Legal and Regulatory:
Economic Growth And Regulatory Paperwork Reduction Act of 1996
Subtitle D -- Consumer Credit - continued

Sec. 2412. Civil Liability.

Section 2412 applies sections 616 and 617 of FCRA (15 U.S.C. 1681n and 1681o) to any person who willfully or negligently fails to comply with FCRA. Previously, a private right of action for these violations was available only against a CRA or a user of information. Therefore, furnishers of information, including financial institutions, now may be subject to civil liability in certain cases. See section 2413. This section also provides a minimum ($100) and maximum ($1000) civil penalty for willful noncompliance of FCRA, as an alternative to actual damages, in addition to punitive damages and fees and costs. If the willful noncompliance is the result of obtaining information under false pretenses or knowingly without a permissible purpose, however, a consumer is entitled to receive actual damages or $1,000, whichever is greater. Moreover, any person who obtains a consumer report from a CRA under false pretenses or knowingly without a permissible purpose is liable to the CRA for actual damages or $1,000, whichever is greater.

Section 2412 also provides that, if any filing in connection with an action for civil damages was made in bad faith or for the purpose of harassment, the court must award attorney fees to the prevailing party.

Sec. 2413. Responsibilities of Persons Who Furnish Information to Consumer Reporting Agencies.

Section 2413 adds a new section, to be codified as section 623 of FCRA, which imposes new duties and liability on furnishers of information to CRAs. In addition to their role as users of consumer credit reports, financial institutions also frequently serve as furnishers of information to CRAs.

Specifically, section 2413: (1) prohibits furnishers of information from providing any information to a CRA if they know, or consciously avoid knowing, that the information is inaccurate; (2) requires persons who regularly and in the normal course of business furnish information to a CRA about a consumer to (a) promptly notify the CRA of any furnished information which they later determine to be inaccurate or incomplete, and provide the CRA with corrections or additional relevant information; and (b) notify the CRA of any voluntary closure of a credit account by the consumer; (3) requires furnishers of information to a CRA regarding a delinquent account being placed for collection to provide the CRA with the date of the delinquency; and (4) prohibits furnishers from providing information to a CRA that is disputed by a consumer without giving notice to the CRA that the information is in dispute.

Section 2413 also requires furnishers of information to CRAs, after receiving notice from a CRA that a consumer is disputing the information, to investigate the disputed information and report back to the CRA promptly, after considering all relevant information submitted by the consumer. If the investigation reveals that the disputed information is inaccurate or incomplete, the furnisher must report the results of the investigation to all CRAs to which the information was originally reported.

Furnishers of information to CRAs may be subject to private right of actions for willful or negligent noncompliance of this section's reinvestigation procedures for disputed information. However, private rights of action for violations of this section's requirements regarding the provision of accurate information to CRAs only may be brought by States on behalf of residents of that State, and only if the furnisher has been first enjoined by the State from committing the violation and has violated the injunction. The appropriate Federal regulator may intervene in this action but only on behalf of residents of that State. See section 2417. Furnishers of information are subject to administrative enforcement actions by the appropriate Federal regulator or State. However, violations of the requirements to provide accurate information to CRAs may be enforced only under the administrative enforcement provision in FCRA. See section 2416.

Sec. 2414. Investigative Consumer Reports.

This section amends section 606 of FCRA (15 U.S.C. 1681d) to, among other things, prohibit a CRA from: (1) furnishing an investigative consumer report unless the requester of the report has certified that he or she has provided the required disclosures to the consumer and will comply with the other requirements of this section; (2) obtaining information to prepare an investigative consumer report for employment purposes if the inquiry by the requesting employer or prospective employer would violate Federal or State equal employment opportunity laws; (3) including information in the report relating to arrests, indictments, convictions, civil actions, tax liens or outstanding judgements unless the CRA has verified the accuracy of the information within the last 30 days; and (4) including adverse information in the report obtained from a personal interview with a friend, neighbor, or associate of the consumer, among others, unless the CRA has followed procedures to obtain confirmation of the information from an additional source, and the person interviewed is the best possible source of the information.

Sec. 2415. Increased Criminal Penalties for Obtaining Information Under False Pretenses.

Section 2415 increases the penalties for persons found guilty of obtaining information from a CRA under false pretenses (section 619 of FCRA (15 U.S.C. 1681q)) and for CRA officers or employees who knowingly provide consumer information to unauthorized persons (section 620 of FCRA (15 U.S.C. 1681r)). These persons now may be subject to fines under title 18 of the United States Code, instead of fines of not more than $5000, and imprisoned for up to two years, instead of one year.

Sec. 2416. Administrative Enforcement.

Section 621 provides the FTC and other Federal regulators with authority to enforce FCRA. The OCC is specifically given the authority to bring enforcement actions against national banks under section 8 of the FDI Act (12 U.S.C. 1818). Section 2416 amends section 621 of FCRA (15 U.S.C. 1681s) to permit the OCC, as well as other appropriate Federal agencies, to bring enforcement actions against furnishers of information to CRAs and users of CRAs for solicitation purposes, in addition to CRAs and other users of CRAs as permitted under prior law.

Section 2416 also provides the FTC with the authority to assess civil money penalties in Federal district court for knowing violations that constitute a pattern or practice of violations of FCRA, with penalties of up to $2,500 for each violation. However, the FTC may only bring an action for furnishing inaccurate information to a CRA (a violation of section 623(a), as added by section 2413 of the Regulatory Paperwork Reduction Act) if the furnisher has first been enjoined from committing the violation in an action brought by the FTC and has violated the injunction or order.

In addition, section 2416 prohibits the Federal banking agencies, among others, from examining for compliance with FCRA except "in response to a complaint (or if the agency otherwise has knowledge) that the [financial institution] has violated a provision of [FCRA]. . . ." If the agency determines, in investigating a complaint, that a violation has occurred, the agency may examine the bank for FCRA compliance but only during its next two regularly scheduled examinations.

This section also prohibits the FTC and the Federal banking agencies, among others, from prescribing trade regulation rules or other regulations with respect to FCRA. But see section 2418, which permits the Fed, in consultation with other Federal banking agencies, to issue interpretations of FCRA for financial institutions and their holding companies and affiliates.

Sec. 2417. State Enforcement of Fair Credit Reporting Act.

Prior to the enactment of these amendments, section 621 of FCRA (15 U.S.C. 1681s) provided for administrative enforcement only by Federal agencies. The Federal banking agencies enforce FCRA with respect to depository institutions under 8 of the FDI Act. Section 2417 permits the "chief law enforcement officer" of a State or other designated State official, also to bring certain types of enforcement actions in Federal or State court against persons (including national banks) for violations of FCRA, as well as State laws. However, this section requires the State to provide the relevant Federal agency with written notice of the action and a copy of the complaint, and permits the Federal agency to intervene in the action, request removal of the action to Federal district court, and file petitions for appeal. If the appropriate Federal regulator has already instituted a civil or administrative action for a violation of FCRA, this section prohibits States from bringing an action for the same violation during the pendency of the Federal action. Finally, section 2417 prohibits actions against furnishers of inaccurate information to a CRA (violations of section 623(a), as added by section 2413 of the Regulatory Paperwork Reduction Act) unless the furnisher has first been enjoined from committing the violation in an action brought by the State and has violated the injunction or order.

Sec. 2418. Federal Reserve Board Authority.

Section 2418 amends section 621 (15 U.S.C. 1618s) to provide that the Fed, in consultation with the appropriate Federal agencies, may issue an interpretation of any provision of FCRA as it applies to any bank, thrift, or credit union, or their holding companies or affiliates.

Sec. 2419. Preemption of State Law.

Previously, section 622 of FCRA (15 U.S.C. 1618t) provided that FCRA does not "annul, affect, or exempt any person subject to the [FCRA] from complying with the laws of any State with respect to the collection, distribution, or use of any information on consumers, except to the extent that those laws are inconsistent with the [FCRA], and then only to the extent of the inconsistency." Section 2419 modifies this provision (renumbered as section 624) by providing that FCRA expressly preempts State law in discrete areas, including: (1) prescreening; (2) the time by which a CRA must take any action concerning disputed information; (3) the duties of a person who takes any adverse action with respect to a consumer; (4) the duties of persons who use a consumer report in connection with any credit or insurance transaction that is not initiated by the consumer and that consists of a firm offer of credit or insurance; (5) information contained in consumer reports (except that existing State laws are grandfathered); (6) responsibilities of persons who furnish information to CRAs (except that certain laws of Massachusetts and California are grandfathered); (7) the exchange of information among affiliates (except for certain laws of Vermont); and (8) the form and content of the summary of a consumer's rights under FCRA required in any consumer disclosure.

This preemption does not apply to any settlement, agreement, or consent judgement between and State and a CRA in effect on enactment of this section, and does not apply to any provision of State law that is enacted after January 1, 2004 that specifically is intended to supplement FCRA and give greater protection to consumers than FCRA.

Sec. 2420. Effective Date.

This section provides that, unless otherwise specified, the amendments made to FCRA are effective one year after enactment (September 30, 1997). Any person that is subject to FCRA may, however, comply with the new provisions prior to that date.

Sec. 2421. Relationship to Other Law.

This section provides that FCRA does not supersede or otherwise affect 18 U.S.C. 3721 with respect to motor vehicle records for surveys, marketing, or solicitations.

Sec. 2422. Federal Reserve Board Study.

This section requires the Fed, in consultation with the other Federal banking agencies and the FTC, to conduct a study and report to Congress in six months on whether organizations which are not subject to FCRA are engaged in the business of making sensitive consumer identification information (including social security numbers, mothers' maiden names, prior addresses, and dates of birth) available to the public; whether these activities create undue potential for fraud and risk of loss to insured depository institutions; and whether Federal law should be amended to address these risks.