FCRA Package, a Big Win Wrapped with New Strings. (Fair Credit Reporting Act)

By Cocheo, Steve | ABA Banking Journal, January 2004 | Go to article overview

FCRA Package, a Big Win Wrapped with New Strings. (Fair Credit Reporting Act)


Cocheo, Steve, ABA Banking Journal


Experienced CEOs and compliance officers have long known that anytime Congress touches a banking law, there's going to be work involved.

Case in point: The Fair and Accurate Credit Transactions Act of 2003, signed into law Dec. 4, which permanently extends the Fair Credit Reporting Act's preemptions of state laws.

FACTA, a major legislative package concerning marketing of consumer credit, consumer privacy protections, and the ongoing scourge of "identity theft," represented a tremendous balancing of interests. And it represents a new list of "to do" items for regulatory agencies and bankers.

During a recent ABA telephone seminar, held only days after FACTA passed, Nessa E. Feddis, association senior regulatory counsel, advised bankers to keep their upcoming chores in perspective.

"In many cases your institutions are already doing what will be required," said the ABA attorney. "But there are always nuances and small details, so you have to pay attention. And as you go through all the new requirements, keep in mind the value of the federal pre-emption, and that a single rule is far superior to many rules."

The legislation affects all institutions that extend credit to consumers, whether they do so locally or nationally.

"Bankers frequently look at the dark side of things," attorney Richard Fischer said in an interview. A recognized FCRA specialist with Morrison & Foerster LLP, Washington, D.C., Fischer said there will be some additional burdens as a result of FCRA reform. But, he said, when one looks at what individual states were cooking up, the law's passage is clearly a win.

Thomas Bernoski, vice-president and compliance officer at $4.9 billion-assets Provident Bank, Baltimore, has been through the final FCRA materials and says he's not anxious about the additional workload. About nine "different regulatory and compliance areas are affected, by Bernoski's count, but he thinks all the changes and adjustments can be handled.

"I don't see anything here that's causing me heartburn at this point," says Bernoski.

Overview of a fast-track law

There were anxious moments, but in the end, banking obtained much of what it needed in the legislation. States will be permanently barred, for example, from setting their own laws or regulations regarding what's put in consumer credit reports; the responsibilities lenders have for furnishing information to credit bureaus; and how banks and other lenders use them to prescreen consumers for credit marketing and how they share information about consumers' finances among their affiliates.

In addition, many potential legal liabilities that might have affected banks have been eliminated or controlled by the new legislation. For instance, many "private rights of action"--the ability of individuals, rather than the government and its regulators, to sue over certain aspects of a law-were eliminated, avoided, or severely restricted in scope.

Banks and other consumer creditors received some new responsibilities for fighting identity theft. One saving grace, however, is that all they need do is follow federal law in this matter--state laws affecting the areas covered in the new law are preempted. An example of the responsibilities is the duty to investigate changes of address on credit card accounts that are followed by requests for additional or replacement cards.

Banks will have to examine their policies and procedures for credit granting as the law is implemented. All credit grantors, for example, will have to be able to build into their systems a way to check if consumers have one of three levels of "fraud alert" activated on their credit bureau files. There are also some new disclosure requirements that banks will have to get used to.

And sharing consumer data among bank affiliates will become more complicated under the new law. Also, privacy notices that banks are already required to issue will likely get more complex. …

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