electronic data processing equipment for amassing. storing. retrieving. and communicating individualized data has posed a threat, now being increasingly recognized, to the constitutional rights of tens of millions of citizens. The American Civil Liberties Union is particularly interested in controlling the use of individualized data and, at the same time, in preserving rights of free inquiry and proper dissemination of appropriate information.

THE FAIR CREDIT REPORTING ACT

Since April of 1971, when the Fair Credit Reporting Act went into effect, experience has demonstrated certain weaknesses and omissions in that law. Many consumer advocates and an unfortunately large number of those who have attempted to exercise rights under the Act have had reason to believe that the rights of the individuals adversely affected by individualized data are often less carefully safeguarded than were the abilities of investigation agencies and credit granting entities to amass and misuse data. The complaint most frequently heard by the American Civil Liberties Union and its affiliates around the country is the inability to secure a written copy of the report affecting the individual and the onerous and expensive procedures which the present Act imposes upon the consumer who desires to avail himself or herself of rights provided by law. No less degrading to the inquiring consumer have been the lethargy and uncooperativeness of many credit reporting agencies in relying upon technicalities which the present Act makes available.

In hearings before this Committee in 1973 on then S. 2360, a collection of specific horror stories of destroyed lives and indignities imposed was placed on the record. Unfortunately, the Fair Credit Reporting Act remains as it was, and the history of indignities, intrusions, absurdities, and injuries continues.

S. 1840 would cure many of the deficiencies referred to.

DISCLOSURE OF SOURCES IS ESSENTIAL TO CONSUMER PROTECTION

It of course has been and will be argued that people will hesitate to make disclosures to investigators if the anonymity of sources cannot be guaranteed. The same arguments were unsuccessfully made with respect to granting access by students to their own records under the Buckley Amendment. The argument is completely met by traditional concepts of due process, confrontation, and fair play. Let that person who has an adverse thing to say but is afraid to be identified as one who says it, keep his or her mouth shut. The occasional coward who may have verifiable information but be unwilling to disclose it because of fear of being involved will pose a much lighter burden upon the flow of credit information than the far more numerous careless and vindictive persons with unverifiable infor mation who are presently able to destroy lives and careers by slanders protected by an unjustifiable shield of anonymity. The American Civil Liberties Union would argue that the requirement of disclosure of sources in Section 609(a) of S. 1840 does not go far enough, in that sources of information in investigative consumer reports are required to be disclosed only in connection with litigation or unresolved disputes. Certainly, no less is required for minimal consumer protection.

IMMUNITY ELIMINATION

Under the existing law, a person who prepares or procures an investigative consumer report in violation of the statute is protected simply by saying that he maintained reasonable procedures to assure compliance but that somehow they did not work. The loophole is enormous, and the elimination thereof from Section 606, essential. The existence of standards of negligence under Section 617, with its rebuttable presumptions and willfulness in Section 616, fully protects any reporting agency or user of information which can establish its good faith and due care. The absence of recoveries under the four year old Act attests to the impropriety of the present immunity section.

NOTIFICATION

Probably the single most burdensome fact upon the consuming public remains the ignorance of the consumer from the moment the file is opened until after the damage is done. It is the policy of a sound law to provide redress for inquiries suffered as the compensation for the failure of the first line of legislative defense

to have operated in preventing the imposition of the injury. The requirement of S. 1840 that the consumer be notified ab initio and have an opportunity for input correction and deletion before reputations and careers are ruined is essential to the prophylactic operation of the Fair Credit Reporting Act, just as the elimination of anonymity and the availability of minimum damages are essential for the therapeutic effect. It may well be that the costs of all this notice to all these people will increase the cost of credit reports, and therefore credit, and therefore goods and services. Due process of law is a good for which society has expressed its willingness to pay, at least in this country, by the embodiment thereof within the principles of the Fifth and Fourteenth Amendments. If the cost of all the things we buy must go up for all of us in order to prevent injustice from being imposed upon many of us, that judgment was made when the Bill of Rights was adopted, and the American Civil Liberties Union urges that absolute notification from the very beginning of the opening of a file [as well as to all people with respect to whom there are already files] is no less than constitutionally required.

The argument may be made that a compromise would be appropriate so that only those for whom new reports will hereafter be opened should receive notification, while those tens of millions of us who are already the subjects of filed reports will be denied the equal protection of the Fair Credit Reporting Act. The classification is arbitrary and therefore unlawful. If its costs the credit industry more and that cost must be passed along to all of us, so be it. Insofar as the amount of that cost is concerned, it is suggested that it cannot be more than pennies per person and that the known damage done to untold millions which can and will be corrected when people learn of their rights is a benefit to society far outweighing the cost to the industry.

REGULATORY AUTHORITY

We are long past the stage in the administration of the complicated affairs of the United States of America when it can successfully be argued that legislative draftsmanship can forsee and solve all problems. The existing language of the Fair Credit Reporting Act has been interpreted so as to prevent the issuance of appropriate and necessary regulations. The granting of the rulemaking authority to the Federal Trade Commission is essential to the orderly enforcement of the law. The efficacy of regulatory agency rulemaking and enforcement has repeatedly been demonstrated. The abstract reaction that the proliferation of bureaucracy is to be avoided is no response to the specific requirements which, the absence of regulations since 1971 has proven, reuder the statute largely theoretical and not an effective device to carry out Congressional intent.

PHYSICAL ACCESS

Again and again, consumers have complained to affiliates of the American Civil Liberties Union concerning the inadequacy of disclosures made to them orally and incomprehensibly under the present Fair Credit Reporting Act. The requirement that a copy be delivered for visual inspection is essential. The law has long traditionally viewed oral materials with skepticism, and, certainly, an oral summary of an available written report would not be admissible evidence in any court operating under common law traditions within the framework of due process of law. The cumbersome requirements under the 1971 Act are eliminated by the salutary provision of S. 1840 that copies be provided by mail upon demand. Any cost to the industry of such mailing is far outweighted by the alternative of requiring personal pick up, for even if the consumer is within mass transit distance of the reporting agency, fare far exceeds postage.

The Committee is no doubt familiar with the Millstone case now awaiting decision by the United States Court of Appeals for the Eighth Circuit, in which allegations resulting in cancellation of an insurance policy include, among other things, that the consumer was a hippie who was thought by some people to use drugs, that he provided housing for out of town peace demonstrators in Washington, and that he himself with his long hair had participated in several peace demonstrations. Former Supreme Court Justice Tom Clark, in listening to argu ment in the case, was particularly interested in the physical unavailability of the report to Mr. Millstone, despite his repeated efforts under the present inadequate provisions of the Act to secure the complete contents of the report.

MEDICAL RECORDS

The failure of the existing statute to provide appropriate access to medical records is one of its most glaring deficiencies. This is not the forum to join debate with those members of the medical profession who resist the concept. that a patient ought to have access to her or his own medical records. The proposed amendment in S. 1840 differentiates between those medical records which came directly from the subject, which may be revealed to the subject, and those medical records which came from third parties, which may be revealed only to a physician designated by the subject. Whether that physician will in turn reveal some or all of the data to the patient is a matter strictly between that physician and the patient. The fear of some physicians and other health care providers in this regard is thus irrelevant to the proposed amendment.

As to the necessity for enforcing the right of a patient to have access to her or his own medical records, let me add a horror story to the collection in the Committee's files. At a recent meeting of American College Health Association. for whom I participated in a seminar on the subject and at which the members of that organization overwhelmingly expressed their approval for granting of patient access to patient records, I learned of the case of a young woman at a large Southern university. She was denied acceptance into the professional graduate school of her choice for reasons which were incomprehensible in light of her scholastic record and personal attainments. In her desperate effort to discover the cause of the obstacle to her career, she finally gained access to her health records at the university, and she discovered that another young woman, falsely representing herself to be the young woman we are discussing. secured treatment for venereal disease, and the entries of the diagnosis, treatment, et cetera, were made on the chart of our young woman, and the attachment of her medical records to her graduate-professional school application resulted in her rejection. Fortunately, the access arranged for her by the medical staff at the university resulted in the expungement of the erroneous entries and notification to the rejecting professional school, so that her life was able to be resumed in a manner which never would have been possible and for reasons she never would have understood had she not been granted access to her own file.

CONCLUSION

The American Civil Liberties Union urges that S. 1840 be adopted in a form no less beneficial to the consumer than as it presently stands.

I appreciate, personally and on behalf of the American Civil Liberties Union, the opportunity to appear before you.

[Letters were received from Mr. Wiebusch and Mr. Gutman, they are printed at p. 979.]

Senator BIDEN. Our next witnesses will be Robert S. Gross, credit sales manager, J. L. Brandeis & Sons, Omaha, Nebr., third vice chairman, board of directors, credit management division of National Retail Merchants Association; and Mike Zoroya, vice president and general manager, May Co., St. Louis, Mo., for the American Retail Federation.

Gentlemen, I realize you have a thick statement. If you could compress that to 10 minutes in testimony we would appreciate it so we could ask you some questions.

STATEMENT OF ROBERT S. GROSS, CREDIT SALES MANAGER, J. L. BRANDEIS & SONS, OMAHA, NEBR., THIRD VICE CHAIRMAN, BOARD OF DIRECTORS, CREDIT MANAGEMENT DIVISION OF NATIONAL RETAIL MERCHANTS ASSOCIATION

Mr. GROSS. We will try very hard to do that.

My name is Robert Gross. I am credit manager of J. L. Brandeis & Sons, Inc., Omaha, Nebr. I am appearing here today to present the position of the National Retail Merchants Association (NRMA), on S. 1840, which would amend the Fair Credit Reporting Act. NRMA's members operate more than 30,000 retail outlets throughout the United States, which account for approximately $80 billion

in sales annually, and range in size from small specialty shops to large retail chains. Many NRMA members offer their customers the opportunity to purchase merchandise on credit, and in that connection rely extensively upon information from consumer reporting agencies. Accordingly, NRMA is vitally interested in S. 1840.

Today, as in 1973, when the Senate last dealt with the collection and dissemination of credit and other information by consumer reporting agencies and others, consumer credit continues to be a major factor in our economy. An important component in the continued growth and viability of consumer credit is the balance achieved by Congress in the existing Fair Credit Reporting Act.

Indeed, when S. 823, which served as the model for the final version of the act, was unanimously passed by the Senate on November 6, 1969, Senator Proxmire stated on the Senate floor:

I believe this bill is a reasonable Lill. It is fair to the consumer and fair to the credit reporting industry and those who use credit reports. The industry has voluntarily cooperated with the committee in developing sound and workable legislation which accomplishes the objectives without imposing unduly restrictive requirements on the industry.

As retailers we still believe the act "is fair to the consumer and fair to the credit reporting industry and those who use credit reports." We are deeply concerned that S. 1840 would impose the "unduly restrictive requirements" which were deemed inappropriate to achieve the objectives of sound and workable legislation when the existing law was enacted.

Without limiting the type of adverse consequences which might arise as a result of S. 1840, we believe the proposed amendments would: (1) create, unnecessarily, expenses for consumer reporting agencies and users of consumer reports; (2) fail to provide the consumer with any corresponding significant benefit relative to the increased costs which would be engendered; (3) cause users, because of increased costs and potential liability, to refrain from obtaining reports in many cases and instead deny credit, insurance, or employment, and (4) inappropriately subject consumer reporting agencies and users of consumer reports to penalties.

NRMA's objections to specific proposed amendments are detailed in a statement submitted for the record on behalf of NRMA and ARF. In the time remaining, I would like to highlight our concerns over some of the proposed amendments. Other concerns will be noted by ARF.

In section 615(a), as major users of consumer reports, retailers are particularly concerned with the proposed amendments to section 615 of the act. The existing "trigger" for requiring a user to disclose the name of the consumer reporting agency furnishing the reportdenial of credit, insurance, or employment or increased charge for credit or insurance-is clear, objective and fully adequate to protect

the consumer.

The proposal-requiring desclosure by a user of a consumer report when "adverse action" is taken as a result of that report, would confuse the circumstances when disclosure must be made. What adverse consequences, other than those covered by existing law, can be involved? We are unable to discern any purpose which would be served by this amendment.

A second problem with proposed section 615 (a), it would require users to furnish a copy of an investigative report. This would precipitate the automatic disclosure of confidential sources and the consequential "drying-up" of investigative information, protected by section 609 (a) (2). Also, requiring users rather than the reporting agency to furnish a copy of a report undercuts the fundamental wisdom of the act-to bring the consumer and the reporting agency together. Since the agency is responsible for the contents of reports, consumers should receive information regarding reports from the agency, which can answer questions regarding the report and make changes when appropriate.

In addition, since retailers typically do not rely on investigative reports in making credit decisions, but only sometimes use investigative reports for employment purposes, compliance with proposed section 615 (a) (2) by retailers would result in pointless furnishing of duplicative report copies since the reporting agency must furnish the consumer with a copy, pursuant to proposed section 609 (c).

We believe that current law provides the consumer with proper access to investigative information without imposition of unnecessary costs, and should not be changed.

Section 615(b). We believe that the proposed amendment to section 615(b), which relates to disclosure when information is obtained from a source other than a consumer reporting agency, is unnecessary and recommend that the subsection be repealed, or at least be amended so as not to apply to credit transactions. Such action is appropriate in light of the requirements under the FRB's equal credit opportunity regulations, as well as the requirements in S. 1927, currently before this committee, both of which afford the consumer the right to a statement of the reasons why credit was denied.

Section 615(c). In addition, we believe that requiring the user of a consumer report to certify a specific purpose whenever it requests a report on an individual is unnecessary. We are unable to understand the purpose of this amendment, since section 607(a) already requires users to certify the purposes for which information is requested. If the amendment is designed to require a separate certification each time. a report is requested, it will slow down credit transactions to the consumer's detriment and substantially increase paperwork and expense for users.

We are also extremely concerned with proposed requirements not imposed directly on users, but which would be imposed on consumer reporting agencies, since users and ultimately the consumer will be required to bear the costs of such requirements.

Knowing that time is short, I will focus only on proposed section 609 (d) and note that our statement covers this and other requirements in greater detail. We are particularly concerned that the proposed requirement that consumer reporting agencies notify the consumer in writing whenever a file is opened on such consumer and that the agencies notify each person on whom a file is presently maintained will generate phenomenal costs.

Given the mobility of our society, compliance costs would be staggering, simply for paper, postage and mailing. Because consumers may be in the files of all reporting agencies covering areas where they have lived, notification on existing files could literally put many reporting agencies out of business. For new files, we believe that the