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Lenders Concerned about FCRA

The Senate Banking Committee last month approved by voice vote a bill that would permanently extend the Fair Credit Reporting Act, but potentially cause some problems for mortgage lenders.

The financial services industry backs a permanent extension of the FCRA that would ban states from interfering with federal standards on consumer credit reporting. And the Mortgage Bankers Association is very pleased with a similar FCRA bill (H.R. 2622) passed by the House. However, the Senate measure contains provisions that would trigger an adverse action notice to mortgage applicants if negative data in their credit file causes the lender to charge a higher interest rate.

"The adverse action language now in the Senate bill is a real concern to us and others in the industry," said MBA's top lobbyist Kurt Pfotenhauer.

The language is "tremendously vague," he said. MBA will continue work with Senate Banking Committee staff on improving the language, Mr. Pfotenhauer said. But it is likely to be an issue that will have to be resolved when House and Senate conferees meet to iron out the differences in their respective bills.

"The good news is that the Senate is moving a bill and we really need to get a bill done this year," the MBA lobbyist said.

The House did not adopt the adverse action approach advocated by the FTC and the Treasury Department. Instead the House adopted an approach that is based on a California law, which requires mortgage lenders and brokers to disclose the applicant's credit score along with the reason codes. Lenders can charge a nominal fee for this disclosure as a result of an amendment by Rep. Bob Ney, R-Ohio.

House Financial Services Committee chairman Michael Oxley, R-Ohio, said he was pleased with the Senate Banking Committee's action and he expects Congress will complete work on the FCRA before Congress adjourns for the year.

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