THE US POLITICAL ENVIRONMENT New President will mean a new Chairman of the Federal Trade Commission; new officials at the Treasury; new approach with

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1 THE NEXT TWO YEARS: CHALLENGES AND OPPORTUNITIES FOR THE US CREDIT REPORTING SYSTEM WCCR 2008 RIO DE JANEIRO, BRAZIL OCTOBER 20, 2008 ROBERT R. BELAIR OLDAKER, BIDEN & BELAIR WASHINGTON, DC (202)

2 THE US POLITICAL ENVIRONMENT New President will mean a new Chairman of the Federal Trade Commission; new officials at the Treasury; new approach with the Congress In the Senate, Democrats are poised to pick up five to eight seats In the House, Democrats are poised to pick up 15 to 25 seats 2

3 What is the next Congress (and President) likely to mean for the credit reporting industry? More regulation for credit reporting industry Expanding (and changing) the FTC s role Restricting the uses of credit reports Requiring greater accuracy in reports Challenges: Restrictions on using reports for insurance; employment; government Opportunities: Greater regulation levels playing field by expanding FCRA reach; safety and soundness metrics; rulemaking reduces law enforcement risks 3

4 More emphasis on consumer rights A free score Opt-in or opt-out out for posting data to the file More disclosures/financial literacy Challenges: Costs to the industry; deterioration in the completeness or accuracy of reports Opportunities: Sales of credit monitoring and other products to consumers; posting consumer provided information to the file 4

5 More emphasis on rights for low and moderate income consumers Alternative data Restrictions on collection or use of data or scores that are seen as proxies for race, ethnicity, even age Foreign language reports, disclosures and consumer assistance Challenges: Higher costs; lower sales; less accuracy and/or completeness Opportunities: Fewer unbanked or thin file consumers; enhanced sales because number of consumers with reports and scores is larger 5

6 More restrictions on acquiring data Restrictions on acquiring and/or using sensitive, personally identifiable data SSNs Biometrics Restrictions on acquiring and/or using public records data Restrictions on acquiring and/or using OFAC data; no-fly data; other intelligence type data Challenges: Accuracy and completeness; ID authentication deterioration Opportunities: Special data access rights for credit reporting 6

7 More regulation of data furnishers and customers (banks and other financial service organizations) Greater responsibility for accuracy Greater responsibility for reinvestigations More legal risk for misuse of credit reports Challenges: Furnisher reporting could be chilled; accuracy and predictive value of reports and scores could be compromised Opportunities: Mandatory reporting; transfer of some legal responsibilities from credit reporting industry to furnishers and customers 7

8 New laws promote competition from new sources New banking regulations (and consolidation) promote private label credit reporting New laws permit federal agencies to create special purpose credit bureaus New laws effectively authorize credit reporting by Internet search engines Challenges: Balkanization of credit reporting undermines national credit reporting systems and their risk management function Opportunities: New laws level the playing field; new competitors become furnishers and customers 8

9 CONCLUSION Today, the US credit reporting industry and its products particularly the credit score are seen by everyone as a valued part of the consumer credit economy and, thus, the entire US economy Next step is for the credit reporting industry to be seen in the US not merely as a consumer s credit report card but, rather, as the consumer s credit teacher educating and enabling consumers to participate even more successfully in the US economy 9