[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                   EXAMINING THE NEED FOR H.R. 2885,

                THE CREDIT MONITORING CLARIFICATION ACT

=======================================================================


                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 20, 2008

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-112



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            DEBORAH PRYCE, Ohio
CAROLYN B. MALONEY, New York         MICHAEL N. CASTLE, Delaware
LUIS V. GUTIERREZ, Illinois          PETER T. KING, New York
NYDIA M. VELAZQUEZ, New York         EDWARD R. ROYCE, California
MELVIN L. WATT, North Carolina       FRANK D. LUCAS, Oklahoma
GARY L. ACKERMAN, New York           RON PAUL, Texas
BRAD SHERMAN, California             STEVEN C. LaTOURETTE, Ohio
GREGORY W. MEEKS, New York           DONALD A. MANZULLO, Illinois
DENNIS MOORE, Kansas                 WALTER B. JONES, Jr., North 
MICHAEL E. CAPUANO, Massachusetts        Carolina
RUBEN HINOJOSA, Texas                JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri              CHRISTOPHER SHAYS, Connecticut
CAROLYN McCARTHY, New York           GARY G. MILLER, California
JOE BACA, California                 SHELLEY MOORE CAPITO, West 
STEPHEN F. LYNCH, Massachusetts          Virginia
BRAD MILLER, North Carolina          TOM FEENEY, Florida
DAVID SCOTT, Georgia                 JEB HENSARLING, Texas
AL GREEN, Texas                      SCOTT GARRETT, New Jersey
EMANUEL CLEAVER, Missouri            GINNY BROWN-WAITE, Florida
MELISSA L. BEAN, Illinois            J. GRESHAM BARRETT, South Carolina
GWEN MOORE, Wisconsin,               JIM GERLACH, Pennsylvania
LINCOLN DAVIS, Tennessee             STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire         RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota             TOM PRICE, Georgia
RON KLEIN, Florida                   GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida                 PATRICK T. McHENRY, North Carolina
CHARLES WILSON, Ohio                 JOHN CAMPBELL, California
ED PERLMUTTER, Colorado              ADAM PUTNAM, Florida
CHRISTOPHER S. MURPHY, Connecticut   MICHELE BACHMANN, Minnesota
JOE DONNELLY, Indiana                PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida               KENNY MARCHANT, Texas
JIM MARSHALL, Georgia                THADDEUS G. McCOTTER, Michigan
DAN BOREN, Oklahoma                  KEVIN McCARTHY, California
BILL FOSTER, Illinois                DEAN HELLER, Nevada
ANDRE CARSON, Indiana

        Jeanne M. Roslanowick, Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 20, 2008.................................................     1
Appendix:
    May 20, 2008.................................................    31

                               WITNESSES
                         Tuesday, May 20, 2008

Beales, J. Howard III, Associate Professor of Strategic 
  Management and Public Policy, School of Business, George 
  Washington University..........................................    12
Bennett, Leonard A., Consumer Litigation Associates, P.C.........    14
Fortney, Anne P., Partner, Hudson Cook, LLP......................    10
Holland, Robin, Senior Vice President, Global Consumer Services, 
  Equifax Inc....................................................     9

                                APPENDIX

Prepared statements:
    Brown-Waite, Hon. Ginny......................................    32
    Carson, Hon. Andre...........................................    33
    Kanjorski, Hon. Paul E.......................................    34
    Beales, J. Howard III........................................    36
    Bennett, Leonard A...........................................    45
    Fortney, Anne P..............................................    64
    Holland, Robin...............................................    80

              Additional Material Submitted for the Record

Kanjorski, Hon. Paul E.:
    Letter to Chairman Barney Frank from the Federal Trade 
      Commission, dated May 20, 2008.............................    88


                   EXAMINING THE NEED FOR H.R. 2885,



                         THE CREDIT MONITORING



                           CLARIFICATION ACT

                              ----------                              


                         Tuesday, May 20, 2008

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Barney Frank 
[chairman of the committee] presiding.
    Members present: Representatives Frank, Kanjorski, Waters, 
Maloney, Watt, Moore of Kansas, Clay, McCarthy, Baca, Miller of 
North Carolina, Scott, Green, Cleaver, Perlmutter; Bachus, 
Royce, Jones, Biggert, Price, and Heller.
    The Chairman. This hearing of the Committee on Financial 
Services will come to order.
    We are here today to have a legislative hearing on H.R. 
2885, the Credit Monitoring Clarification Act. The chairman of 
the Capital Markets Subcommittee, Mr. Kanjorski of 
Pennsylvania, is the sponsor and the lead person on this 
committee on this issue as on many others.
    So I will be convening the hearing, but I will be turning 
over the gavel to Mr. Kanjorski, who will be the prime sponsor 
and guide as we go forward on this legislation. I think we have 
a bill where there is conceptual agreement. There are some 
questions about the specifics, so this is a hearing in which I 
think it will be very important to focus on how to do this and 
make, I think, an important contribution to the good 
functioning of the financial community.
    So, with that, I am going to turn it over to the gentleman 
from Pennsylvania, who will be making the opening statement and 
conducting the hearing.
    Mr. Kanjorski. [presiding] Thank you, Mr. Chairman.
    The Committee on Financial Services will come to order. 
Without objection, all members' opening statements will be made 
a part of the record. I thank you, Mr. Chairman, for convening 
the full committee hearing on H.R. 2885, the Credit Monitoring 
Clarification Act. Congressman Royce and I have worked on this 
issue for several years, and our legislation enjoys the support 
of many members of the Financial Services Committee.
    If promoted and sold in a truthful manner, credit 
monitoring services can help consumers maintain an accurate 
credit file and provide them with valuable information for 
fighting identity theft. Credit monitoring is also often 
provided free-of-charge to victims of data security breaches, 
and as a result has gained wide acceptance in the marketplace.
    In 1996, we enacted the Credit Repair Organizations Act, 
otherwise known as CROA. This law protects consumers against 
the problematic and unethical credit practices of credit repair 
organizations. In enacting CROA, we put in place a broad 
definition of what constitutes a credit repair organization. In 
the decade following the enactment of CROA, products such as 
credit monitoring services have come into the market. In recent 
years, however, some parties have begun to interpret the CROA 
definition of a credit repair organization to include credit 
monitoring services, exposing the providers of credit 
monitoring services to legal ambiguity. These interpretations 
also result in the provision of confusing credit repair notices 
to credit monitoring consumers.
    Additionally, because CROA prohibits advance payments, the 
providers of legitimate credit monitoring products cannot offer 
annual subscriptions. The Federal Trade Commission has for 
several years indicated support for differentiating the 
treatment of credit monitoring services for the treatment of 
repair organizations under CROA.
    In testimony and correspondence, the Commission has 
regularly noted that it ``seized little basis on which to 
subject the sale of legitimate credit monitoring and similar 
educational products and services to grow specific prohibitions 
and requirements, which were intended to address deceptive and 
abusive credit repair business practices.''
    To address the Commission's concerns, we have worked for a 
number of years on the legislation. In the 109th Congress, 
during the mark-up of the Accountability and Trust Act in the 
Financial Services Committee, we offered an amendment that 
passed in a voice vote to clarify the treatment of credit 
monitoring under CROA. Since then, we have worked to revise and 
include our legislative proposal to include new consumer 
protections and refine the credit monitoring exception.
    As introduced, H.R. 2885 would provide an activity-based 
exemption from CROA for credit monitoring services. The users 
of these services would get new consumer protections, too. 
Additionally, our bill updates the credit repair disclosures 
required under CROA to reflect changes made by the Fact Act in 
2003 that provide consumers with access to free credit reports.
    Today's hearing will help us to determine how we can 
further improve H.R. 2885. In an effort to strike the right 
balance we have modified this legislation considerably over the 
years. We will continue to do so going forward, I suspect. The 
Commission has advised us that the exemption for legitimate 
credit monitoring services must be carefully considered and 
narrowly drawn.
    Consumer groups also want to ensure that the legislation 
does not ultimately undermine CROA's existing consumer 
protections against fraudulent credit repair organizations. I 
agree with both of them. To achieve the goal of workable credit 
monitoring exemption under CROA, that maintains strong consumer 
protections, the Commission has previously urged the Congress 
to continue to reach out to stakeholders. Today's hearing acts 
on that recommendation by bringing together a number of 
stakeholders who detail concerns and find common ground.
    In sum, I am pleased that we have the opportunity here to 
learn more about the benefits of credit monitoring and to learn 
more about the concerns with our legislation. We need to ensure 
that as we move forward with the consideration of H.R. 2885, we 
do not allow bad actors to use the proposed exemption to 
circumvent CROA's protections. It is therefore my hope that we 
can work with all interested parties going forward to perfect 
the language of the bill.
    Are there any other members with opening statements?
    Mr. Bachus.
    Mr. Bachus. Thank you, Chairman Kanjorski. I want to thank 
you and Congressman Royce for your leadership in bringing the 
Credit Monitoring Clarification Act before this committee.
    As you know, Ranking Member Biggert of the subcommittee and 
I are both co-sponsors of this legislation and we both commend 
you and Mr. Royce for all of your fine work on this 
legislation. I also thank Chairman Frank for agreeing to hold 
this hearing.
    In 1996 Congress, through the leadership of this committee, 
enacted the Credit Repair Organization's Act, or CROA, to help 
consumers by putting an end to unfair and deceptive practices 
of entities that promised that they could remove negative but 
accurate data from a consumer's credit report. In its effort to 
help consumers, Congress imposed a number of requirements on 
credit repair organizations.
    Perhaps most significantly we prohibited these businesses 
from charging customers fees before they had performed the 
services they promised, but industry practices have changed. 
CROA was enacted before certain monitoring products became 
popular, as consumers sought new ways to track their credit 
histories and to protect themselves against identity theft.
    As I said earlier, the gentleman from Pennsylvania, 
Subcommittee Chairman Kanjorski, and the gentleman from 
California, Mr. Royce, took leadership on this issue and worked 
closely with the Federal Trade Commission to ensure that their 
legislation will allow these legitimate credit monitoring 
products to be offered without running afoul of CROA.
    Under the legislation, firms offering credit monitoring 
services must provide consumers with certain disclosures and 
the opportunity to counsel without paying a penalty or fee. 
H.R. 2885 also updates the more general disclosures that must 
be provided to customers or consumers under CROA to conform the 
statute to changes made by the Fair and Accurate Transactions 
Act, or the Fact Act of 2003, which this committee fashioned in 
a bipartisan way, and I think has been one of the great 
successes of bipartisan cooperation in the past Congress.
    H.R. 2885 will build on this and is substantially similar 
to provisions that were included in data security legislation 
that passed the committee in the 109th Congress, but was never 
considered by the full House. So, once again, Mr. Kanjorski, I 
want to thank you; I want to thank Representative Royce and the 
other co-sponsors of this legislation; I want to Chairman Frank 
for holding the hearing; and finally, I thank the witnesses for 
being here today and for the testimony you will offer.
    Thank you very much.
    Mr. Kanjorski. Thank you, Mr. Bachus.
    I would like to recognize the Congressman from Kansas, Mr. 
Moore, who has been instrumental in support of this 
legislation.
    Mr. Moore of Kansas. Thank you, Mr. Chairman, and I thank 
you for holding this important hearing today on H.R. 2885, the 
Credit Monitoring Clarification Act. As we all know, identity 
theft and misuse of personal data are extremely serious 
problems in our society.
    The consequences of identity theft can become increasingly 
severe the longer it goes undiscovered, and it is very 
important that consumers have all the available tools to 
monitor their sensitive personal data and direct fraudulent 
activity early in the process. Credit monitoring services are 
important tools that empower consumers with information about 
changes to their credit report and explanations for these 
changes so consumers can take immediate action to protect 
themselves in the event of an error on their credit report.
    Additionally, these products help consumers make educated 
decisions that will improve their credit status. Unfortunately, 
the continuation of these services is endangered due to an 
unintended consequence of a 1996 law enacted by Congress, the 
Credit Repair Organizations Act, CROA, to protect consumers 
against the problematic and unethical practices of credit 
repair organizations.
    I don't believe that Congress enacted CROA with the intent 
of diminishing access to credit monitoring products which were 
not yet in existence at the time the law was enacted. For this 
reason, I am a co-sponsor of H.R. 2885, which would clarify 
that credit monitoring products are not subject to the same 
restrictions as credit repair products under CROA.
    As we move forward, Mr. Chairman, we should make every 
effort to ensure that H.R. 2885 is narrowly crafted so it will 
prevent unscrupulous persons from gaining access to this 
exemption. But, I hope this hearing is a precursor to passage 
of this legislation in committee and in the full House.
    Thank you, Mr. Chairman, I look forward to hearing the 
witnesses' testimony today. Thank you.
    Mr. Kanjorski. Thank you, Mr. Moore.
    And now, we will hear from the gentlelady from Illinois, 
Mrs. Biggert.
    Mrs. Biggert. Thank you, Mr. Chairman, and I would like to 
thank Chairman Frank for holding today's hearing on a bill to 
clarify congressional intent regarding a Credit Repair 
Organizations Act or CROA provision that defines credit repair 
organizations.
    I would also like to thank my colleagues, Congressman 
Kanjorski and Congressman Royce, for introducing H.R. 2885. I 
am honored to be a co-sponsor of this bill along with Ranking 
Member Bachus. Today is not the first time that we worked on a 
technical corrections bill.
    For example, last week, the House passed a bill, the Credit 
and Debit Card Receipt Clarification Act, to clarify a 
misinterpreted fair and accurate credit transactions act or 
Fact Act provision. The vague provision resulted in confusion, 
a loophole, and lawsuits regarding which credit card numbers a 
business must truncate on a consumer's credit card receipt. 
Similarly, the bill we will examine today, H.R. 2885, aims to 
clarify the intent of Congress regarding a provision in CROA 
that defines credit repair organizations.
    Everyone has heard or seen the ads about credit repair 
services: ``Bad credit; no credit; we can erase your bad 
credit, 100 percent guaranteed.'' But let's face it. Only time 
and prudent financial planning can repair a person's credit 
report, and that's why many credit repair ads are so 
misleading--to prevent consumers from paying for illegitimate 
credit repair services.
    Credit repair organizations are not allowed under current 
law to charge an up-front fee for their credit repair services. 
On the other hand, credit monitoring services, which are 
primarily provided by the three major credit bureaus, are 
legitimate services allowing a consumer to monitor activity on 
their credit report to detect and dispute, for example, 
incorrect data or fraudulent activity.
    Pre-credit monitoring services often will be provided to a 
consumer giving him a tool to detect fraudulent activity as a 
result of a data breach. Another use of credit monitoring 
services, and my favorite, is when for an up-front fee, a 
consumer uses a credit monitoring service to evaluate his or 
her credit scoring report. The consumer then works to improve 
his or her credit working by working to pay bills on time and 
lower his or her debt. That is financial literacy and personal 
responsibility at their best.
    The up-front fee for the credit monitoring service is 
legitimate. Unfortunately, once again, some trial lawyers filed 
lawsuits against credit bureaus claiming that credit monitoring 
service falls under CROA's definition of credit repair 
organization.
    As I mentioned earlier, credit repair organizations are not 
allowed to charge an up-front fee for their credit repair 
services. In short, certain trial lawyers want CROA interpreted 
to mean that a credit monitoring service is a credit repair 
service and therefore cannot charge an upfront fee. If a credit 
monitoring service charges an up-front fee, it is in violation 
of the law.
    I was recently told by Credit Bureau representatives that 
for fear that they will be sued again under CROA, credit 
bureaus are waiting to roll out new credit monitoring products 
and services that could help consumers today. It is important 
that legitimate credit monitoring services not be considered 
credit repair services. We should work to ensure that 
legitimate uses of credit monitoring are not hampered by a 
technical glitch in the law, and I think that H.R. 2885 does 
just that.
    With that, I look forward to hearing today's witnesses and 
their testimony on H.R. 2885.
    I yield back.
    Mr. Kanjorski. Thank you, Mrs. Biggert.
    I would now like to recognize the gentleman from Georgia, 
Mr. Scott, who also has been instrumental in supporting this 
bill and helping to draft it.
    Mr. Scott?
    Mr. Scott. Thank you so much, Mr. Chairman. And it is 
indeed a pleasure to work with you on this bill, H.R. 2885, 
which will strengthen existing consumer protections that are 
addressed in the Credit Repair Organizations Act and will help 
address the need for further consumer protections. But first, I 
would like to recognize one of our guests here, Ms. Robin 
Holland, a wonderful person from Equifax, in Atlanta, Georgia.
    Let me say just a few things about her because she is a 
very dynamic person. She is a senior vice president for global 
consumer services at Equifax, and her function is to oversee 
Equifax's consumer support operations, which includes credit 
reports and consumer fraud inquiries. She is a frequent guest 
on CNN and NBC Nightly News. She also teaches workshops on 
identify theft and she helps consumers control their credit.
    Welcome to the committee, Ms. Holland. It is a pleasure to 
have you here.
    Now, let me just say why H.R. 2885 is so important. 
Legitimate credit monitoring services strongly support H.R. 
2885, because they know that this will help improve upon 
already successful initiatives that are implemented in CROA. 
Consumers who received notices from credit monitoring service 
organizations regarding activity on their credit reports can 
then access their credit reports in view of the action there.
    By accessing their reports, in many instances, consumers 
find they are potential victims of identity theft, or the 
report may reveal that an incorrect item was placed on the 
report, whichever way, this is very important for consumers to 
have. CROA was extremely important in combatting harmful credit 
repair activities; however, CROA's definition of credit repair 
organizations could apply to any organization that supplies 
credit monitoring services; and, as such, should be amended so 
these legitimate companies offering credit monitoring services 
are protected from lawsuits or the prospects of new litigation.
    This bill in no way weakens consumer protection 
initiatives. Instead, consumers will receive important new 
protections under this legislation. No existing law gives a 
consumer the right to cancel the credit monitoring subscription 
before the end of its term and receive a pro rata refund. This 
bill would give consumers this new right. This legislation 
would also assure that consumers are given clear and concise 
disclosures about their right to free, annual credit reports. 
In all, we will indeed benefit from the enactment of H.R. 2885 
by serving business and consumers alike.
    I look forward to the testimony of the distinguished 
witnesses.
    Thank you, Mr. Chairman.
    Mr. Kanjorski. Thank you very much, Mr. Scott.
    Now, we will hear from our colleague, Mr. Royce of 
California, who has been instrumental in this. I daresay those 
people in the public, and particularly the media, say that the 
two sides of the aisle do not cooperate on matters. I can 
attest to the fact that they are dead wrong.
    Mr. Royce and myself are co-sponsors of so many pieces of 
legislation, and if anyone wants to check our philosophical 
differences, they are also extreme.
    Mr. Royce?
    Mr. Royce. I don't know if they are that extreme, Mr. 
Chairman, but I do thank you. I thank you for all of your work 
on this issue, and I thank you also for helping to arrange this 
hearing today. I think it was in the 109th Congress that you 
and I first introduced this legislation; and it was following 
the passage of the Credit Repair Organizations Act in 1996 that 
these credit monitoring services first began to emerge. 
Unfortunately, because of the expansive definition of CROA, 
credit reporting agencies found themselves subject to CROA when 
trying to provide legitimate credit monitoring services.
    So this broad definition has created a legal ambiguity. It 
has created uncertainty in the marketplace for these credit 
reporting agencies, and it has been the basis for several 
frivolous lawsuits, class-action type lawsuits that have cost 
the industry tens of millions of dollars.
    Now, the Federal Trade Commission has consistently 
expressed support for differentiating the treatment of credit 
monitoring services from the treatment of credit repair 
organizations under CROA. There was a hearing before the Senate 
in July of 2007, and Lydia Parnes, who is the Director of the 
Bureau of Consumer Protection at the FTC, said that as a matter 
of policy, the FTC sees little basis on which to subject the 
sale of legitimate credit monitoring and similar educational 
products and services to CROA's specific prohibitions and 
requirements, which were intended to address deceptive and 
abusive credit repair business practices.
    Now, those very arguments are reiterated in a letter that 
each of us received today from the FTC. Credit monitoring 
services offered customers several legitimate services related 
to tracking the credit report, including notifying consumers 
when there are significant changes to the credit report files. 
These services can protect consumers against identity theft. 
They limited the damage following security breaches.
    So, in closing, the Credit Monitoring Clarification Act is 
a small but critical piece of legislation which clarifies the 
definition of a credit repair organization and provides much-
needed legal certainty in the marketplace. And, again, Mr. 
Chairman, I would like to thank you for all your work on this 
and we should thank the witnesses for coming today to testify. 
I yield back the balance of my time.
    Mr. Kanjorski. Thank you, Mr. Royce.
    And now, we will hear from the gentleman from Georgia, Mr. 
Price.
    Mr. Price. Thank you, Mr. Chairman.
    I, too, want to add my words of thanks to you and Mr. Royce 
for your leadership on this issue and for chairing this 
committee. I want to begin by associating myself with the 
remarks of the other gentleman from Georgia in welcoming Ms. 
Holland from Equifax, a wonderful corporate citizen in the 
State of Georgia.
    Mr. Chairman, as you well know, it often falls to us to 
revisit legislation that has been passed by a previous Congress 
due to the law of unintended consequences, where Congress does 
something and the falling dominoes affect something that is 
much further down the table or down the road. And I believe 
that H.R. 2885, the Credit Monitoring and Clarification Act, 
does that very important function. Again, I want to thank 
Subcommittee Chairman Kanjorski and Congressman Royce for their 
work for years, literally, on this issue and for their 
leadership.
    As has been stated, Congress in 1996 enacted the Credit 
Repair Organization Act or CROA at the urging of consumer 
report agencies to stop the unfair and deceptive practices of 
entities that promised consumers they could alter or remove 
negative but accurate and current data from a credit report. 
And while the goal is very worthwhile, the term ``credit repair 
organization'' was intended to apply solely to companies who 
charge money in order to improve a consumer's credit record, 
credit history, or credit rating.
    It wasn't intended, as numerous lawsuits alleged, to cover 
consumer reporting agencies or other entities that make 
available credit information for monitoring or informational or 
educational or credit literacy purposes. The issue that we must 
address is that CROA was written too broadly, or at the very 
least interpreted too broadly. As written, CROA covers any 
service which directly or indirectly intends to ``improve a 
credit report.''
    As a result, the trial bar has predictably brought class 
action suits against all three of the national credit bureaus 
and many of their resellers. The trial bar has alleged that the 
selling of a credit monitoring product serves at least the 
implied purpose of ``improving'' a consumer's credit record. If 
legislative relief is not provided, the potentially 
catastrophic consequences of class action awards, I would 
suggest would drive credit monitoring products from the 
marketplace, or at the very least, adversely distort their 
pricing and their delivery.
    Mr. Chairman, as you know, these companies provide a needed 
and a wonderful service. They should not fall prey to liability 
due to inartful congressional action. It is important to 
remember that CROA was enacted before any of the recently 
developed positive and popular consumer education and credit 
file monitoring products were created.
    Credit file monitoring products have become a consumer's 
first line of defense against identity theft, and credit file 
monitoring products are routinely made available to victims of 
security breaches. Congress should not allow unintended 
consequences and an overly active trial bar to strip consumers 
of the most powerful tools to combat identity theft that they 
have at their disposal.
    I hope that the chairman of the full committee will work 
quickly with the sponsors of this legislation to ensure rapid 
adoption by the House. I look forward to working positively to 
that end, and I thank the chairman and yield back.
    Mr. Kanjorski. Thank you, Mr. Price.
    Are there any other members who desire to make an opening 
statement?
    There being none, we will now start with the introduction 
of the panel. First, let me thank the panel for appearing 
before the committee today, and without objection, your written 
statements will be made a part of the record. You will each be 
recognized for a 5-minute summary of your testimony.
    First, we have Ms. Robin Holland, the senior vice president 
of global operations at Equifax, which provides credit 
monitoring services. I must say, from listening to Mr. Scott, 
obviously, you are well-represented here on the committee, Ms. 
Holland, so you had better be very good in your testimony.
    Ms. Holland. Thank you.

   STATEMENT OF ROBIN HOLLAND, SENIOR VICE PRESIDENT, GLOBAL 
                    OPERATIONS, EQUIFAX INC.

    Ms. Holland. Thank you. Mr. Chairman and members of the 
committee, I want to thank you and thank your outstanding staff 
for the opportunity to testify today on behalf of Equifax in 
support of the reform of the Credit Repair Organization Act, or 
CROA, as it is commonly called.
    We have submitted written testimony for the record. And 
with your permission, I just want to take a few minutes to 
highlight that testimony. Let me first say a word about 
Equifax. Equifax is the oldest, the largest, and the only 
domestically publicly traded national credit bureau. Equifax is 
proud of its history, and proud of its services, and, most 
importantly, proud of its credit monitoring services. These 
services help consumers to understand their credit score, their 
credit report. They help consumers to better manage their use 
of credit and, most importantly, it helps them guard against 
identity theft.
    Let me emphasize right at the outset that Equifax very much 
supports CROA and its comprehensive and strict regulation of 
credit repair organizations. These organizations routinely 
promise consumers that they will help them improve their credit 
score or their credit report by removing adverse but, 
nonetheless, accurate and timely information from their 
reports.
    This is a deceptive, fraudulent, and ultimately, quite 
incorrect representation, and the victims include consumers 
whom I talk to every single day in my job, creditors, and the 
National Credit Bureaus, including Equifax. Ironically, 
however, CROA has been used wrongly and inappropriately to 
attempt to punish consumer reporting agencies for offering 
these great credit monitoring products.
    And, let's be very clear about the difference between 
credit monitoring products and so-called credit repair 
services. Credit monitoring products, including the products 
offered by Equifax, facilitate consumer access to credit 
reports and scores. They provide proactive notification of 
changes in their reports and scores. They provide explanations 
of scoring algorithms and provide consumers with numerous 
credit score-related tools, which include projects and 
forecasts.
    Simply stated, credit monitoring products are the very best 
strategy to promote consumer financial literacy, something that 
we all need to work together to increase in our country. And we 
are also the consumer's very best strategy to prevent and 
mitigate the cruel impact of identity fraud. CROA's definition 
of credit repair services is so broad that it can arguably but 
wrongly be interpreted as covering any of these vital credit 
monitoring services, because these services directly or 
indirectly can be used to approve a consumer's credit record, 
credit history, or credit score.
    CROA defines a credit repair organization as an entity 
which purports directly or indirectly to help consumers improve 
their credit report. For this reason, Equifax urges Congress to 
enact legislation to make it absolutely clear that credit 
monitoring is not credit repair. The FTC has expressed the same 
sentiment, that is, that there is no basis for applying CROA to 
credit monitoring services.
    If CROA were to be misapplied to credit monitoring 
services, it would mean that consumers would no longer be able 
to buy these services on a subscription basis, and that 
consumers would receive notices and warnings which are 
appropriate for consumers faced with sales pitches for credit 
repair services, but which are entirely inappropriate and 
indeed confusing and deceptive when applied to credit 
monitoring services.
    And it would mean that entities offering consumer 
monitoring services would potentially be faced with liability, 
including the discouragement of all moneys paid by all persons 
at least in a class action suit for the credit monitoring 
service. Quite frankly, this would virtually drive credit 
monitoring services out of the marketplace. It is for this 
reason that we very much appreciate this committee's interest 
in CROA reform.
    We also appreciate efforts in the Congress where bipartisan 
legislation has been introduced that makes clear that credit 
monitoring activities are not credit repair activities. The 
House bill also provides consumers with additional protections 
including a very detailed description of their free reports and 
I.D. for our protections under FACTA and the Fair Credit 
Reporting Act, and it gives them the ability to cancel this 
contract with the right to a pro rata refund.
    Thank you for the opportunity to testify, and of course I 
will be delighted to answer any questions.
    [The prepared statement of Ms. Holland can be found on page 
80 of the appendix.]
    Mr. Kanjorski. Next, we will hear from Ms. Anne Fortney, a 
partner with Hudson Cook.
    Ms. Fortney.

    STATEMENT OF ANNE P. FORTNEY, PARTNER, HUDSON COOK, LLP

    Ms. Fortney. Thank you, Mr. Chairman, and members of the 
committee, for the opportunity to appear before you.
    I am Anne Fortney, a partner in the Washington, D.C., 
office of the Hudson Cook law firm. Our firm specializes in 
consumer financial services, and we assist in compliance with a 
variety of consumer protection laws. I bring to this practice 
more than 30 years experience in the consumer financial 
services field, including service as Associate Director for 
Credit Practices at the Federal Trade Commission.
    In private practice, I have worked extensively with credit 
grantors and with the consumer reporting industry. I commend 
you for holding this hearing and I offer testimony in support 
of H.R. 2885, the Credit Monitoring Clarification Act.
    I believe that this bill enhances consumer protections and 
clarifies the scope of CROA. Some background may provide 
context for my views.
    While at the FTC, I first learned of problems caused by 
credit repair organizations. Consumers paid substantial fees in 
advance to companies that promised to clean up or repair poor 
credit histories by removing negative but accurate information 
from consumer reports.
    The consumer reporting and credit granting industries were 
burdened with frivolous accuracy disputes generated by credit 
repair organizations. Although these organizations could not 
deliver on their promises to remove all negative information 
from their credit report histories, in the process, they were 
sometimes successful in deleting some information.
    Their tactics undermined the integrity and the reliability 
of the consumer reporting system. In 1996, at the urging of the 
Federal Trade Commission and the consumer reporting industry, 
Congress enacted CROA to combat these unfair and deceptive acts 
and practices. CROA included a broad definition of a credit 
repair organization in order to ensure that these organizations 
could not easily evade coverage.
    When CROA was enacted, credit monitoring services had not 
yet been developed. Even as these services were being 
developed, no one thought that CROA applied. These services are 
valuable tools to educate consumers about their credit 
practices and to protect them against identity theft and other 
problems that might negatively affect their credit. They are 
legitimate services offered by consumer reporting agencies, 
their affiliates, and retailers. Banks and other creditors also 
provide credit monitoring for their customers, and these 
services are often offered to consumers following a data 
security breach. The FTC has recognized the value of credit 
monitoring for consumers.
    There is no similarity between credit repair tactics and 
credit monitoring services. No matter what the form of credit 
repair, and there are many variations now on this form, the 
tactics are always the same. And the result is always the same: 
fraud on consumers and fraud on the consumer reporting and 
credit granting system.
    In addition, no credit repair organization can offer credit 
monitoring services, because no one can provide these services 
without a contractual relationship with a consumer reporting 
agency or reseller for access to the credit reporting data. And 
no consumer reporting agency would permit such a contractual 
relationship.
    Even though the valuable services offered by credit 
monitoring companies bear no resemblance to the deceptive 
tactics of credit repair organizations, some have interpreted 
CROA broadly to reach credit monitoring.
    The reason is that these services might be marketed as a 
tool that could assist consumers in improving their credit. 
Well, credit monitoring can, in fact, help consumers manage and 
thereby improve their credit.
    As a result of the interpretation that CROA may apply to 
credit monitoring, companies offering these services have been 
subject to costly litigation. Typically, the litigation does 
not involve claims of unfair or deceptive credit repair 
tactics, but simply an argument that CROA technically applies. 
Courts have not reached a consensus on whether or how CROA 
should apply to credit monitoring, and many cases have settled.
    Until Congress amends CROA, companies offering credit 
monitoring will continue to face the threat of new litigation. 
For these reasons, CROA must be amended. I believe that a 
narrowly tailored exemption is the best solution. H.R. 2885 
would accomplish this. The bill would provide credit monitoring 
companies with an exemption from CROA, and at the same time 
create new disclosure and pro rata refund requirements 
specifically for credit monitoring.
    Those protections do not exist today. The bill, therefore, 
would benefit consumers as well as the industry.
    True credit repair organizations could not hide behind a 
claim that they were credit monitoring companies under this 
bill. Consumer reporting agencies would not allow credit repair 
organizations to access consumer credit file information and 
the FTC could still prosecute credit repair organizations under 
CROA and the FTC Act.
    In conclusion, I encourage Congress to enact H.R. 2885 to 
amend CROA.
    Thank you. I am happy to answer any questions the committee 
may have.
    [The prepared statement of Ms. Fortney can be found on page 
64 of the appendix.]
    Mr. Kanjorski. Thank you very much, Ms. Fortney.
    Next we will hear from Mr. Howard Beales, an associate 
professor of strategic management at George Washington 
University.
    Mr. Beales?

   STATEMENT OF J. HOWARD BEALES III, ASSOCIATE PROFESSOR OF 
  STRATEGIC MANAGEMENT AND PUBLIC POLICY, SCHOOL OF BUSINESS, 
                  GEORGE WASHINGTON UNIVERSITY

    Mr. Beales. Thank you, Mr. Chairman, and members of the 
committee, for inviting me to testify today.
    My name is Howard Beales, and I teach in the business 
school at George Washington University. I have a Ph.D. in 
economics from the University of Chicago and more than a decade 
of experience in addressing consumer protection issues at the 
Federal Trade Commission.
    Most recently, I was the Director of the Bureau of Consumer 
Protection there from 2001 through 2004. I am appearing today 
as a former official who had responsibility for enforcing CROA 
and an academic with a long-standing interest in consumer 
protection regulation.
    CROA is an unusual statute. Rather than prohibit credit 
repair outright, CROA imposes a business model that is simply 
not workable. No credit repair organization may charge for its 
service before the service is fully performed. In other 
markets, payment after the fact is confined to services where 
there is a face-to-face relationship between the buyer and the 
seller or a continuing relationship.
    Otherwise, it is not a feasible way to conduct most 
consumer transactions. In addition, there must be a written 
contract, a 3-day cooling-off period, and extensive 
disclosures. Imagine what it would be like to get your lawn 
mowed if sellers followed that business model. Give the 
difficulties of the CROA business model, it is not surprising 
that there are few cases that involve organizations that admit 
they are subject to CROA. Instead, they try to avoid the 
statute.
    Imposing an unworkable business model on a business that is 
almost always fraudulent, like credit repair, is not 
particularly problematic if the definition is tightly drawn. In 
CROA, however, the definition is extremely broad. It includes 
anyone who sells any service to improve any consumer's credit 
record, credit history, or credit rating, or provides advice 
about those subjects.
    Read literally, this language would cover some of the FTC's 
consumer education materials, such as ``Building a Better 
Credit Report,'' which will let you learn how to improve your 
credit score. They are available for free from the FTC, but 
they are also available for a charge of $1 from the Federal 
Citizen Information Center in Pueblo, Colorado. For $1 more, 
you can pick up a copy of your credit score, co-sponsored by 
the Consumer Federation of America, and learn how to raise your 
score, also payable before the advice is rendered. It is absurd 
to think that Congress meant to restrict such obviously 
valuable consumer education efforts.
    But to avoid that conclusion, you have to look beyond the 
statutory language. There is, after all, a wealth of advice 
about improving your credit rating. Valuable, real world 
businesses face exactly this problem. One example, this credit 
monitoring which alerts consumers about changes in their credit 
report. These services enable consumers to correct information 
that was only included in their credit report because of fraud. 
Again, there is no conceivable public purpose in restricting 
these services.
    Another example is services that evaluate what consumers 
might do to improve their credit scores. Consumers in the 
modern world need to understand what influences their score and 
how they can improve it. That is, consumers need advice about 
how to improve their credit rating. It can't be done by 
changing the past, but consumers can change their credit rating 
by changing their behavior.
    Some changes, like consistently paying on time, take time. 
Others, like paying down outstanding debt, can affect scores 
more quickly. But there are also urban myths about how to 
improve scores, like closing unused accounts, that will 
actually reduce scores if consumers follow that advice. 
Consumers in the language of CROA need accurate advice. It is 
possible to avoid the absurd results. Doing so, however, 
requires looking beyond the simple language of the statute. 
Some courts have been willing to do so. Others have not, 
depending in part on the facts of the case.
    Unfortunately, as is often true, bad facts make bad law, 
and some of the cases have involved some bad facts. Hillis v. 
Equifax  involves some good facts. The case involves Score 
Power, a service that included access to a simulator, that 
allowed consumers to see how various actions would affect their 
credit score over time.
    The court looked beyond the statutory language of CROA and 
concluded that credit rating and credit record all refer to a 
consumer's historical, tangible, and displayable credit record. 
The critical question was whether the defendants had implied to 
the average consumer that they would perform a form of credit 
repair or were merely engaged in legitimate credit counseling. 
The line drawn in Hillis is a reasonable one, but other cases 
have not reached the same results.
    To avoid losing valuable services, a line must be drawn to 
distinguish legitimate credit monitoring from illegitimate 
credit repair. The Hillis line is reasonable, but it is a line, 
and it creates the need to prove that a credit repair fraud is, 
in fact, making claims to consumers that it can modify the 
historical credit record. Congress, rather than the courts, 
should draw the line.
    Courts have been attempting to discern what Congress meant 
and they have come to different conclusions. Whether drawn by 
Congress or the court, any line that distinguishes fraud and 
legitimate business will create new opportunities for fraud. 
That is inherent in distinguishing between fraud and legitimate 
conduct, and it is not without costs. But there are also 
obvious costs of prohibiting legitimate products that are 
useful to consumers. It is Congress, not the courts, that 
should seek to strike the best possible balance in drawing a 
line.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Beales can be found on page 
36 of the appendix.]
    Mr. Kanjorski. Thank you very much, Mr. Beales.
    Now, we will hear from Mr. Bennett, an attorney with 
Consumer Litigation Associates.
    Mr. Bennett?

     STATEMENT OF LEONARD A. BENNETT, CONSUMER LITIGATION 
                        ASSOCIATES, P.C.

    Mr. Bennett. Good morning, and thank you for the 
opportunity to appear on behalf of the National Association of 
Consumer Advocates, the low income clients of the National 
Consumer Law Center and the U.S. PIRG.
    Let me begin with a couple of caveats. I try cases, but the 
folks that I represent, myself in particular, do not support 
the type of litigation that is suggested to have been such a 
detriment to the credit industry. The NACA members, for 
example, were not the folks who tried to pioneer into 
legitimate credit monitoring and tied to CROA.
    And the advantage today, not just in terms of the 
opportunity for bipartisan agreement on this bill, but you 
actually have an opportunity for agreement between consumer 
groups and the CRAs and legitimate entities that sell credit 
monitoring, there is no dispute amongst which you have heard 
here about the interests that this committee could further by 
separating legitimate credit monitoring, useful information.
    Information sold by Ms. Holland's company--and I know, Ms. 
Holland, your phrases are justified--versus those, for example, 
that are sold by the Lexington Law Group, who was one of our 
nemeses. The Credit Repair Organizations Act is an issue in 
CROA that apart from the committee, when we deal with the 
credit reporting agencies and we talk outside of this committee 
hearing, it is something we share. Ms. Holland and I spoke 
before the committee that credit repair is a detriment, is a 
scourge, to both the industry as well as to the consumers on 
whose behalf we advocate. And the question here is not whether 
or not legitimate, pure credit monitoring, should be subject to 
CROA, but rather, how do you separate that?
    I beg to differ with my colleague and the conclusion that 
was suggested that credit repair organizations cannot use 
credit monitoring. That is demonstrably incorrect, and I have 
included in my written testimony from the Web site of the 
Lexington Law Group, one of the consumer nemesis, one of the 
first offenders in our view under CROA, the products that they 
sell as part of their credit repair package, they sell credit 
monitoring. They sell something called report watch and 
identity theft insurance.
    While legitimate companies such as Equifax may not sell to 
those credit repair organizations, the bill, H.R. 2885, as 
currently drafted, is so broad in the new exemptions it offers, 
and the definition or lack of credit monitoring as to open a 
floodgate, the last floodgate to render CROA ineffective. The 
people we represent, the advocates, the attorneys general, the 
JAGs, the consumer organizations who have to as private 
attorneys general enforce CROA, will have absolutely no means 
to do so.
    And it is an interest that I expect both the consumer 
reporting agencies and consumer groups share. The credit repair 
is a disaster if it is unfettered, unbounded, and unregulated. 
The bill as drafted needs changes, and, I know that certainly 
the committee has been receptive. We appreciate the time that 
staff and committee members have offered us.
    But the changes, just to outline a couple I have recognized 
in my written materials, the first is that the exemptions after 
credit monitoring that allow anything related to providing 
advice to identify theft victims, which is what Lexington Law 
Group already has, is so broad, the advantage that industry 
would advocate from this bill is by saying if there's credit 
monitoring then it won't be credit repair.
    That simplifies it, but as an attorney, our attorneys 
haven't read it. The affect of it is if this bill is enacted 
would conclude, if you have credit monitoring, they will not be 
with the services sold with it, the governance and CROA. And 
that's fine for legitimate companies who are moving in a 
direction with this advice, score, interpretation, and so 
forth. But moving the other direction, like the Lexington Law 
Group, you have companies who will begin to add credit 
monitoring.
    And it doesn't have to be a legitimate credit report such 
as the quality report from Atlanta's Equifax. It could be a 
small company out in California that doesn't maintain an 
extensive database, but could claim we are offering you a copy 
of the report that this side company now sells. To the extent 
that this committee is able to free legitimate companies from 
the governance of CROA, it will have the reciprocal effect in 
the other direction.
    We appreciate the time that you have given us. We 
appreciate the good work that both sides of the aisle and this 
committee have offered and we remain willing to work with 
anyone as we hope to with industry to improve this bill.
    [The prepared statement of Mr. Bennett can be found on page 
45 of the appendix.]
    Mr. Kanjorski. Thank you very much, Mr. Bennett, and thank 
you to the whole panel for your testimony. It looks like we 
have some difference of opinion, but no difference of opinion 
that we want to get somewhere where we are not quite sure how 
we get there.
    I have some questions that I am sure the rest of the panel 
will have. Let us start with the proposition, Mr. Bennett. You 
said that probably all members of the panel want to accomplish 
the conceptual idea of what we have in mind, but exactly how do 
we do it? Is it possible for the various interest groups to 
come together and really define and accept?
    Have you tried to work that out, if I may ask the whole 
panel?
    Mr. Bennett. Well, Congressman, I was busy making trouble 
as a trial lawyer a week or two ago, and didn't have an 
opportunity to work with that professor. I do know Ms. Holland. 
I know Ms. Fortney. I know Mr. Pratt. We spoke CRAs. Pat and I 
spoke. Ms. Holland and I spoke last week. I have a very good, 
friendly relationship with the chief litigation attorneys for 
Equifax and I asked to set up a meeting so that we could try to 
come up with something.
    We have, Congressman, for years when we're off the record 
in CRA and consumer lawyers are talking. They are both just 
pounding their fists and pulling their hair out about credit 
repair, and so I really think that there is the possibility in 
the bill to accomplish that. Ms. Holland could offer a better 
side of that, but our side; we would work hard for that.
    Ms. Holland. We are always interested in working with 
anybody who wants to do what is right by consumers. At Equifax, 
we have a legislative affairs team, which I am not a part of, 
but certainly I contribute to that. And I echo Mr. Bennett's 
comments that certainly we would be willing to work together, 
because at Equifax we always want to do what is best for the 
consumer.
    Mr. Kanjorski. Thank you, Ms. Holland.
    I would really like to get working on this. Our problem is 
how we craft the credit monitoring exception; and, if we do not 
do it correctly, we fail in our attempt to solve what I 
consider to be a serious problem. I think all of the sponsors 
of the legislation recognize it, and obviously the panel 
recognizes it as a serious problem.
    Is there anybody who has an idea of what the test could be 
that would allow the FTC to quickly determine who is a 
legitimate credit monitoring provider? Is there some test out 
there that is a magic set of words such that if they do not hit 
this test, they just do not comply? And, on the other hand, if 
they do, they are in the box?
    Ms. Fortney, let us draw on your 30 years of experience.
    Ms. Fortney. And I have worked on this legislation as well. 
I think as everybody has discussed, it is difficult to come up 
with what would be essentially a bright-line test, because it 
should be something that is easily discernable.
    So, if there were litigation at the stage of a motion to 
dismiss, a court could recognize that a company is, or is not, 
within the definition of a credit repair organization. We 
recognize that there are concerns with the current, what is 
referred to as an activity-based exemption. We are very willing 
to work with everyone to see if there are ways that exception 
could be more precisely drawn.
    I do disagree with Mr. Bennett. I think that if the 
exception is drafted in such a way that it is clear that only 
companies that have access to credit monitoring services from 
consumer reporting agencies, as defined in the Fair Credit 
Reporting Act, or resellers that worked with those agencies; 
again, I have not looked at the materials of the Lexington Law 
Firm or similar companies, but I doubt very much if those types 
of companies have an ongoing contractual relationship with 
consumer reporting agencies or their resellers in order to 
provide a credit monitoring product. And we know that credit 
repair organizations and other companies that want to commit 
fraud will say just about anything, but the test really is what 
do they do.
    Mr. Kanjorski. Well, I assume, Mr. Bennett, that it would 
not be very hard to set up an organization that appears to be a 
credit monitoring organization, but is not using the 
information and the thoroughness that is usually associated 
with the likes of the highly credible monitoring organizations. 
Is that correct?
    Mr. Bennett. Absolutely, Congressman, and with due respect 
to Ms. Fortney, who has considerably more experience than me in 
the field, the bill as currently written doesn't make the 
exemption to limit it to--I hate to use the phrase ``legitimate 
consumer reporting agencies''--but legitimate consumer 
reporting agencies. It is so limited. And I understand just 
from secondhand accounts that the FTC has considered the 
possibility of a party-specific carve-out as opposed to an 
activity carve-out that there could be ways, if we worked 
through the legislation together, to use definitions that have 
not only a legislative definition, but significant, objective 
case law interpreting it, such as what is a consumer reporting 
agency or a national consumer reporting agency.
    Those types of changes, we think, can strengthen it. In the 
case of the consumer reporting agencies, it is a stretch, 
despite that we are often on the opposite side. It really would 
be a stretch to say that Equifax would engage in deceptive 
conduct. I don't think that is where the concern would come 
from, but there needs to be a protection that would be sort of 
a fall-back, that despite the efforts of the committee and the 
interests to craft the right language to draw that sort of 
backstop in the event that as Mr. Pratt calls the savvy CROs 
come up with ways around this to prohibit deceptive acts and 
practices in this regard.
    Mr. Kanjorski. Thank you.
    Mr. Beales, I know you are anxious to contribute something. 
I will give you a few minutes, because my time is running out.
    Mr. Beales. Thank you.
    I don't think there is a magic solution. I mean, we 
certainly looked hard for it in the time that I was at the 
Federal Trade Commission, because this was very much an issue 
and we didn't think that the statute should be applied, you 
know, to credit monitoring, and the FTC still doesn't.
    The difficulty is that any line creates factual questions 
about which side of the line are you on. I think, as I said in 
my testimony, the line in Hillis is reasonable. Are you making 
promises about changing your historic credit record? That's 
what credit repair is all about. But it does create a factual 
question that complicates litigation from sort of either side, 
because you have to be able to establish that was the claim 
that a real credit repair organization was actually making.
    And it creates a factual question the other way, too, 
because it's not immediately obvious that there was no such 
claim. And even in Hillis, that was exactly what happened. So I 
think it can be done. You can craft a line that will work 
pretty well, but you can't craft a line that is bullet-proof 
and incapable of being circumvented without one that looks at 
facts.
    Mr. Kanjorski. Well, I think you have hit on something that 
I would like to ask the whole panel. We want to move this 
legislation, and it is touchy and difficult, and we do not want 
to flub it, to tell you the truth. And I think as I recognize 
from the panel's testimony and discussion here today, and from 
everybody I am familiar with, we want to do by all sides the 
right thing and accomplish the end result.
    In order to do that, maybe I could ask the panel to 
cooperate in a strange way. Beyond this hearing date that you 
will make yourselves available for a roundtable discussion with 
the staff so that we can literally pin you down for several 
hours and put the pressure on you to come up with a legitimate 
standard or definition that we can use to accomplish our end.
    Could the panel agree to be available in that way with the 
staff to accomplish that end?
    Ms. Fortney. Yes, sir.
    Ms. Holland. Yes.
    Mr. Kanjorski. Without charging exorbitant fees?
    Well, I would appreciate it, and maybe we could prove that 
there are ways to accomplish good legislation in a speedy 
fashion. And that is what we want to attain here, so as I cut 
off my questioning period, I want to thank you in advance for 
your cooperation with the staff.
    We will get in contact with you in the next several days so 
that those meetings can be arranged, and we would like your 
wholehearted support and intellectual talents and capacities to 
be really lasered onto this problem to see if we can solve it 
within a reasonably short period of time.
    So thank you very much. And now, for 5 minutes of her 
insightful questioning, my good friend, Mrs. Biggert from 
Illinois.
    Mrs. Biggert. Thank you, Mr. Chairman. This is a general 
question, but it seems like credit monitoring services seem to 
be like other subscription services. You pay a fee, and then 
you receive the service in monthly installments, like cable 
television or magazines, I guess. Does CROA prohibit these 
kinds of arrangements in which providers can charge 
subscription fees for services? Mr. Bennett and Ms. Fortney?
    Mr. Bennett. I don't believe it does. Absolutely not unless 
it's something other than credit monitoring. Certainly no one 
in our organization would accept or have accepted the cases 
that have been criticized in the testimony today. My office, 
certainly--and we extensively litigate credit reporting 
generally--wouldn't go near such a case. I don't believe that 
the law would so restrict credit monitoring.
    It's really the ancillary services and not so much those 
that are at issue with a company like Equifax that really cross 
the line.
    Mrs. Biggert. Well, the company offers the credit 
monitoring and additional credit repair services. Wouldn't 
those services then fall outside the exemption that H.R. 2885 
allows?
    Ms. Fortney. I believe they would.
    And also to answer the question about the subscription, 
your analogy to cable television is a very good analogy, 
because people do pay for that, I believe, in advance. There 
are many types of subscriptions that are paid in advance. 
Credit monitoring is paid in advance on a monthly subscription 
basis, and the problem with CROA is that CROA prohibits the 
receipt of any fees in advance before the services are 
rendered. And that is really the heart of the difficulty.
    The companies that are offering credit monitoring are not 
engaging in the deceptive practices that led to the enactment 
of CROA. And the lawsuits don't allege that; they're focusing 
on just a very technical definition. So if the bill is able to 
make clear in the definition who is included and who is 
excluded, then the credit repair organizations will remain as 
they should under CROA, and the credit monitoring companies 
will be able to be exempted.
    But we have also discussed the fact that the exemption 
would bring with it certain additional consumer protections, 
pro-rata refunds. If the subscription is paid, for instance, on 
something other than a monthly basis, if it is paid on an 
annual basis, the consumer who cancels would be able to get a 
pro-rata refund. Also disclosures explaining more to consumers 
about what is involved in credit monitoring.
    Mrs. Biggert. Thank you. So I guess the question is, how do 
you draw the line in the sand?
    Ms. Fortney. That is the question.
    Mr. Bennett. Congresswoman?
    Mrs. Biggert. Mr. Bennett?
    Mr. Bennett. The problem is in terms of the drafting, the 
CROA definition is expansive. And the reason it's an issue for 
credit monitoring is because it includes essentially any 
service offering advice about improving your credit record, and 
that can include an identity theft victim, who needs help 
getting identity theft accounts off their trade line; it 
doesn't just mean illegitimate. But the H.R. 2885 language only 
puts someone back into the CROA definition if it's 
representations that they're going to modify or remove adverse 
information that is accurate, which is Mr. Beales' concern, 
which is our concern. Because credit repair organizations don't 
say that; they're a lot more savvy now. They don't come out and 
say, ``We will help your remove inaccurate information.'' They 
say, ``We will help you remove adverse information.'' They 
don't really tie themselves down like that.
    And so the CROA definition is different than the exclusion.
    Mrs. Biggert. Okay. Thank you. And I just had one more 
question for Mr. Beales, quickly. How has the Internet changed 
the credit monitoring business?
    Mr. Beales. Well, I'm not sure that I can answer that. But 
it seems like it has really made it possible in a way that it 
probably wasn't before. I mean, if you had to rely on snail 
mail to get your notification that something had changed in 
your credit report, it's a little hard to imagine how a credit 
monitoring business--
    Mrs. Biggert. I just wondered if you knew that there was 
more, because of the pop-ups and all the things, the 
advertising on the Internet.
    Mr. Beales. I'm sure--I mean that's the way the product is 
most often delivered is over the Internet. So in that sense, 
I'm sure there is more of it than there was with less Internet 
use.
    Mrs. Biggert. Okay. Thank you. I yield back.
    Mr. Kanjorski. Thank you, Ms. Biggert.
    And now, the gentlelady from California, Ms. Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    For the panel, I have become very concerned about the use 
of credit scores in areas that seem to have little relation to 
a customer's ability to make timely payments, such as the use 
of credit scores to set up car insurance premiums. Last week, I 
introduced H.R. 6062, the Personal Lines of Insurance Fairness 
Act of 2008, with Representative Gutierrez, and tomorrow the 
Oversight and Investigations Subcommittee will hold a hearing 
on this practice.
    But I'm interested in the role, if any, credit monitoring 
services play in the practice of using credit scores to set 
insurance premiums. Specifically, can any of you tell me if 
there has been any research on whether or not use of these 
services has a positive or negative impact on a consumer's 
credit score for those consumers who choose to use them? In 
short, is it worth the subscription fee? And on average, how 
much do consumers pay for these services?
    Many consumers subscribe to these services because they are 
offered for the first 30 days free of charge. Do you know 
anything about this?
    Ms. Holland. Ms. Waters, let me just first say that the 
credit monitoring service is a very, very valuable tool. And 
while I can't speak to the insurance fees, but what I can say 
to you is that these tools, what I strongly believe--I speak to 
consumers every day, and what I find is that there is a need 
for consumers to have a better understanding of their credit, 
their credit score, and what are the right types of decisions 
you make related to that? That's not a black/white, poor/rich 
issue. That is an issue that everyone needs to understand.
    And so these credit monitoring services really help 
consumers and educate them about: Here's a change in your 
credit file; here's how that change has impacted your credit 
file. They can see this information, they can act on the 
information almost instantly. And so to me, I think not having 
these tools and resources, these credit monitoring services 
actually would do a great disservice to consumers who have--
those--
    Ms. Waters. Okay. Before you go any further, what does this 
bill do to the so-called important services you are describing? 
How does this bill help or hurt, and what impact does this have 
in dealing with the agencies that repair credit?
    Ms. Holland. Well, number one, how it helps the consumers 
is that if they subscribe to these services, they don't need 
these credit repair organizations. They don't need these bad 
actors with bad scripts, who promise them things that they 
cannot deliver.
    What this does is put them in control; it gives them the 
knowledge and the power to make sure that they are making good 
decisions and that they are able to have good credit scores 
that allow them to get the best offerings, whether it is to buy 
a refrigerator or to buy a car, or anything.
    Ms. Waters. Let me just ask, if I may, I think it was Mr. 
Bennett?
    Mr. Bennett. Yes?
    Ms. Waters. Mr. Bennett, would you describe again why you 
think this bill does not help, and that this bill empowers, 
perhaps, the repair agencies to do the kind of work that many 
of us are concerned about.
    Mr. Bennett. Yes, certainly. We began with an assumption 
which I have not raised here, that there is no threat to credit 
monitoring. These cases, or the few of them that were 
discussed, the credit monitoring services prevailed on all 
important issues. When they settled, they settled for free 
credit monitoring. That was what was paid to the people who 
these other non-NACA lawyers represented.
    That trade-off versus the trade-off of the unfettered 
ability to use credit repair so long as you sell credit 
monitoring or something that could be a credit monitoring 
product, we think is a trade-off, and we're surprised that 
industry supports it in that fashion. It would eliminate the 
last ability that we have against credit repair organizations; 
which to be candid, we represent consumers, NCLC represents 
low-income consumers. These are amongst the most vulnerable of 
individuals out there who are targeted by credit repair.
    If you do a Google search for, ``How do I fix my credit 
report?'' or ``Identity theft,'' credit repair organizations 
pop up first. And so the balance--you're using a hammer to swat 
a fly with respect with credit monitoring. The trade-off, as 
currently crafted, opens up the people we represent, we think, 
to far more villainous trade-off.
    And I think with respect to the credit repair, if you were 
to do a search--and we have heard a lot about these cases 
against credit monitoring, and there are a couple of them.
    But as long as the statute of CROA has been around, try 
finding cases where our side can get around the exclusions that 
are already used, the nonprofit exclusion, the ability to break 
things down into services to require payment before credit 
repair is done. We aren't necessarily winning the battle; 
otherwise, we wouldn't have the credit repair problem in 
general. And to carve out an exclusion as opposed to with 
bipartisan support correct CROA in a way to help the industry, 
to help consumers, this committee has an opportunity. It can 
help credit monitoring legitimate services, and it could help 
protect the people who we represent, who you all represent, 
against the real bad apples.
    Ms. Waters. Thank you. I yield back.
    Mr. Kanjorski. Thank you very much, Ms. Waters.
    And now, we will have the gentleman from California, Mr. 
Royce.
    Mr. Royce. Thank you, Mr. Chairman.
    Maybe we could go to Ms. Holland. Ms. Holland, could you 
explain for us, maybe, the effects that this previous wave of 
lawsuits had on your company and the products and services that 
you offer, as well maybe as what we might expect going forward 
if Congress fails to enact a legislative fix here? Could you 
get into some of those details for us, Ms. Holland?
    Ms. Holland. Mr. Royce, at a minimum, the lawsuits have had 
an effect in terms of ongoing innovation and development of 
credit monitoring services and products. You know, at Equifax 
we introduced the first product in 2000, and because of 
consumer feedback, we have continued to refine those products 
and make offerings that consumers tell us that they want.
    So when you talk about lawsuits that are going on related 
to CROA, what ends up happening is, is that those developments 
and innovations are stalled, because companies such as Equifax 
are concerned about CROA, and therefore they're not going to be 
able to build and make these services for consumers.
    What we believe with this amendment is that consumers get a 
more robust notice. They get their rights as it relates to a 
free report. They get a pro-rata refund. They're able to cancel 
any of these services if they don't want them at any time, with 
no penalty of any fee.
    And so we strongly believe that CROA as it exists right now 
will do a disservice to these companies that offer these 
monitoring products, and quite candidly with the clause of 
disgorgement of all revenues, very well could drive these 
products out of the marketplace, which in turn to me is harmful 
to consumers.
    Mr. Royce. And why would that be harmful to the consumers?
    Ms. Holland. Well, because--
    Mr. Royce. Maybe Mr. Bennett feels we would be better off 
without these industries to begin with. Explain the benefit to 
the consumer, then.
    Ms. Holland. Well, the benefit of the credit monitoring 
services is that consumers literally have at their fingertips 
tools and resources to make better decisions and to manage 
their credit. And so when you have these tools and services go 
away, they're going to be subject to bad actors and these fly-
by-night companies, who could care less about them, who could 
absolutely care less. Not a week goes by that I don't talk to a 
consumer who says, ``Hey, I paid `X' amount of money.'' They 
said they were going to delete all of his negative information, 
and they didn't do it. Well, then our company explains to them, 
``You know, no one can do that for you.''
    Mr. Royce. But you are a lot easier target. I mean, for 
lawsuits of tens of millions of dollars, you're an easy target. 
The fly-by-night operators, whom we were originally trying to 
get in CROA, they're hard to find.
    Ms. Holland. Right.
    Mr. Royce. They're not easy to locate, because they just 
strike and move on, or change their name, or--
    Ms. Holland. Right. They change their name. They come up 
and start a different company under a different name. But you 
know, Equifax is always going to be there, right there on 
Peachtree Street in Atlanta. And so we're an easy target.
    Mr. Royce. Yes. Well, I'll follow up with Ms. Fortney, 
because she has a background in this, too. And on the argument 
you just made, Ms. Fortney, are you aware of instances in which 
CROA is impeding the introduction of new consumer services into 
the marketplace?
    Ms. Fortney. Yes. In addition to the problems that 
companies offering credit monitoring services currently have--
and the litigation is ongoing, the litigation and the threat is 
always there--and the reason why there have been relatively few 
lawsuits is because relatively few companies offer credit 
monitoring services.
    But the threat of the litigation has been an impediment to 
companies coming out with tools that can help consumers better 
manage their credit. References to tools such as credit score 
simulators, things of that kind, have not been put on the 
market in some instances, because those tools can, in fact, 
help consumers improve their credit. And as we have seen today, 
the difficulty with CROA is that the definition of a credit 
repair organization includes anyone who represents directly or 
indirectly that they can help consumers improve their credit, 
even if they can do so.
    So very much so, the law as currently drafted, is impeding 
the introduction of new tools that can help consumers better 
manage their credit.
    Mr. Royce. I yield back.
    Mr. Kanjorski. I assure you, we did not cut off the 
microphone. I am sorry.
    Mr. Moore from Kansas?
    Mr. Moore of Kansas. Thank you, Mr. Chairman. A question 
for Ms. Fortney and Mr. Beales. It appears that the FTC 
generally is in agreement that CROA should not be applied to 
legitimate credit monitoring services. Do you believe that's an 
accurate characterization of the FTC's position on the issue?
    Ms. Fortney. That is my understanding of their position, 
yes.
    Mr. Beales. And mine as well.
    Mr. Moore of Kansas. Very good. It's also my understanding 
that the industry worked with the FTC in getting CROA enacted 
into law. Why didn't, in your opinion, the FTC issue an opinion 
letter explaining why it was not the intent of CROA to have 
credit monitoring services fall into the definition of credit 
repair organizations?
    Ms. Fortney. The FTC no longer issues staff opinion letters 
under the Fair Credit Reporting Act. And the reason they don't 
is that the courts were not required to follow them or even 
defer to them, and in some instances the courts refused to do 
so.
    So although the Commission, as I understand it, does 
support the industry's concerns here, drafting or writing a 
staff opinion letter would probably not put an end to the 
litigation or solve the problem.
    Mr. Moore of Kansas. Do you agree, Mr. Beales?
    Mr. Beales. Well, I think some of the difficulty is the 
same one that you're having here, is how do you draw the line? 
An opinion letter would have to craft a line based on the 
language of the statute or the intent; but it would have to 
draw a line. And that has been the difficulty is finding a 
reasonable way to draw the line without creating too many of 
the kinds of problems Mr. Bennett is worried about.
    Ms. Fortney. The other problem is the Commission does not 
have rulemaking authority under CROA. So whatever line the 
Commission were to draw in a letter would not necessarily solve 
the problem.
    Mr. Moore of Kansas. Thank you very much. Thank you, Mr. 
Chairman.
    Mr. Kanjorski. Thank you, Mr. Moore.
    Now, we will hear from the gentleman from Georgia, Mr. 
Price.
    Mr. Price. Thank you, Mr. Chairman. And I want to thank the 
panelists. I think this has been helpful, although I think that 
we continue to struggle with the differences between--you all 
have been very polite to each other, and I appreciate that, but 
I think there are some differences here that I would like to 
try to explore.
    Mr. Bennett, would you agree that there are indeed 
individuals who have taken advantage, for lack of a better 
term, of CROA for frivolous or unnecessary, or lawsuits that 
the vast majority of the American people would say, ``Well, 
that just ought not apply.''
    Mr. Bennett. Yes. And in fact, the vast majority, if not 
the entirety of our organization would similarly agree.
    Mr. Price. How do you reconcile that then with your 
testimony that you gave just a moment ago, and your printed 
testimony where you state that credit monitoring isn't governed 
by CROA under current law?
    Mr. Bennett. Because in those cases, lawyers filed--non-
consumer lawyers, without backgrounds in the area filed those 
cases. And from a practical standpoint--I pay mortgages, I run 
my law firm, we have to win our cases to prevail--those 
individuals made a foolhardy decision to pursue a case that did 
not have significant merit. And on the important dispositive 
motions, in Hillis, for example, they lost.
    Mr. Price. But as we have heard from Ms. Holland, there are 
consequences of those suits, correct?
    Mr. Bennett. There are, and we agree, Congressman, we 
absolutely agree with a couple of things. We agree that credit 
monitoring can provide services that are advantageous. And 
similarly we agree that CROA could be better crafted to more 
narrowly exclude legitimate non-deceptive credit monitoring 
from the bill. It's just a matter of how do we--
    Mr. Price. Identify that line.
    I appreciate that, and I would echo the sentiments and the 
comments of the chairman, that hopefully we will be able to get 
together and come up with that bright line.
    Ms. Holland, I would like to explore a little bit further. 
I know that you said that the effects of these lawsuits would 
significantly, and may have significantly decreased the amount 
of innovation and development and also the potential for 
driving products out of the marketplace. I am interested in the 
issue of identity theft and the benefit to consumers for 
gaining this credit monitoring information to them; and if H.R. 
2885 isn't passed, what the consequences are to consumers who 
are trying to protect themselves from identify theft.
    Ms. Holland. I think that if you no longer have credit 
monitoring services such as we offer, that you are taking away 
one of the number one tools that consumers use to protect 
themselves from identify theft. If we take a look, the FTC had 
a survey, and they basically stated that 11 percent of the 
consumers found out about identify theft using a credit 
monitoring service. When you hear about these data breeches 
that occur at these companies, the first thing they do is offer 
the consumers who are impacted a credit monitoring service.
    So you are taking away a tool that has been the number one 
tool that people go to; it is the go-to tool for preventing and 
mitigating identify theft. And so I think despite the fact that 
it increases financial literacy, what I said earlier is a great 
thing that you lose is the whole protection against identify 
theft.
    Mr. Price. Mr. Bennett, would you agree with that?
    Mr. Bennett. I do agree. I think that one of the advantages 
to what I'll call non-deceptive pure credit monitoring is that 
you can see what's coming. And I think it fits in best with a 
number of protections that you and this committee have 
supported under FACTA and other FCRA protections. The Alert 
systems, for example. Credit monitoring is a sort of diversion 
of a paid alert system.
    Mr. Price. I'm running out of time, and I want to get to 
another point of your written testimony, and that is where you 
state that H.R. 2885 would expose every ID theft victim to 
unregulated credit repair. Seeing as how you agree with Ms. 
Holland about the importance of credit monitoring companies for 
individuals to protect themselves from identify theft, but then 
state that this would in essence, I guess, harm consumers who 
are concerned about identify theft, what is the specific 
language--if you're aware of, and if not maybe you can get back 
to us--what is the specific language in H.R. 2885 that you 
believe results in exposing every identify theft victim, to 
unregulated credit repair?
    Mr. Bennett. It is Section 2(b)(1)(c), that it excludes 
governance under CROA if the product is sold in conjunction 
with the provision of materials or services to assist the 
consumer who is a victim of identify theft. I cite the 
Lexington Law Group, which is sort of the poster child.
    Mr. Price. Right.
    Mr. Bennett. And the Lexington Law Group says, ``Lexington 
Law Group can assist you in identify theft restoration. They 
will work to clean up your credit report, increase your credit 
score by challenging all the negative credit report items 
occurred. We also,'' and so forth.
    Mr. Price. Okay. I understand. I am out of time, but I 
thank you, Mr. Chairman. I hope we can work on that specific 
language to make it so that it's amenable to responsible 
individuals in the consumer efficacy industry. But I just want 
to reiterate once again that I think these companies are 
providing a remarkable and valuable service to all Americans, 
and I hope that we will be able to prevent the problems that we 
have from CROA.
    Mr. Kanjorski. Thank you very much, Mr. Price.
    And now, Mr. Scott, you are recognized for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman. What is it about the 
current definition of credit repair organization that brings 
about a difficulty or a gray area here, where we need to amend 
it for clarification because of the opening up of possibilities 
of lawsuits?
    Ms. Fortney. The definition includes--there are a number of 
activities that make an entity a credit repair organization 
under the statute. And the definition includes representations 
directly or indirectly that the entity can help consumers 
improve their credit.
    And the reason is that when credit repair organizations 
were first coming on the scene, that is exactly what they said, 
``We can help you improve your credit. We can repair your 
credit. We can remove negative information.'' In fact, they 
still say that.
    So the definition includes, as part of the activities that 
would make an entity a credit repair organization, the fact 
that the entity is representing directly or even indirectly 
that it can improve the consumer's credit.
    Well, in fact, credit monitoring services and related tools 
do help consumers improve their credit; but the definition 
doesn't depend on whether the representation that the entity 
can help improve the credit is accurate or inaccurate; it's 
just if the entity directly or indirectly makes that 
representation.
    Mr. Scott. And that is what opens up this window of 
possible liability that brings about the need to correct that 
to prevent that liability, that brings on the lawsuits, that 
then in effect affects the innovation of products that Ms. 
Holland talked about. Is that a correct assessment?
    Ms. Fortney. That is correct.
    Mr. Scott. All right.
    Now, Mr. Bennett, why would you object to that? That seems 
to be perhaps a technical adjustment we need to make. Where am 
I losing something? Why are you objecting to that?
    Mr. Bennett. Well, again in principle--and I think that 
Congressman, you have said it best--a technical adjustment 
would be necessary. But in principle, we don't disagree. I 
think that having non-deceptive, having the legitimate credit 
monitoring that Equifax sells available and not governed by 
CROA is an objective we share and we will support.
    The problem is the deceptive services sold by other 
companies, they do fit that definition. What is happening is 
with H.R. 2885, you are taking credit monitoring and you are 
providing the use or the inclusion of credit monitoring as a 
free pass. And the bill does it legitimately in the case of 
Equifax. But that free pass is not limited just to legitimate 
companies that use credit monitoring, but in the cases of 
credit repair organizations that will now add credit monitoring 
products to their illegitimate credit repair services, and now 
those illegitimate services benefit from the ambition of this 
community, this committee, and our interests at having 
legitimate and pure credit monitoring.
    It is where that line is drawn, Congressman, and I think 
that we probably agree that credit repair is a really horrific 
problem for the industry and for consumers.
    Mr. Scott. Do you agree with that, Ms. Fortney? Where do 
you differ from what he just said?
    Ms. Fortney. Where I differ is that I agree that credit 
repair organizations will attempt to--if this bill is enacted 
in its present form, they will attempt to characterize their 
activities such that they would then come within the exception.
    The issue, though, is if that is all they did--if all they 
did was offer credit monitoring through a consumer reporting 
agency as defined--or reseller as defined in the Fair Credit 
Reporting Act--if all they did was provide legitimate identify 
theft help after somebody has been a victim, they wouldn't be a 
credit repair organization. That's not what makes them a credit 
repair organization. What makes them a credit repair 
organization is all the other activities that are also included 
in the definition of a credit repair organization that brings 
them under the scope of CROA.
    Mr. Scott. All right. Well, thank you for that. And I agree 
with you, Mr. Chairman, that this is a great committee, and 
it's going to be very helpful to us in crafting this bill. And 
both of your points of view certain illuminate this situation.
    Now Ms. Holland, let me ask you to explain for us exactly 
how subscribing to a credit monitoring product will help a 
consumer guard against identify theft or to mitigate identify 
theft?
    Ms. Holland. When a consumer subscribes to a credit 
monitoring service, they are given a--
    Mr. Scott. You might want to get a little closer to the 
microphone.
    Ms. Holland. When consumers subscribe to a credit 
monitoring service, they are sent an alert, and that alert 
tells them if there has been a change to their credit file, 
such as a line of credit has been opened or a balance has 
changed. When they receive that alert, they are able to go 
online, access their credit repair, and evaluate what that 
change was. If that change was not initiated by them, they have 
no knowledge of it, they could be an indication of fraud, and 
they can immediately begin the fraud process.
    So almost instantly they know about changes in their file, 
and they can act upon it.
    Secondly, after you have become a victim, as we have seen 
with all the data breeches, they now, if their information has 
been sold or it's on the black market, they now have a credit 
monitoring service, so they're going to continue to get those 
alerts. They can act upon it, they can protect their file with 
anything from a fraud alert. And so there are so many tools. It 
puts the power in the consumer's hand. And they now can be 
proactive, using this service to protect themselves against the 
horrible effects of identify theft.
    Mr. Scott. Well, thank you very much, and I think you're 
right on it, because the weakness in our system is that the 
consumer is laissez-faire.
    Ms. Holland. Yes.
    Mr. Scott. I mean this will help engage that consumer in 
his own financial affairs to take control.
    Thank you, Ms. Holland. Thank you, committee.
    Mr. Kanjorski. Thank you, Mr. Scott.
    And now, Mr. Clay from Missouri.
    Mr. Clay. Thank you very much, Mr. Chairman.
    Ms. Holland, I am a co-sponsor of H.R. 2885, the Credit 
Monitoring Clarification Act. We are in agreement that this 
legislation is necessary as CROA was established before credit 
monitoring services.
    The intent was never to equate these services with credit 
repair organizations. You oversee the consumer reports 
operations of Equifax, Inc., a major credit reporting agency 
that also offers a credit monitoring service. How has 
regulation under CROA restricted the service that your 
organization offers consumers as a credit monitoring 
organization, and how will this change under H.R. 2885?
    How does this benefit the consumer, since that is who we 
are primarily concerned with?
    Ms. Holland. Absolutely. At Equifax, we certainly believe 
in empowering consumers, because knowledge is power. CROA as it 
currently exists really hinders our ability to continue to 
develop products that meet the consumer marketplace's needs. 
So, for example, we conduct quite a lot of focus groups, and we 
have ideas that will enhance these credit monitoring products. 
But because of how CROA exists right now, without this 
amendment that we're proposing, we really have, you know, taken 
kind of back seat and stalled on some of those products in 
introducing them and continuing the research and what we can 
continually do to enhance those products.
    What we believe the amendment does--because remember, it is 
all about the consumer here--we are all about wanting to 
protect and empower consumers--the first thing that is very 
important is a consumer can get this credit monitoring service 
under our amendment. They can cancel it at any time. They're 
not going to be penalized; they're not going to have to pay a 
fee. And they're entitled to a pro-rata refund.
    Secondly, they are going to get clear--and what I always 
call when I deal with consumers--``user-friendly'' notices 
about what their rights are. Not notices that are in little-
bitty font type. You know, we have all seen them. The notices 
that clearly say, ``Here is what your rights are under a free 
credit report.''
    And I think most importantly that taking away--financial 
literacy to me is so important when I talk the consumers every 
day, and when I go out and do seminars, is that it also will 
allow them to increase their knowledge of financial literacy. 
And they in turn can make better choices and have a better 
life.
    Mr. Clay. Thank you for that response.
    Anyone else on the panel, can you elaborate on how you 
think this bill will benefit consumers?
    Ms. Fortney. Well, I agree with Ms. Holland that the bill 
will assure the continuation of credit monitoring services and 
will also enable companies offering other valuable tools for 
consumers to bring them onto the marketplace and to offer those 
products to consumers.
    The other thing is that defending a class action lawsuit 
based on even technical definitions of CROA is an enormously 
expensive, burdensome undertaking for a company, and does 
interfere with the ability of a company to devote its resources 
to doing the things that it is in business to do.
    And so I think that even though a lot of these lawsuits 
have settled, as long as the definition of credit repair 
organization and CROA remains the way it is, companies are 
going to be faced with the threat of new litigation, are going 
to have to defend new lawsuits, and that also impedes their 
ability to offer products and services to consumers.
    Mr. Clay. Thank you for that response.
    Mr. Bennett?
    Mr. Bennett. Since I am the official who has criticized the 
bill, let me switch to the other side. This bill does a number 
of good things, and certainly aspires to do others. In terms of 
strengthening CROA itself, this is an opportunity where all of 
us at this table, I'm sure, would like to see a bill that makes 
the illegitimate non-credit monitoring credit repair, the savvy 
folks who have been circumventing CROA allows this committee to 
put some teeth back in as to the illegitimate; at the same time 
when it plugs those holes to make sure that the legitimate 
credit monitoring companies don't get caught up in it. And we 
support that, we would be enthusiastically in support of it if 
CROA could serve that function as well as it's considered.
    We have discussed some of the necessary improvements. We 
think absolutely, drawing the line about deceptive conduct has 
to be in the bill. It has to be such that deceiving and 
manipulating--whether you call it credit monitoring like 
Lexington Law Group does or not--is different than what Equifax 
is doing, and what Tru Credit or TransUnion is doing.
    And so this bill offers a great opportunity not only from 
industry's standpoint to make sure that credit monitoring 
services don't get caught up, but to refortify the original 
commitment against the illegitimate companies.
    Mr. Clay. And do you find credit monitoring services to be 
pretty effective as far as notifying the consumer? The red flag 
goes up in their credit report?
    Mr. Bennett. I do think--I mean there is a question as to 
cost, trade-offs, but those are business decisions. In terms of 
whether it is good to have more information for consumers, 
absolutely. The more information consumers have, honest 
information, non-deceptive information, the better our clients 
are empowered.
    Mr. Clay. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Mr. Kanjorski. Thank you very much, Mr. Clay.
    The Chair notes that some members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for members to submit written questions to these 
witnesses, and to place their responses in the record.
    Before we adjourn, without objection, a letter from the 
Federal Trade Commission, dated May 20, 2008, will be made a 
part of the record.
    I want to thank the panel, and take special time to thank 
you, because I think you have really made a contribution in 
your testimony today, and more than that, your willingness to 
serve as an advisory panel over the next several weeks to see 
if we can, in fact, get some standard that will allow us to 
move forward with this legislation. So individually and 
collectively I want to thank you on behalf of the committee for 
that most generous offer. Thank you.
    And now this panel is dismissed, and the hearing is 
adjourned.
    [Whereupon, at 11:40 a.m., the hearing was adjourned.]


                            A P P E N D I X



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