[Congressional Record Volume 149, Number 176 (Tuesday, December 9, 2003)]
[Extensions of Remarks]
[Pages E2493-E2494]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 CONFERENCE REPORT ON H.R. 2622, FAIR AND ACCURATE CREDIT TRANSACTIONS 
                              ACT OF 2003

                                 ______
                                 

                               speech of

                           HON. DENNIS MOORE

                               of kansas

                    in the house of representatives

                       Friday, November 21, 2003

  Mr. MOORE. Mr. Speaker, I rise today in support of the conference 
report on H.R. 2622, the Fair and Accurate Credit Transactions Act of 
2003 (the FACT Act). As a member of the House Financial Services 
Committee and as a member of the conference committee that drafted the 
final version of this legislation, I was deeply involved in the 
drafting and consideration of this measure.
  I was pleased to join with my colleagues, Representatives Bachus, 
Hooley and Biggert, in introducing this bipartisan measure. This bill 
was approved in subcommittee on a vote of 41-0, in full committee by a 
vote of 63-3 and by the full House by a vote of 392-30 with one voting 
present. Earlier this week, the Senate approved a similar version of 
this bill by 95-2.
  Mr. Speaker, this is the way Congress should work. This is the way 
our constituents want us to conduct their business. Consideration of 
this bill consistently has been bipartisan and thoughtful. All members 
of the committee with opinions and proposals on the issues raised by 
H.R. 2622 were able to offer amendments and participate in debate. The 
way in which this measure was handled made this a stronger piece of 
legislation than the version we introduced. I commend our committee's 
leadership, Chairman Oxley and Ranking Democrat Frank, for making this 
possible.
  Mr. Speaker, the problems of inaccurate and incomplete information 
that plague the current credit reporting system are of great personal 
concern to those of our constituents who have suffered them. I'm sure 
each of us could relate instances involving constituents who have faced 
tremendous difficulty and aggravation in correcting inaccurate credit 
histories.
  This legislation directly addresses these very real problems faced by 
people every day of the year. Our credit system is the envy of every 
other country in the world. Our country, overall, does an excellent job 
of making credit available quickly and fairly to consumers and 
businesses. Enactment of H.R. 2622 will preserve and strengthen this 
system. This conference agreement permanently extends those provisions 
of the 1996 version of the Fair Credit Reporting Act (FCRA) that 
prevent states from enacting stronger credit laws, thereby extending 
the federal standards in those areas--including those rules dealing 
with how affiliates can share consumer information.
  The measure also provides new consumer protections against identity 
theft, including the

[[Page E2494]]

following new provisions of law. The FACT Act will:
  Provide consumers with a free credit report every year from each of 
the three national credit bureaus, from a single centralized source;
  Give consumers the right to see their credit scores;
  Provide consumers with broad new medical privacy rights;
  Give consumers the ability to opt-out of information sharing between 
affiliated companies for marketing purposes;
  Establish a financial literacy commission and a national financial 
literacy campaign;
  Ensure that consumers are notified if merchants are going to report 
negative information to the credit bureaus about them; and
  Extend the seven expiring provisions of the Fair Credit Reporting 
Act.
  The FACT Act also includes several significant new provisions 
addressing the problems surrounding identity theft. It will:
  Allow consumers to place ``fraud alerts'' in their credit reports to 
prevent identity thieves from opening accounts in their names, 
including special provisions to protect active duty military personnel;
  Require creditors to take certain precautions before extending credit 
to consumers who have placed ``fraud alerts'' in their files;
  Allow consumers to block information from being given to a credit 
bureau and from being reported by a credit bureau if such information 
results from identity theft;
  Provide identity theft victims with a summary of their rights;
  Provide consumers with one-call-for-all protection by requiring 
credit bureaus to share consumer calls on identity theft, including 
requested fraud alert blocking.
  Prohibit merchants from printing more than the last 5 digits of a 
payment card on an electronic receipt;
  Require banks to develop policies and procedures to identify 
potential instances of identity theft;
  Require financial institutions to reconcile potentially fraudulent 
consumer address information; and
  Require lenders to disclose their contact information on consumer 
reports.
  While this legislation was the product of a bipartisan consensus and 
a conference procedure that produced what, overall, is an outstanding 
measure, I would like to raise concerns with one provision of the bill 
that I believe may need to be re-addressed in the near future, or we 
may run the risk of thwarting the continued evolution of risk-based 
pricing in the home mortgage market. First, I would like to talk about 
the benefits of risk-based pricing in the mortgage market. Not too long 
ago, only borrowers that fit the industry's cookie cutter mold of 
creditworthiness were deemed qualified to purchase a home or to tap 
their home equity. The market was two-tiered--all those who fit the 
mold got credit at the same price, and those who didn't fit the mold 
got no credit at all.
  But that has changed dramatically in recent years. More sophisticated 
risk measurement models were developed in the 1990s--helped in large 
part by the uniform credit reporting standards we are today preserving 
in this bill--that allow lenders to accurately measure credit risk and 
price it accordingly. The result has been that families previously shut 
out of the home purchase and home equity markets now have access to 
credit from mainstream lenders at rates that reflect the underlying 
risk of the borrower and the property. Mortgage credit markets are now 
fluid and access to credit is no longer bifurcated between the haves 
and have-nots. As research by the Federal Reserve Board has shown, the 
development of risk based pricing and the non-prime lending market has 
contributed significantly to the recent increases in homeownership 
rates, especially among low- and moderate-income households.
  With the growth of risk-based pricing comes the responsibility to 
educate consumers about the impact of less-than-timely repayment 
behavior and inaccurate credit report data on the cost of credit. One 
provision of this bill--which I strongly supported as did all of the 
major mortgage lenders--will require that lenders provide every home 
mortgage borrower with a copy of their credit score, the range of 
possible scores so borrowers can see where they fall in the spectrum, 
and the top four factors that lowered their score. The notice further 
advises borrowers about how credit scores are used and the need to 
ensure that their credit report information is accurate. The home 
mortgage transaction is the only one in which such information is 
provided to borrowers and the mortgage industry should be commended for 
supporting it.
  I am concerned, however, that a second provision of this bill--the 
Section 311 Risk Based Pricing Notice--may present problems for the 
mortgage industry because of the complex interaction of underwriting 
variables that go beyond credit history and extend to property 
characteristics and borrower financial assets like down payment and 
reserves. Specifically, I have concerns with the content and timing of 
the notice, as well as with the difficulty of determining the 
circumstances under which the notice would be triggered.
  There are many variables relating to the pricing and terms of 
mortgage loans that are unrelated to credit scores. These include 
whether the loan has a fixed or variable rate, the property type and 
the condition, the down payment and loan-to-value ratio, the debt-to-
income ratio, and the presence or absence of features like prepayment 
penalties, mortgage insurance or balloon payments. In addition, the 
pricing of mortgage credit also changes frequently, sometimes several 
times a day, based upon market conditions or a lender's need for 
product to meet its production goals. Finally, the interest rate that 
borrowers pay--even for the exact same loan closing on the same day--
will vary widely based on when the borrower locked-in the interest 
rate. In other words, borrowers who close on the same day may have 
interest rates that were set weeks apart from one another.
  In addition, the final combination of rates and terms will reflect 
not only credit information, but the nature of the collateral, the 
financial assets of the borrower and choices made by borrowers based on 
their own personal circumstances. What is favorable to one borrower--
for example, a higher rate in exchange for no closing costs--may not be 
for another. What is a material term? Just rates and fees? Or is a 
fixed rate loan better than an adjustable? If a borrower gets a lower 
interest rate because he or she chooses a prepayment penalty, who gets 
the notice--the borrower with the lower rate or the one with the 
prepayment penalty?
  The risk based pricing notice in Section 311 asks mortgage lenders to 
make subjective decisions in order to determine which borrowers 
received ``material terms'' that are ``materially less favorable'' than 
the ``most favorable terms'' made available to a ``substantial 
proportion of consumers.'' In the context of a complicated mortgage 
transaction, this is a truly daunting regulatory burden fraught with 
significant compliance and legal risk. I fear that the impact of this 
risk will force lenders to use fewer risk categories and eliminate 
product features to ensure that such comparisons are easy to make and 
pose little risk of compliance error. This will not be good for 
consumer access to credit or consumer choice.
  As to timing of delivery of a notice, I note that information 
concerning a consumer's credit history and its relationship to the 
pricing of mortgage products may best be given to the consumer early in 
the credit granting so that this information can facilitate informed 
decision-making by the prospective borrower as well as timely consumer 
review of credit reports to ensure accuracy. Better that every mortgage 
borrower get an early disclosure about importance of good credit and an 
accurate report--before they pay application fees and get invested in a 
home purchase decision--than to get one at the closing table.
  Recognizing the challenges associated with implementing a risk based 
pricing notice in the mortgage context, I urge the regulatory agencies 
charged with rule making under this Section to report back to the 
Congress with recommendations for how to make the triggering, timing 
and content of the risk based pricing notices work in mortgage 
transactions without exposing lenders to undue compliance and 
litigation risks. These are issues that--if not addressed through the 
rulemaking--will need to be reexamined by Congress.
  Mr. Speaker, I congratulate my fellow conferees for the significant 
and important legislation we have produced--the Fair and Accurate 
Credit Transactions Act of 2003--and urge the House to join with me in 
approving this measure today.

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