The B.C. Civil Liberties Association has received several complaints from persons who felt that they were treated unfairly by credit reporting agencies. In investigating these complaints we noticed serious problems with the Credit Reporting Act, the provincial legislation which regulates the activities of credit reporting agencies. It was decided to take a closer look at the Act, with a view to suggesting changes which would answer the BCCLA’s privacy concerns.
What we have discovered is that the Actsuffers from three kinds of problems:
- It is out of date.
- The protections offered consumers are largely illusory.
- The range of information gathered and disseminated is far too broad.
The Act, brought into force in 1973, is so out of date that many of its sections have no real meaning given the way the business of credit reporting agencies is carried on. For example, much of the access by member organizations to credit reports and the receipt of credit information by the reporting agencies is carried on through computers. As a result, the sections in the Act which require hard copy to back up information in the reports, and which require the reporting agency to release reports only with the express written consent of the consumer, are almost totally disregarded. With minor exceptions, both the only hard copy which backs up a credit report, and the signed consent forms for the release of information to the member, are held by the member institutions. Credit reporting agencies are thus forced to rely on the accuracy of the information presented to them and can only assume that written consent for the release of information was obtained. Credit reporting agencies regularly fail to comply with these sections, not because they flout the law, but because the manner in which information is collected and disseminated makes compliance virtually impossible.
The BCCLA does not believe that the solution is to force reporting agencies to abandon modern communication technology and revert to prehistoric methods of collecting and disseminating information in order to comply with the Act. However, when the manner of collection and disseminating information has outstripped our ability to guarantee even the most rudimentary protection of the privacy interests of citizens of B.C., this manner of doing business must be investigated and altered where necessary to protect those privacy interests.
The BCCLA does not have the expertise to suggest how the transfer of credit information could be carried out in a manner to fully protect the privacy rights of consumers. For example, we simply do not know how proof of consent by a consumer can be ascertained by the reporting agency before release of a credit report given direct computer access, especially when the speed of a request for, and release of, the information is so important. All we can do is to state the principles which capture the privacy rights of consumers with respect to credit reporting and urge the experts to redraft the legislation so as to reflect those principles.
Another basic problem with the Act is that it regulates only the credit reporting agencies, yet much of what is required of those agencies by the Act is out of their control. Reporting agencies are supposed to ensure the fairness and accuracy of credit reports, yet all they can do when a report is questioned is to check that the information they are reporting is the same as that which was fed to them by the credit grantors using their services. Some questions regarding accuracy and fairness are not answerable in this manner. The question is often about the accuracy or fairness of the information which is fed to them, and that is a question for the credit grantor.
Another example: the Act stipulates which uses of the information are appropriate and which are not, yet reporting agencies have little knowledge of, and no control over, the use which the member will make of the information. Thus, section 10 provides that the reporting agency cannot give out information unless it has “reason to believe” that the member “intends” to use the information for one of the listed purposes. To our knowledge, the intention of the member with regards to the use of the information is never raised in practice and could not be checked even if it were raised. This purported curb on the use of credit information is no curb at all.
What these examples illustrate is that much of what is purported to be regulated by the Act is not, in practice, regulated at all. Nor could it be, given that the content and use of credit information is not controlled by the reporting agency, but rather by the banks, trust companies, insurance companies, debt collection agencies, credit card companies and a host of other individual and institutional members which use the service.
Again, it is not clear how this problem is to be solved. Some of the member agencies are regulated either provincially or federally, and the relevant acts might be rationalized with the Credit Reporting Act so that at least some of the content and use of credit information could be regulated. However, that still leaves much unregulated: many of the members are not regulated at all or are regulated outside the province or the country. As well, the use of the information may not, in practice, be regulated—even for those businesses which are covered by a regulatory scheme. The fact is that once the credit information is in the hands of the member, there appears to be little that can be done to regulate its use.
Therefore, our most important suggestions for changes to the Act have to do with the kinds of information which should be contained in a credit report. We believe that the only kinds of information which should appear in a credit report are:
- identifying information
- a history of the consumer’s borrowing and repayment and
- information directly related to a consumer’s willingness and ability to repay a debt.
No personal or medical information should be allowed, nor irrelevant criminal convictions, nor information about a consumer’s spouse. We are not suggesting that credit grantors should be prevented from obtaining such information, but we reject the idea that if they want it they should be able to get if from a credit report. If a credit grantor decides it needs such information before extending credit, then it can ask for it directly from the consumer.
In what follows we make a number of suggestions for changes to the Act. We do not think that simply making these changes will result in an Act which satisfies all our concerns. As we said, contemporary methods of carrying on business in the credit reporting industry have outstripped our ability to control the transmission of credit information to such an extent that patching up the Act simply will not do. The government needs to take a hard look at the way this business is carried on, and then to draft new legislation which institutes real controls over the method and content of such transmissions. The suggestions made below indicate in some detail a number of the concerns which we think need to be addressed.
CREDIT REPORTING ACT
The definition in the Act of “personal information” is very broad and open: “Character, reputation… mode of living, or any other matter respecting the consumer” would appear to allow the gathering and dissemination under the Act of almost any kind of personal information—from the sexual orientation of a consumer to his or her membership in a political organization. In our view this kind of information should not be collected and disseminated under the Act. It is irrelevant, or should be, to the credit reporting industry. Furthermore, the brochures produced by the Credit Bureau of Vancouver and the Associated Credit Bureaus of Canada both answer the question “Is there information about my personal life in my credit report?” with a resounding “no”.
The brochures suggest that only specialized agencies compile information from friends and neighbours for an “investigative consumer report”. What are these agencies? What is their purpose? Are they regulated by the Act? How does one know that one is being investigated by such an agency?
6 Unsuitable application
This section allows the Registrar to consider an applicant for registration unsuitable in a number of circumstances. The section ought to provide that if any of those circumstances are found to exist for example, conviction of an offence involving dishonest or fraudulent acts—the Registrar shall consider an applicant unsuitable for registration instead of “may”.
7 Suspension or cancellation
Likewise this section, outlining the circumstances in which anyone registered under the Act may have his or her registration cancelled or suspended, should be mandatory.
If procedural due process is provided for under the Act for those facing suspension, the public interest is more effectively served by limiting the discretion of the Registrar in sections 6 and 7. If the Ministry wanted to preserve some of the Registrar’s discretion, it could do so by allowing such discretion with respect to the less serious forms of conduct described in sections 6 and 7.
10 To whom reports may be given
(1)(a) The use of the information should be more narrowly restricted than it is in the Act. Information ought not to be released for use in debt collection (the collector has access to all the information the lender has), for tenancy purposes except a first tenancy (the tenant has a proven track record), for employment purposes except where bonding is necessary or for insurance purposes (insurer can cancel policy). Subsection (vi), which deals with one class of persons who have access to information contained in the report, reads like a catch-all and should be repealed.
11 Contents of reports
(2) Only information that which can be confirmed by reference to hard copy should be stored and used in the reports. Input to the computer is sometimes in error.
(3)(a) Information for which no source is provided should not be included in a report even if the credit agency believes that the source is “reasonably ascertainable” by the consumer.
(3)(c) This subsection, which allows unfavourable and uncorroborated information to be reported if the lack of corroboration is noted, should be deleted. Our remarks above with respect to the definition of personal information are applicable here. If, as credit agencies claim, such information is not used by them, there is no need for provisions for its use in the Act. If personal information is to be used at all, the definition must be much narrower. In our view, the use of information with respect to character, reputation and mode of living ought to be expressly forbidden. Certainly, uncorroborated information—particularly unfavourable personal information—should not be included in a report under any circumstances.
3(i) This section provides that information relating to convictions that are more than six years old may not be in a report. In our view, only those convictions relevant to willingness or ability to pay a debt should be included in report. What is the relevance, for example, of a conviction for impaired driving or possession of a small amount of marijuana to credit worthiness?
3(j) No information that is obtained orally should be included in a report even if, as is provided in this section, the content of the oral report is noted in the file.
3(k) Information in a report that is adverse to the consumer’s interest and is more than six years old may prejudice debtors who attempt to pay off the debt because the six year period runs from the date of last activity. The rationale offered by credit reporting agencies, however, is a reasonable justification for this practice. The Limitations Act allows an action on a debt to be commenced within six years of the confirmation of the debt. Confirmation includes any acknowledgement of the debt including payment. To remove a detrimental mark from a credit report while the debt giving rise to it is still actionable is to mislead creditors and deprive them of information that may be important to their assessment of credit worthiness.
3(n) Only those types of court proceedings relevant to the determination of credit worthiness should be included in a report. These could be specified in the Regulations.
12 Consent or notice for report
(1) The only condition under which credit grantor should be able to obtain a report from an agency is when it has the express written consent of the consumer. Credit reports should not be available to someone who notifies the consumer that a report will be obtained as is provided for in this section.
(2) An examination of almost any application for credit will reveal that the requirement that consents to obtain reports be in type not less than ten point in size is being systematically ignored.
(3) Again, for the purposes of debt collection all the necessary information may be obtained by the collector from the lender.
13. Notice of denial of benefit or increase of cost
(1) The letter delivered under this subsection notifying a consumer of a denial of a benefit or an increase of cost should also notify the consumer that a credit report was relied upon and provide the reason for the denial or increase.
14. Disclosure to consumer
(1)(a) A fee ought not to be charged to consumers for the disclosure of information. Any fee could have the effect of limiting consumers’ access to such information. Furthermore, agencies must be required to produce the requested information in a form that is understandable to the average consumer.
(1)(a)(ii) This subsection provides that sources of information need not be disclosed to a consumer if the consumer can readily identify the source. Who is to determine whether or not the consumer can readily ascertain the source of any particular information in the report?
(1)(a)(iii) This subsection provides that the names of anyone who has received a report respecting the consumer in the last twelve months must be disclosed. There is no apparent reason why the names of only those who have received a report in the preceding 12 months should be released to the consumer. This seems particularly unbalanced when one considers that detrimental marks up to six years old may be used against the consumer. A consumer who queries the accuracy of a detrimental mark that is more than twelve months old ought to have access to information related to that mark.
(2)(b)(c) The toll and mailing charges should be incurred by the agency so that equal access is guaranteed to all consumers regardless of ability to pay.
(5) A hard copy of any information requested by the consumer should be provided in an understandable form at the expense of the agency instead of merely allowing the consumer to make an abstract of the information.
(8) The collection and dissemination of medical information under this Act needs to be studied. The difficulty with this kind of information is that, although it may be relevant to some credit grantors, it is not information that ought to be available to all who obtain credit reports. The Act does not allow for differentiation in the provision of information. One solution would be to prohibit the exchange of medical information under the Act and leave it to the individual credit grantor to request it directly from the consumer seeking the benefit.
15. Explanation by consumer
A consumer may deliver a 100-word explanation to a reporting agency relating to any information in the report. This section should specify that the agency must include the 100 word explanation with every report at the time it is issued. The agency should also be required to inform the consumer of his or her right to include the explanation with the report.
16 Correction of errors
This section is far too loosely worded. Where a consumer disputes the accuracy or completeness of any information (the Act says “accuracy and completeness”) in his or her file the agency ought to be required to respond to the statement of protest filed by the consumer within a reasonable time period and outline the efforts that have been made by the agency to confirm the information, the results of those investigations and the consumer’s right to appeal. There should also be some limitation on the agency’s ability to pass on information that is under protest or being appealed. Perhaps the Registrar could be given the discretion to limit the release of such information.
17. Order of Registrar
The duty of the Registrar to amend information that is, in his or her opinion, inaccurate or incomplete should not be discretionary. The duty to amend such information should be mandatory.
18. Investigation of complaints
The agency’s obligation to furnish information to the Registrar under this section should include a specified time within which the information is to be supplied. The Registrar ought to be under an obligation to respond to complainants.
Included as an offence should be the release of any information about a consumer by an officer or employee of an agency except in compliance with the Act. Furthermore, the monetary penalties for violation of the Act are insignificant and should be increased considerably.
CREDIT REPORTING REGULATIONS
(2) This subsection would be unnecessary if s. 12(l)(b) of the Act were repealed as recommended above.
(5) “Normal business hours” should be interpreted to mean at least common banking hours, i.e; 10:00 am to 3:00 pm to allow reasonable access for consumers.
The fee of $100 to apply to register under the Act is far too low. This provision and other sections in the Act combine to create a situation where access to a huge amount of private information is available to anyone willing to pay an inconsequential fee for use in a wide range of circumstances.
6. Consumer reports
l (a) Credit information about a consumer’s spouse ought not to be included in any report. With respect to medical and personal information, refer to our comments above.
(c) No information about criminal charges should be allowed. This section should refer to criminal convictions.
8. Consent and notification
(a) The consent section of many credit applications exceeds the form of consent set out in the Regulations. Consents commonly go far beyond authorization to simply obtain a credit report and allow the receipt and exchange of credit information from credit agencies and other unspecified individuals and companies.
(b)(c) See our comments about s. 12(l)(b) above. If, however, that section is retained notice to the spouse of the consumer that a report is being obtained from an agency should not be deemed consent by or notification of the consumer.
This section provides that certain persons are exempted from Part I of the Act. There is no Part I in the Act. From what did the Legislature intend to exempt these individuals and why?
1. The Registrar and major credit reporting agencies should be given public education duties. Many of the brochures now available are rife with inaccuracies and fail to clearly set out the rights of consumers and the obligations of agencies.
2. An accessible and uncomplicated appeal process should be set out in the Act for resolution of disputes about information in reports.
3. The publication of an annual report on the operation of credit reporting agencies and other aspects of the Act should be a statutory duty of the Registrar. This report should include information about the number of complaints received, the nature of the complaints, against whom they were made and how they were resolved.