MINUTES OF THE meeting

of the

ASSEMBLY Subcommittee on Commerce and Labor

 

Seventy-First Session

March 26, 2001

 

 

The Subcommittee on Commerce and Labor was called to order at 1:46 p.m., on Monday, March 26, 2001.  Chairman David Parks presided in Room 4100 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

 

SUBCOMMITTEE MEMBERS PRESENT:

 

Mr.                     David Parks, Chairman

Mr.                     Bob Beers

 

STAFF MEMBERS PRESENT:

 

Vance Hughey, Committee Policy Analyst

Dawn Lee, Committee Secretary

 

OTHERS PRESENT:

 

James J. Jackson, Associated Credit Bureaus, Inc.

Mary R. Lau, Executive Director, Retail Association of Nevada

 

 

Chairman Parks called the meeting to order, noted that all members of the subcommittee were present and opened the hearing on A.B. 157.

 

Assembly Bill 157:  Prohibits reporting agencies from imposing charge to provide consumer reports and related information under certain circumstances. (BDR 52-612)

 

Chairman Parks asked for comments with regards to A.B. 157 as introduced and recognized Mr. James Jackson representing the Associated Credit Bureaus.

 

Mr. Jackson indicated the Associated Credit Bureaus opposed A.B. 157.  He then referenced Exhibit C, a letter from himself to Chairman Dini, Assemblyman Parks, and the Committee on Commerce and Labor; and Exhibit D, a letter from Mr. Eric Ellman, Senior Manager State Government Relations, Associated Credit Bureaus, Inc., to Chairman Dini and the Committee on Commerce and Labor.  Their opposition centered around the fact that the Fair Credit Reporting Act (FCRA) [15 U.S.C. §1681 et seq.] and the Nevada Credit Reporting Law under Nevada Revised Statutes Chapter 598C already covered most of what was proposed in A.B. 157.  The major difference under A.B. 157 made it incumbent upon the nationwide credit reporting services to notify consumers whenever an adverse credit circumstance was placed on their credit report.  Mr. Jackson testified that research had not found the $8.50 maximum chargeable amount to a consumer for their credit report had been a barrier to obtaining the report.  Additionally, federal law required that anyone unemployed and seeking employment who had been denied credit for any reason, or anyone on public assistance could receive a free copy of their credit report.

 

Chairman Parks asked Mr. Jackson for a copy of the letter from Mr. Ellman, which was promptly provided.

 

Mr. Jackson pointed out Mr. Ellman’s letter basically reiterated what his own letter had already stated.  Chairman Parks observed the letters did appear to be consistent with each other.  He then recognized Ms. Mary Lau, Executive Director, Retail Association of Nevada.

 

Ms. Lau began by stating the information she had been waiting for from the credit bureaus had been received and apologized for not having it available when the bill was first heard.  She proceeded with the information that where similar legislation had passed it had not aided the consumers it was intended to assist.  In fact, it had done nothing but drive up the cost of business.  The increased cost was ultimately passed on to the very consumers it had attempted to help in the first place.

 

Ms. Lau also mentioned some unintended consequences within the language of A.B. 157, including the letter of disclosure concerning adverse action or three inquiries.  A consumer who stopped at three different automobile dealerships in one weekend and gave permission to the dealership to run their credit could generate three inquiries.  The adverse action language referenced negative information, and negative could be a speculative term.  If a consumer were to close his credit file, for instance by cancellation of a credit card, it would show only that the account was closed.  That could be viewed as negative until the consumer had the chance to explain that he had decided not to carry that credit card any longer.  These points raised definitional problems.  Additionally, merchants were required by federal standards to inform the consumer as to why they were refused credit “based on the report from [the credit reporting agency].”  Merchants were required to give consumers a copy of their report at that time as part of a consent decree and part of current federal standards.  The current language could interfere with that process already in place.

 

Ms. Lau continued, stating it had been her organization’s experience regarding this type of legislation that it ended up harming the very consumers it was meant to help and the problem it was meant to address was not resolved.  There have been a number of changes by the credit bureaus that did protect the consumer and did eliminate the possibility of “double negatives” appearing once a file had been cleared.  Credit bureaus currently shared knowledge with consumers to correct their reports and inform them of their consumer rights.

 

Chairman Parks called for questions of the committee.

 

Mr. Jackson informed the committee of the effect similar legislation has had in one state, Colorado.  A credit report was the item “sold” by a credit reporting bureau.  In cases where they have had to give away their product, the result has been increased costs to the grantors of credit from the credit bureaus for their service.  This led to higher prices for the consumer, as was the experience in Colorado.  As indicated in both Exhibits C and D, the Colorado situation resulted in some scaling back of the provision thresholds and how many times a credit report must be provided in any twelve-month period.  Finally, while A.B. 157 appeared to have usefulness and similar legislation had been introduced in other states, only Colorado had adopted such legislation and had since stayed it.

 

Chairman Parks mentioned a law in California that would permit consumers to get credit scores from national credit agencies and asked for comments.

 

Ms. Lau explained credit scoring as a model put forth for financial calculation.  Credit managers would use the indicated benchmark figure to assist in the judgment of whether or not a consumer could take on more debt and still be able to meet their current responsibilities.  In California, many people did not understand credit scoring as opposed to what their credit file said.  A credit file would show an in-depth history of the consumer and their credit worthiness, whereas a credit scoring system is more a “snapshot.”  The law in California was a way to inform consumers of exactly what credit managers would look at.

 

Chairman Parks commented that he understood credit scoring to be a number system between 300 and 850, with 850 being the best number.  He reiterated for clarification to Ms. Lau that it was a “snapshot” of a consumer’s situation at a particular time.

 

Ms. Lau verified that credit scoring would show a brief overview.  A comparative analysis would be a situation with two people being considered for credit, with each party earning $30,000 annually.  The factors that would make one person more credit worthy than another could be that one person held credit cards that would allow them to get $60,000 in debt, making that person technically bankrupt.  They could have more debt than they could earn in a year.  The next person could have only $1,200 in outstanding debt and his score would be much higher.  Additionally, if both parties had gone to more than one lender looking for the best deal, the number of times their credit was run would lower the score.  Other factors could include length of current employment and length of current residence, both of which would also impact a score.

 

Chairman Parks thanked Ms. Lau for her explanation.  He commented that since California passed the law it appeared to have been opened up to consumers across the country per an article from the Las Vegas Review Journal (Exhibit E).  He then read the fifth paragraph of the article:

 

But a new California disclosure law has prompted some of them to change that policy.  Consumers anywhere in the country can now get their score—as well as a detailed explanation of how it was calculated.  All you need is access to the Internet and $12.95.

 

Ms. Lau ventured the opinion that it was a very good tool for consumers and would teach them what is looked at in credit evaluations.

 

Chairman Parks asked Mr. Beers for any comments.  There being none, he then moved on to the recommendation from the committee regarding the action to be taken on A.B. 157.  He indicated pursuant to his discussions with Mr. Jackson, Mr. Ellman, and Mr. Beatty, he could see potential problems with the bill should it be enacted.

 

 

Chairman Parks asked for any final comments. 

 

MR. BEERS MOVED THE SUBCOMMITTEE RECOMMEND TO THE FULL COMMITTEE A.B. 157 BE INDEFINITELY POSTPONED.

 

MR. PARKS SECONDED THE MOTION.

 

THE MOTION CARRIED UNANIMOUSLY.

 

Chairman Parks adjourned the hearing at 2:04 p.m.

 

RESPECTFULLY SUBMITTED:

 

 

 

Dawn Lee

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Assemblyman David Parks, Chairman

 

 

DATE: