Richard Shelby

Mr. SHELBY

Mr. SHELBY. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. SHELBY. Madam President, I intend to oppose this amendment and all amendments that are not within the four corners of the Fair Credit Reporting Act legislation. The committee spent a great deal of time, as the Presiding Officer knows, as a distinguished member of the Banking Committee, carefully considering the reauthorization and reform of the Fair Credit Reporting Act national standards. The committee bill is carefully crafted, and it balances protecting consumer interests and ensuring the efficiency of our credit markets. The committee bill was unanimously approved, as the Presiding Officer knows, by a voice vote in the committee, which is hard to get. It was unanimous. Extraneous amendments, I believe, alter this balance and focus and threaten our ability to maintain the strong, bipartisan consensus necessary to pass this important legislation this year. As a result, the managers of the bill--Senator Sarbanes and I--intend to oppose including this amendment and all non-Fair Credit Reporting Act-related amendments, regardless of their merit. This might have some merit, but I think it can be better served at another place on another day. At the proper time, I will move to table the amendment. Right now, I yield to Senator Sarbanes. Mr. FEINGOLD addressed the Chair.

Mr. SHELBY. If the Senator will yield, I understand the concerns. I think it is also true that debit card transactions and ATM transactions have some significant differences. Namely, the retailer owns the debit machine while the bank owns the ATM machine. This makes a ``point of sale'' disclosure--as we achieved in Gramm-Leach-Bliley--more difficult since banks cannot easily adjust the equipment and the software.

Mr. SHELBY. I take a minute to commend Mr. Durbin, the Senator from Illinois, for his good work in this area. He has recognized this as a very important issue and has done something about it. Whether it is Sallie Mae or anybody else, what we are interested in is all the reporting we can get that would affect someone's credit. I again commend Senator Durbin for the work he has done. I am sure he will follow up and make sure this is part of the law.

Mr. SHELBY. Mr. President, the managers are prepared to accept this amendment.

Mr. SHELBY. The managers are prepared to accept this amendment.

Mr. SHELBY. Mr. President, I move to reconsider the vote.

Mr. SHELBY. I urge the adoption of the amendment.

Mr. SHELBY. If the Senator will yield, we do have a copy of the letter from Sallie Mae.

Mr. SHELBY. Madam President, the managers are prepared to accept the amendment offered by Senator Corzine. It is a good amendment and makes a lot of sense.

Mr. SHELBY. Mr. President, I suggest the absence of a quorum.

Mr. SHELBY. Mr. President, I now move to table the Feinstein-Boxer amendment and ask for the yeas and nays.

Mr. SHELBY. I urge the adoption of the amendment.

Mr. SHELBY. Mr. President, I move to reconsider the vote.

Mr. SHELBY. I have listened carefully to the comments of Senator Feinstein earlier, and I will make a couple of important points in response to her amendment. First, as a privacy advocate, I fully appreciate the interest and concern at hand. Indeed, both Senator Sarbanes and I have been very sensitive and worked together a lot on privacy concerns. As we took up the Fair Credit Reporting Act, this was one of the key considerations we sought to balance, even as the law itself requires. We did this in what was a very comprehensive, transparent, and lengthy review of the law and issues at hand as we considered reauthorizing our national credit standard. Second, the amendment of the Senator from California makes two basic assumptions which ultimately guide her amendment's approach and goal, as I understand it. No. 1, that there is something inherently nefarious about the use of affiliate structures; No. 2, that consumers have no rights or means to protect themselves with respect to the handling of their transaction and experience information. I believe that our consideration in the Banking Committee would therefore be instructive in understanding the better approach adopted in our bill and why I intend to oppose the amendment of the Senator from California. To the first point: Why do affiliates exist? Companies establish affiliates for a variety of legal, tax, and accounting reasons--because laws require them to do it. What do these structures mean for consumers? Some companies choose to create separate legal entities known as separately capitalized affiliates. Other companies elect to locate all of their business lines in a single entity. Regardless of the structure that a firm employs, consumer information is generally used in the same fashion. Affiliates or the separate business line share it to service their customers, fight fraud, or develop new business. The affiliate sharing provisions contained in the Fair Credit Reporting Act exist to make it clear that companies should not suffer because they have chosen a particular corporate structure. From the consumer's perspective, I believe there is no real difference between a company making an internal transfer of information among departments and sharing between affiliates. In fact, in many cases where affiliate sharing is occurring, most consumers would not recognize that the two parties are involved in the transfer. Rather, they would be under the impression that information is merely being moved within the single entity with whom they have chosen to do business. Second, there are real rules and provisions governing the manner in which transaction and experience information is handled. First, we need to consider what exactly transaction and experience information is. Transaction and experience information involves checking and saving account balances, credit card balances and repayment history, mortgage balances and repayment history, and mortgage and brokerage account balances and transaction activity. In many instances, the information is the very information provided to the consumer reporting agencies where, as consumer report information, consumers are afforded significant rights under the Fair Credit Reporting Act. More important, however, this is information that is routinely provided to consumers as required by separate laws and regulations. For example, the Truth in Lending Act, the Fair Credit Billing Act, the Truth in Savings Act, the Electronic Funds Transfer Act, provisions of the securities laws and the Uniform Commercial Code all provide consumers substantive rights with respect to transaction and experience information. These include disclosures and access rights and error resolution procedures. I believe the bottom line is that consumers already have access to and rights concerning transaction experience information right now under the law. But at the end of the day, I believe the main concern I heard with affiliate sharing uses was the use for marketing purposes. At the end of the day, I believe that is all that is really left restricted, in some way, under California's approach after accounting for the exceptions and exemptions. So after spending more than a year considering the law carefully in order to balance the needs of our national credit system, which we all believe is crucial to the operation and strength of our economy, with a need to protect consumers rights, the Banking Committee identified two key areas for increased Federal protection: The sharing of medical information and restricting affiliate sharing used for marketing purposes. This bill does so in the context of the Fair Credit Reporting Act in a straightforward and narrowly tailored way and does not give preferential treatment to certain business models over others. This brings us to a third and very important point. The Fair Credit Reporting Act deals with more than just financial institutions. The sponsors, as you know as a member of the Banking Committee, Mr. President, seek to impose a model that was tailored strictly for financial institutions to all furnishers of credit information, subject to the Fair Credit Reporting Act. This model is largely based on SB-1, the California Financial Services Law. The amendment's sponsors have tried to graft a banking bill on to the Fair Credit Reporting Act. This effort, I believe, is misplaced, and this effort does not mesh with how the FCRA, the Fair Credit Reporting Act, works and to whom it applies. Gramm-Leach-Bliley made it permissible for California and all other States to pass legislation that regulates third party sharing activity. This bill would not affect those provisions in the California law that come because of Gramm- Leach-Bliley. With respect to the part of SB-1 that conflicts with the Fair Credit Reporting Act, the California law was preempted, making it unenforceable when it was enacted. This bill does not change or alter that fact in any way. The irony is that, even if we were to assume these provisions were violated, California's attempt to overturn Federal law is actually weaker than the Senate bill. The California law, as I have heard here, as it is targeted at financial institutions, covers a much more limited range than the broader Fair Credit Reporting Act, which deals with information, not entities, and therefore includes retailers, auto dealers, mortgage providers--anyone who furnishes credit. Furthermore, California's rule is eaten by its exceptions and its exemptions. Its provisions provide consumers with no real choices or meaningful protection. The Senate bill covers the areas that consumers care about--marketing and the sharing of medical information--by providing real protection. Unlike the Senate bill, the California law still exempts most of the largest financial service firms they claim the law is intended to address. The Senate bill was carefully tailored to address key concerns in a more clear and a concise way. The Senate bill before us targets unwanted solicitations without otherwise preventing sharing activities that provide benefits to consumers. Unlike the California bill, the Senate bill is designed to protect consumer interests. The unenforceable portions of the California law were designed to promote a specific business model by hobbling others. I yield the floor.

Mr. SHELBY. Mr. President, I move to reconsider the vote.

Mr. SHELBY. Mr. President, I move to reconsider the vote.

Mr. SHELBY. Absolutely. Senator Sarbanes and I agree with Senator Schumer and support further study of this issue. We have planned and drafted a letter to the Federal Reserve Board asking them to conduct a comprehensive review of this issue.

Mr. SHELBY. Mr. President, I ask unanimous consent that the vote occur on passage of the bill on Wednesday--tomorrow--with no intervening action or debate, at a time determined by the majority leader, after consultation with the Democratic leader. Further, I ask unanimous consent that following that vote, the Senate insist on its amendment, request a conference with the House, and the Chair be authorized to appoint conferees on the part of the Senate, with a ratio of 4 to 3. I also ask unanimous consent that S. 1753 then be returned to the calendar.

Mr. SHELBY. I urge adoption of the amendment.

Mr. SHELBY

Mr. SHELBY. It is our intention to adopt the substitute and ask it be treated as original text but we will wait for the other side before we adopt the amendment. Mr. President, I am pleased to bring before the Senate S. 1753, the National Consumer Credit System Improvement Act of 2003. This bill was unanimously approved by the Senate Banking Committee on September 23 of this year by a voice vote. The Fair Credit Reporting Act, is a very important, highly complex law that governs crucial aspects of the consumer credit system. This national system is huge--involving trillions of dollars and millions of people, and is at the heart of the economic well being of this country. The bipartisan bill before the Senate is the product of extensive hearings and deliberations by the Senate Banking Committee. Over the course of the past 5 months, the Banking Committee held six hearings related to the reauthorization of the seven expiring FCRA national standards as well as the effectiveness and efficacy of the FCRA as a whole. The committee's process helped us identify key areas that required reform or improvement, while at the same time, reinforcing the importance of our national credit reporting system to the operation of our financial markets and economy as a whole. The committee bill incorporates many important reforms while creating permanent national standards. This bill reflects a careful balance between ensuring the efficient operation of our markets and protecting the rights of consumers. Over the 6 years since the FCRA was last amended, significant changes have occurred in our credit markets. There are now participants, new technologies, new underwriting practices, and new products. Indeed, there is more that has changed than has remained the same in the operation of the credit markets since the last time Congress considered the FCRA. These changes have been largely positive. They have expanded access to credit to more Americans and permitted loan approvals in hours rather than weeks. However, these new developments have had some unintended consequences. Identity theft. As our economy has grown more automated, more electronic transactions occur without the lender and borrower ever meeting face to face. As a result, the transfer of information has become much more pervasive, and a new crime has emerged that takes advantage of this flow of information. This crime is called identity theft, and the incidence of this crime has grown geometrically in recent years. Identity theft involves a person using someone else's personal information without their knowledge to commit fraud or theft. Practically speaking, the crime involves misappropriation of such personal information as a victim's name, date of birth, and social security number. Identity thieves then use this information to open new credit card accounts, to divert current accounts from victims to themselves, and to open bank accounts in victims' names, among other things. The bad charges and the hot checks usually happen while the victims, banks, credit card companies and other firms are unaware that something is amiss. In the wake of unauthorized activity and skipped payments, the creditor usually takes action and ultimately cuts the thief off. At this point, the creditor's losses are curtailed, but the nightmare is just beginning for the ultimate victim of identity theft--the individual whose identity the thief assumed. In most instances, the victims first become aware of the fact that they have been targeted when the creditor seeks payment. It is also when they begin to experience the negative consequences--dealing with law enforcement and the collection agencies. Thereafter, when the results of the criminals' handiwork shows up on their credit reports, they face the considerable task of restoring their good name and credit rating. This bill attempts to combat this growing crime while also helping consumers restore their credit standing and give victims assistance. The bill contains a number of provisions that deal with identity theft: S. 1753 directs Federal banking regulators, the National Credit Union Administration and the Federal Trade Commission to develop guidelines and regulations to identify and prevent identity theft; The bill mandates the inclusion of fraud alerts in credit files, to notify users of credit reports that a consumer could be a victim of identity theft; The bill will restrict the amount of information available to identity thieves, by requiring the truncation of credit and debit card account numbers on electronically printed receipts; and S. 1753 increases the punishment of identity theft crimes. S. 1753 also provides victims of identity theft with meaningful assistance something they do not really have today: The bill requires the FTC to prepare a summary of rights of identity theft victims; S. 1753 establishes procedures to block the reporting of and the refurnishing of identity theft-related activities; and it requires the national credit reporting agencies to coordinate and share identity theft complaints. Another aspect of this bill is accuracy. The committee also focused its attention on how best to ensure the accuracy of credit information. Accurate credit reports are absolutely crucial to the efficient operation of our credit market. Indeed, the changing nature of our credit markets has made accuracy more important than ever. Credit report information is increasingly used as the key determinant of the cost of credit and insurance in this country. In addition, technology has permitted lenders to use credit information to more precisely assess risks posed by borrowers. Gone are the day when lenders merely stamped loans as ``approved'' or ``not approved.'' Today, the lenders employing credit history data, use mathematical models to analyze credit risk and create risk-based prices for credit cards, mortgages and other products. Use of risk-based pricing allows lenders to extend credit to a broader range of borrowers on credit terms, which match the credit risk they pose. Additionally, its use results in very few credit applicants being rejected. Again this is a very positive development, but not one without a cost. Currently, credit applicants who are rejected received adverse action notices and access to a free credit reports. This allows such consumers to review the accuracy of their credit report information. Due to risk- based pricing, consumers are often not given the adverse action notice when information contained in their credit report significantly impacts the cost of the credit offer. Rather, they receive a counteroffer with credit offered at a higher price or with more restricted terms. This development presents a huge concern. The adverse action notice is the primary tool in the FCRA to ensure mistakes in credit reports are discovered. To address this situation, the committee bill requires regulators to promulgate rules to provide consumers notice when, because of information contained in a consumer's credit report, the creditor makes a counter offer to the consumer on terms that are materially less favorable than the most favorable terms available to a substantial portion of consumers. These notices will make consumers aware of the need to check their reports to ensure their accuracy. The need for ensuring the greatest possible accuracy in credit information does not end with these new notices. For example, in large credit transactions, such as mortgages, rate differences, as the Presiding Officer knows, can translate into hundreds of thousands of dollars over the course of a loan. Even in smaller dollar credit transactions, such as credit cards, rate differences can mean large amounts of money. With the practice of credit card companies reviewing credit reports and adjusting rates in real time becoming more prevalent, the application of risk-based pricing to consumer finances is practically an everyday event. Credit reporting information is increasingly used as the key determinant of the cost of credit or insurance. With the rewards for good credit so meaningful in this country, and the penalties for bad credit so costly, it is more critical than ever before that credit reports accurately portray consumers' credit histories. The committee bill addresses this in several ways. One, the bill provides consumers the right to obtain a free copy of their credit report annually through a centralized system and request of their credit scores or information about credit scores in certain circumstances. This is a big change. S. 1753 directs the Federal banking regulators, the National Credit Union Administration, and the Federal Trade Commission to develop guidelines to ensure greater accuracy and completeness of information in credit reports. Furthermore, it directs the Federal Trade Commission and the Federal Reserve to conduct ongoing studies on the accuracy of consumer reports and the resolution of consumer complaints. Privacy protections are addressed in this bill. S. 1753, the bill before us, contains a number of important new privacy protections for consumers. The committee-designed protections are based on our extensive deliberations and focus on core areas of concern in the privacy arena; namely, direct marketing and medical information. The bill contains important new medical information protections which significantly limit creditors' use of consumer medical information and restrict the dissemination of medical information in credit reports. These provisions require the coding of medical information that is included in credit reports and prohibits creditors from obtaining or using medical information in determining a consumer's eligibility for credit. S. 1753 also requires affiliated companies to give consumers notice and an opportunity to opt out of direct marketing. In addition, the bill requires the regulators to study information-sharing practices of affiliated companies and the level of consumer understanding. Financial literacy was another topic of our committee deliberations. The committee understands that informed, knowledgeable consumers are best positioned to take advantage of new credit products and to reduce the likelihood of falling prey to negative developments, such as identity theft. Financial education is crucial to the effective operation of our credit markets since the Fair Credit Reporting Act places significant responsibility on the consumer to ensure the accuracy of their credit reports. For these reasons, the bill establishes the Financial Literacy and Education Commission to review and create Federal programs and coordinate the existing financial literacy efforts already established. The committee has devoted a significant amount of time and energy in this bill to build a complete and thorough record on the highly complex issues involved with the Fair Credit Reporting Act. The legislation we are considering today, which was passed unanimously out of the Banking Committee, reflects the time and consensus achieved during that process. It contains language that was developed by a number of my colleagues on both sides of the aisle, and I thank all of them for their efforts. I also particularly thank the ranking member and former chairman, Senator Sarbanes, for his insight and the significant contributions he and his staff have added as we have moved through this process over the course of the year. I believe we have achieved the difficult objective of striking the proper balance between enhancing the rights of consumers and improving the efficient operation of our credit markets. Mr. President, I now yield the floor to my distinguished colleague from Maryland, the ranking Democrat.

Mr. SHELBY. Mr. President, I thank the Senator from South Dakota for permitting me to do this. I ask unanimous consent that the substitute amendment be adopted and considered original text for the purposes of further amendment and that no points of order be waived by this agreement.

Mr. SHELBY. Mr. President, I send a substitute amendment to the desk and ask for its immediate consideration.

Mr. SHELBY

Mr. SHELBY. Mr. President, I pay tribute today to a dear friend and Alabama icon, Mr. Earl Goodwin. Earl passed away on Friday, October 24, 2003 at the age of 93. He and I and our families have been close friends for nearly 40 years, and his death is a great loss for the State of Alabama. Earl was a soldier in the United States Armed Forces, fighting on the beaches of Normandy. He made multiple trips back to England to pick up more groups of troops bringing them over to France. He completed these missions in aircraft that were unsafe because of their frequent crash landings. Earl was a true war hero, who put love of country before everything else. After the war, he returned to Alabama and eventually created Bush Hog which became one of the world's foremost manufacturer of farm implements. Bush Hog employs hundreds of Dallas County residents, and has made great contributions in economic development to the region. Earl was a visionary with a smart mind for business. He will certainly be remembered for the tremendous difference he made in Dallas County. Throughout his time in business, Earl was active in the community and politically astute. A lifelong Democrat, he became a prominent member of the Alabama State Senate, worked for Governor George Wallace, worked to elect Governor Don Siegelman, and served as a National Democratic Committeeman. Senator Goodwin is an example of the American success story. Born into poverty, Earl took adversity and challenged it in every way possible. He was a war hero, a successful businessman, a husband of 61 years, and a father and grandfather. Earl Goodwin will be missed by all those who knew him, and I hope this tribute exemplifies, in a small way, the kind of man that he was.

Mr. SHELBY

Mr. SHELBY. Mr. President, I pay tribute to a dear friend, Garry Drummond, of Birmingham, AL. Garry Drummond was recently named to the Alabama Business Hall of Fame. Garry is the chairman and chief executive officer of Drummond Company, Inc., one of Alabama's largest coal producers and a major national producer of foundry coke. The company was founded in 1935 by Mr. Heman Drummond, father of five brothers who are still associated with the company today. The company's executive and administrative offices are in Birmingham, with operational headquarters in Jasper, AL. Garry was born in Sipsey, AL, on June 8, 1938. He earned his Associate degree from Walker College in 1959. He received his bachelor of science degree in civil engineering from the University of Alabama in 1961. He also holds an honorary doctorate of science from the University of Alabama, awarded in May 1983, and served on the University's board of trustees from 1983 to 2001. Garry has been active in the coal industry and its State, national, and international organizations. He is the longest running board member of the National Mining Association and is a former member of the board of directors of the American Coal Foundation. He is a founder of the Mining and Reclamation Council of America , MARC, a national trade organization representing primarily surface miners that later merged with the National Coal Association in 1987. Garry served as MARC's first chairman. He is a member of the board of directors and past chairman of the Alabama Coal Association and a former member of the National Coal Council, an advisory group appointed by the U.S. Secretary of Energy. He is also a member of the board of directors of the Center for Energy and Economic Development. I offer Garry my congratulations and best wishes as he becomes a member of the Alabama Business Hall of Fame.