By Harris S.B. No. 27
75R10191 BEM-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of persons that provide consumer credit
1-3 information to third parties; providing a civil penalty.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title 2, Business & Commerce Code, is amended by
1-6 adding Chapter 20 to read as follows:
1-7 CHAPTER 20. REGULATION OF CONSUMER CREDIT REPORTING AGENCIES
1-8 Sec. 20.01. DEFINITIONS. In this chapter:
1-9 (1) "Adverse action" includes:
1-10 (A) the denial of, increase in a charge for, or
1-11 reduction in the amount of insurance for personal, family, or
1-12 household purposes;
1-13 (B) the denial of employment or other decision
1-14 made for employment purposes that adversely affects a current or
1-15 prospective employee; or
1-16 (C) an action or determination with respect to a
1-17 consumer's application for credit that is adverse to the consumer's
1-18 interests.
1-19 (2) "Consumer" means an individual who resides in this
1-20 state.
1-21 (3) "Consumer file" means all of the information about
1-22 a consumer that is recorded and retained by a consumer reporting
1-23 agency regardless of how the information is stored.
1-24 (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 the Fair Credit Reporting Act (15 U.S.C. Sections 1681a and 1681b),
2-9 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; or
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 the Fair
2-21 Credit Reporting Act (15 U.S.C. Section 1681m), as amended, to the
2-22 consumer in the event of adverse action against the consumer.
2-23 (5) "Consumer reporting agency" means a person that
2-24 regularly engages wholly or partly in the practice of assembling or
2-25 evaluating consumer credit information or other information on
2-26 consumers to furnish consumer reports to third parties for monetary
2-27 fees, for dues, or on a cooperative nonprofit basis. The term does
3-1 not include a business entity that provides only check verification
3-2 or check guarantee services.
3-3 (6) "Investigative consumer report" means all or part
3-4 of a consumer report in which information on the character, general
3-5 reputation, personal characteristics, or mode of living of a
3-6 consumer is obtained through a personal interview with a neighbor,
3-7 friend, or associate of the consumer or others with whom the
3-8 consumer is acquainted or who may have knowledge concerning any
3-9 such information. The term does not include specific factual
3-10 information on a consumer's credit record obtained directly from a
3-11 creditor of the consumer or from a consumer reporting agency when
3-12 the information was obtained directly from a creditor of the
3-13 consumer or from the consumer.
3-14 Sec. 20.02. PERMISSIBLE PURPOSES; PROHIBITION; USE OF
3-15 CONSUMER'S SOCIAL SECURITY NUMBER. (a) A consumer reporting
3-16 agency may furnish a consumer report only:
3-17 (1) in response to a court order issued by a court
3-18 with proper jurisdiction;
3-19 (2) in accordance with the written instructions of the
3-20 consumer to whom the report relates; or
3-21 (3) to a person the agency has reason to believe:
3-22 (A) intends to use the information in connection
3-23 with a transaction involving the extension of credit to, or review
3-24 or collection of an account of, the consumer to whom the report
3-25 relates;
3-26 (B) intends to use the information for
3-27 employment purposes only if the consumer consents in writing to the
4-1 furnishing of the report;
4-2 (C) intends to use the information in connection
4-3 with the underwriting of insurance involving the consumer only if
4-4 the consumer consents in writing to the furnishing of the report;
4-5 (D) intends to use the information in connection
4-6 with a determination of the consumer's eligibility for a license or
4-7 other benefit granted by a governmental entity required by law to
4-8 consider an applicant's financial responsibility or status;
4-9 (E) has a legitimate business need for the
4-10 information in connection with a business transaction involving the
4-11 consumer; or
4-12 (F) intends to use the information for any
4-13 purpose authorized under the Fair Credit Reporting Act (15 U.S.C.
4-14 Section 1681 et seq.), as amended, and regulations adopted under
4-15 that Act.
4-16 (b) A consumer reporting agency may not prohibit a user of a
4-17 consumer report or investigative consumer report from disclosing
4-18 and explaining the contents of the report or providing a copy of
4-19 the report to the consumer to whom it relates at the consumer's
4-20 request if adverse action against the consumer based wholly or
4-21 partly on the report has been taken or is contemplated by the user
4-22 of the report. A user of a consumer credit report or a consumer
4-23 reporting agency may not be found liable or otherwise held
4-24 responsible for a disclosed or copied report when acting under this
4-25 subsection. The disclosure or copy of the report, by itself, does
4-26 not make a user of the report a consumer reporting agency.
4-27 (c) If a consumer furnishes the consumer's social security
5-1 number to a person for use in obtaining a consumer report, the
5-2 person shall include the consumer's social security number with the
5-3 request for the consumer report and shall include the social
5-4 security number with all future reports of information regarding
5-5 the consumer made by the person to a consumer reporting agency.
5-6 Sec. 20.03. DISCLOSURES TO CONSUMERS. (a) On request and
5-7 proper identification provided by a consumer, a consumer reporting
5-8 agency shall disclose to the consumer in writing all information
5-9 pertaining to the consumer in the consumer reporting agency's files
5-10 at the time of the request, including:
5-11 (1) the name of each person requesting credit
5-12 information about the consumer during the preceding six months and
5-13 the date of each request;
5-14 (2) a set of instructions describing how information
5-15 is presented on the consumer reporting agency's written disclosure
5-16 of the consumer file; and
5-17 (3) a nationwide toll-free number for use in resolving
5-18 a dispute if the consumer submits a written dispute to the consumer
5-19 reporting agency.
5-20 (b) The information must be disclosed in a clear, accurate
5-21 manner that is understandable to a consumer.
5-22 (c) A consumer reporting agency annually shall:
5-23 (1) notify in writing or by telephone each consumer
5-24 about whom the consumer reporting agency furnished a consumer
5-25 report during the 12 months preceding the date of the notice; and
5-26 (2) provide a copy of the consumer report to the
5-27 consumer free of charge.
6-1 Sec. 20.04. CHARGES FOR CERTAIN DISCLOSURES. (a) Except as
6-2 provided by Subsection (b), a consumer reporting agency may impose
6-3 a reasonable charge on a consumer for the disclosure of information
6-4 pertaining to the consumer. The amount of the charge may not
6-5 exceed the retail price of a written report rendered in the normal
6-6 course of business to other customers of the agency for each
6-7 request for information.
6-8 (b) A consumer reporting agency may not charge a fee for:
6-9 (1) a request by a consumer for a copy of the
6-10 consumer's file made not later than the 60th day after the date on
6-11 which adverse action is taken against the consumer;
6-12 (2) notification of the deletion of information that
6-13 is found to be inaccurate or can no longer be verified sent to a
6-14 person designated by the consumer, as prescribed by the Fair Credit
6-15 Reporting Act (15 U.S.C. Section 1681i), as amended;
6-16 (3) a set of instructions for understanding the
6-17 information presented on the consumer report; or
6-18 (4) a toll-free telephone number that consumers may
6-19 call to obtain additional assistance concerning the consumer
6-20 report.
6-21 Sec. 20.05. REPORTING OF INFORMATION PROHIBITED.
6-22 (a) Except as provided by Subsection (b), a consumer reporting
6-23 agency may not furnish a consumer report containing information
6-24 related to:
6-25 (1) a case under Title 11 of the United States Code or
6-26 under the federal Bankruptcy Act in which the date of entry of the
6-27 order for relief or the date of adjudication predates the consumer
7-1 report by more than 10 years;
7-2 (2) a suit or judgment in which the date of entry
7-3 predates the consumer report by more than seven years or the
7-4 governing statute of limitations, whichever is longer;
7-5 (3) a tax lien in which the date of payment predates
7-6 the consumer report by more than seven years;
7-7 (4) a record of arrest, indictment, or conviction of a
7-8 crime in which the date of disposition, release, or parole predates
7-9 the consumer report by more than seven years; or
7-10 (5) another item or event that predates the consumer
7-11 report by more than seven years.
7-12 (b) A consumer reporting agency may furnish a consumer
7-13 report that contains information described by Subsection (a) if the
7-14 information is provided in connection with:
7-15 (1) a credit transaction with a principal amount that
7-16 is or may reasonably be expected to be $150,000 or more;
7-17 (2) the underwriting of life insurance for a face
7-18 amount that is or may reasonably be expected to be $150,000 or
7-19 more; or
7-20 (3) the employment of a consumer at an annual salary
7-21 that is or may reasonably be expected to be $75,000 or more.
7-22 (c) A consumer reporting agency may not furnish medical
7-23 information about a consumer in a consumer report that is being
7-24 obtained for employment purposes or in connection with a credit,
7-25 insurance, or direct marketing transaction unless the consumer
7-26 consents to the furnishing of the medical information.
7-27 (d) A consumer reporting agency shall report information in
8-1 response to a request for credit information about a consumer not
8-2 later than the first anniversary of the date on which the credit
8-3 information is requested. The consumer reporting agency may retain
8-4 information concerning a request for credit information about a
8-5 consumer in a consumer's file for not more than two years after the
8-6 date on which the credit information is requested.
8-7 Sec. 20.06. DISPUTE PROCEDURE. (a) If the completeness or
8-8 accuracy of information contained in a consumer's file is disputed
8-9 by the consumer and the consumer notifies the consumer reporting
8-10 agency of the dispute, the agency shall reinvestigate the disputed
8-11 information free of charge and record the current status of the
8-12 disputed information not later than the 30th business day after the
8-13 date on which the agency receives the notice. The consumer
8-14 reporting agency shall provide the consumer with the option of
8-15 notifying the agency of a dispute concerning the consumer's file by
8-16 speaking directly to a representative of the agency.
8-17 (b) Not later than the fifth business day after the date on
8-18 which a consumer reporting agency receives notice of a dispute from
8-19 a consumer in accordance with Subsection (a), the agency, unless
8-20 otherwise directed by the consumer, shall provide notice of the
8-21 dispute to each person who provided any information related to the
8-22 dispute and each person requesting information about the consumer.
8-23 (c) A consumer reporting agency may terminate a
8-24 reinvestigation of information disputed by a consumer under
8-25 Subsection (a) if the agency reasonably determines that the dispute
8-26 is frivolous or irrelevant. An agency that terminates a
8-27 reinvestigation of disputed information under this subsection shall
9-1 promptly notify the consumer of the termination and the reasons for
9-2 the termination by mail, or if authorized by the consumer, by
9-3 telephone. The presence of contradictory information in a
9-4 consumer's file does not by itself constitute reasonable grounds
9-5 for determining that the dispute is frivolous or irrelevant.
9-6 (d) If disputed information is found to be inaccurate or
9-7 cannot be verified after a reinvestigation under Subsection (a),
9-8 the consumer reporting agency, unless otherwise directed by the
9-9 consumer, shall promptly delete the information from the consumer's
9-10 file, revise the consumer file, and provide the revised consumer
9-11 report to the consumer and each person who requested the consumer
9-12 report within the preceding six months. The consumer reporting
9-13 agency may not report the inaccurate or unverified information in
9-14 subsequent reports.
9-15 (e) Information deleted under Subsection (d) may not be
9-16 reinserted in the consumer's file unless the person who furnishes
9-17 the information to the consumer reporting agency reinvestigates and
9-18 states in writing or by electronic record to the agency that the
9-19 information is complete and accurate.
9-20 (f) A consumer reporting agency shall provide written notice
9-21 of the results of a reinvestigation or reinsertion made under this
9-22 section not later than the fifth business day after the date on
9-23 which the reinvestigation or reinsertion has been completed. The
9-24 notice must include:
9-25 (1) a statement that the reinvestigation is complete;
9-26 (2) a statement of the determination made by the
9-27 agency on the completeness or accuracy of the disputed information;
10-1 (3) a copy of the consumer's file or consumer report
10-2 and a description of the results of the reinvestigation;
10-3 (4) a statement that a description of the procedure
10-4 used to determine the accuracy and completeness of the information
10-5 shall be provided to the consumer by the agency on request,
10-6 including the name, business address, and, if available, the
10-7 telephone number of each person contacted in connection with the
10-8 information;
10-9 (5) a statement that the consumer is entitled to add a
10-10 statement to the consumer's file disputing the accuracy or
10-11 completeness of the information as provided by the Fair Credit
10-12 Reporting Act (15 U.S.C. Section 1681i), as amended; and
10-13 (6) a statement that the consumer is entitled to
10-14 dispute resolution as prescribed by this section, after the
10-15 consumer receives the notice specified under this subsection.
10-16 (g) This section does not require a person who obtains a
10-17 consumer report for resale to another person to alter or correct an
10-18 inaccuracy in the consumer report if the report was not assembled
10-19 or prepared by the person.
10-20 Sec. 20.07. CORRECTION OF INACCURATE INFORMATION. (a) A
10-21 consumer reporting agency shall provide a person who provides
10-22 consumer credit information to the agency with the option of
10-23 correcting previously reported inaccurate information by speaking
10-24 directly to a representative of the agency or by submitting the
10-25 correction by facsimile or other automated means.
10-26 (b) Not later than the fifth day after the date on which the
10-27 consumer reporting agency receives a correction, the agency shall
11-1 correct the consumer's file and notify the consumer of the
11-2 correction. A consumer reporting agency shall have a method of
11-3 verifying communications made by persons who provide information to
11-4 the agency.
11-5 Sec. 20.08. CONSUMER'S RIGHT TO FILE ACTION IN COURT OR
11-6 ARBITRATE DISPUTES. (a) An action to enforce an obligation of a
11-7 consumer reporting agency to a consumer under this chapter may be
11-8 brought in any court as provided by the Fair Credit Reporting Act
11-9 (15 U.S.C. Section 1681 et seq.), as amended, or may be submitted
11-10 to binding arbitration after the consumer has followed all dispute
11-11 procedures in Section 20.06 and has received the notice specified
11-12 in Section 20.06(f) in the manner provided by the rules of the
11-13 American Arbitration Association.
11-14 (b) A decision rendered by an arbitrator under this section
11-15 does not affect the validity of an obligation or debt owed by the
11-16 consumer to any party.
11-17 (c) A prevailing party in an action or arbitration
11-18 proceeding brought under this section shall be compensated for the
11-19 party's attorney fees and costs of the proceeding as determined by
11-20 the court or arbitration.
11-21 (d) A consumer may not submit to arbitration more than one
11-22 action against a particular consumer reporting agency during any
11-23 120-day period.
11-24 (e) The results of an arbitration action brought against a
11-25 consumer reporting agency doing business in this state shall be
11-26 communicated in a timely manner to other consumer reporting
11-27 agencies doing business in this state.
12-1 (f) If a determination is made in favor of a consumer after
12-2 submission of a dispute to arbitration, the disputed adverse
12-3 information in the consumer's file or record shall be removed or
12-4 stricken in a timely manner. If the adverse information is not
12-5 removed or stricken, the consumer may bring an action against the
12-6 noncomplying agency under this section regardless of the 120-day
12-7 waiting period required under this subsection.
12-8 Sec. 20.09. CIVIL LIABILITY. (a) A consumer reporting
12-9 agency that wilfully or negligently violates this chapter or the
12-10 Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.), as
12-11 amended, is liable to the consumer against whom the violation
12-12 occurs for the greater of three times the amount of actual damages
12-13 to the consumer or $1,000, reasonable attorney fees, and court or
12-14 arbitration costs for each inaccurate entry in the consumer's file
12-15 that was disputed by the consumer.
12-16 (b) A consumer reporting agency that negligently violates
12-17 this chapter or the Fair Credit Reporting Act (15 U.S.C. Section
12-18 1681 et seq.), as amended, is liable to the consumer against whom
12-19 the violation occurs for actual damages to the consumer or $1,000,
12-20 whichever is greater, for each inaccurate entry in the consumer's
12-21 file that was disputed by the consumer, reasonable attorney fees,
12-22 and court or arbitration costs. A consumer reporting agency is not
12-23 considered to negligently violate this chapter or the Fair Credit
12-24 Reporting Act (15 U.S.C. Section 1681 et seq.), as amended, if, not
12-25 later than the 30th day after the date on which the agency receives
12-26 notice of a dispute from a consumer under Section 20.06, the agency
12-27 corrects the complained of item or activity and sends the consumer
13-1 and each person who received the consumer information written
13-2 notification of the corrective action in accordance with Section
13-3 20.05(f), unless otherwise directed by the consumer.
13-4 (c) In addition to liability imposed under Subsection (a),
13-5 a consumer reporting agency that does not correct a consumer's file
13-6 and consumer report before the 10th day after the date on which a
13-7 judgment is entered against the agency because of inaccurate
13-8 information contained in a consumer's file, is also liable for
13-9 $1,000 a day until the inaccuracy is corrected.
13-10 Sec. 20.10. REMEDIES CUMULATIVE. An action taken under this
13-11 chapter does not prohibit a consumer from taking any other action
13-12 authorized by law except that a credit reporting agency may not be
13-13 subject to suit with respect to any issue that was the subject of
13-14 an arbitration proceeding brought under Section 20.08.
13-15 SECTION 2. This Act takes effect September 1, 1997.
13-16 SECTION 3. The importance of this legislation and the
13-17 crowded condition of the calendars in both houses create an
13-18 emergency and an imperative public necessity that the
13-19 constitutional rule requiring bills to be read on three several
13-20 days in each house be suspended, and this rule is hereby suspended.