For Immediate Release 13 March 2003
Contact: Ed Mierzwinski or Liz Hitchcock, 202-546-9707x314
Press Briefing On Threats To State Financial
Statement of Edmund Mierzwinski
U.S. PIRG Consumer Program Director
The state PIRGs are pleased to join with California State Senator Jackie Speier, one of the nation's foremost privacy champions, to argue in favor of states' rights, consumer rights and privacy rights. Her leadership, and the leadership of California citizen groups seeking to qualify a ballot referendum to give their citizens privacy rights and privacy protections, are the major reason Congress may finally make modest efforts toward fighting identity theft. Of course, industry insists on eviscerating states' rights as their price for some modest federal improvements. But a broad spectrum of the public disagrees with them.
Identity theft is at epidemic levels. Complaints to the FTC doubled in 2002. Worse, new data show that millions of consumers may be paying high sub-prime interest rates unnecessarily, due to discrepancies in their credit reports.
In 2003, after years of neglect, the U.S. Congress may finally pay attention to these serious problems facing consumers' financial lives. While the states have actively led the fight to stop identity theft by cleaning up sloppy financial industry practices, Congress has ignored identity theft since the 1998 enactment of legislation criminalizing only what the crooks do and ignoring what the industry does to make identity theft easy.
In the last few months, the financial industry has rolled out the big guns, the big money and the big lie in its efforts to prevent states from protecting consumers from privacy invasions, identity theft and credit bureau errors. Of course, the big guns, Chairman Greenspan and Secretary Snow, can say what they want. But the industry is using the big money to run a deceptive, misleading campaign focused on the big lie that strong state consumer and privacy laws will hurt our economy. Actually the real threat to the so-called free flow of information comes from creditor practices, not state laws.
Industry first claimed that the entire Fair Credit Reporting Act needed to be reauthorized. Only a partial, temporary preemption provision expires, not the whole act. Privacy laws get stronger if Congress does nothing.
Second, industry claims that the FCRA overrides the Gramm-Leach-Bliley act, preventing states from enacting strong privacy laws that affect affiliate sharing. If that were a "gimme," why is industry so afraid that Jackie Speier's SB 1 or the even stronger California groups' proposed ballot referendum might pass? Industry wants to extend FCRA preemption and it also wants to guarantee that the weak Gramm-Leach-Bliley law, with its meaningless "no-opt" protection, becomes the law of the land. Fortunately, Chairman Shelby and Senator Sarbanes may have something to say about that.
Third, industry claims it cares about identity theft. If so, why has blocked Congress from doing anything more than criminalizing identity theft - in 1998 -- while the crime has skyrocketed and California and other states have passed numerous laws to stop it (see attachment)? Last week, VISA claimed it was "voluntarily" truncating credit card numbers to stop identity theft. Wrong-California and Ohio already require it and that's why VISA decided to go national. Only the past state action and the threat of future federal action forced them to act.
Fourth, industry claims state laws are a threat to the free flow of information. Actually, industry is the real threat to the free flow of information. Industry doesn't want consumers to have the strong consumer and privacy rights triggered by an adverse credit decision when a credit report is used. They want to use unregulated information derived from affiliate sharing to make credit decisions based on secret profiles. If you are denied based on a secret profile, you won't have the same rights as when you are denied based on a credit report. Further, two federal regulators, the OCC and the FFIEC, have criticized the creditor practice of limiting the free flow of information by not telling credit bureaus everything about their good customers' credit history. They do this in a successful attempt to deflate their customer's credit scores-so their customers are captives and cannot shop around. Congress has ignored consumer credit problems for years. But now, Congress realizes that the powerful financial services industry doesn't want California, either through Jackie Speier's legislation or a citizen referendum announced yesterday, to give its citizens actual privacy protections and consumer rights.
The Fair Credit Reporting Act is one of our strongest and most important privacy and consumer protection laws. But the consumer rights guaranteed by the Fair Credit Reporting Act are at risk.
Federal law should serve as a floor, not as a "Duck: Low Ceiling." We agree with industry that a uniform national law would be the most efficient, provided it is adequate. Congress never enacts strong consumer laws absent a really big scandal or the threat of state action. Remember, even Enron wasn't enough to guarantee corporate reform-it also took Worldcom.
Retaining states' right to enact stronger laws is the best way to guarantee an eventual strong uniform federal law. The states are rational actors; they will not act to balkanize our financial system. But if we take away states' rights, we are taking away consumer rights without guaranteeing a strong law. That's the wrong way to make public policy.
Ultimately, this is not a fight about the FCRA. It is a fight about consumer rights in the entire credit system. When do consumers have the right to know how their information is being used for credit granting and when won't they? When will consumers have the right to dispute their files and when won't hey? When will consumers have the right to know about profiles and when won't they? When will consumers have the right to stop secondary marketing uses without consent and when won't they?
Protecting the right of states to enact strong consumer and privacy laws will help put the fair back in fair credit reporting. California's Jackie Speier is at the forefront of our efforts to guarantee consumers real privacy protections.
U.S. PIRG is the national lobbying office for the State Public Interest Research
Groups. State PIRGs are non-profit, non-partisan public interest advocacy groups.