To amend the Fair Credit Reporting Act to prohibit the use of consumer credit history for any insurance purpose and to require the disclosure of consumer reports and the credit scoring procedure in order to prevent inaccuracies and mistakes in consumer credit reports, and for other purposes.

July 18, 2003

Mr. THOMPSON of Mississippi introduced the following bill; which was referred to the Committee on Financial Services

To amend the Fair Credit Reporting Act to prohibit the use of consumer credit history for any insurance purpose and to require the disclosure of consumer reports and the credit scoring procedure in order to prevent inaccuracies and mistakes in consumer credit reports, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Consumer Credit Protection Act Amendments of 2003'.

SEC. 2. FINDINGS.

Section 602(a) Fair Credit Reporting Act (15 U.S.C. 1681) is amended--

(1) by redesignating paragraph (4) as paragraph (6);

(2) by striking paragraphs (2) and (3) and inserting the following new paragraphs:

`(2) Consumer credit reporting agencies have assumed a dominant role in evaluating consumer credit and other information on consumers.

`(3) Credit reports may report on as factors to establish a consumer's eligibility for credit, insurance, and even employment.

`(4) The automated calculation of credit scores has become the primary way of quickly evaluating all of the subjective factors taken into account in determining a consumer's creditworthiness, credit standing, credit capacity, debts, character, general reputation, or mode of living.

`(5) When a credit reporting agency undertakes a business that has the potential to profoundly affect a consumer's life, it is incumbent that these agencies ensure that the information provided is accurate.'; and

(3) by inserting after paragraph (6) (as so redesignated by paragraph 1 of this section) the following new paragraph:

`(7) Due to the inequality of the rates of property and casualty insurance, many State insurance commissioners have concurred that prohibiting the use of credit history and credit scores for personal lines of insurance and improving the disclosure of credit information will provide greater protection for the consumer.'.

SEC. 3. DEFINITIONS.

(a) NEW DEFINITIONS- Section 603 of the Fair Credit Reporting Act (15 U.S.C. 1681a) is amended by adding at the end the following new subsection:

`(q) CREDIT SCORE, RISK PREDICTOR, AND RISK SCORE- The terms `credit score', `risk predictor', and `risk score' mean the numerical value or categorization derived from a statistical tool or modeling system used to predict the likelihood of certain credit behaviors, including default.'.

(b) AMENDMENTS TO EXISTING DEFINITIONS- Subsection (m) of section 603 of the Fair Credit Reporting Act (15 U.S.C. 1681a(m)) is amended to read as follows:

`(m) CREDIT TRANSACTION THAT IS NOT INITIATED BY THE CONSUMER- The term `credit transaction that is not initiated by the consumer' does not include the use of a consumer report by a person with whom the consumer has a credit account for purposes of--

`(1) reviewing the account; or

`(2) collecting the account.'.

SEC. 4. IMPERMISSIBLE USES OF CREDIT SCORES IN CONSUMER INSURANCE DETERMINATIONS; COMPLIANCE WITH EQUAL CREDIT OPPORTUNITY ACT.

(a) IN GENERAL- Section 604 of the Fair Credit Reporting Act (15 U.S.C. 1681b) is amended by adding at the end the following new subsections:

`(h) IMPERMISSIBLE USES OF CONSUMER CREDIT SCORES IN CONSUMER INSURANCE DETERMINATIONS- With respect to all personal lines of insurance, including any auto, homeowners, dwelling fire, life, disability, and health insurance or annuity, intended for consumer, family, or household use, an insurance provider may not take any of the following actions on the basis, in whole or in part, of the consumer report obtained from a consumer

reporting agency), or a credit score, of any consumer, including an applicant for such insurance:

`(1) Refuse to underwrite or renew any such insurance.

`(2) Cancel an existing policy of insurance.

`(3) Increase the premium for any such insurance, either while the policy is in effect or at the time of renewal, or fail to offer or provide any discount otherwise available.

`(4) Rate the risk of the occurrence of the event covered by such insurance.

`(5) Assign the insured or applicant to a rating tier.

`(6) Place insurance for an insured consumer or applicant with an affiliated company.

`(7) Require a particular payment plan under circumstances where any additional payment plans are available for such insurance.

`(i) COMPLIANCE WITH EQUAL CREDIT OPPORTUNITY ACT- Any credit scoring system used to generate any risk or credit score shall comply with the Equal Credit Opportunity Act.'.

(b) TECHNICAL AND CONFORMING AMENDMENTS-

(1) Section 604(a)(3) of the Fair Credit Reporting Act (15 U.S.C. 1681b) is amended--

(A) by striking subparagraph (C);

(B) by redesignating subparagraphs (D), (E), and (F) as subparagraphs (C), (D), and (E), respectively; and

(C) in subparagraph (D) (as so redesignated, by striking `or current insurer,'.

(2) Section 604(c) of the Fair Credit Reporting Act (15 U.S.C. 1681b(c)) is amended--

(A) in paragraphs (1) and (3) by striking `or insurance' each place such term appears; and

(B) in paragraph (1), by striking `subparagraph (A) or (C) of subsection (a)(3)' and inserting `subsection (a)(3)(A)'.

(3) Paragraphs (1) and (5) of section 604(e) of the Fair Credit Reporting Act (15 U.S.C. 1681b(e)) are each amended by striking `or insurance' each place such term appears.

(4) Section 604(g) of the Fair Credit Reporting Act (15 U.S.C. 1681b(g)) is amended by striking `or insurance'.

(c) CLERICAL AMENDMENTS- The heading for section 604(c) of the Fair Credit Reporting Act (15 U.S.C. 1681b(c)) is amended by striking `OR INSURANCE'.

(d) COMPLIANCE STUDY- The Federal Trade Commission shall conduct a study of the compliance of insurance providers with the amendment made by this section and shall submit a report containing the findings and conclusions of the Commission to the Congress before the end of the 1-year period beginning on the date of the enactment of this Act.

SEC. 5. AMENDMENTS TO THE DISCLOSURE OF CREDIT SCORES AND CREDIT REPORTS TO CONSUMERS.

(a) IN GENERAL- Section 609(a) of the Fair Credit Reporting Act (15 U.S.C. 1681g(a)) is amended by striking all of the provisions of such subsection that precede paragraph (2) and inserting the following:

`(a) INFORMATION ON FILE; SOURCES; REPORT RECIPIENTS- Every consumer reporting agency shall, upon request, and subject to section 610(a)(1), clearly and accurately disclose to the consumer the following:

`(1) INFORMATION- All information in the consumer's file at the time of the request including credit consumer reports, any information concerning credit scores and credit consumer reports, and any other risk scores or predictors relating to the consumer including any credit scores used, and a clear and concise summary of how the scores and predictors are derived, including--

`(A) The factors taken into account in deriving a score or predictor;

`(B) How such factors are applied to the consumer;

`(C) The relative weight given to each factor;

`(D) The manner and extent to which such factors raise or lower the score or predictor;

`(E) The names of all persons that provided the credit score or credit file upon which the credit score was created; and

`(F) A statement indicating that the information and credit scoring model may be different from the credit score that may be used by the lender.'.

(b) ANNUAL DISCLOSURE OF RIGHTS REQUIRED- Section 609 of the Fair Credit Reporting Act (15 U.S.C. 1681g) is amended by adding at the end the following new subsection:

`(d) ANNUAL DISCLOSURE OF RIGHTS REQUIRED-

`(1) IN GENERAL- A credit reporting agency shall annually provide a consumer with the written

summary of rights required under section 609(c), by letter sent by first-class mail, whenever one of the following events occurs within any 12-month period:

`(A) The credit reporting agency has received 3 credit inquiries pertaining to the consumer.

`(B) The credit reporting agency has received a report that would add negative information to the consumer's file.

`(2) FORMAT OF LETTER- Any letter mailed to a consumer pursuant to this subsection may be a form letter, except that each letter shall include a notice or separate form the consumer may complete and return to the consumer reporting agency to request a copy of the credit consumer report.

`(3) ADDITIONAL CONTACT INFORMATION UNDER CERTAIN CIRCUMSTANCES- In the case of any consumer reporting agency which compiles and maintains files on consumers on a nationwide basis, the letter or notice shall include a toll-free telephone number and worldwide web address established by the agency for the consumer to request a free report under the terms of section 612(c).'.

(c) FREE DISCLOSURES UNDER CERTAIN CIRCUMSTANCES- Section 612(c) of the Fair Credit Reporting Act (15 U.S.C. 1681j(c)) is amended to read as follows:

`(c) FREE DISCLOSURE OF CONSUMER REPORTS- In addition to the disclosures required under subsection (b) or the law of any State, upon the request of a consumer, a consumer reporting agency shall make all disclosures pursuant to section 609 without charge to that consumer under the following circumstances:

`(1) Annually, upon the written, oral, or electronic request of the consumer.

`(2) Up to 3 additional times a year, if a consumer certifies in writing that the consumer--

`(A) is unemployed and intends to apply for employment in the 60-day period beginning on the date on which the certification is made;

`(B) is a recipient of public welfare assistance; or

`(C) has reason to believe that the file on the consumer at the agency contains inaccurate information due to fraud or identity theft.'.

(d) DUTIES OF USERS TAKING ADVERSE ACTIONS ON THE BASIS OF INFORMATION CONTAINED IN CONSUMER REPORTS- Section 615(a) of the Fair Credit Reporting Act (15 U.S.C. 1681m(a)) is amended to read as follows:

`(a) DUTIES OF USERS TAKING ADVERSE ACTIONS ON THE BASIS OF INFORMATION CONTAINED IN CONSUMER REPORTS-

`(1) IN GENERAL- If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall--

`(A) provide oral, written, or electronic notice of the adverse action to the consumer; and

`(B) provide a copy of the consumer's complete report that the consumer reporting agency provided to the user, including any information concerning credit scores and credit consumer reports, and any other risk scores or predictors relating to the consumer including any credit scores used; and

`(2) SUMMARY OF RIGHTS- A user who provides a notice and a copy of a consumer report and credit score to a consumer under paragraph (1) shall also provide to the consumer--

`(A) a written summary of all of the rights that the consumer has under this title;

`(B) an explanation of how the consumer may exercise the rights of the consumer under this title;

`(C) a list of all Federal agencies responsible for enforcing any provision of this title and the address and any appropriate phone number of each such agency, in a form that will assist the consumer in selecting the appropriate agency; and

`(D) a statement that the consumer may have additional rights under State law and that the consumer may wish to contact a State or local consumer protection agency or State attorney general to learn of those rights.

`(3) FORM OF SUMMARY OF RIGHTS-

`(A) IN GENERAL- The user shall provide a description in writing of the rights of the consumer under paragraph (2) using the form and content prescribed by the Federal Trade Commission (after consultation with each Federal agency referred to in section 621(b).

`(B) COMPLIANCE WITH SUBSTANTIALLY SIMILAR FORMAT- Any user shall be deemed to be in compliance with this subsection if the user provides disclosures under paragraph (2) that are substantially similar to the model disclosure adopted by the Federal Trade Commission under this paragraph.

`(C) EFFECTIVE DATE OF SUMMARY OF RIGHTS DISCLOSURES- No disclosures shall be required under paragraph (2) before the date on which the Federal Trade Commission prescribes the form and content of such disclosures under subparagraph (A).'.

SEC. 6. EFFECTIVE DATE.

The amendments made by this Act shall take effect at the end of the 90-day period beginning on the date of the enactment of this Act.

END