cents.

7-10           (b)  A consumer reporting agency may not charge a fee for:

7-11                 (1)  a request by a consumer for a copy of the

7-12     consumer's file made not later than the 60th day after the date on

7-13     which adverse action is taken against the consumer;

7-14                 (2)  notification of the deletion of information that

7-15     is found to be inaccurate or can no longer be verified sent to a

7-16     person designated by the consumer, as prescribed by Section 611 of

7-17     the Fair Credit Reporting Act (15 U.S.C. Section 1681i), as

7-18     amended;

7-19                 (3)  a set of instructions for understanding the

7-20     information presented on the consumer report; or

7-21                 (4)  a toll-free telephone number that consumers may

7-22     call to obtain additional assistance concerning the consumer

7-23     report.

7-24           Sec. 20.05.  REPORTING OF INFORMATION PROHIBITED.

7-25     (a)  Except as provided by Subsection (b), a consumer reporting

 8-1     agency may not furnish a consumer report containing information

 8-2     related to:

 8-3                 (1)  a case under Title 11 of the United States Code or

 8-4     under the federal Bankruptcy Act in which the date of entry of the

 8-5     order for relief or the date of adjudication predates the consumer

 8-6     report by more than 10 years;

 8-7                 (2)  a suit or judgment in which the date of entry

 8-8     predates the consumer report by more than seven years or the

 8-9     governing statute of limitations, whichever is longer;

8-10                 (3)  a tax lien in which the date of payment predates

8-11     the consumer report by more than seven years;

8-12                 (4)  a record of arrest, indictment, or conviction of a

8-13     crime in which the date of disposition, release, or parole predates

8-14     the consumer report by more than seven years; or

8-15                 (5)  another item or event that predates the consumer

8-16     report by more than seven years.

8-17           (b)  A consumer reporting agency may furnish a consumer

8-18     report that contains information described by Subsection (a) if the

8-19     information is provided in connection with:

8-20                 (1)  a credit transaction with a principal amount that

8-21     is or may reasonably be expected to be $150,000 or more;

8-22                 (2)  the underwriting of life insurance for a face

8-23     amount that is or may reasonably be expected to be $150,000 or

8-24     more; or

8-25                 (3)  the employment of a consumer at an annual salary

 9-1     that is or may reasonably be expected to be $75,000 or more.

 9-2           (c)  A consumer reporting agency may not furnish medical

 9-3     information about a consumer in a consumer report that is being

 9-4     obtained for employment purposes or in connection with a credit,

 9-5     insurance, or direct marketing transaction unless the consumer

 9-6     consents to the furnishing of the medical information.

 9-7           Sec. 20.06.  DISPUTE PROCEDURE.  (a)  If the completeness or

 9-8     accuracy of information contained in a consumer's file is disputed

 9-9     by the consumer and the consumer notifies the consumer reporting

9-10     agency of the dispute, the agency shall reinvestigate the disputed

9-11     information free of charge and record the current status of the

9-12     disputed information not later than the 30th business day after the

9-13     date on which the agency receives the notice.  The consumer

9-14     reporting agency shall provide the consumer with the option of

9-15     notifying the agency of a dispute concerning the consumer's file by

9-16     speaking directly to a representative of the agency during normal

9-17     business hours.

9-18           (b)  Not later than the fifth business day after the date on

9-19     which a consumer reporting agency receives notice of a dispute from

9-20     a consumer in accordance with Subsection (a), the agency shall

9-21     provide notice of the dispute to each person who provided any

9-22     information related to the dispute.

9-23           (c)  A consumer reporting agency may terminate a

9-24     reinvestigation of information disputed by a consumer under

9-25     Subsection (a) if the agency reasonably determines that the dispute

 10-1    is frivolous or irrelevant.  An agency that terminates a

 10-2    reinvestigation of disputed information under this subsection shall

 10-3    promptly notify the consumer of the termination and the reasons for

 10-4    the termination by mail, or if authorized by the consumer, by

 10-5    telephone.  The presence of contradictory information in a

 10-6    consumer's file does not by itself constitute reasonable grounds

 10-7    for determining that the dispute is frivolous or irrelevant.

 10-8          (d)  If disputed information is found to be inaccurate or

 10-9    cannot be verified after a reinvestigation under Subsection (a),

10-10    the consumer reporting agency, unless otherwise directed by the

10-11    consumer, shall promptly delete the information from the consumer's

10-12    file, revise the consumer file, and provide the revised consumer

10-13    report to the consumer and, on the request of the consumer, to each

10-14    person who requested the consumer report within the preceding six

10-15    months.  The consumer reporting agency may not report the

10-16    inaccurate or unverified information in subsequent reports.

10-17          (e)  Information deleted under Subsection (d) may not be

10-18    reinserted in the consumer's file unless the person who furnishes

10-19    the information to the consumer reporting agency reinvestigates and

10-20    states in writing or by electronic record to the agency that the

10-21    information is complete and accurate.

10-22          (f)  A consumer reporting agency shall provide written notice

10-23    of the results of a reinvestigation or reinsertion made under this

10-24    section not later than the fifth business day after the date on

10-25    which the reinvestigation or reinsertion has been completed.  The

 11-1    notice must include:

 11-2                (1)  a statement that the reinvestigation is complete;

 11-3                (2)  a statement of the determination made by the

 11-4    agency on the completeness or accuracy of the disputed information;

 11-5                (3)  a copy of the consumer's file or consumer report

 11-6    and a description of the results of the reinvestigation;

 11-7                (4)  a statement that a description of the procedure

 11-8    used to determine the accuracy and completeness of the information

 11-9    shall be provided to the consumer by the agency on request,

11-10    including the name, business address, and, if available, the

11-11    telephone number of each person contacted in connection with the

11-12    information;

11-13                (5)  a statement that the consumer is entitled to add a

11-14    statement to the consumer's file disputing the accuracy or

11-15    completeness of the information as provided by Section 611 of the

11-16    Fair Credit Reporting Act (15 U.S.C. Section 1681i), as amended;

11-17    and

11-18                (6)  a statement that the consumer may be entitled to

11-19    dispute resolution as prescribed by this section, after the

11-20    consumer receives the notice specified under this subsection.

11-21          (g)  This section does not require a person who obtains a

11-22    consumer report for resale to another person to alter or correct an

11-23    inaccuracy in the consumer report if the report was not assembled

11-24    or prepared by the person.

11-25          Sec. 20.07.  CORRECTION OF INACCURATE INFORMATION.  (a)  A

 12-1    consumer reporting agency shall provide a person who provides

 12-2    consumer credit information to the agency with the option of

 12-3    correcting previously reported inaccurate information by submitting

 12-4    the correction by facsimile or other automated means.

 12-5          (b)  The credit reporting agency which receives a correction

 12-6    shall have reasonable procedures to assure that previously reported

 12-7    inaccurate information in a consumer's file is corrected in a

 12-8    prompt and timely fashion.

 12-9          Sec. 20.08.  CONSUMER'S RIGHT TO FILE ACTION IN COURT OR

12-10    ARBITRATE DISPUTES.  (a)  An action to enforce an obligation of a

12-11    consumer reporting agency to a consumer under this chapter may be

12-12    brought in any court as provided by the Fair Credit Reporting Act

12-13    (15 U.S.C. Section 1681 et seq.), as amended, or, if agreed to by

12-14    both parties, may be submitted to binding arbitration after the

12-15    consumer has followed all dispute procedures in Section 20.06 and

12-16    has received the notice specified in Section 20.06(f) in the manner

12-17    provided by the rules of the American Arbitration Association.

12-18          (b)  A decision rendered by an arbitrator under this section

12-19    does not affect the validity of an obligation or debt owed by the

12-20    consumer to any party.

12-21          (c)  A prevailing party in an action or arbitration

12-22    proceeding brought under this section shall be compensated for the

12-23    party's attorney fees and costs of the proceeding as determined by

12-24    the court or arbitration.

12-25          (d)  A consumer may not submit to arbitration more than one

 13-1    action against a particular consumer reporting agency during any

 13-2    120-day period.

 13-3          (e)  The results of an arbitration action brought against a

 13-4    consumer reporting agency doing business in this state shall be

 13-5    communicated in a timely manner to other consumer reporting

 13-6    agencies doing business in this state.

 13-7          (f)  If a determination is made in favor of a consumer after

 13-8    submission of a dispute to arbitration, the disputed adverse

 13-9    information in the consumer's file or record shall be removed or

13-10    stricken in a timely manner.  If the adverse information is not

13-11    removed or stricken, the consumer may bring an action against the

13-12    noncomplying agency under this section regardless of the 120-day

13-13    waiting period required under this section.

13-14          Sec. 20.09.  CIVIL LIABILITY.  (a)  A consumer reporting

13-15    agency that wilfully violates this chapter is liable to the

13-16    consumer against whom the violation occurs for the greater of three

13-17    times the amount of actual damages to the consumer or $1,000,

13-18    reasonable attorney fees, and court or arbitration costs.

13-19          (b)  A consumer reporting agency that negligently violates

13-20    this chapter is liable to the consumer against whom the violation

13-21    occurs for the greater of the amount of actual damages to the

13-22    consumer or $500, reasonable attorney fees, and court or

13-23    arbitration costs.  A consumer reporting agency is not considered

13-24    to have negligently violated this chapter if, not later than the

13-25    30th day after the date on which the agency receives notice of a

 14-1    dispute from the consumer under Section 20.06 that clearly explains

 14-2    the nature and substance of the dispute, the agency completes the

 14-3    reinvestigation and sends the consumer and, at the request of the

 14-4    consumer, each person who received the consumer information written

 14-5    notification of the results of the reinvestigation in accordance

 14-6    with Section 20.06(f).

 14-7          (c)  In addition to liability imposed under Subsection (a), a

 14-8    consumer reporting agency that does not correct a consumer's file

 14-9    and consumer report before the 10th day after the date on which a

14-10    judgment is entered against the agency because of inaccurate

14-11    information contained in a consumer's file is also liable for

14-12    $1,000 a day until the inaccuracy is corrected.

14-13          Sec. 20.10.  REMEDIES CUMULATIVE.  An action taken under this

14-14    chapter does not prohibit a consumer from taking any other action

14-15    authorized by law except that a credit reporting agency may not be

14-16    subject to suit with respect to any issue that was the subject of

14-17    an arbitration proceeding brought under Section 20.08.

14-18          SECTION 2.  This Act takes effect October 1, 1997.

14-19          SECTION 3.  The importance of this legislation and the

14-20    crowded condition of the calendars in both houses create an

14-21    emergency and an imperative public necessity that the

14-22    constitutional rule requiring bills to be read on three several

14-23    days in each house be suspended, and this rule is hereby suspended.