[Congressional Record Volume 149, Number 123 (Tuesday, September 9, 2003)]
[Extensions of Remarks]
[Pages E1742-E1743]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 PRIVATE SECTOR MANDATE ESTIMATE FOR H.R. 2622, THE FAIR AND ACCURATE 
                    CREDIT TRANSACTIONS ACT OF 2003

                                 ______
                                 

                         HON. MICHAEL G. OXLEY

                                of ohio

                    in the house of representatives

                       Tuesday, September 9, 2003

  Mr. OXLEY. Mr. Speaker, pursuant to section 423(f)(2) of the 
Congressional Budget Act, I am hereby submitting for printing in the 
Congressional Record the statement of private-sector mandates for H.R. 
2622, the Fair and Accurate Credit Transactions Act of 2003, prepared 
by the Director of the Congressional Budget Office pursuant to section 
424(b) of the Congressional Budget Act. This statement was not 
available for printing in the report by the Committee on Financial 
Services to accompany that bill (H. Rept. 108-263).
                                                    U.S. Congress,


                                  Congressional Budget Office,

                                Washington, DC, September 9, 2003.
     Hon. Michael G. Oxley,
     Chairman, Committee on Financial Services, House of 
         Representatives, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed statement on private-sector mandates 
     for H.R. 2622, the Fair and Accurate Credit Transactions Act 
     of 2003, CBO completed a federal cost estimate and an 
     assessment of the bill's effects on state, local, and tribal 
     governments on September 3, 2003.
       If you wish further details on the private-sector 
     statement, we will be pleased to provide them. The CBO staff 
     contact is Paige Piper/Bach, who can be reached at 226-2940.
           Sincerely,
                                              Douglas Holtz-Eakin,
                                                         Director.
     H.R. 2622--Fair and Accurate Credit Transactions Act of 2003
       Summary: H.R. 2622 would permanently extend the national 
     credit reporting standards in the Fair Credit Reporting Act 
     (FCRA) which is scheduled to expire on January 1, 2004. The 
     bill would prevent states from imposing new restrictions on 
     how financial institutions share consumer information. The 
     bill also would provide new consumer protections against 
     identity theft (that is, fraud committed using another 
     person's identifying information). In addition, H.R. 2622 
     would give consumers access to certain financial records, 
     promote increased accuracy of credit reports, and provide 
     protections of consumers' medical information.
       H.R. 2622 would impose several private-sector mandates, as 
     defined in the Unfunded Mandates Reform Act (UMRA), on 
     consumer reporting agencies, individuals and businesses that 
     print electronic credit card receipts, certain mortgage 
     lenders, financial institutions, credit and debit card 
     issuers, and debt collection agencies. CBO expects the direct 
     costs of those mandates would exceed the annual threshold for 
     private-sector mandates ($117 million in 2003, adjusted 
     annually for inflation) in at least one of the first five 
     years the mandates are in effect.
       Private-sector mandates contained in bill: H.R. 2622 would 
     impose private-sector mandates, on consumer reporting 
     agencies, individuals and businesses that print electronic 
     credit card receipts, certain mortgage lenders, financial 
     institutions, credit and debit card issuers, and debt 
     collection agencies by:
       Requiring free credit reports upon the request of an 
     individual;
       Requiring truncation of credit card account numbers on 
     receipts printed electronically;
       Requiring disclosure of credit scores when approving 
     certain loans; and
       Requiring certain fraud alerts and blocks in consumer 
     credit files.
       Estimated Direct Cost of the Private Sector: CBO expects 
     the aggregate direct costs of the private-sector mandates in 
     the bill would exceed the annual threshold established by 
     UMRA ($117 million in 2003, adjusted annually for inflation) 
     in at least one of the first five years the mandates are in 
     effect.
     Consumer access to credit reports
       Section 501 would require consumer reporting agencies to 
     provide an annual free credit report upon the request of an 
     individual. Based on information from industry and government 
     sources, CBO assumes a threefold increase in the number of 
     individuals requesting a free credit report each year. CBO 
     estimates that the additional direct consumer reporting 
     agencies for providing mandatory free credit reports would be 
     $1.00 to $2.00 per report with a total cost ranging from $30 
     million to $60 million per year.
       Under current law, if a consumer disputes information 
     contained in their consumer file at a consumer reporting 
     agency, the agency must reinvestigate the disputed 
     information free of charge. The mandate requiring free credit 
     reports would have a secondary effect. The number of 
     consumers who would exercise their option to receive a free 
     annual credit report would likely increase the number of 
     subsequent reinvestigations. According to industry sources, 
     the cost for additional reinvestigations would be $7.00 to 
     $8.00 per reinvestigation. Assuming half of those individuals 
     who receive a free credit report dispute the information 
     requiring a reinvestigation, the total cost would range from 
     $110 million to $125 million per year. Such cost would not be 
     direct cost, as defined in UMRA, and would not count towards 
     the statutory threshold.
     Truncation of credit card account numbers
       Section 203 would impose a private-sector mandate by 
     requiring individuals and businesses that accept credit cards 
     to truncate the credit card account numbers by including no 
     more than the last five numbers on an electronically printed 
     cardholder receipt. The mandate would take effect three years 
     from the date of enactment for machines currently in use and 
     beginning in 2006 for machines put into service after January 
     1, 2005. According to the credit card processing industry, 
     some systems are currently in compliance because they are 
     capable of electronically printing truncated account 
     numbers on customer receipts. In order to comply with this 
     mandate, some merchants would have to make modifications 
     to their systems, including software reprogramming, 
     formatting changes to dial-up terminals, and purchase of 
     new printing devices. Costs to replace machines would 
     range from $300 to $1,000 per unit. Assuming merchants 
     would have to replace 25 percent of the currently used 
     machines in 2007, the cost to replace such machines, 
     including programming modifications, would amount to at 
     least $85 million in that year.
     Disclosure of consumer credit score
       Section 502 would require certain mortgage lenders that use 
     a consumer credit score in approving loans to provide a copy 
     of the credit score and associated information received from 
     a consumer reporting agency to the customer as soon us 
     reasonably practicable. Based on approximately 13 million 
     annual mortgage loan applications affected by this provision, 
     and handling and mailing costs provided by the industry, CBO 
     expects that the direct cost to provide such information 
     would range from $35 million to $55 million per year.
     Fraud alert in credit file
       Section 202 would require consumer reporting agencies to 
     include a fraud alert in the file of a consumer and disclose 
     to the consumer that they may request a free copy of the file 
     when the agency receives a direct request that a consumer has 
     been or is about to become a victim of fraud, including 
     identity theft. A consumer reporting agency would also be 
     required to include an active-duty alert in the file of an 
     active-duty military consumer upon their request. In 
     addition, section 205 would require consumer reporting 
     agencies to block any information in the file of a consumer 
     that the consumer identifies as resulting from an alleged 
     identity theft and confirms with a police report. An agency 
     also would be required to notify the furnisher of the 
     information identified by the consumer of certain information 
     regarding such a block. According to the consumer reporting 
     industry and government sources, the national consumer 
     reporting agencies generally provide such alerts and

[[Page E1743]]

     blocks voluntarily. Therefore, CBO estimates that the direct 
     cost to comply with those mandates would not be significant.
     Other notification and disclosure requirements
       Other provisions of the bill would impose private-sector 
     mandates as follows:
       Prohibit any person who receives a copy of a police report 
     from a consumer regarding identity theft from furnishing any 
     negative information on the consumer to a consumer reporting 
     agency;
       Require a financial institution that extends credit to 
     provide a one-time notice in writing to a customer, no later 
     than 30 days after the institution furnishes negative 
     information to a consumer reporting agency regarding credit 
     extended to the customer;
       Require credit card issuers to clearly and conspicuously 
     disclose to a consumer their ability to increase an annual 
     percentage rate in certain circumstances when making 
     unsolicited offers of credit to consumers; and
       Require a debt collection agency that learns information in 
     a consumer report is the result of identity theft or 
     otherwise is fraudulent to notify the furnisher of the 
     information or the relevant consumer reporting agency that 
     the information is fraudulent.
       Based on information from various industry and government 
     sources, CBO expects the direct cost to comply with those 
     mandates would not be as significant as the direct costs of 
     other mandates in the bill.
       In addition, the bill would impose other private-sector 
     mandates as follows:
       Require a consumer reporting agency that receives a request 
     for a consumer report using an address substantially 
     different for the addresses in the consumer's file to notify 
     the requester of the existence of the discrepancy;
       Require credit and debit card issuers that receive a 
     request for additional or replacement cards on an existing 
     account within a short period of time after receiving a 
     change of address form to notify the cardholder at the former 
     address or use other means to confirm the address change; and
       Prohibit a consumer reporting agency from providing credit 
     reports that contain medical information with some exceptions 
     and would require medical companies to identify themselves as 
     such when reporting credit information.
       According to industry sources, many entities currently 
     comply with such requirements voluntarily, and therefore, the 
     direct cost to comply with those mandates would not be 
     significant.
       Estimate prepared by: Paige Piper/Bach.
       Estimate approved by: Roger Hitchner, Assistant Director 
     for Microeconomics and Financial Studies Division.

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