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FCRA: Improved, With Burdens

There is nothing like a sunsetting provision in a law to draw everyone's attention to it. This time, it was the Fair Credit Reporting Act. The provision for state law preemption on information sharing among affiliates was due to expire before January 2004. The loss of the preemption would constitute an open invitation to state legislators eager to score election points with their constituents by passing state laws restricting information sharing.

This picture is not a pretty one because each state is likely to create different permissions and prohibitions. In today's mobile society, this would create compliance chaos not only for the largest of banks, but for every financial institution in the country. Customer expectations would quickly become based on what they had experienced or heard about in another state. It promised to be a compliance and customer relations nightmare.

In the eleventh hour, Congress put a stop to the pending nightmare by enacting permanent federal preemption. But this coup came at a price: more compliance. To compliance watchers, this is neither new nor unexpected. Sunset provisions invariably carry the hidden cost of more compliance because, when the provision is reevaluated on the eve of the sunset, there are always lots of new ideas. They get raised because the issue is being looked at anyway, so why not?

Advocacy groups also see sunset provisions as a pending opportunity to get more. So they were ready with ideas and prepared to sell them. The opportunity was perfect. Not only did Congress have to give attention to the FCRA, but concerns about identity theft were high. And since identity theft issues inevitably involve credit reports, the opportunity was perfect. So the revised FCRA has new provisions designed to be tools in the prevention and correction of identity theft.

What is a match made in heaven for consumer groups can easily become a major compliance burden for financial institutions. Or - it could be an opportunity. It depends on how you approach it.

The new law clearly carries burdens. But, remembering that these burdens are all things that consumers want, you can also see these as opportunities. Smart institutions will take the attitude that, since they have to do it anyway, they might as well do it right. In fact, they might as well do it so well that they can take credit for it. Doing so is a great way to earn consumer points.

The right approach can mean the difference between selling customers on your institution or hefting one more set of compliance burdens in an already overloaded package. Take the creative approach and consider the opportunities.

For example, the law mandates that you take certain steps to help consumers and to provide information. Use the opportunity to educate customers so that they understand the information that they are getting. This need not involve a great deal of extra work on your part. You can do this by cruising the Internet and compiling some great free stuff from the federal government. Yes, the same federal government that brings you compliance burden is nice enough to provide you with some free customer tools. Use them.

Check the Federal Trade Commission's website, www.ftc.gov, for consumer information written in plain English. You can find anything from statement stuffers to lengthy booklets. For example, pull down a statement stuffer that tells customers when and how to obtain their free annual credit report - and encourage them to do it. Tell customers how to contact you if they have any concerns about their accounts or about the information in the report. Position your institution as the friendly, supportive, helper. Promise consumers that you will research their problems - since you have to anyway.

In short, use this requirement as a marketing tool. Everyone benefits. Your customers will know more (and hopefully make fewer mistakes), you can look like the good guy (for a refreshing change) and you might even get some CRA Service Test credit for this.

Copyright © 2003 Compliance Action. Originally appeared in Compliance Action, Vol. 8, No. 13, 12/03

First published on 12/01/2003

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