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PIRG:  Letter to the Federal Reserve Board

14 August 1997

 William Wiles, Secretary 
Federal Reserve Board
Washington, DC 20551

 RE: Docket R-0978

 Dear Mr. Wiles,

 We are writing on behalf of PIRG members around the country and on behalf of all consumers generally to comment on proposed revisions to Regulation B's [Equal Credit Opportunity Act] Appendix C, as proposed on 11 July 1997. As you know, the state Public Interest Research Groups are non- profit, non-partisan consumer advocacy organizations with a long history of support for greater consumer protections under the Fair Credit Reporting Act (FCRA).

 In particular, we are writing to support the Board's accurate interpretation of the Fair Credit Reporting Act (as amended by Public Law 104-208, September 1996) that a company that takes adverse action based on a credit report that is obtained from an affiliate is required to provide the full notices and disclosures that any credit report user must provide under new Section 615(a).

 In our view, Congress clearly intended to broaden consumer disclosure rights as a major part of its amendments to the Fair Credit Reporting Act. One of the primary flaws in the old act was its failure to require all users from complying with section 615. A second problem was section 615's narrow disclosure requirement. Even if a consumer received notice, he or she often didn't know what the notice meant because the notice requirement was so vague. When Congress amended the law, it both widened (and clarified) the disclosure requirements substantially and also applied them to virtually all users taking adverse actions.

 If affiliates were allowed to circumvent these disclosures, by claiming exception from those heightened Section 615 duties of users, then many consumers would fail to receive the benefits of the new act, and the primary Congressional intent that consumers learn of mistakes in their credit files, learn of their statutory rights and be given an opportunity to both understand and correct the mistakes in their reports, would be subverted.

 The Board's proposal correctly rejects the notion that affiliates are not users under Section 615(a), when an adverse action is taken based on a credit report. The Board correctly understands that while the Congress created an affiliate-sharing exception (Section 603(d)(2)(a)) from the definition of credit report, it did so only to prevent affiliates from becoming "consumer reporting agencies" (and acquiring all their associated duties). But Congress did not intend to grant affiliates the right to look at a "credit report," and somehow transmogrify the "credit report" into something else that didn't require an adverse action notice.

 As the Board itself points out, to read the law, as amended, in such a way that affiliates would not have the same duties as other users creates an unacceptable situation: "Interpreting the statute otherwise would produce a result that does not appear to be consistent with the purposes of the law, by allowing creditors who could get consumer reports from affiliates rather than consumer reporting agencies to avoid giving consumers the FCRA disclosures and rights." (62 FR 37167).

 We appreciate the opportunity to comment on this important matter. Please do not hesitate to contact us if you have additional questions. Again, we are in full support of the Board's analysis that affiliates are subject to full Section 615 disclosure requirements to ensure that all consumers benefit from the expanded disclosures provided by the amended Fair Credit Reporting Act. Please contact me if you have additional questions.

 Very truly yours,

 Edmund Mierzwinski
Consumer Program Director



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