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.