A landmark consumer protection law called the Fair Credit Reporting Act may get a makeover this summer. But the news isn't all good.
Though consumers are likely to get some new safeguards -- victims of identity theft may find it easier to clear their names, for example -- the law could supplant much stronger state laws, leaving residents of many states with less protection, consumer advocates complain.
At particular risk are residents of California and other states whose governments have provided stronger credit protections than those provided in both the existing and the proposed federal laws, said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group in Washington.
The proposed federal law could preempt these state protections, which range from greater privacy rights to the requirement that credit agencies provide free credit reports. And that rankles consumer advocates.
"We don't think Congress should be in the business of stopping state legislatures from protecting their citizens," said Travis Plunkett, legislative director at Consumer Federation of America. "If nothing is done to grandfather the state laws, we could see a weak federal law displace better state laws. That doesn't protect consumers anywhere."
Retailers, banks and credit card companies say federal law should take precedence to keep requirements uniform and make it easier for companies to operate across state lines.
But consumer advocates contend that state laws shouldn't be preempted unless federal law provides greater protection for consumers.
Thanks to a bill passed by the state Legislature, for instance, Californians recently won the right to be promptly notified if the security of their credit data has been breached. Golden State residents also have some of the strongest opt-out laws in the country, which allow consumers to block pre-approved credit offers, among other things.
Residents of six states -- Massachusetts, New Jersey, Maryland, Vermont, Georgia and Colorado -- have the right to receive a free credit report once a year, Plunkett said. And in Massachusetts, creditors must adhere to tougher reporting standards.
Neither of these is part of federal law. The proposed revision of the federal law, however, would include the right to a free credit report.
The debate is complicated by the fact that much has happened in the world of credit since the Fair Credit Reporting Act was adopted in 1970. Among other things:
