Consumer Credit Report Reform Act

By: Season Bennett

What It Does

The new Act substantially helps banking and other organizations by allowing them to share information among affiliates and to be more flexible in offering credit and insurance to the public. This Act also places significant new duties of users of credit reports and furnishers of information to credit reporting agencies. It beefs up enforcement provisions, and contains a number of other requirements, many of which relate to disclosure to consumers and maintaining consumer privacy. The Act also changes rules with respect to consumer reporting agencies and the use of credit reports in the employment context, although these provisions are not discussed in detail here.

What Does It Clarify?

The law clarifies and expands the ability of entities within a holding company to share transactional information. For information as to transactions or experiences between the consumer and the person making the report, the new law allows full communication of that information among persons related by common ownership or affiliated by corporate control. For instance, it appears that a bank can now share a customer's transaction records at the bank with an affiliate, without triggering the rules governing consumer reports. The new law also allows any communication of other customer information among affiliates -- such as information not arising from the bank's transactions -- but only if the consumer is given a clear opportunity to opt out of having that other information shared.

Other Facts

This Act first happened on September 30th, 1996. The Consumer Credit Report Reform Act also called the "Act" expands the civil liability provisions. In October Congressional leaders requested that the Federal Trade Commission or FTC conduct a study of possible violations of consumer privacy rights by companies that operate computer data bases. The Consumer Credit Reporting Reform Act of 1996 is important in its own right and as an indication of the continuing importance of the Federal Trade Commission in electronic commerce and privacy issues.