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BROOMALL, Pa. -Will state lawmakers be able to enact their own legislation on things like credit reporting compliance, pre-screening, and content of credit reports when the federal preemption provision of the Fair Credit Reporting Act (FCRA) sunsets Dec. 31? Not if the three major credit report agencies, lenders and financial services industry leaders can convince federal legislators of the ramifications of not extending the preemption. That’s just what TransUnion wanted to impart to legislative staff members who were invited to attend a National Credit Reporting System symposium hosted by the company to discuss the impact of the Fair Credit Reporting Act (FCRA) Preemption Loss on Consumer Credit. . “We need consistency of data,” Allen Stevens, VP of lending at Franklin Mint FCU here told a Credit Union Times reporter. “Consistent data affects the quality of the data. Inconsistent data adversely impacts credit quality.” Stevens was the sole credit union representative on a five-person panel that was held during the one-day symposium on Feb. 28. Other panel participants included officials from Sears Roebuck & Co., Capital One, Citigroup, and Sidley, Austin, Brown and Wood, a New York-based law firm that specializes in capital markets. Among the attendees at the symposium were more than 20 staffers to members of the House and Senate financial services committees who were invited to hear from credit providers on the ramifications if Congress decides not to extend the federal FCRA preemption. Barry Botruff, EVP and chief compliance officer for TransUnion said the company deliberately selected panelists who represented the gamut of sizes of credit providers “because we wanted the legislative representatives to be able to hear and see how allowing the federal preemption to sunset will affect all lenders.” Stevens, like other panel participants, wants to see the preemption rolled over and extended. “A member of a credit union in Pennsylvania could have the same credit profile as a member of another credit union in New Jersey, but if the Fair Credit Reporting Act federal preemption sunsets, the two members could wind up having two different credit unions and be offered different pricing on a similar loan. Credit unions would have to be able to handle different data for 50 different sets of rules set by each state. Credit grantors, said Botruff, have built their lending models based on the comprehensiveness of the data the credit reporting agencies collect. But Botruff said that, “Allowing the federal preemption in the Fair Credit Reporting Act to sunset would make it difficult for the credit reporting agencies to maintain a comprehensive database that credit grantors rely on.” Since data would be handled differently from state-to-state, Botruff said that would impede the credit approval process and eventually be detrimental to borrowers. “With the way the credit reporting system is set up to work, it allows small lenders to compete with larger ones. That could change if the federal preemption is allowed to sunset,” said Botruff. “Credit unions could wind up bearing the brunt of a non-extension of FCRA federal preemptions because many of them may not have the resources to make the necessary changes to their lending policies,” Botruff said. “Lenders would have to reevaluate their lending policies and processes to see how they’re affected by the laws and regulations of a particular state, and that would impact the way lenders do business and increase the likelihood of risk in lenders’ credit portfolio depending on the degree of information on file about the borrower. That in turn would raise the cost of processing a loan application. The increased cost would invariably be passed on to consumers making it more expensive for them to obtain a loan,” he said. Botruff said the three major credit reporting agencies – TransUnion, Equifax and Experion – are “all on the same page,” and the Consumer Data Industry Association (CDIA) is working with the three companies to provide a united front on the issue. Meanwhile, the halls of Capitol Hill have been abuzz with discussion of the sunsetting of the federal exemption. Botruff said if no decision is made by the Dec. 31 deadline, “there is the potential” for a short term extension until Congress is able to work out the details. He said he’d heard “rumors” that some members of Congress were working to have the federal preemption extension issue tied to privacy legislation. Botruff said he is against this happening because it would make the issue more complicated and difficult to understand and work with. “The two are somewhat related, but we want to see them handled separately because if they’re combined, it creates a higher level of complexity, it becomes unwieldy and hard to understand,” Botruff said. That may prove to be easier said than done. Gary Kohn, vp of legislative affairs and senior legislative counsel said FCRA “is expected to serve as the main vehicle to carry the privacy debate.” CUNA, said Kohn, endorses extending FCRA’s federal preemption provisions. In information provided to Congress during in February during the GAC, CUNA stated that, “Without federal preemption, states could enact different definitions, restrictions and penalties, making it almost impossible for uniform credit reports and crdit scoring models. Loan decisions could take longer, and they could be more expensive, leaving less credit available to consumers.CUNA calls on Congress to reauthorize the Fair Credit Reporting Act (FCRA), including each of its federal preemptions, in the interest of assuring the free flow of credit through the maintenance of uniform national standards, and all its other attendant consumer benefits.” But while CUNA is interested in protecting consumers’ information, it does not want it to be done at the expense of hamstringing credit unions from providing services to members in a cost-effective and easily accessible way. Treasury Secretary John Snow recently addressed the issue of the sunsetting of the FCRA’s federal exemption provision when he spoke at America’s Community Bankers’ annual government affairs conference. Snow was quoted in the March 11th issue of Congress Daily, an on-line publication of the Washington, D.C.-based National Journal magazine, as saying, “his department hoped to persuade Congress to take a `two track’ approach on financial privacy legislation this year, one that would include extending the FCRA’s information sharing provisions.We have a national standard, and if we’re to continue to make the sort of progress of making credit [available] – that requires information exchange. That has to go hand in hand with the identity theft problem.” Snow said he was confident “we’ll be able to persuade Congress – a free flow of information – [and] trying to do it with identity theft is also important. The two coalescing, coming together should ensure a good legislative outcome.” -

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