It’s been nearly 50 years since then U.S. Sen. William Proxmire, the iconic Wisconsin Democrat, took aim at the nation’s credit-reporting industry for its secrecy and sometimes-underhanded tactics that often hurt consumers.
Proxmire was one of the earliest members of Congress to see the abuse many consumers were taking at the hands of an industry that profited handsomely by collecting and selling people’s private financial information.
Yes, the industry was providing a needed service to banks, credit card issuers and finance companies with timely reports on the credit worthiness of potential borrowers. But at the same time, Proxmire pointed out, they were slipshod in their methods and when they made mistakes, which was all too frequently, it was next to impossible to get them corrected. Further, the credit-reporting companies claimed ownership of the records and consumers couldn’t even see their own credit scores unless they paid a sizable fee.
Worse, the Wisconsin senator noted, the credit-reporting agencies were playing fast and loose with the financial information they had collected on millions of Americans.
Proxmire succeeded in passing the Fair Credit Reporting Act that at least allowed consumers access to their own credit reports free once a year and imposed some regulations on how the credit information the agencies compiled could be used. Unfortunately, the FCRA had few teeth. Enforcement was placed in the Federal Trade Commission, for instance, where fines are limited and there often are bigger fish to fry, putting credit abuses that could ruin people’s financial lives forever on the back burner.
Such has been the case in the years since. The credit-reporting lobbyists have successfully fought off stiff regulations and serious enforcement for decades.
As a New York Times story noted recently, the lack of federal oversight allowed the credit bureaus to rapidly expand their core business of building consumer credit dossiers for lenders and other companies. The bureaus hired investigators to expand their dossiers beyond just how faithfully a consumer pays his or her credit card, car and house bills. Now they also collected information on a person’s “moral character,” which includes drinking habits, quarrels with neighbors and being unfaithful to a spouse, for instance.
Soon insurance companies, rental agencies and similar businesses were buying the credit ratings to decide who they would insure or who could qualify for an apartment.
All this was what Proxmire had warned about way back in the late 1960s.
Now comes the Equifax scandal. All of its information on 140 million Americans is now in the hands of computer hackers, including everyone’s Social Security number, simply because our government refused to require that credit reporting agencies take steps to protect that crucial information.
There is at least one hope that something will be done to rein in these reporting bureaus and subject them to rules that will protect consumers. It’s the Consumer Financial Protection Bureau that was created when the Obama administration succeeded in passing the Dodd-Frank banking reform bill following the Great Recession.
The CFPB has launched an investigation into Equifax and the entire reporting industry that could help spell out what changes are needed. In fact, the 7-year-old bureau was instrumental in blocking an attempt by the credit-reporting industry to require aggrieved consumers to arbitrate their own cases and prevent them from joining together to file class-action lawsuits.
But the CFPB has been targeted by the Trump administration and like-thinking congressional Republicans, who view the agency as meddling in “free markets” and hindering economic growth. It’s the same kind of thinking that has allowed certain businesses to pad their own bottom lines at the expense of consumers.
It’s clearly the lack of sensible regulation that led to the Equifax scandal that has put tens of millions of people at financial risk through no fault of their own. It’s another example of why the claim of some that regulations aren’t needed and are a hindrance to the economy is nothing more than a lie.