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TRW does not protect the right to privacy to any consumer. In fact, it invades the right to privacy. Any debtor's clerk in this country can get a copy of your credit report on a moment's notice, Mr. Chairman. But under the law it will take you 30 days to get the same information from a credit reporting bureau. Is that the protection to the right to privacy?

More importantly, this action by the credit bureau is harmful to the consumer, and as an example, in California an elderly gentleman in San Bernadino County had a stroke, which among other things, caused him to have financial problems. He asked his adult daughter to speak to TRW on his behalf because he could not get out of bed.

TRW, because of this so-called right to privacy, refused to talk to the daughter, even though she had a signed statement from her father. Isn't it strange, you could be charged with murder and have an attorney. You can sign a power of attorney to anyone to take care of your financial matters if incapacitated, but credit reporting bureaus refuse to recognize the right to representation that every business and economic segment of the American society recognizes.

In the area of convenience, TRW says that you can deal directly with them at their store front locations. But the problem is that they only have four in California, a State of 26 million people. The locations are not generally known, and the hours they are open are horrendous. In California, the hours are from 9 until 12, 1:30 to 4, Monday through Friday and that is it. How can the general consumer take time from work and then appear only to be told it would take a couple of hours to run your TRW report before they can even discuss it?

All of the examples that I have given you are in effect a representation of legal fraud upon the consumer. I have in front of me 160 letters. I could have brought several thousand from TRW that implied that if you use a credit repair organization, you might be breaking the law. And because you might be using a credit repair organization, they will not respond to your inquiry.

I have an interview held with KCOP in L.A. showing an official of TRW denying the existence of this letter and implying that it is a phony, but the next day the reporter brought back the evidence that the TRW official had lied about the letter.

Mr. Chairman, I would like your permission to show that tape now.

Chairman Annunzio. How long is it going to take?
Ms. Halford. About 2Vfe minutes, sir.
[A video tape was played for the subcommittee.]
Ms. Halford. Thank you, Mr. Chairman.

I will go on now. This is an example of why the consumer needs to have the right to representation before a credit bureau. Each one of us has had our own horror story about dealing with a credit bureau. I have talked with members of your staff and others on the Hill

Chairman Annunzio. Ms. Halford, how much more time do you want. We are beginning to run out of time and we want questions. I said at the beginning you can have between 5 and 10 minutes, and your whole statement would be made part of the record.

Ms. Halford. I understand, sir. I have only one page to go.

Chairman Annunzio. Proceed.

Ms. Halford. Thank you. I strongly support this legislation with two changes, Mr. Chairman. First, I urge an amendment that would ensure the right to representation with a credit reporting bureau. This should indeed be a fundamental right of all people.

Second, I suggest that section 404 that deals with prohibiting practice be amended. It is suggested that a $50,000 surety bond be issued before a firm could get clients, such a surety bond is next to impossible to get. Surety companies are not issuing them to our industry, plus it would take a consumer years under the current status of such bonds to get paid from the bond.

I would suggest that an escrow account or trust can be set up of $50,000 as an alternative. Let me finish this issue. An older gentleman in southern California was forced to sue 25 of his creditors in small claims court for reporting derogatory information on his credit profile, which didn't belong to him. He decided to do this after persisting for 3 years in correcting the information.

He has won most of his cases. Each creditor requested that the information be deleted from the profile. However, TRW refused to do it. Should creditors and consumers really suffer this way? Thank you for this opportunity of testifying in support of H.R. 458 with the two proposed amendments.

Chairman Annunzio. Thank you very much, Ms. Halford.

Mr. Rayburn, we have heard today about Credit-Rite, which took in $2.3 million from 9000 consumers. Maryland requires a $10,000 bond. H.R. 458 would require a $50,000 bond. Given the amounts involved, are such bonding limits realistic in your opinion?

Mr. Rayburn. The answer to your question, I believe, Mr. Chairman, is the fact that if this company that we heard the testimony about today had been required to get from a legitimate bonding company a $50,000 bond before they were able to go into business, they would have never collected a nickel from a consumer because they wouldn't have gotten the bond.

Chairman Annunzio. That is an added protection for the consumer.

Mr. Rayburn. Absolutely, sir.

Chairman Annunzio. You mentioned in your statement that some credit repair services offer legitimate services. Can you discuss these services that you consider legitimate and those that you consider abuses or not legitimate.

Mr. Rayburn. Yes. The legitimate services that they provide, I believe, are those informational services that some unsophisticated consumers are not able to get for themselves. As an example, it is rare that the consumer has full knowledge of the Federal Fair Credit Reporting Act or in our case in the State of Maryland, the State Credit Reporting Act, and as a result they can get this information from one of these credit repair services, if they are willing to pay a fee for it.

Now, please understand that they can also get this information from an attorney, for which they usually pay a fee or from legal aid, if they qualify, but in all cases from the Commissioner of Credit and the Office of the Attorney General at no charge whatsoever.

I believe the Federal Trade Commission is not charging any fees either for consumers. They do have informational services. They have a Bureau of Consumer Protection here in Washington, and I might add, sir, that the offices of the Congressmen in their local districts provide this kind of information to their constituents at no charge as well, or refer them to State agencies that will give this kind of information at no charge.

Chairman Annunzio. Well, Mr. Rayburn, if the Congressmen are listening, that is one way of coming back each time.

Mr. Rayburn. It wasn't intended that way, sir, but we do get a number of inquiries from our Congress people in Maryland's offices and they know us and know that they can contact us. I am certain that it is the same way in Illinois and Indiana and wherever else in the United States you have an office.

Chairman Annunzio. I would point out that we are going to continue until the first bells ring for a vote. After that we are going to have to leave. Please try to make your answers short. We want to get as many questions in as possible.

Mr. Hilee. Ms. Noonan, as was mentioned by Ms. Halford, should the Fair Credit Reporting Act give the consumer a right of third party representation before a credit bureau? Current law states, of course, that only the consumer can represent himself before the bureau. Can you comment on this proposed change?

Ms. Noonan. Of course. As you know, the Fair Credit Reporting Act permits consumers to bring a third party with them if they would like. If a person feels, for any reason, that they can benefit from the assistance of a friend, relative or paid person, they are free under existing law to do that. Moreover, I would note that it is not necessary to go to the office of the credit bureau in order to obtain disclosures of the information in your file or to dispute it. In fact, most credit bureaus accomplish that over the phone and through the mail.

Mr. Hiler. So if there is a problem with a credit bureau about allowing a third party to assist an individual in their dealings with the credit bureau, no new legislation is needed. I mean, that is something that is—that ability is already in existing law.

Ms. Noonan. The existing law gives you a couple of different options. The credit bureaus have provided a third. You may go down in person, but few consumers choose that because of the time involved. You may get a disclosure over the telephone, and most credit bureaus permit a disclosure through the mail as well.

The consumer can initiate that process and the response comes back to the consumer. When consumers get the information back, either by phone or mail, they can share it with whomever they like. If consumers want to use the right to go down in person, they may bring someone with them under existing law.

Mr. Hiler. Mr. Kurth, can you comment on the same question I asked about third party representation before credit bureaus.

Mr. Kurth. As Ms. Noonan pointed out, existing law permits a consumer to be accompanied by a third party on the disclosure. This has not been a problem for the industry. In the wisdom of the committee, when the law was written back in—it became effective in the early 70's, those provisions and protections were put in there.

Mr. Hiler. Ms. Halford, where do you perceive the problem to be?

Ms. Halford. Mr. Hiler, the problem here is that the credit bureaus are saying that, yes, you can be accompanied by a person of your choice to the—directly to the credit bureau. This is the way I understand the Fair Credit Reporting Act.

This is a provision for appearing in person, not by mail. If you were to give me a power of attorney and I use that power of attorney to obtain a copy of your credit profile, the credit bureaus will not allow me to.

Mr. Hiler. Ms. Noonan?

Ms. Noonan. The law requires credit bureaus to respond when a person with a power of attorney, acting on a consumer's behalf, requests disclosure of information in the consumer's file. However, the credit bureau may send the report directly to the consumer. There is no requirement that the disclosure be made to the third party. This practice helps assure the privacy of the information in the report. Moreover, it protects consumers from false promises of credit repair. If a third party engaged in credit repair fraud were permitted to obtain a consumer's credit report directly, the consumer would have less opportunity to discover that his or her credit report has not been improved by the credit repair company. The way the system works now, the credit report must go through the consumer's hand, which gives the consumer an opportunity to learn exactly what is contained in his or her credit report before, during, and after the so-called credit repair process.

We would note, however, that this doesn t preclude the consumers from sharing that information with anyone they choose.

Mr. Connelly. Mr. Hiler, to mandate to law third-party representation for a consumer to a credit bureau sounds like it is neat idea. But in fact, sir, it would open up one of the most major loopholes that we are here trying to close up. Picture, if you will, sir, the advertisements in front of you of these, and as you saw here, and see those adds saying "Erase bad credit. Hire us as your third party representative to the credit bureau. We will help you erase bad credit."

That is what they are going to do. It is not a case of hire us so that we will go in and correct erroneous information. That is not the gimmick. This is a smoke screen, sir. It is just going to add another loophole to the loophole the chairman has identified and you have by cosponsoring this legislation, that is in section 611 and it is a good provision that says that you have to re-verify and delete it if it can't be re-verified.

That is the little loophole they are taking advantage of right now. This would add another one, sir.

Mr. Hiler. Mr. Rayburn, do you—in the State of Maryland's eyes, is the bonding, the surety bond the only way to go or is the trust fund concept, which apparently is in place in California, a legitimate thing to look at, or do you see distinctions that are important?

Mr. Rayburn. We have an alternative trust fund provision in Maryland. We have a $10,000 bond. There is also the alternative to post a $10,000 cash trust payable to the State of Maryland as an alternative, if they can't get the bond.

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Mr. Hiler. Sir.

Mr. Kurth. Mr. Hiler, I will note that Illinois just passed legislation regulating credit repair companies. They have a $100,000 bond imposed in that law.

Mr. Hiler. I have no further questions, Mr. Chairman.

Chairman Annunzio. Mr. Wylie?

Mr. Wylie. Thank you, Mr. Chairman.

First, I want to apologize for being late. The Veterans' Affairs Committee had a markup on judicial review this morning and we don't have proxy voting in that committee. All of the Members were present and I thought it was important that I be on record there. So that is the reason. Although this subject is just as important, I felt like I had to be present.

Chairman Annunzio. Thank you. We are happy to have you here. You always add so much to our hearings.

Mr. Wylie. Thank you. We worked on the Fair Credit Reporting Act years ago together and helped write it. One of the provisions was the Privacy Act provisions party at the insistence of the consumer groups. And I think that is part of the Act that needs to be protected.

Having said that, Ms. Halford, your testimony states that the legislation under consideration does not mandate that credit reporting bureaus recognize existence of credit clinics and thereby precludes the consumer from having representation. Is it not true that you are free to give the consumer any advice you wish as long as the consumer personally acquires his or her credit report, either in writing or by personally visiting the credit bureau?

Ms. Halford. That is correct, Mr. Wylie.

Mr. Wylie. Is it not reasonable that a credit bureau then required that an individual be personally responsible for securing his or her credit report to assure that his or her privacy is not violated and is this requirement not like a bank's requirement, for instance, where no one except the customer can request a copy of his or her bank statement?

Ms. Halford. That is correct. Let me separate one thing here. The problem is not obtaining the report. The problem is getting the credit bureau to investigate information that we have found to be inaccurate or unverifiable under the Fair Credit Reporting Act.

Obtaining the report is not a problem. Once the information has been investigated as being inaccurate or unverifiable, then the credit service organization who represents that consumer would have the right to dispute the information to the credit bureau.

Now, I understand that there is a lot of controversy

Mr. Wylie. Have you been able to obtain the credit report yourself?

Ms. Halford. Yes, sir, I have.

Mr. Wylie. Through your organization Design System?
Ms. Halford. Yes, sir, I have.

Mr. Wylie. Without a power of attorney from people you represent?

Ms. Halford. I didn't get that.

Mr. Wylie. Without a power of attorney from the people you are representing?

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