What You Haven’t Heard About that Bad Banking Bill; It Preempts State Identity Theft Reforms
We're opposing S2155 on the Senate floor this week. The main message against in the media has been that it puts mortgage borrowers at risk of bad loans and racial discrimination. Worse, it puts our economy at risk by removing important bank regulator tools to rein in risky practices by giant and big banks. For that matter, it could even allow risky practices to migrate to community banks. But there's more. The bill's so-called consumer protection provisions intended to offset its rollbacks, including its free credit freeze, aren't that good and preempt stronger state actions.
By now, you might have seen the flashy headlines about President Trump and the other Republicans deregulating banks with the help of several Senate Democrats.
S.2155, the so-called “Economic Growth, Regulatory Relief, and Consumer Protection Act” was brought to the full Senate on Tuesday and full debate starts today. It already has the co-sponsorship of 12 Democratic Senators, likely ensuring the votes it needs to get passed before debate even began this morning. Several more Democrats voted in favor of its “motion to proceed” yesterday.
The reasons for opposition to this bill by us and many others include that it puts mortgage borrowers at risk of bad loans and racial discrimination. Worse, it puts our economy at risk by removing important bank regulator tools to rein in risky practices by giant and big banks. For that matter, it could even allow risky practices to migrate to community banks.
What you probably haven’t heard about yet are the problems with one of the provisions in the bill being sold as a consumer protection. While this provision appears to eliminate fees for getting and removing credit freezes, it may not work as advertised. Credit freezes are a commonsense tool that prevents new account identity theft that have been adopted nationwide.
When we popularized the idea of the freeze 15 years ago, credit bureaus fought state laws creating credit freezes in the first place, so we were forced to settle, in most states, for a fee. PIRG has long called for the elimination of the fees charged by the credit bureaus in most states. We, as consumers, shouldn’t have to pay to control or protect our financial information when we didn’t give them permission to collect it or sell it in the first place.
The elimination of credit freeze fees would not make up for the risks to mortgage borrowers and our economy that the rest of the bill poses. But this bill’s free freeze provision is problematic in its own right. It preempts and replaces state freeze laws with a new law that has an apparent loophole and a weaker security measure.
State freeze laws explicitly allow for temporary removals of freezes when consumers want to apply for credit, insurance or, in some cases, employment. The federal proposal refers to free removals but does not even mention temporary suspension of freezes or “lifts” the way state laws do. This appears to be a loophole that could allow credit bureaus to still charge for temporary lifts, including in the four states (Indiana, Maine, North Carolina, South Carolina) where both freezes and lifts are free and in three more states (Delaware, Tennessee and Virginia) where lifts are explicitly free.
So, by co-sponsoring this bill, Senators Chris Coons (DE), Tom Carper (DE), Joe Donnelly (IN), Angus King (ME), Thom Tillis (NC), Tim Scott (SC), Bob Corker (TN), Mark Warner (VA), and Tim Kaine (VA), all support a bill that replaces their own current state laws with something weaker.
State freeze laws also require a consumer to provide a password or personal identification number in addition to proper identification when they want to temporarily or permanently remove a freeze. This bill only requires “proper identification” but not passwords or PINs. This could make it easier for an identity thief to remove your freeze and apply for credit in your name. Therefore, this bill also appears to be weaker than most, if not all, state laws when it comes to the security of removing credit freezes.
In addition to the above two problems, by preempting or overriding state freeze laws, this bill could prevent states from taking even stronger action such as automatically freezing consumer credit reports.
In 2003, the last time Congress enacted significant identity theft reforms, it recognized the importance of non-preemption and, instead, retained state identity theft reform and financial privacy leadership. It chose to allow states to continue to pass more stringent reforms. Nearly every state passed both credit freeze laws and data breach laws; several also passed data security laws. Today, with this bill under consideration in the Senate and a retrograde data breach and data security draft bill (Blaine Luetkemeyer (MO) and Carolyn Maloney (NY) under consideration in the House Financial Services Committee today, Congress is on the verge of defying and denying the right of states to protect their citizens from any and all privacy invasions.
Director, Consumer Campaign, PIRG
Mike directs U.S. PIRG’s national campaign to protect consumers on Wall Street and in the financial marketplace by defending the Consumer Financial Protection Bureau, and works for stronger privacy protections and corporate accountability in the wake of the Equifax data breach. Mike lives in Washington, D.C.