Greenspan Again Urges Preemption Renewal

By Heller, Michele | American Banker, May 1, 2003 | Go to article overview

Greenspan Again Urges Preemption Renewal


Heller, Michele, American Banker


Unless Congress renews a key preemption provision of the Fair Credit Reporting Act, the cost of loans will rise, Federal Reserve Board Chairman Alan Greenspan told a House panel Wednesday.

This is the second time this year that Mr. Greenspan has urged lawmakers to renew the provision, which bars states from adopting new standards on a wide range of credit-related issues, such as when a loan can be deemed delinquent and how companies may share certain customer data with affiliates. It expires Jan. 1.

The provision, set to expire Jan. 1, "keeps credit available to everybody" and "keeps interest rates lower than they would otherwise be," he told the House Financial Services Committee.

"There is just no question that unless we have some major sophisticated system of credit evaluation continuously updated, we'll have very great difficulty in maintaining the level of consumer credit currently available," Mr. Greenspan said, "because clearly without the information that comes from credit bureaus and other sources, lenders would have to impose an additional risk premium -- because of the uncertainty -- before they make such loans or ... not make those loans at all."

The comments of the central bank chief, who was on Capitol Hill to report on the state of the economy, came in response to questions from Rep. Paul E. Gillmor, R-Ohio, on how the economy would be affected if states were allowed to enact their own laws restricting the flow of consumer credit information.

"What would be the likely market impact of state-imposed restrictions on pre-screened offers of credit or insurance? …

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