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1.4.3 Senate Bill 823

At the beginning of the new congressional session, Senator Proxmire and a bipartisan group of nine other senators introduced Senate Bill 823, the bill that would eventually become law. For the first time, the legislation was called the Fair Credit Reporting Act. It was designed to “establish certain Federal safeguards over the activities of CRAs in order to protect consumers against arbitrary, erroneous, and malicious credit information.”133

Citing the vast size and scope of the credit reporting industry,134 the Senator’s introductory remarks noted the wide range of information included in consumer reports: financial status; bill paying records; items of public records including “arrests, suits, judgments, and the like”; dossiers on individuals; information on drinking; marital discords; adulterous behavior; general reputation; habits; and morals. “While the growth of this information network is somewhat alarming, what is even more alarming is the fact that the system has been built up with virtually no public regulation or supervision.”135

The value of a credit reporting industry was recognized. Senator Proxmire called CRAs “absolutely essential.”136 Creditors need sound information about creditworthiness, quickly. The purpose of the bill was to “correct certain abuses which have occurred within the industry and to ensure that the credit information system is responsive to the needs of consumers as well as creditors.”137

The bill was designed to address three types of abuses: the problems of inaccuracies or inaccurate or misleading information, the problem of irrelevant information, and the problem of maintaining confidentiality.138 Whether these abuses were adequately addressed by the legislation which emerged from Congress is still subject to debate. Given the fact that the current FCRA addresses abuses of the reporting industry by establishing “reasonable procedures” and general rather than specific standards, it is especially helpful to note the original intentions of the Senate bill.

Inaccurate and misleading information was called the most serious problem in the credit reporting industry.139 Inaccuracy is a general term which still bedevils the courts today. Senator Proxmire listed five types of inaccuracies giving rise to abuses requiring a legislative response. The five are as follows: the confusion of information about persons with similar or identical names,140 biased or one-sided information,141 malicious gossip and hearsay,142 computer errors,143 and incomplete information.144

Irrelevant information is information which, while it may be “technically accurate, does not serve any useful or appropriate purpose.”145 Two types of irrelevant information were noted. The first type was minor offenses committed years ago. The second was information that goes beyond the immediate purpose for acquiring information and includes extraneous details and inappropriate personal information.146

Privacy and confidentiality were also major concerns of the time. The FCRA proponents addressed themselves to four aspects of confidentiality.147 Many CRAs supplied their reports to virtually anyone. Frequently, information was used by agencies inconsistently with the purposes indicated when the information was collected.148 Internal security procedures were often inadequate.149 And finally, information collected privately was often made available to governmental agencies.150

To address all these factors, Senate Bill 823 depended heavily upon rulemaking by the Federal Reserve Board. In the main, it set out objectives in general terms with the expectation that specifics would be promulgated by rule. The objectives were these: to ensure confidentiality; to provide a reasonable opportunity to correct information, upon request; to limit the collection, retention, or furnishing of information “bearing upon the credit rating of any individual to those items essential for the purposes for which the information is sought and to preclude the collection, retention, or furnishing of information which only marginally benefits the purposes for which the information is sought or which represents an undue invasion of the individual’s right to privacy”; to keep information current and to destroy obsolete information; to notify an individual when adverse public record information is obtained by a reporting agency and to provide an opportunity to comment; and to ensure that information is provided only to persons with a legitimate business need and for the purposes disclosed in the collection of the information.151

In addition to these general objectives, Senate Bill 823 was more specific in three regards. First, it covered all reports making any representation as to the creditworthiness or general reputation of an individual; it was not limited to credit, insurance, or employment purposes. Similarly, it covered all legitimate business uses in connection with consumer credit or other transactions with the individual on whom the information was furnished.152 Second, whenever credit was denied in whole or in part because of a consumer report, notice of that fact together with the name and address of the reporting agency was to be given to the individual. Third, the bill provided for actual damages, punitive damages of not less than $100 nor more than $1000, and attorney fees.

Public hearings,153 secret negotiations,154 a committee compromise,155 unanimous committee action,156 and unanimous voice vote of the Senate157 followed swiftly. All of this happened even before the main House bill was introduced. Moreover, the language of this Senate version is in most respects the language of the current law; it was largely unaffected by House deliberations. For this reason, a closer look at the changes that occurred in Senate Bill 823 is merited.

The most significant compromise in the Senate bill immunized CRAs, informants, and users of consumer reports from substantial liability under state defamation laws in certain circumstances.158 More than any other change, this concession won the industry’s support for the bill159 and the enmity of former consumer supporters.160

It did not start out this way. When the Senate public hearings were convened, Senator Proxmire intended to create new liability for CRAs that violated the new federal Act and to retain liability under state laws for inaccurate or defamatory information.161 Senator Proxmire’s original bill required reporting agencies to open their files to individuals about whom they collect information. The agencies objected strongly that this would leave them and their sources of information open to huge numbers of nuisance suits and dry up the flow of information necessary for the efficient operation of the credit market. Their then current policies usually were to permit consumer access to their files only if consumers waived their right to bring state law claims. Senator Proxmire began to waver and wonder aloud whether, in exchange for being required to open their files to consumers, credit agencies and others should be immunized from potential liability under state tort laws.162 This is exactly the deal that was made.163

Another major change in the Senate legislation eliminated rulemaking. Rather than set forth objectives and require the Federal Reserve Board (or the Federal Trade Commission) to implement general goals through regulations, the Act was considerably more explicit in establishing its own standards and procedures.

The third major change was to set out more explicitly consumer rights of access to files and to correct information. In several instances, at the urging of the Nixon Administration, the rights are more beneficial for consumers than originally proposed by Senator Proxmire.164 On the other hand, several consumer benefits that were anticipated to flow from rulemaking were not included in the legislation.165 For example, agencies no longer had to notify a consumer when adverse information was included in any file; instead, a consumer who was turned down on the basis of a report would have a right to find out what was in the credit file and have it corrected.166

A last major change involved the redrafting of the operative definition of consumer report.167 For the first time, the definition incorporated information used for governmental benefits and business transactions involving consumers.168 The intent and meaning of these changes is still debated today.169


  • 133 {128} 115 Cong. Rec. 2410 (1969).

  • 134 {129} “Although a number of congressional committees have recently begun to investigate the activities of consumer reporting agencies, most Americans still do not realize the vast size and scope of today’s credit reporting industry or the tremendous amount of information which these agencies maintain and distribute.” 115 Cong. Rec. 2410 (1969).

  • 135 {130} Id.

  • 136 {131} Id. at 2411.

  • 137 {132} Id. Senator Proxmire also put it this way: “Since the consumer pays the bill in the end, he has the right to have his interests represented and protected. The credit reporting system can only be justified if it serves the consumer as well as business.” Id. at 2414.

  • 138 {133} Id. at 2411.

  • 139 {134} “Perhaps the most serious problem in the credit reporting industry is the problem of inaccurate or misleading information. There have been no definitive studies made of just how accurate is the information in the files of consumer reporting agencies. Even if it is 99 percent accurate—and I doubt that it is that good—the 1 percent inaccuracy represents over a million people. While the credit industry might be satisfied with a 1 percent error, this is small comfort to the one million citizens whose reputations are unjustly maligned. Moreover, the composition of the 1 million persons is constantly shifting. Everyone is a potential victim of an inaccurate credit report. If not today, then perhaps tomorrow.” Id. at 2411.

  • 140 {135} “Confusion with other persons: each year, millions of Americans get married, get divorced, change their name, their job or their residence. Millions of people have the same or similar name. Therefore, it is no wonder that credit bureaus frequently confuse one individual with another, sometimes with tragic results.” Id.

  • 141 {136} “Biased information: A record of slow or nonpayment in a person’s credit file does not necessarily mean he is a poor risk. Perhaps he had a legitimate dispute with a merchant and withheld payment until the merchant lived up to the terms of the contract. While merchants have a wide variety of collection weapons, about the only bargaining power consumers have is the threat to hold up payment. Unfortunately, the consumer’s side of the story does not find its way as easily into the files of the credit bureau as does the merchant’s version.” Id.

  • 142 {137} “Malicious gossip and hearsay: Perhaps the most serious misinformation in consumer reporting agency files is malicious gossip and hearsay. This type of information is most prevalent in the files of consumer reporting agencies which specialize in investigating people who apply for insurance or employment. The information is often obtained from neighbors or coworkers where the opportunity is ripe for anonymous character assassination. These kinds of investigations usually include detailed information on highly personal items.” Id. This is the first reference in the legislative history to consumer reports compiled for insurance or employment purposes.

  • 143 {138} “Computer errors: With the growing trend toward computerization, the incidence of computer errors is on the increase.” Id.

    Also, “undoubtedly the computerization of personal information about millions of individuals gives this subject greater importance and urgency then it had in the days when the average businessman knew his customers personally and knew the good credit risks from the bad, and the insurance agent was an old acquaintance who knew the probably good actuarial risks from the probably bad ones. Today, such data is almost completely second-hand, third-hand or even more distant and impersonal, and it is almost impossible to find a human being to unravel a computer error once it is made. When the computer is half a continent away and connected to the store by electronics, the remoteness of the customer from the real arbiter of his creditworthiness becomes even pronounced.” Hearing on H.R. 16340 Before the Subcomm. on Consumer Affairs of the H. Comm. on Banking and Currency, 91st Cong. 1 (1970) (remarks of Rep. Leonor Sullivan).

  • 144 {139} “Incomplete information: Because of the increased computerization and standardization of credit bureau files, all of the relevant information is not always reflected in a person’s file.” (For example, Senator Proxmire notes, one may be classified as a “slow payer” despite the existence of extenuating circumstances which are not noted in a standardized computerized report.) Id. 115 Cong. Rec. 2410 (1969).

    “Another type of incomplete information is concerned with adverse items of public records. Most consumer reporting agencies assiduously cull adverse information on people from newspapers, court reports, and other public documents. These items include records of arrest, judgments, liens, bankruptcies, suits, and the like. However, most agencies are not anywhere nearly as diligent in following up on the case to record information favorable to the consumer. Action following arrest is often dropped because of evidence. Suits are dismissed or settled out of court. Judgments are reversed. However, these facts are seldom reported by the consumer reporting agencies with the result that their records are systematically biased against the consumers.” Id. at 2412.

  • 145 {140} Id.

  • 146 {141} Id. at 2413.

  • 147 {142} “What is disturbing is the lack of any public standards to insure that the information is kept confidential and used only for its intended purpose. The growing accessibility of this information through computer- and data-transmission techniques makes the problem of confidentiality even more important.” Id. at 2413.

  • 148 {143} “When an individual seeks to buy an insurance policy, it might be argued that he has given his implied consent to be investigated. Likewise, when he applies for employment. But surely the doctrine of implied consent cannot be stretched to infer that the individual has agreed that information acquired in an insurance investigation or filled out on a credit application can be furnished to prospective employers. Considering the gossipy personal information included in . . . insurance investigations it is frightening to think such information could affect a person’s entire career. It is bad enough to be turned down for insurance. It is much worse to lose a job on the basis of an erroneous piece of gossip in a credit file.” Id.

  • 149 {144} “Since credit bureaus are almost entirely responsive to the needs of business and have little responsibility to consumers, it is difficult to see major expenditures on security systems in the absence of public standards.” Id.

  • 150 {145} “One can certainly be sympathetic to the problems of the FBI and IRS in meeting their heavy responsibilities. But, nonetheless, their right to investigate is not absolute and is subject to various constitutional restraints . . . [R]egardless of whether the individual has any legal control over the information on him in a consumer reporting agency’s file, I certainly feel he has a moral claim to controlling its use. He should not be entirely dependent upon the policies of the particular consumer reporting agencies to protect his basic rights.” Id.

  • 151 {146} See S. 823, 91st Cong. § 164 (introduced Jan. 31, 1969); 15 Cong. Rec. 2415 (1969).

  • 152 {147} S. 823, 91st Cong. §§ 163, 164(f) (introduced Jan. 31, 1969); 15 Cong. Rec. 2415 (1969).

  • 153 {148} Hearings on S. 823 Before the Subcomm. on Financial Institutions of the S. Comm. on Banking and Currency, 91st Cong. 2 (1969). In convening public hearings, Senator Proxmire set out a consumer bill of rights: “The Aim of the Fair Credit Reporting Act is to see that the credit reporting system serves the consumer as well as the industry. The consumer has a right to information which is accurate; he has a right to correct inaccurate or misleading information; he has a right to know when inaccurate information is entered into his file; he has a right to see that the information is kept confidential and is used for the purpose for which it is collected; and he has a right to be free from unwarranted invasions of his personal privacy. The Fair Credit Reporting Act seeks to secure these rights.”

    Also, “In a free society there is no place for protected character assassination masquerading under the guise of a credit report.” Id.

  • 154 {149} Senator Bennett, the spokesperson for industry interests, characterized the negotiations as occurring between committee members and industry representatives. “The committee members and representatives of both the reporting agencies and the industries which they serve have worked hard to reach agreement on responsible legislation which would protect the legitimate interests of both consumers and industry.” 115 Cong. Rec. 33,412 (1969).

  • 155 {150} “We have reached a compromise that I can enthusiastically support.” 115 Cong. Rec. 33,413 (1969) (remarks of Sen. Proxmire).

  • 156 {151} Id. at 33,408.

  • 157 {152} Id. at 33,414.

  • 158 {153} See § 10.4, infra, for exceptions to this immunity.

  • 159 {154} “It is an industry bill.” Hearings on H.R. 16340 Before the Subcomm. on Consumer Affairs of H. Comm. on Banking and Currency, 91st Cong. 108 (1970) (remarks of John L. Spafford, President, Associated Credit Bureaus Inc.). See also 115 Cong. Rec. 33,412–13 (1969) (remarks of Sen. Bennett).

  • 160 {155} “If the choice is the Senate Bill or no bill, then I think it has to be no bill.” Hearings on H.R. 16340 Before the Subcomm. on Consumer Affairs of the H. Comm. on Banking and Currency, 91st Cong. 84 (1970) (remarks of Anthony Roisman, Consumer Federation of America). “I have the feeling about S. 823 that it really is an act to protect and immunize the credit bureaus rather than an act to protect the individual who has been abused by credit information flow created by the bureaus.” Id. at 190 (remarks of Prof. Arthur Miller, University of Michigan).

  • 161 {156} Hearings on S. 823 Before the Subcomm. on Financial Institutions of the S. Comm. on Banking and Currency, 91st Cong. 24 (1969).

  • 162 {157} Id. For example, at page 104, Senator Proxmire asks rhetorically: “How about simply exempting the credit bureaus? After all, you have a situation here where you are recommending at least when this adverse information is entered, the consumer is notified he has an opportunity to come in and correct it. The credit bureau has complied with the law. What they have done is simply secure the information that the informant has given them, there has been an opportunity for correction made [sic]. Presumably if the consumer is right, the correction would be made. And under these circumstances, why should there be any basis for a suit?”

  • 163 {158} 115 Cong. Rec. 33,411 (1969) (“That is the quid pro quo.”) (remarks of Sen. Proxmire).

  • 164 {159} See Hearings on S. 823 Before the Subcomm. on Financial Institutions of the S. Comm. on Banking and Currency, 91st Cong. 11 (1969) (testimony of Virginia Knauer, Special Assistant to President Nixon) (e.g., consumers’ right to learn contents of reports; right to submit explanatory statements; requirement that corrected version of reports be sent to earlier recipients).

  • 165 {160} See generally Hearings on H.R. 16346 Before the Subcomm. on Consumer Affairs of the H. Comm. on Banking and Currency, 91st Cong. (1970).

  • 166 {161} 115 Cong. Rec. 33,411 (1969) (remarks of Sen. Proxmire).

  • 167 {162} Compare S. 823, 115 Cong. Rec. 2415 (1969) with today’s statute.

  • 168 {163} 15 U.S.C. § 1681a(d).

  • 169 {164} See § 2.3, infra.