B-200091.OM, NOV 13, 1981

B-200091.OM: Nov 13, 1981

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SUBJECT: RELEASE OF CONSUMER REPORTS TO SENATE SUBCOMMITTEE STAFF MEMBER DIGEST: NEITHER THE FAIR CREDIT REPORTING ACT NOR ANY OTHER LEGAL SOURCE THAT WE ARE AWARE OF WOULD PROHIBIT RELEASE OF COPIES OF "SANITIZED" CONSUMER REPORTS FOR USE AT SENATE HEARING. AFMD - JEFFREY STEINHOFF: THIS IS IN RESPONSE TO YOUR REQUEST FOR AN OPINION ON WHETHER THERE IS ANY LEGAL PROHIBITION AGAINST THE RELEASE OF COPIES OF "SANITIZED" CONSUMER REPORTS FOR USE AT A SENATE HEARING. NOR ARE WE AWARE OF ANY OTHER LEGAL SOURCE THAT WOULD PROHIBIT THE RELEASE OF THESE REPORTS. THIS IS BECAUSE THE SANITIZED CREDIT REPORTS CONTAIN SUCH SPECIFIC DATA THAT EVEN WITH EXPLICIT IDENTIFYING DATA REMOVED. THESE ARE FEDERAL DIRECT LOAN PROGRAMS THAT MAKE LOW INTEREST LOANS AVAILABLE TO HEALTH PROFESSIONS AND NURSING SCHOOL STUDENTS.

B-200091.OM, NOV 13, 1981

SUBJECT: RELEASE OF CONSUMER REPORTS TO SENATE SUBCOMMITTEE STAFF MEMBER DIGEST: NEITHER THE FAIR CREDIT REPORTING ACT NOR ANY OTHER LEGAL SOURCE THAT WE ARE AWARE OF WOULD PROHIBIT RELEASE OF COPIES OF "SANITIZED" CONSUMER REPORTS FOR USE AT SENATE HEARING. IN ADDITION, WE BELIEVE THAT GAO'S REDISCLOSURE OF THESE REPORTS WOULD BE CONSISTENT WITH THE PURPOSE FOR WHICH WE OBTAINED THEM AND GAO'S CERTIFICATION IN ITS CONTRACT WITH TRW.

GROUP DIRECTOR, AFMD - JEFFREY STEINHOFF:

THIS IS IN RESPONSE TO YOUR REQUEST FOR AN OPINION ON WHETHER THERE IS ANY LEGAL PROHIBITION AGAINST THE RELEASE OF COPIES OF "SANITIZED" CONSUMER REPORTS FOR USE AT A SENATE HEARING. AS DISCUSSED BELOW, WE DO NOT BELIEVE THAT THE FAIR CREDIT REPORTING ACT PROHIBITS THEIR RELEASE, NOR ARE WE AWARE OF ANY OTHER LEGAL SOURCE THAT WOULD PROHIBIT THE RELEASE OF THESE REPORTS. WE DO, HOWEVER, BELIEVE THAT THE RELEASE OF THESE REPORTS MAY OPEN GAO TO CRITICISM OF BEING INSENSITIVE TO THE PRIVACY OF THE INDIVIDUALS INVOLVED. THIS IS BECAUSE THE SANITIZED CREDIT REPORTS CONTAIN SUCH SPECIFIC DATA THAT EVEN WITH EXPLICIT IDENTIFYING DATA REMOVED, IT MIGHT BE POSSIBLE TO IDENTIFY THE INDIVIDUAL INVOLVED.

BACKGROUND

AFMD CONDUCTED AN AUDIT OF THE HEALTH PROFESSIONS AND NURSE TRAINING STUDENT LOAN PROGRAMS, AUTHORIZED BY 42 U.S.C. SEC. 294M AND SEC. 297A. THESE ARE FEDERAL DIRECT LOAN PROGRAMS THAT MAKE LOW INTEREST LOANS AVAILABLE TO HEALTH PROFESSIONS AND NURSING SCHOOL STUDENTS. THE AUDIT TURNED UP EVIDENCE THAT A LARGE PERCENTAGE OF LOAN RECIPIENTS WHO ARE NOW PRACTICING DOCTORS, DENTISTS, AND NURSES HAD FAILED TO REPAY THEIR LOANS. AS PART OF THE REVIEW, AFMD OBTAINED CONSUMER REPORTS ON APPROXIMATELY ONE HUNDRED OF THESE PEOPLE FROM TRW CREDIT DATA, A CREDIT REPORTING AGENCY. THE REPORTS WERE ANALYZED TO FIND OUT WHETHER THE DOCTORS AND NURSES REPAID OTHER LOANS PROMPTLY AND WHETHER THEY SEEMED TO BE FINANCIALLY ABLE TO REPAY THEIR STUDENT LOANS. WE UNDERSTAND THAT, AS A RESULT OF THIS REVIEW, AFMD PLANS TO RECOMMEND CORRECTIVE ACTION TO THE SCHOOLS PARTICIPATING IN THE LOAN PROGRAMS AND TO HHS, THE FEDERAL AGENCY RESPONSIBLE FOR PROGRAM ADMINISTRATION.

HEARINGS CONCERNING THESE DELINQUENT STUDENT LOANS ARE TENTATIVITY SCHEDULED FOR NOVEMBER 19. THE HEARINGS ARE BEING HELD ON S. 1249, A BILL INTRODUCED BY SENATOR PERCY TO INCREASE THE EFFICIENCY OF GOVERNMENT-WIDE EFFORTS TO COLLECT DEBTS OWED THE UNITED STATES. MR. ALAN MERTZ, A STAFF MEMBER OF THE SUBCOMMITTEE ON ENERGY, NUCLEAR PROLIFERATION AND GOVERNMENT PROCESSES, SENATE COMMITTEE ON GOVERNMENTAL AFFAIRS, IS ORGANIZING THE HEARINGS FOR SENATOR PERCY. HE REQUESTED THAT GAO PROVIDE HIM WITH COPIES OF THE CREDIT REPORTS IN OUR POSSESSION. FN1 WE UNDERSTAND THAT HE INTENDS TO DISPLAY SOME OF THESE REPORTS ON CHARTS AT THE HEARINGS AS EXAMPLES OF LOAN RECIPIENTS WHOSE CREDIT HISTORY REFLECTS AN ABILITY TO REPAY.

ISSUE AND ANALYSIS

THE QUESTION WE WERE ASKED IS WHETHER THE FAIR CREDIT REPORTING ACT PROHIBITS GAO FROM RELEASING COPIES OF SANITIZED CREDIT REPORTS TO MR. MERTZ.

THE FAIR CREDIT REPORTING ACT, 15 U.S.C. SEC. 1681-1681T, IS AIMED AT WHAT CONGRESS SAW AS THE MAJOR PROBLEMS IN THE CREDIT REPORTING INDUSTRY - INACCURATE AND IRRELEVANT CREDIT REPORT INFORMATION. THE ACT REGULATES CREDIT BUREAUS AND OTHER ORGANIZATIONS THAT GATHER AND REPORT INFORMATION ABOUT CONSUMERS. IT DOES SO BY ALLOWING THESE ORGANIZATIONS, DESCRIBED AS "CONSUMER REPORTING AGENCIES" TO FURNISH CREDIT REPORTS FOR CERTAIN ENUMERATED PURPOSES, AND NO OTHERS. THE ACT APPLIES TO ALL GOVERNMENT AGENCIES AS USERS OF REPORTS. IF A GOVERNMENT AGENCY WANTS A REPORT IN THE HANDS OF A CONSUMER REPORTING AGENCY, IT MUST COMPLY WITH THE PROVISIONS OF THE ACT IN ORDER TO OBTAIN IT. SEE, E.G., UNITED STATES V. PUNTORIERI, 379 F.SUPP. 332, 334 (1974). NO PROVISION IN THE ACT PROHIBITS A USER OF CREDIT REPORTS FROM SUBSEQUENTLY REDISCLOSING THEM; NOR DOES THE ACT PLACE ANY CONDITIONS OR RESTRICTIONS ON REDISCLOSURE. THUS, THE ACT DOES NOT PROHIBIT GAO FROM RELEASING THEM TO MR. MERTZ.

THE LIMITATIONS ON DISCLOSURE SET FORTH IN THE ACT ARE CONFINED TO THE CIRCUMSTANCES UNDER WHICH A CONSUMER REPORTING AGENCY MUST DISCLOSE INFORMATION ABOUT A PARTICULAR CONSUMER TO THAT CONSUMER. 15 U.S.C. SECS. 1681G, 1681H. THE ONLY OBLIGATION THAT THE ACT PLACES ON A USER OF CREDIT REPORTS IS TO ADVISE A CONSUMER OF THE NAME AND ADDRESS OF THE CONSUMER REPORTING AGENCY IF THAT CONSUMER IS DENIED A JOB OR CREDIT BASED ON ADVERSE INFORMATION OBTAINED FROM THAT AGENCY. SEE SEC. 1681M. THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT EXPLAINED THAT:

"*** BY ITS TERMS SECTION 604 15 U.S.C. SEC. 1681B REGULATES DISCLOSURE BY 'CONSUMER REPORTING AGENCIES' AND NO OTHER PARTIES. PASSAGE OF THE FCRA WAS PROMPTED BY CONCERN OVER THE POWER OF THOSE AGENCIES AND THE POTENTIAL FOR ABUSE IT PRESENTED, NOT THE LESSER RISK OF SUBSEQUENT DISCLOSURES OR DISTORTIONS BY THE MORE FRAGMENTED GROUP OF CUSTOMERS OF REPORTING AGENCIES ***."

FTC V. MANAGER, RETAIL CREDIT CO., MIAMI BRANCH OFFICE, 515 F.2D 988, 997 (1975).

IN ADDITION TO CONSIDERING THE QUESTION OF WHETHER THE ACT PROHIBITS REDISCLOSURE, WE ALSO CONSIDERED WHETHER GAO'S REDISCLOSURE OF THESE REPORTS WOULD BE CONSISTENT WITH THE PURPOSE FOR WHICH WE OBTAINED THEM. SECTION 1681E OF THE FAIR CREDIT REPORTING ACT REQUIRES CONSUMER REPORTING AGENCIES TO MAKE REASONABLE EFFORTS TO VERIFY THE IDENTITY OF PROSPECTIVE USERS OF ITS CREDIT REPORTS AND THE USES CERTIFIED BY THAT USER. THIS SECTION GOES ON TO STATE THAT "NO CONSUMER REPORTING AGENCY MAY FURNISH A CONSUMER REPORT TO ANY PERSON IF IT HAS REASONABLE GROUNDS FOR BELIEVING THAT THE CONSUMER REPORT WILL NOT BE USED FOR A PURPOSE LISTED IN SECTION 1681B OF THIS TITLE."

THE FEDERAL TRADE COMMISSION GUIDELINES FN2 ALSO NOTE THAT CONSUMER REPORTING AGENCIES ARE RESPONSIBLE FOR OBTAINING A CERTIFICATION FROM A USER THAT IT WILL USE THE INFORMATION FOR NO OTHER PURPOSE THAN THE ONE FOR WHICH THE REPORT WAS OBTAINED. GAO'S CONTRACT WITH TRW INCLUDES A FORM CERTIFICATION TO THIS EFFECT. FN3

SECTION 1681B INCLUDES THE FOLLOWING AS A PERMISSIBLE PURPOSE FOR A CONSUMER REPORTING AGENCY TO FURNISH A REPORT:

"(3) TO A PERSON WHICH IT HAS REASON TO BELIEVE -

(A) INTENDS TO USE THE INFORMATION IN CONNECTION WITH A CREDIT TRANSACTION INVOLVING THE CONSUMER ON WHOM THE INFORMATION IS TO BE FURNISHED AND INVOLVING THE EXTENSION OF CREDIT TO, OR REVIEW OR COLLECTION OF AN ACCOUNT OF THE CONSUMER ***."

GAO OBTAINED THE CREDIT REPORTS OF DOCTORS AND NURSES WHO HAVE FAILED TO REPAY THEIR STUDENT LOANS. THE RECOMMENDATIONS THAT GAO ANTICIPATES MAKING AS A RESULT OF ITS REVIEW ARE INTENDED TO RESULT IN IMPROVEMENTS OF THE HEALTH PROFESSIONS AND NURSE TRAINING LOAN PROGRAMS IN GENERAL AND IN THE POSSIBLE COLLECTION OF THE STUDENT LOANS OF THE PARTICULAR DOCTORS AND NURSES WHOSE CREDIT HISTORIES YOUR STAFF REVIEWED. IN OUR VIEW, THIS USE OF CREDIT REPORTS IS CONSISTENT WITH THE PERMISSIBLE STATUTORY PURPOSE QUOTED ABOVE AND GAO'S CERTIFICATION IN ITS CONTRACT WITH TRW. FURTHERMORE, WE BELIEVE THAT GAO'S REDISCLOSURE TO MR. MERTZ OF COPIES OF SANITIZED CONSUMER REPORTS WOULD BE CONSISTENT WITH THIS PURPOSE. THE USE OF CREDIT HISTORY INFORMATION AT THE HEARINGS WOULD ILLUSTRATE AND SUPPORT OUR FINDINGS AND OUR RECOMMENDATIONS.

FN1 MR. MERTZ INFORMALLY ADVISED MS. FINLEY, OF MY STAFF, THAT ALTHOUGH HE WOULD LIKE EXACT COPIES WITH NO DELETIONS, HE IS WILLING TO ACCEPT "SANITIZED" COPIES OF THE CREDIT REPORTS - COPIES ON WHICH THE NAME, ADDRESS, SOCIAL SECURITY AND BANK ACCOUNT NUMBERS AND ANY OTHER PERSONAL IDENTIFIERS ARE DELETED. HE WAS NOT RECEPTIVE TO MS. FINLEY'S SUGGESTION THAT WE PROVIDE HIM AGGREGATE DATA RATHER THAN THE SANITIZED VERSIONS. SHE SUGGESTED, FOR EXAMPLE, THAT A CREDIT REPORT ENTRY SHOWING "A CHARGE ACCOUNT AT J. MAGNIN" COULD BE DESCRIBED AS "A CHARGE ACCOUNT AT A LOCAL DEPARTMENT STORE." IN OUR VIEW, THE MORE GENERAL DESCRIPTION STRIKES AN APPROPRIATE BALANCE BETWEEN THE PRIVACY OF THE INDIVIDUAL AND THE SPECIFICITY OF THAT PERSON'S CREDIT HISTORY. MR. MERTZ REJECTED THIS SUGGESTION. CONSEQUENTLY, WE ADDRESSED OURSELVES TO THE QUESTION OF GAO'S RELEASE OF "SANITIZED" CONSUMER REPORTS.

FN2 FTC PAMPHLET "COMPLIANCE WITH THE FAIR CREDIT REPORTING ACT"; PUBLISHED IN 1971, REPRINTED IN THE CONGRESSIONAL RECORD AT 117 CONG.REC. 17417 (1971); AND REVISED IN 1979. THE FTC IS RESPONSIBLE FOR THE GENERAL ADMINISTRATION OF THE FAIR CREDIT REPORTING ACT. HOWEVER, ITS INTERPRETATIONS ARE NOT SUBSTANTIVE RULES AND DO NOT HAVE THE FORCE AND EFFECT OF STATUTORY PROVISIONS. 16 C.F.R. SECS. 1.71, 1.73.

FN3 "SUBSCRIBER USE LIMITATIONS. SUBSCRIBER HEREBY CERTIFIES AND AGREES THAT IT WILL REQUEST AND USE CREDIT DATA RECEIVED FROM TRW SOLELY IN CONNECTION WITH A TRANSACTION INVOLVING THE DEBTOR AS TO WHOM A CREDIT PROFILE IS SOUGHT. IF, SUBSEQUENT TO THE EXECUTION OF THIS AGREEMENT, TRW UNDERTAKES TO MAKE CREDIT DATA GENERALLY AVAILABLE TO OTHER SUBSCRIBERS AND CUSTOMERS FOR USE IN CONNECTION WITH NON-CREDIT BUSINESS TRANSACTIONS AND AS PERMISSIBLE UNDER APPLICABLE FEDERAL OR STATE LAW, THEN SUBSCRIBER SHALL BE ENTITLED TO REQUEST CREDIT DATA FOR SUCH EXPANDED USAGE."