FAIR CREDIT REPORTING ACT 81 what was being done by the agencies and protected by judicial decision was to allow the honest communication of misinformation in order to insure the availability of correct information on occasion" even though the duty of the credit bureaus to subscribers was to furnish information which was accurate and not erroneous.78 A second major problem with the credit reports was that, even if a person knew the name of the credit reporting agency, he was rarely given access to the information in his file." Insurance reporting firms generally would not even admit to having made a report on an individual much less reveal the contents of their files to him." Credit bureaus would often place roadblocks in the path of the consumer who attempted to gain access to his file by placing a "nuisance charge" on the investigation or merely placing the date of the interview as much as two weeks away. Yet access alone, without the ance. The cost of such insurance could easily be passed onto the subscribers who, it would seem would willingly assume the extra cost (or pass it on to their own customers) in the interest of greater accuracy. The idea is by no means novel since many professions, the medical and legal being the best known, use the same type of insurance, and the services they perform are every bit as much in the public interest as those of credit bureaus. For a discussion of third-party liability insurance see Note, Libel and Slander-The Qualified Privilege of Mercantile Agencies, 9 S.C.L.Q. 291, 293 (1957). "See generally Note, supra note 12, at 645. See generally Note, Libel and Slander-The Qualified Privilege of Mercantile Agencies, 9 S.C.L.Q. 291, 293 (1957). "See Hearings on Commercial Credit Bureaus, supra note 1, at 10-11. The Subcommittee had addressed this same problem earlier when it investigated the National Data Bank. One of the findings of the Subcommittee, supra note 31, was that the individual must have access to his own files. The subcommittee reasoned: The best and most reliable way to assure that erroneous or non-contextual information is not stored in a National Data Center of any data system would be to allow each individual access to information concerning him. Even with restrictions on the type of material that can go into a data system and provisions for guaranteeing that only proper retrievals can be made, procedures should be established to allow an American the right to determine the nature of the information that could harm him. Electronic data processing need not, and must not. subvert the constitutional and legal safeguards Americans have the right to expect and demand. H.R. REP. NO. 1842, 90th Cong., 2d Sess. 4 (1968). "See S. REP. No. 517, 91st Cong., 1st Sess. 3 (1969). "Id. Senator Proxmire, when introducing his bill, cited this as one of the major problems. By way of example, he cited to a credit bureau trade publication which stated: If the declined applicant is interested enough in his or her record to visit the bureau, and feels strongly enough that an error has been made, we should take the time to investigate. In checking with other bureau managers, I find most of them are willing to investigate. However, some bureaus discourage this by placing a nuisance charge on the investigation, or merely placing the date of the interview as much as two weeks away. 83 EMORY LAW SCHOOL ability to correct or at least comment on a disputed item, is not a remedy: visibility does not necessarily correct problems." Some credit bureaus proceeded on the assumption that the individual was guilty until proven innocent and refused to delete that which was no longer verifiable unless the consumer could prove it incorrect. Since most credit agencies operate on a high-volume basis and correction procedures are costly, time spent with consumers going over individual reports would either reduce the agency's profits substantially or make the cost of the reports prohibitive." The problem, then, would seem to be balancing the consumer's right to have only correct information in his credit report (and the user's right to correct information) against the agency's right to make a profit. The question of whether good credit is actually a right or merely a privilege was never answered until the Fair Credit Reporting Act. The major criticism of the information contained in the reports was that it was often inaccurate. This inaccuracy included information which was false, incomplete, irrelevant, and obsolete." Errors of identification are perhaps the most striking since they are so completely erroneous and unthinkable. These errors arise because either the identifying information is the 115 CONG. REC. S1165 (daily ed. Jan. 31, 1969). This procedure, according to one investigator with Retail Credit Co. who asked to remain anonymous, is still continued today. See 115 CONG. REC. S1165 (daily ed. Jan. 31, 1969). As was pointed out during the hearings, Congressman Zablocki's original bill provided only for access and was silent as to the power to correct disputed data. See Hearings on Commercial Credit Bureaus, supra note, at 14. "See S. REP. No. 517, 91st Cong., 1st Sess. 3 (1969). "This point was made by Mr. W. Lee Burge during the hearings, when explaining the purpose behind the policy of the non-disclosure clause in the standard contracts: [J]ust because the legal processes are so involved and the time factor is so involved, we feel that the whole business information process would be slowed down and in many cases the cost would increase drastically because you are not preparing a case for trial when you make a business investigation. You are preparing the essentials for a decision on that particular transaction. Hearings on Retail Credit Co., supra note 34, at 13. See also 115 CONG. REC. S1164-65 (daily ed. Jan. 31, 1969). Congressman Gallagher succinctly phrased the situation when he said, "Perhaps you are really selling people, merchandizing reputations, retailing character." Hearings on Retail Credit Co., supra note 34, at 45. See 115 CONG. REC. S1163, 1167 (daily ed. Jan. 31, 1969). "See id. at S1163: 114 Cong. Rec. S10029 (daily ed. Aug. 2, 1968). See generally Note, supra note 7; Miller, Detour to 1984, NATION, June 1, 1970, at 648-50 (general discussion of the quality of credit reports). "During the hearings, it was admitted that about one percent of all reports involved mistaken identity. Hearings on Commercial Credit Bureaus, supra note 1, at 109. Although at first this may seem a negligible percentage, given the fact that over 110 million reports were issued, the error factor of 1.1 million is substantial. FAIR CREDIT REPORTING ACT 83 same or so nearly the same as to make confusion inevitable unless a certain amount of care and precision is used. The Wall Street Journal carried an article a month before the Gallagher hearings describing how a New York assemblyman was refused a major credit card due to an "unfavorable" credit report, based, as he discovered after repeated phone calls, visits, and threats of legislative action, on an outstanding judgment against someone with a similar name." Credit files often contain incomplete information. Critics argue that this problem arises through the use of items of public record." Credit bureaus systematically compile public record information such as records of suits, tax liens, arrests, indictments, convictions, bankruptcies, judgments, and the like. This information is taken from court records and newspaper accounts dealing with legal action involving individuals in the bureau's geographic area." The information is then included in a person's credit report. The most serious flaw of this procedure is that the information is not kept current because to do so would be costly or because the information is not available." Arrests can lead to dismissed charges; arrest records may be later expunged because the arrest was unjustified; lawsuits may also be dismissed or settled out of court; and convictions may be reversed on appeal. Yet this information rarely, if ever, gets recorded in the credit files. The prejudicial effect of reporting a civil or criminal action which has only been commenced is inherent especially when included in a report which will be used as the basis for credit or employment. Reliance upon the user's understanding that arrest does not equal guilt or that suit does not equal wrong is for the most part unfounded. Biased reporting is a much more invidious form of inaccuracy. It can occur in two very different ways. A buyer and a seller may disagree over the quality of merchandise delivered or a tenant and landlord disagree over the conditions of the apartment rented. In both cases, the consumer may legally withhold payment to insure rectification of the alleged wrong. This tactic is the most effective leverage in getting performance of the contract as they believe it was made. What often happens, however, especially if heated words were exchanged, is that the seller or landlord will report this "See Sesser, How Credit Bureaus Collect and Use Data on Millions of Persons, Wall Street Journal, Feb. 5, 1968, at 1. See also Hearings on Commercial Credit Bureaus, supra note 1, at 10-11. "See S. REP. No. 517, 91st Cong., 1st Sess. 4 (1969); Hearings on Commercial Credit Bureaus, supra note 1, at 10-11; 115 Cong. REC. S1164 (daily ed. Jan. 31, 1969). "S. REP. No. 517, 91st Cong., 1st Sess. 4 (1969); Hearings on Commercial Credit Bureaus. supra note 1, at 10-11; 115 CONG. REC. S1164 (Jan. 31, 1969). "See Comment, Protection of the Consumer Interest and the Credit Rating Industry, 2 PAC. L.J. 635 (1971). 84 JOURNAL OF PUBLIC LAW EMORY LAW SCHOOL action simply as non-payment or slow payment." This act of reprisal will hardly ever be discovered by the consumer although it will follow him in his credit report for many years. It is an anonymous treatment because the reporter of the information is never held accountable for, it, and he is never in danger of defending a libel suit for having entered it. In addition, it allows for a good deal of slanderous, anonymous reprisal against purchasers on the part of some segments of the selling community. The other form of bias is more subtle. It is the combination of the investigator's own value judgments and the "quota system." Based on his findings, regardless of how unfounded in fact they may be, the investigator must make a determination as to the subject's credit-worthiness. Influencing this decision is the factor that, prodded by supervisors trying to justify the service, the investigators are expected to file a certain percentage of derogatory reports." Such a practice is reprehensible not only because of its arbitrariness, but also because of the inherent injustice it bespeaks. If credit reports are in fact an indispensible part of the new economic system, the minimum requirement should be that they be fair, impartial, and based on objective standards. Credit reports often contain information which is either irrelevant or "See S. REP. No. 517, 91st Cong., 1st Sess. 3 (1969); Hearings on Commercial Credit Bureaus, supra note 1, at 11; 115 Cong. Rec. S1163-64 (daily ed. Jan. 31, 1969). The mechanics of this problem came to light in an exchange between Congressman Rosenthal and Mr. H. C. Jordan during the hearings: Rosenthal: Let's suppose a television set that I bought on credit doesn't work well and I tell them that I am not going to pay until the set is fixed or replaced, and I don't pay for 2 or 3 months and we have this dispute going, what happens to my credit rating? Jordan: If you refuse to pay for the television set, the subscriber's accounting system, unless he inhibits it, will record the fact that you are 60 days delinquent. This is a fact of your credit experience. Rosenthal: So because of the fact that he sold me a bum television set I can't go out and get a mortgage and buy a new house? Jordan: Whether you can get a mortgage depends on the mortgage lender's interpretation. Rosenthal: The mortgage lender from reading your record would not know that I am a pretty good guy but there is this dispute over a television set; he would get a piece of cold information that would have marked me as a delinquent. Jordan: He would have the facts which are undeniable that you did not pay your bill. Hearings on Commercial Credit Bureaus, supra note 1, at 76. "See Nader, The Dossier Invades the Home, SATURDay Rev., April 17, 1971, at 19; TIME, May 3, 1971, at 86 (stating that the rejection rate often runs as high as 10-15 %). Generally, credit agencies report that the rejection rate (“unfavorable reports") is about five percent. See Hearings on Retail Credit Co., supra note 34, at 25. FAIR CREDIT REPORTING ACT 85 obsolete or both." Information about a person's private life, such as racial or ethnic descent, domestic trouble, housekeeping habits, or the condition of his yard are basically irrelevant for purposes of deciding credit-worthiness or suitability for employment. Such information is generally based on subjective opinion rather than objective fact and may even invade the individual's right to privacy. Obsolete information is a different problem mainly because creditors obviously have a right to know if a person had a history of bill-paying troubles or a pattern of bankruptcies. It would seem unfair, however, to burden a consumer with a bad-credit rating for life, especially since the basis for the rating may have been one or more of the inaccuracies discussed above. Some agencies have a regular review and destruction process, but others do not." The confidentiality of credit reports is another major concern." Until recently, credit reporting agencies had only a vague policy as to when they would furnish information. Unauthorized access to the highly personal information, some of which may have been inaccurate, was only one aspect of the problem. The point was well demonstrated by Professor Alan Westin during the Gallagher hearings." Information on the personal background of "See S. REP. No. 517, 91st Cong., 1st Sess. 4 (1969). The Federal Trade Commission has stated in an advisory opinion that there is no restriction as to relevancy in the Act. See 4 CCH CONSUMER CREDIT GUIDE ¶ 11,313, at 59,806 (1971). "See S. REP. No. 517, 91st Cong., 1st Sess. 4 (1969). Mr. W. Lee Burge acknowledges that Retail Credit Co. reviews its files yearly, deleting everything which does not have an immediate value: We determine whether there is serious fraud situation or a claim history Wydler: You mean they are physically destroyed? Burge: We tear them up and throw them away. Wydler: This is not a case of crossing out things on old reports? You actually take Burge: It is not a deletion of out-of-date information. It is a destruction process. Burge: We keep adverse information there depending on its seriousness. But most Hearings on Retail Credit Co., supra note 34, at 30-31. "See 115 CONG. Rec. S1165-66 (daily ed. Jan. 31, 1969); 114 CONG. REC. S10,030 (daily ed. Aug. 2, 1968); Hearings on Commercial Credit Bureaus, supra note 1, at 1. This same problem was focused upon by the Subcommittee during the hearings on the National Data Bank and became a major finding. See H.R. REP. No. 1842, 90th Cong., 2d Sess. 3-9 (1968). *For a more detailed discussion of the experiment see Hearings on Commercial Credit Bureaus, supra note 1, at 6-10. S. REP. No. 517, 91st Cong., 1st Sess. 4 (1969), refers to another experiment conducted by a reporter for a major TV network who was able to obtain ten out of twenty reports requested at random from twenty credit bureaus by using the name of a completely fictitious company under the guise of offering the individuals credit. |