1-1 By: Harris S.B. No. 27 1-2 (In the Senate - Filed April 8, 1997; April 10, 1997, read 1-3 first time and referred to Committee on State Affairs; 1-4 April 25, 1997, reported favorably, as amended, by the following 1-5 vote: Yeas 13, Nays 0; April 25, 1997, sent to printer.) 1-6 COMMITTEE AMENDMENT NO. 1 By: Nelson 1-7 Amend S.B. No. 27 as follows: 1-8 (1) In SECTION 1, at the end of Subdivision (4), Section 1-9 20.01 of added Chapter 20, Business & Commerce Code (Introduced 1-10 version page 2, after line 48), insert: 1-11 "(D) any communication of information described 1-12 in this subdivision among persons related by common ownership or 1-13 affiliated by corporate control; or 1-14 (E) any communication of other information among 1-15 persons related by common ownership or affiliated by corporate 1-16 control, if it is clearly and conspicuously disclosed to the 1-17 consumer that the information may be communicated among such 1-18 persons and the consumer is given the opportunity before the time 1-19 that the information is initially communicated to direct that such 1-20 information not be communicated among such persons." 1-21 (2) In SECTION 1, Paragraph (B), Subdivision (3), Subsection 1-22 (a), Section 20.02 of added Chapter 20, Business & Commerce Code 1-23 (Introduced version page 3, lines 12-13), strike "only if the 1-24 consumer consents in writing to the furnishing of the report" and 1-25 substitute "as authorized under the Fair Credit Reporting Act (15 1-26 U.S.C. Section 1681 et seq.), as amended, and regulations adopted 1-27 under that Act" 1-28 (3) In SECTION 1, Paragraph (C), Subdivision (3), Subsection 1-29 (a), Section 20.02 of added Chapter 20, Business & Commerce Code 1-30 (Introduced version page 3, lines 15-16), strike "only if the 1-31 consumer consents in writing to the furnishing of the report" and 1-32 substitute "as authorized under the Fair Credit Reporting Act (15 1-33 U.S.C. Section 1681 et seq.), as amended, and regulations adopted 1-34 under that Act" 1-35 (4) In SECTION 1, Subsection (b), Section 20.02 of added 1-36 Chapter 20, Business & Commerce Code (Introduced version page 3, 1-37 line 30) strike "and explaining" 1-38 (5) In SECTION 1, Section 20.03 of added Chapter 20, 1-39 Business & Commerce Code (Introduced version page 3, lines 61-66), 1-40 strike Subsection (c) and substitute a new Subsection (c) to read 1-41 as follows: 1-42 "(c) A consumer reporting agency shall provide a copy of the 1-43 consumer report to the consumer on the request of the consumer and 1-44 on evidence of proper identification, as directed by the Fair 1-45 Credit Reporting Act (15 U.S.C. Section 1681 et seq.), as amended, 1-46 and regulations adopted under that Act." 1-47 (6) In SECTION 1, Subsection (a), Section 20.04 of added 1-48 Chapter 20, Business & Commerce Code (Introduced version page 4, 1-49 lines 2-4), strike "the retail price of a written report rendered 1-50 in the normal course of business to other customers of the agency 1-51 for each request for information" and substitute "$8" 1-52 (7) In SECTION 1, Section 20.05 of added Chapter 20, 1-53 Business & Commerce Code (Introduced version page 4, lines 52-58), 1-54 strike Subsection (d). 1-55 (8) In SECTION 1, Subsection (d), Section 20.06 of added 1-56 Chapter 20, Business & Commerce Code (Introduced version page 5, 1-57 line 21), between "and" and "each" insert ", on the request of the 1-58 consumer, to" 1-59 A BILL TO BE ENTITLED 1-60 AN ACT 1-61 relating to the regulation of persons that provide consumer credit 1-62 information to third parties; providing a civil penalty. 1-63 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-64 SECTION 1. Title 2, Business & Commerce Code, is amended by 2-1 adding Chapter 20 to read as follows: 2-2 CHAPTER 20. REGULATION OF CONSUMER CREDIT REPORTING AGENCIES 2-3 Sec. 20.01. DEFINITIONS. In this chapter: 2-4 (1) "Adverse action" includes: 2-5 (A) the denial of, increase in a charge for, or 2-6 reduction in the amount of insurance for personal, family, or 2-7 household purposes; 2-8 (B) the denial of employment or other decision 2-9 made for employment purposes that adversely affects a current or 2-10 prospective employee; or 2-11 (C) an action or determination with respect to a 2-12 consumer's application for credit that is adverse to the consumer's 2-13 interests. 2-14 (2) "Consumer" means an individual who resides in this 2-15 state. 2-16 (3) "Consumer file" means all of the information about 2-17 a consumer that is recorded and retained by a consumer reporting 2-18 agency regardless of how the information is stored. 2-19 (4) "Consumer report" means a communication or other 2-20 information by a consumer reporting agency relating to the credit 2-21 worthiness, credit standing, credit capacity, debts, character, 2-22 general reputation, personal characteristics, or mode of living of 2-23 a consumer that is used or expected to be used or collected, wholly 2-24 or partly, as a factor in establishing the consumer's eligibility 2-25 for credit or insurance for personal, family, or household 2-26 purposes, employment purposes, or other purpose authorized under 2-27 Sections 603 and 604 of the Fair Credit Reporting Act (15 U.S.C. 2-28 Sections 1681a and 1681b), as amended. The term does not include: 2-29 (A) a report containing information solely on a 2-30 transaction between the consumer and the person making the report; 2-31 (B) an authorization or approval of a specific 2-32 extension of credit directly or indirectly by the issuer of a 2-33 credit card or similar device; or 2-34 (C) a report in which a person who has been 2-35 requested by a third party to make a specific extension of credit 2-36 directly or indirectly to a consumer makes a decision with respect 2-37 to the request, if the third party advises the consumer of the name 2-38 and address of the person to whom the request was made and the 2-39 person makes the disclosures that must be made under Section 615 of 2-40 the Fair Credit Reporting Act (15 U.S.C. Section 1681m), as 2-41 amended, to the consumer in the event of adverse action against the 2-42 consumer. 2-43 (5) "Consumer reporting agency" means a person that 2-44 regularly engages wholly or partly in the practice of assembling or 2-45 evaluating consumer credit information or other information on 2-46 consumers to furnish consumer reports to third parties for monetary 2-47 fees, for dues, or on a cooperative nonprofit basis. The term does 2-48 not include a business entity that provides only check verification 2-49 or check guarantee services. 2-50 (6) "Investigative consumer report" means all or part 2-51 of a consumer report in which information on the character, general 2-52 reputation, personal characteristics, or mode of living of a 2-53 consumer is obtained through a personal interview with a neighbor, 2-54 friend, or associate of the consumer or others with whom the 2-55 consumer is acquainted or who may have knowledge concerning any 2-56 such information. The term does not include specific factual 2-57 information on a consumer's credit record obtained directly from a 2-58 creditor of the consumer or from a consumer reporting agency when 2-59 the information was obtained directly from a creditor of the 2-60 consumer or from the consumer. 2-61 Sec. 20.02. PERMISSIBLE PURPOSES; PROHIBITION; USE OF 2-62 CONSUMER'S SOCIAL SECURITY NUMBER. (a) A consumer reporting 2-63 agency may furnish a consumer report only: 2-64 (1) in response to a court order issued by a court 2-65 with proper jurisdiction; 2-66 (2) in accordance with the written instructions of the 2-67 consumer to whom the report relates; or 2-68 (3) to a person the agency has reason to believe: 2-69 (A) intends to use the information in connection 3-1 with a transaction involving the extension of credit to, or review 3-2 or collection of an account of, the consumer to whom the report 3-3 relates; 3-4 (B) intends to use the information for 3-5 employment purposes only if the consumer consents in writing to the 3-6 furnishing of the report; 3-7 (C) intends to use the information in connection 3-8 with the underwriting of insurance involving the consumer only if 3-9 the consumer consents in writing to the furnishing of the report; 3-10 (D) intends to use the information in connection 3-11 with a determination of the consumer's eligibility for a license or 3-12 other benefit granted by a governmental entity required by law to 3-13 consider an applicant's financial responsibility or status; 3-14 (E) has a legitimate business need for the 3-15 information in connection with a business transaction involving the 3-16 consumer; or 3-17 (F) intends to use the information for any 3-18 purpose authorized under the Fair Credit Reporting Act (15 U.S.C. 3-19 Section 1681 et seq.), as amended, and regulations adopted under 3-20 that Act. 3-21 (b) A consumer reporting agency may not prohibit a user of a 3-22 consumer report or investigative consumer report from disclosing 3-23 and explaining the contents of the report or providing a copy of 3-24 the report to the consumer to whom it relates at the consumer's 3-25 request if adverse action against the consumer based wholly or 3-26 partly on the report has been taken or is contemplated by the user 3-27 of the report. A user of a consumer report or a consumer reporting 3-28 agency may not be found liable or otherwise held responsible for a 3-29 disclosed or copied report when acting under this subsection. The 3-30 disclosure or copy of the report, by itself, does not make a user 3-31 of the report a consumer reporting agency. 3-32 (c) If a consumer furnishes the consumer's social security 3-33 number to a person for use in obtaining a consumer report, the 3-34 person shall include the consumer's social security number with the 3-35 request for the consumer report and shall include the social 3-36 security number with all future reports of information regarding 3-37 the consumer made by the person to a consumer reporting agency. 3-38 Sec. 20.03. DISCLOSURES TO CONSUMERS. (a) On request and 3-39 proper identification provided by a consumer, a consumer reporting 3-40 agency shall disclose to the consumer in writing all information 3-41 pertaining to the consumer in the consumer reporting agency's files 3-42 at the time of the request, including: 3-43 (1) the name of each person requesting credit 3-44 information about the consumer during the preceding six months and 3-45 the date of each request; 3-46 (2) a set of instructions describing how information 3-47 is presented on the consumer reporting agency's written disclosure 3-48 of the consumer file; and 3-49 (3) a nationwide toll-free number for use in resolving 3-50 a dispute if the consumer submits a written dispute to the consumer 3-51 reporting agency. 3-52 (b) The information must be disclosed in a clear, accurate 3-53 manner that is understandable to a consumer. 3-54 (c) A consumer reporting agency annually shall: 3-55 (1) notify in writing or by telephone each consumer 3-56 about whom the consumer reporting agency furnished a consumer 3-57 report during the 12 months preceding the date of the notice; and 3-58 (2) provide a copy of the consumer report to the 3-59 consumer free of charge. 3-60 Sec. 20.04. CHARGES FOR CERTAIN DISCLOSURES. (a) Except as 3-61 provided by Subsection (b), a consumer reporting agency may impose 3-62 a reasonable charge on a consumer for the disclosure of information 3-63 pertaining to the consumer. The amount of the charge may not 3-64 exceed the retail price of a written report rendered in the normal 3-65 course of business to other customers of the agency for each 3-66 request for information. 3-67 (b) A consumer reporting agency may not charge a fee for: 3-68 (1) a request by a consumer for a copy of the 3-69 consumer's file made not later than the 60th day after the date on 4-1 which adverse action is taken against the consumer; 4-2 (2) notification of the deletion of information that 4-3 is found to be inaccurate or can no longer be verified sent to a 4-4 person designated by the consumer, as prescribed by Section 611 of 4-5 the Fair Credit Reporting Act (15 U.S.C. Section 1681i), as 4-6 amended; 4-7 (3) a set of instructions for understanding the 4-8 information presented on the consumer report; or 4-9 (4) a toll-free telephone number that consumers may 4-10 call to obtain additional assistance concerning the consumer 4-11 report. 4-12 Sec. 20.05. REPORTING OF INFORMATION PROHIBITED. 4-13 (a) Except as provided by Subsection (b), a consumer reporting 4-14 agency may not furnish a consumer report containing information 4-15 related to: 4-16 (1) a case under Title 11 of the United States Code or 4-17 under the federal Bankruptcy Act in which the date of entry of the 4-18 order for relief or the date of adjudication predates the consumer 4-19 report by more than 10 years; 4-20 (2) a suit or judgment in which the date of entry 4-21 predates the consumer report by more than seven years or the 4-22 governing statute of limitations, whichever is longer; 4-23 (3) a tax lien in which the date of payment predates 4-24 the consumer report by more than seven years; 4-25 (4) a record of arrest, indictment, or conviction of a 4-26 crime in which the date of disposition, release, or parole predates 4-27 the consumer report by more than seven years; or 4-28 (5) another item or event that predates the consumer 4-29 report by more than seven years. 4-30 (b) A consumer reporting agency may furnish a consumer 4-31 report that contains information described by Subsection (a) if the 4-32 information is provided in connection with: 4-33 (1) a credit transaction with a principal amount that 4-34 is or may reasonably be expected to be $150,000 or more; 4-35 (2) the underwriting of life insurance for a face 4-36 amount that is or may reasonably be expected to be $150,000 or 4-37 more; or 4-38 (3) the employment of a consumer at an annual salary 4-39 that is or may reasonably be expected to be $75,000 or more. 4-40 (c) A consumer reporting agency may not furnish medical 4-41 information about a consumer in a consumer report that is being 4-42 obtained for employment purposes or in connection with a credit, 4-43 insurance, or direct marketing transaction unless the consumer 4-44 consents to the furnishing of the medical information. 4-45 (d) A consumer reporting agency shall report information in 4-46 response to a request for credit information about a consumer not 4-47 later than the first anniversary of the date on which the credit 4-48 information is requested. The consumer reporting agency may retain 4-49 information concerning a request for credit information about a 4-50 consumer in a consumer's file for not more than two years after the 4-51 date on which the credit information is requested. 4-52 Sec. 20.06. DISPUTE PROCEDURE. (a) If the completeness or 4-53 accuracy of information contained in a consumer's file is disputed 4-54 by the consumer and the consumer notifies the consumer reporting 4-55 agency of the dispute, the agency shall reinvestigate the disputed 4-56 information free of charge and record the current status of the 4-57 disputed information not later than the 30th business day after the 4-58 date on which the agency receives the notice. The consumer 4-59 reporting agency shall provide the consumer with the option of 4-60 notifying the agency of a dispute concerning the consumer's file by 4-61 speaking directly to a representative of the agency. 4-62 (b) Not later than the fifth business day after the date on 4-63 which a consumer reporting agency receives notice of a dispute from 4-64 a consumer in accordance with Subsection (a), the agency, unless 4-65 otherwise directed by the consumer, shall provide notice of the 4-66 dispute to each person who provided any information related to the 4-67 dispute and each person requesting information about the consumer. 4-68 (c) A consumer reporting agency may terminate a 4-69 reinvestigation of information disputed by a consumer under 5-1 Subsection (a) if the agency reasonably determines that the dispute 5-2 is frivolous or irrelevant. An agency that terminates a 5-3 reinvestigation of disputed information under this subsection shall 5-4 promptly notify the consumer of the termination and the reasons for 5-5 the termination by mail, or if authorized by the consumer, by 5-6 telephone. The presence of contradictory information in a 5-7 consumer's file does not by itself constitute reasonable grounds 5-8 for determining that the dispute is frivolous or irrelevant. 5-9 (d) If disputed information is found to be inaccurate or 5-10 cannot be verified after a reinvestigation under Subsection (a), 5-11 the consumer reporting agency, unless otherwise directed by the 5-12 consumer, shall promptly delete the information from the consumer's 5-13 file, revise the consumer file, and provide the revised consumer 5-14 report to the consumer and each person who requested the consumer 5-15 report within the preceding six months. The consumer reporting 5-16 agency may not report the inaccurate or unverified information in 5-17 subsequent reports. 5-18 (e) Information deleted under Subsection (d) may not be 5-19 reinserted in the consumer's file unless the person who furnishes 5-20 the information to the consumer reporting agency reinvestigates and 5-21 states in writing or by electronic record to the agency that the 5-22 information is complete and accurate. 5-23 (f) A consumer reporting agency shall provide written notice 5-24 of the results of a reinvestigation or reinsertion made under this 5-25 section not later than the fifth business day after the date on 5-26 which the reinvestigation or reinsertion has been completed. The 5-27 notice must include: 5-28 (1) a statement that the reinvestigation is complete; 5-29 (2) a statement of the determination made by the 5-30 agency on the completeness or accuracy of the disputed information; 5-31 (3) a copy of the consumer's file or consumer report 5-32 and a description of the results of the reinvestigation; 5-33 (4) a statement that a description of the procedure 5-34 used to determine the accuracy and completeness of the information 5-35 shall be provided to the consumer by the agency on request, 5-36 including the name, business address, and, if available, the 5-37 telephone number of each person contacted in connection with the 5-38 information; 5-39 (5) a statement that the consumer is entitled to add a 5-40 statement to the consumer's file disputing the accuracy or 5-41 completeness of the information as provided by Section 611 of the 5-42 Fair Credit Reporting Act (15 U.S.C. Section 1681i), as amended; 5-43 and 5-44 (6) a statement that the consumer is entitled to 5-45 dispute resolution as prescribed by this section, after the 5-46 consumer receives the notice specified under this subsection. 5-47 (g) This section does not require a person who obtains a 5-48 consumer report for resale to another person to alter or correct an 5-49 inaccuracy in the consumer report if the report was not assembled 5-50 or prepared by the person. 5-51 Sec. 20.07. CORRECTION OF INACCURATE INFORMATION. (a) A 5-52 consumer reporting agency shall provide a person who provides 5-53 consumer credit information to the agency with the option of 5-54 correcting previously reported inaccurate information by speaking 5-55 directly to a representative of the agency or by submitting the 5-56 correction by facsimile or other automated means. 5-57 (b) Not later than the fifth day after the date on which the 5-58 consumer reporting agency receives a correction, the agency shall 5-59 correct the consumer's file and notify the consumer of the 5-60 correction. A consumer reporting agency shall have a method of 5-61 verifying communications made by persons who provide information to 5-62 the agency. 5-63 Sec. 20.08. CONSUMER'S RIGHT TO FILE ACTION IN COURT OR 5-64 ARBITRATE DISPUTES. (a) An action to enforce an obligation of a 5-65 consumer reporting agency to a consumer under this chapter may be 5-66 brought in any court as provided by the Fair Credit Reporting Act 5-67 (15 U.S.C. Section 1681 et seq.), as amended, or may be submitted 5-68 to binding arbitration after the consumer has followed all dispute 5-69 procedures in Section 20.06 and has received the notice specified 6-1 in Section 20.06(f) in the manner provided by the rules of the 6-2 American Arbitration Association. 6-3 (b) A decision rendered by an arbitrator under this section 6-4 does not affect the validity of an obligation or debt owed by the 6-5 consumer to any party. 6-6 (c) A prevailing party in an action or arbitration 6-7 proceeding brought under this section shall be compensated for the 6-8 party's attorney fees and costs of the proceeding as determined by 6-9 the court or arbitration. 6-10 (d) A consumer may not submit to arbitration more than one 6-11 action against a particular consumer reporting agency during any 6-12 120-day period. 6-13 (e) The results of an arbitration action brought against a 6-14 consumer reporting agency doing business in this state shall be 6-15 communicated in a timely manner to other consumer reporting 6-16 agencies doing business in this state. 6-17 (f) If a determination is made in favor of a consumer after 6-18 submission of a dispute to arbitration, the disputed adverse 6-19 information in the consumer's file or record shall be removed or 6-20 stricken in a timely manner. If the adverse information is not 6-21 removed or stricken, the consumer may bring an action against the 6-22 noncomplying agency under this section regardless of the 120-day 6-23 waiting period required under this section. 6-24 Sec. 20.09. CIVIL LIABILITY. (a) A consumer reporting 6-25 agency that wilfully or negligently violates this chapter or the 6-26 Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.), as 6-27 amended, is liable to the consumer against whom the violation 6-28 occurs for the greater of three times the amount of actual damages 6-29 to the consumer or $1,000, reasonable attorney fees, and court or 6-30 arbitration costs for each inaccurate entry in the consumer's file 6-31 that was disputed by the consumer. 6-32 (b) A consumer reporting agency that negligently violates 6-33 this chapter or the Fair Credit Reporting Act (15 U.S.C. Section 6-34 1681 et seq.), as amended, is liable to the consumer against whom 6-35 the violation occurs for actual damages to the consumer or $1,000, 6-36 whichever is greater, for each inaccurate entry in the consumer's 6-37 file that was disputed by the consumer, reasonable attorney fees, 6-38 and court or arbitration costs. A consumer reporting agency is not 6-39 considered to have negligently violated this chapter or the Fair 6-40 Credit Reporting Act (15 U.S.C. Section 1681 et seq.), as amended, 6-41 if, not later than the 30th day after the date on which the agency 6-42 receives notice of a dispute from a consumer under Section 20.06, 6-43 the agency corrects the complained of item or activity and sends 6-44 the consumer and each person who received the consumer information 6-45 written notification of the corrective action in accordance with 6-46 Section 20.06(f), unless otherwise directed by the consumer. 6-47 (c) In addition to liability imposed under Subsection (a), a 6-48 consumer reporting agency that does not correct a consumer's file 6-49 and consumer report before the 10th day after the date on which a 6-50 judgment is entered against the agency because of inaccurate 6-51 information contained in a consumer's file is also liable for 6-52 $1,000 a day until the inaccuracy is corrected. 6-53 Sec. 20.10. REMEDIES CUMULATIVE. An action taken under this 6-54 chapter does not prohibit a consumer from taking any other action 6-55 authorized by law except that a credit reporting agency may not be 6-56 subject to suit with respect to any issue that was the subject of 6-57 an arbitration proceeding brought under Section 20.08. 6-58 SECTION 2. This Act takes effect September 1, 1997. 6-59 SECTION 3. The importance of this legislation and the 6-60 crowded condition of the calendars in both houses create an 6-61 emergency and an imperative public necessity that the 6-62 constitutional rule requiring bills to be read on three several 6-63 days in each house be suspended, and this rule is hereby suspended. 6-64 * * * * *