Report Title:
Consumer Credit Reporting
Description:
Adds a new chapter to the Hawaii Revised Statutes to regulate consumer credit reporting.
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
55 |
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TWENTY-FIRST LEGISLATURE, 2001 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO CONSUMER CREDIT REPORTING.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Credit reporting agencies have assumed a vital role in assembling and evaluating consumer credit and other information on consumers. Credit reports may report on a consumer's creditworthiness, credit standing, credit capacity, debts, character, general reputation, or mode of living as factors to establish a consumer's eligibility for credit, insurance, or employment. When a credit reporting agency undertakes a business that has the potential to profoundly affect a consumer's life, it is incumbent that these agencies ensure that the information they are providing is accurate.
The legislature believes there is a need to ensure that credit reporting agencies exercise their responsibilities with fairness, impartiality, and respect for consumer rights. The legislature further finds and declares that, in the event that the information provided by a credit reporting agency is inaccurate, the consumer has the right to have that information corrected in a swift and uncomplicated manner.
The purpose of this Act is to require that credit reporting agencies adopt reasonable procedures for dispensing consumer credit information in a manner that is fair and equitable to the consumer.
SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:
"CHAPTER
CONSUMER CREDIT REPORTING
§ -1 Definitions. As used in this chapter:
"Adverse action" includes:
(1) The denial of, increase in any charge for, or reduction in the amount of insurance for personal, family, or household purposes;
(2) The denial of employment or any other decision made for employment purposes that adversely affects a current or prospective employee; or
(3) An action or determination with respect to a consumer's application for credit under a credit arrangement that is adverse to the consumer's interest.
"Consumer" means a natural person residing in this State.
"Credit report" means any written, oral, or other communication or any information by a credit reporting agency bearing on a consumer's creditworthiness, credit standing, credit capacity, debts, character, general reputation, personal characteristics, or mode of living, that is or is expected to be used or collected, in whole or in part, as a factor to establish a consumer's eligibility for credit or insurance to be used for personal, family, household, employment, or any other purposes authorized pursuant to applicable provisions of the Fair Credit Reporting Act, 15 U.S.C. sections 1681a and 1681b, as amended.
The term "credit report" does not include:
(1) Any report containing information solely as to a transaction between the consumer and the person making the report;
(2) Any authorization or approval of a specific extension of credit directly or indirectly by the issuer of a credit card or similar device; or
(3) Any report in which a person, who has been requested by a third party to make a specific extension of credit directly or indirectly to a consumer, conveys a decision with respect to the request, if the third party advises the consumer of the name and address of the person to whom the request was made and the person makes the disclosures that must be made to the consumer pursuant to the provisions of the Fair Credit Reporting Act, 15 U.S.C. section 1681m, as amended, in the event of adverse action.
"Credit reporting agency" means any person who, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in the business of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing credit reports to third parties. "Credit reporting agency" shall not include any governmental agency or any business entity that only provides check verification or check guarantee services.
"Credit score" means a numerical value or a categorization derived from a statistical tool or modeling system used by a person who makes or arranges a loan to predict the likelihood of certain credit behaviors, including default. The numerical value or categorization derived from this analysis may also be referred to as a "risk predictor" or "risk score".
The term "credit score" does not include:
(1) Any mortgage score;
(2) Rating of an automated underwriting system that considers one or more factors in addition to credit information, including, but not limited to:
(A) The loan to value ratio;
(B) The amount of down payment; or
(C) A consumer's financial assets;
or
(3) Other elements of the underwriting process or underwriting decision.
"Creditworthiness" means any entry in a consumer's credit file that impacts the ability of a consumer to obtain and retain credit, employment, business or professional licenses, investment opportunities, or insurance. Entries contained in a consumer file or in a credit report that affect creditworthiness shall include payment information, defaults, judgments, liens, bankruptcies, collections, records of arrest and indictments, and multiple-credit inquiries.
"Employment purposes" means for the purpose of evaluating a consumer for employment, promotion, reassignment, or retention as an employee.
"File" means all of the information on the consumer that is recorded and retained by a credit reporting agency, regardless of how the information is stored.
"Key factor" means a relevant element or reason adversely affecting the credit score for the particular individual listed in order of importance, based on their effect on the credit score.
"Person" means any individual, partnership, corporation, limited liability corporation, trust, estate, cooperative, or association, or other nongovernmental entity.
"State child support enforcement agency" means the child support enforcement agency acting pursuant to section 576D-2, to establish or enforce child support obligations, and any state agency or official that succeeds to these responsibilities under a successor statute.
§ -2 Disclosures to consumers. (a) A credit reporting agency shall, upon written or verbal request and proper identification of any consumer, clearly, accurately, and in a manner that is understandable to the consumer, disclose to the consumer, in writing, all information in its files at the time of the request pertaining to the consumer including:
(1) The names of all persons requesting credit information pertaining to the consumer during the prior six-month period and the date of each request;
(2) Any credit score used, and the key factors used, as set forth in section -4.
(3) A set of instructions, presented in a manner that is understandable to the consumer, describing how information is presented on its written disclosure of the file; and
(4) A toll-free number for use in resolving the dispute if the consumer submitted a written dispute to the credit reporting agency, which operates on a nationwide basis.
(b) A credit reporting agency shall notify a consumer, by letter sent by first-class mail, that the credit reporting agency will provide the consumer with a disclosure copy of the consumer's file at no charge and a toll-free telephone number to call to request such copy, when one of the following events occurs within a twelve-month period:
(1) The credit reporting agency has received three credit inquiries pertaining to the consumer; or
(2) The credit reporting agency has received a report that would add negative information to a consumer's file.
(c) A credit reporting agency need only send one letter to a consumer per twelve-month period pursuant to subsection (b), even if more than one such event occurs in that period.
(d) Any letter mailed to a consumer pursuant to subsection (b) shall not contain any identifying information particular to that consumer, including social security number, place of employment, date of birth, or mother's maiden name.
(e) Any letter mailed to a consumer pursuant to subsection (b) may be a form letter, except that each letter shall advise the consumer of the number and type of events that occurred relating to the consumer that initiated the letter. The letter shall also include a notice or separate form the consumer may complete and return to the credit reporting agency to request a copy of the credit report.
(f) Each credit reporting agency shall, upon request of a consumer, provide the consumer with one disclosure copy of the consumer's file per year at no charge, regardless of whether the consumer made the request in response to the notification in subsection (b). If the consumer requests more than one disclosure copy of the consumer's file per year pursuant to subsection (b), the credit reporting agency may charge the consumer up to $8 for each additional disclosure copy.
§ -3 Consumer consent to release of consumer credit report. (a) A person, other than the consumer, shall not obtain a consumer's credit report unless:
(1) The credit report is obtained in response to an order of a court having jurisdiction to issue such an order; or
(2) The person has secured the consent of the consumer, and the credit report is used for the purpose consented to by the consumer.
(b) Credit reporting agencies shall adopt reasonable procedures to assure maximum possible compliance with subsection (a).
(c) Nothing in this section shall be construed to affect:
(1) The ability of a person, who has secured the consent of the consumer pursuant to subsection(a)(2, to include in the person's request to the consumer, permission to also obtain credit reports, in connection with the same transaction or extension of credit, for the purpose of:
(A) Reviewing the account;
(B) Increasing the credit line on the account;
(C) Taking collection action on the account; or
(D) Other legitimate purposes associated with the account;
and
(2) The use of credit information for the purpose of prescreening, as defined and permitted by the Federal Trade Commission.
§ -4 Credit score. (a) Upon the consumer's request for a credit score, a credit reporting agency shall supply to a consumer a notice that shall include:
(1) The consumer's current credit score or the consumer's most recent credit score that was previously calculated by the credit reporting agency for a purpose related to the extension of credit;
(2) The range of possible credit scores under the model used;
(3) All the key factors that adversely affected the consumer's credit score in the model used, the total number of which shall not exceed four;
(4) The date the credit score was created;
(5) The name of the person or entity that provided the credit score or credit file upon which the credit score was created; and
(6) A statement indicating that the information and credit scoring model may be different from the credit score that may be used by the lender.
If the consumer requests the credit file and not the credit score, then the consumer shall receive the credit file and a statement that the consumer may request and obtain a credit score.
(b) The information required by this shall be provided in the same manner as provided in section -2.
(c) This section shall not be construed to compel a consumer reporting agency to develop or disclose a credit score if the agency does not:
(1) Distribute scores that are used in connection with residential real property loans; or
(2) Develop scores that assist credit providers in understanding a consumer's general credit behavior and predicting the consumer's future credit behavior.
(d) This section shall not be construed to require a consumer credit reporting agency that distributes credit scores developed by another person or entity to provide a further explanation of them, or to process a dispute arising pursuant to section -9, except that the credit reporting agency shall provide the consumer with the name, address, and website of the person or entity who developed the score or developed the methodology of the score. This section does not apply to a credit reporting agency that develops or modifies scores that are developed by another person or entity.
(e) This section does not require a credit reporting agency to maintain credit scores in its files.
§ -5 Credit score disclosure. (a) In complying with section -4, a credit reporting agency shall supply the consumer with:
(1) A credit score that is derived from a credit scoring model that:
(A) Is widely distributed to users by that credit reporting agency in connection with residential real property loans; or
(B) Assists the consumer in understanding the credit scoring assessment of the consumer's credit behavior and predictions about the consumer's credit behavior;
and
(2) A statement indicating that the information and credit scoring model may be different from that used by the lender.
(b) A credit reporting agency may charge a reasonable fee for providing the information required under section -7.
§ -6 Credit score for loan application. (a) Any person who makes or arranges loans, and who uses a consumer's credit score in connection with an application initiated or sought by a consumer for a closed-end loan or establishment of an open-end loan for a consumer purpose that is secured by one to four units of residential real property, shall provide the consumer:
(1) A copy of the information identified in section -4 that was obtained from a credit reporting agency or was developed and used by the user of information; and
(2) The notice contained in subsection (d).
(b) If the person who is subject to this section uses an automated underwriting system to underwrite a loan, that person may satisfy the obligation to provide a credit score by disclosing a credit score and associated key factors supplied by a consumer credit reporting agency. If a numerical credit score is generated by an automated underwriting system used by an enterprise, and that credit score is disclosed to the person, the credit score shall be disclosed to the consumer consistent with subsection (c).
(c) A person subject to the provisions of this section who uses a credit score other than a credit score provided by a credit reporting agency may satisfy the obligation to provide a credit score by disclosing a credit score and associated key factors supplied by a credit reporting agency.
(d) A lender shall provide a home loan applicant a copy of the following notice, which shall include the name, address, and telephone number of each credit bureau providing a credit score that was used:
NOTICE TO THE HOME LOAN APPLICANT
In connection with your application for a home loan, the lender must disclose to you the score that a credit reporting agency distributed to users and the lender used in connection with your home loan, and the key factors affecting your credit scores.
The credit score is a computer generated summary calculated at the time of the request and based on information a credit bureau or lender has on file. The scores are based on data about your credit history and payment patterns. Credit scores are important because they are used to assist the lender in determining whether you will obtain a loan. They may also be used to determine what interest rate you may be offered on the mortgage. Credit scores can change over time, depending on your conduct, how your credit history and payment patterns change, and how credit scoring technologies change.
Because the score is based on information in your credit history, it is very important that you review the credit-related information that is being furnished to make sure that it is accurate. Credit records may vary from one company to another.
If you have questions about your credit score or the credit information that is furnished to you, contact the credit reporting agency at the address and telephone number provided with this notice, or contact the lender, if the lender developed or generated the credit score. The credit reporting agency plays no part in the decision to take any action on the loan application and is unable to provide you with specific reasons for the decision on a loan application.
If you have questions concerning the terms of the loan, contact the lender.
(e) This section shall not require any person to do the following:
(1) Explain the information provided pursuant to section
-4;
(2) Disclose any information other than a credit score or key factor, as defined in section -4;
(3) Disclose any credit score or related information obtained by the user after a loan has closed;
(4) Provide more than one disclosure per loan transaction; or
(5) Provide the disclosure required by this section when another person has made the disclosure to the consumer for that loan transaction.
(f) Any person's obligation pursuant to this section shall be limited solely to providing a copy of this information that was received from the credit reporting agency.
No person has liability under this section for the content of that information within the report provided by the credit reporting agency.
(g) As used in this section:
"Enterprise" means the Federal National Mortgage Association, and any affiliate thereof, and the Federal Home Loan Mortgage Corporation, and any affiliate thereof.
"Person" shall not include an "enterprise".
§ -7 Charges for certain disclosures. (a) A credit reporting agency shall not impose a charge for:
(1) A request for a copy of the consumer's file made within sixty days after adverse action is taken;
(2) Notifying any person designated by the consumer pursuant to the applicable provisions of the Fair Credit Reporting Act, 15 U.S.C. section 1681i, as amended, of the deletion of information that is found to be inaccurate or can no longer be verified;
(3) A set of instructions for understanding the information presented on the credit report and a toll-free telephone number that consumers may use to obtain additional assistance concerning the consumer report; or
(4) The first copy of a consumer disclosure provided to a consumer each calendar year pursuant to section -2.
(b) For all other disclosures to consumers of information pertaining to the consumer, the credit reporting agency may impose a reasonable charge, not to exceed the retail price of a written report rendered in the normal course of business to the customers of such agency for each request for information.
§ -8 Reporting of information prohibited. No credit reporting agency shall make any credit report containing any of the following items of information:
(1) Cases under Title 11 of the United States Code, or under federal bankruptcy law that, from the date of entry of the order for relief or the date of adjudication, predate the credit report by more than ten years;
(2) Suits and judgments that, from the date of entry, predate the credit report by more than seven years or by more than the governing statute of limitations, whichever is the longer period;
(3) Paid tax liens that, from the date of payment, predate the credit report by more than seven years;
(4) Accounts placed for collection or charged to profit and loss that predate the credit report by more than seven years;
(5) Records of arrest, indictment, or conviction of a crime that, from the date of disposition, release, or parole, predate the credit report by more than seven years; or
(6) Any other adverse item of information that predates the credit report by more than seven years.
(b) Subsection (a) shall not apply to:
(1) A credit transaction involving, or that may reasonably be expected to involve, a principal amount of $150,000 or more;
(2) The underwriting of life insurance involving, or that be expected to involve, a face amount of $150,000 or more; or
(3) The employment of an individual at an annual salary that equals or is reasonably be expected to equal $75,000 or more.
(c) A credit reporting agency shall not furnish for employment purposes, or in connection with a credit, insurance, or direct marketing transaction, a credit report that contains medical information about a consumer unless the consumer consents to the furnishing of the credit report.
(d) A credit reporting agency shall not include, in a credit report made to a person requesting credit information pertaining to a consumer, the names of any other persons who have requested credit information pertaining to that consumer or the number of such inquiries made more than one year preceding the date of the credit report; except that such information shall be retained for two years and provided to the consumer as provided in this chapter.
§ -9 Procedure for disputed information (a) If the completeness or accuracy of any item of information contained in the consumer's file is disputed by a consumer and the consumer notifies the credit reporting agency directly of the dispute, the agency shall reinvestigate free of charge and record the current status of the disputed information on or before thirty business days after the date the agency receives notice from the consumer.
(b) On or before five business days after the date a credit reporting agency receives notice of a dispute from a consumer in accordance with subsection (a), the agency shall provide notice of the dispute to all persons who provided any item of information in dispute.
(c) Notwithstanding subsection (a), a credit reporting agency may terminate a reinvestigation of information disputed by a consumer if the agency reasonably determines that the dispute by the consumer is frivolous or irrelevant. Upon making such a determination, a credit reporting agency shall promptly notify the consumer of the determination and the reasons therefor, by mail or by telephone, if authorized by the consumer for that purpose. The presence of contradictory information in the consumer's file does not in and of itself constitute reasonable grounds for determining the dispute is frivolous or irrelevant.
(d) In conducting a reinvestigation under subsection (a), the credit reporting agency shall review and consider all relevant information submitted by the consumer with respect to the disputed information.
(e) If after reinvestigation under subsection (a) of any information disputed by a consumer, the information is found to be inaccurate or cannot be verified, the credit reporting agency shall promptly delete the information from the consumer's file. (f) If any information is deleted after a reinvestigation under subsection (a), the information shall not be reinserted in the consumer's file after deletion unless the person who furnishes the information reinvestigates and states in writing or by electronic record to the credit reporting agency that the information is complete and accurate. The furnisher of information shall not provide the statement unless the furnisher reasonably believes that the information is complete and accurate. Upon reinvestigation and statement by the furnisher, the credit reporting agency shall promptly notify the consumer of any reinsertion.
(g) A credit reporting agency shall provide written notice of the results of any reinvestigation under this section within five business days of the completion of the reinvestigation by mail or by telephone, if authorized by the consumer. This notice shall include:
(1) A statement that the reinvestigation is complete;
(2) A statement of the determination of the agency on the completeness or accuracy of the disputed information;
(3) A credit report that is based on the consumer's file as that file is revised as a result of the reinvestigation;
(4) A description of the manner in which the information disputed by the consumer has been altered, changed, deleted, or modified in the consumer's credit report;
(5) A notification that, if requested by the consumer, a description of the procedure used to determine the accuracy and completeness of the information shall be provided to the consumer by the credit reporting agency, including the name, business address, and telephone number of any furnisher of information contacted in connection with that information; and
(6) A notification that the consumer has the right to add a statement to the consumer's file disputing the accuracy or completeness of the information.
(h) For purposes of this section, "information" shall not include other information in the same item that is not disputed by the consumer.
§ -10 Violations. (a) A violation of this chapter is deemed to be a violation of section 480-2.
(b) A consumer aggrieved by a violation of this chapter may bring an action in circuit court for the consumer's damages, injunctive relief, punitive damages, reasonable costs, and attorneys' fees.
(c) In the case of a violation by a credit reporting agency, or in the case of a wilful violation by any person, the court may also issue an award for the consumer's actual damages or $100, whichever is greater. In considering the amount of punitive damages, the court may consider, among other relevant factors:
(1) The extent to which a credit reporting agency failed to consider relevant information provided by the consumer during any investigation of information in the consumer's file; and
(2) The extent to which a credit reporting agency maintained and complied with procedures designed to ensure compliance with the requirements of this chapter.
(d) This section shall not be construed to limit a credit reporting agency's liability under any other law.
§ -11 Exemptions. (a) Section -3 shall not apply to:
(1) The state child support enforcement agency when investigating a child support case pursuant to Title IV-D of the Social Security Act and section 4102 of Title 3;
(2) The department of taxation, its agents or assigns:
(A) Where the department has reason to believe that the taxpayer is liable for delinquent taxes, and the department is seeking the taxpayer's credit report in furtherance of the investigation or collection of such delinquent taxes; or
(B) Where the department is seeking the taxpayer's credit report in furtherance of the collection of a debt owed by the taxpayer to the State;
or
(3) Credit transactions entered into prior to __________.
SECTION 3. This Act shall take effect upon its approval.
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