[Congressional Record (Bound Edition), Volume 152 (2006), Part 18]
[Extensions of Remarks]
[Page 23774]
[From the U.S. Government Publishing Office, www.gpo.gov]




                             CREDIT REPORTS

                                 ______
                                 

                          HON. EDOLPHUS TOWNS

                              of new york

                    in the house of representatives

                       Thursday, December 7, 2006

  Mr. TOWNS. Mr. Speaker, My esteemed colleagues, thank you very much 
for the opportunity to talk to you about an important issue involving 
credit reports that will disproportionately harm low-income home buyers 
and put most small independent credit reporting agencies out of 
business within a month. The issue involves the ``joint use'' of credit 
reports for mortgages.
  ``Joint use'', ``secondary use'' or ``reissue'' refers to the long-
standing practice recognized in the FCRA, by the Federal Trade 
Commission, and by the Office of the Comptroller of the Currency, which 
allows a credit report to be jointly used by multiple entities 
legitimately engaged with the origination of a mortgage at no 
additional cost. Joint use of credit report information is essential 
for the proper functioning of the mortgage banking, brokerage and 
financing industries and is an important process by which consumers 
shop for and obtain mortgage credit.
  Recently, two of the credit repositories, Equifax and Experian, E&E 
have announced new mandatory fees and burdensome requirements for joint 
use of credit reports starting January 1, 2007. Consumers will now be 
burdened with paying multiple charges for the one-time access of their 
credit report in order to originate a single mortgage transaction. 
Unlike other credit industries, the mortgage credit reporting industry 
is required to depend on three-file merged credit reports provided by 
E&E and TransUnion. The proposed new policy will significantly increase 
mortgage origination costs. Costs for joint use of credit reports 
potentially increase by 100-300 percent. E&E will significantly 
increase their revenues while end users, resellers, and ultimately, 
consumers will pay the costs. In addition, consumers facing the highest 
cost increases will be those with credit challenges such as low income 
and first time homebuyers.
  Further, about ninety percent of the independent credit reporting 
agencies will be unable to meet the additional contractual requirements 
being dictated by E&E. These credit-reporting agencies will be unable 
to access the credit data from E&E and therefore unable to provide the 
mandatory three-file merged credit reports. They will quickly be forced 
out of businesses due to these changes.
  There is no new legislation, court case, regulatory decision or other 
external event to justify such action except to increase the revenues 
of these large companies at the expense of the consumer and to the 
detriment of small credit reporting companies.
  The other repositories, TransUnion and Innovis, have not chosen to 
drastically alter the joint use procedure. TransUnion is evaluating its 
position and CBC Companies, the parent of Innovis, is challenging E&E's 
proposed new guidelines in federal court as a violation of U.S. 
antitrust laws.
  The end user disclosure, joint use, requirements have been working 
well since they were enacted as part of the FCRA in 1997. The recent 
actions by E&E do little to combat the incidence of identity theft and 
increase data security. The main reason for these policies is to raise 
revenue and decrease competition. The effort to implement these new 
reissue/joint use procedures and fees needs to be stopped in order to 
maintain a level playing field, continue effective competition in the 
marketplace and provide fair and equitable access to capital for all 
Americans.
  Any efforts by the major credit repositories to change the reissue 
process should not restrict competition. In order to protect both 
consumers and small, independent credit reporting agencies, E&E should 
make the following changes to their proposed reissue policies.
  Continue to classify the GSEs, HUD and any other ancillary technology 
system that is part of the mortgage origination process as joint use, 
not the new created ``reissue'' or ``secondary use'' classification;
  Allow credit-reporting agencies, at the direction of the end user of 
record, to reissue to any firm on one of the approved mortgage seller 
or servicer lists of Fannie Mae, Freddie Mac or HUD without end user 
documentation and site inspections; and
  Designate a reasonable flat fee for reissue. Note: The changes to the 
2003 FACT Act which included a free credit report to every American on 
an annual basis only required an $.11 per file price increase while 
E&E's proposed policy changes attempt to justify the charge of $1.05 to 
$3.50 per file.
  Thank you very much for the opportunity to address this important 
topic. I strongly suggest that E&E reconsider the policies they plan to 
implement on January 1. Such policies will ultimately hurt the consumer 
and will have a disproportionate effect on low-income individuals. All 
Americans deserve the right to pursue the American dream of 
homeownership and should not be restricted to access to loans because 
of a policy intended solely to raise revenue for two large credit 
repositories.

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