Government attempts to protect
information privacy thus presents quite a conundrum for the credit
reporting industry, consumers and legislators.
Looming Debate over Privacy, Commercial Speech
and the Fair Credit Reporting Act
the 108th Congress in session less than a month, a showdown over
privacy issues is already gearing up. Under the new Republican
leadership, Senator Richard Shelby (R-AL), became the chairman of
the Senate Banking Committee. Known for his strong support of opt-in
privacy provisions and states' rights, Senator Shelby will be a
key player in the debate over key elements of the Fair Credit Reporting
Act (FCRA), including the expiration this year of the national standards
provision that preempts state legislatures from regulating certain
aspects of consumer reporting.
the other side of Congress and the debate is House Financial Services
Committee Chairman Michael G. Oxley (R-OH), who is on the record
as strongly opposing any change to the current privacy rules set
forth in the Gramm-Leach-Bliley Act.
to be left out, the Bush Administration has also weighed in and
stated that, as part of the push for information security, the Treasury
Department's top priority in the FCRA debate is to make it quicker
and easier for consumers who have been victimized by identity theft
to right wrongs in their credit reports.
is a matter that touches all of our lives. Computers have made
it much easier and more profitable for companies to gather and disseminate
information that most Americans consider private. The 90th Congress,
recognizing that Americans need some way to protect themselves from
threats to their privacy, passed the FCRA to ensure public confidence
in the rapidly expanding area of credit-based consumer lending.
The FCRA deals with consumer credit report information and how it
can be used and shared, including individuals' right to access their
own records and correct any mistakes found.
to the FCRA passed in 1996, among other things, preempt states from
regulating the rights of credit bureaus or banks to share information
between affiliates. Those amendments are set to expire January
1, 2004. With the Federal Trade Commission this week reporting
a surge in consumer fraud losses as a result of identity theft,
now is not the time for FCRA to be dismantled. The FCRA establishes
standards for gathering and reporting credit information. These
standards govern the generation, dissemination and use of credit
information and provide procedures for disputing the information
contained therein. Inconsistencies and over-regulation would not
serve lenders and ultimately could grind to a halt consumers' access
to many credit resources.
is clearly within Congress' power to reauthorize uniform standards
for the sharing of private information. When a state statute conflicts
with a federal provision, the federal statute preempts that of the
state due to the Supremacy Clause of the U.S. Constitution, which
provides that "This Constitution, and the Laws of the United States
which shall be made in pursuance thereof; and all treaties made,
or which shall be made, under the Authority of the United States,
shall be the supreme Law of the Land; and the Judges in every State
shall be bound thereby, any Thing in the Constitution or Laws of
any State to the Contrary notwithstanding."
legitimate arguments can be made for why Congress must reauthorize
the state preemption provisions. First among them is that Congress
has the authority to regulate conduct that concerns or interferes
with interstate commerce through the broad powers delegated through
the Commerce Clause. The Commerce Clause contained within the U.S.
Constitution states: "The Congress shall have Power . . . To regulate
commerce . . . among the several States . . . ." (U.S. Const.,
Art. 1, sec. 8, cl. 3). It is well settled that the Supreme Court's
Commerce Clause jurisprudence gives the federal government the ability
to regulate commerce.
it is well established that the "dormant Commerce Clause" might
play some role in the choice of laws to block states from regulating
or taxing in a way that would materially burden or discriminate
against interstate commerce. The Supreme Court has long recognized
that certain types of commerce, like rail and highway traffic, are
uniquely suited to national, as opposed to state, regulation. See,
e.g., Wabash, St. L. & P.R. Co. v. Illinois, 118 U.S. 557
(1886). More recently, the Supreme Court recognized that "[t]he
Internet is 'a unique and wholly new medium of worldwide human communication'
. . . located in no particular geographical location but available
to anyone, anywhere in the world . . . ." (Reno v. ACLU,
521 U.S. 844, 850-51 (1997) (citation omitted). Much like the highway
and railway system in the United States and worldwide, the borderless
nature of the Internet makes it difficult to say that activities
conducted in cyberspace constitute intrastate or national transactions.
suits have been filed throughout the United States challenging state
statutes limiting Internet activity as violative of the commerce
clause. In 1997, a federal district judge cited the commerce clause
to void New York's law attempting to protect minors on the Internet,
stating that "[t]he unique nature of the Internet highlights the
likelihood that a single actor might be subject to haphazard, uncoordinated,
and even outright inconsistent regulation by states that the actor
never intended to reach and possibly was unaware were being accessed.
Typically, states' jurisdictional limits are related to geography;
geography, however, is virtually a meaningless construct on the
Internet." (American Library Ass'n v. Pataki, 969 F. Supp.
160, 168-69 (S.D.N.Y. 1997)). The court further recognized that
"the Internet is one of those areas of commerce that must be marked
off as a national preserve to protect users from inconsistent legislation
that, taken to its most extreme, could paralyze developments of
the Internet altogether." Id.at 169.
reauthorization of federal preemption under the FCRA preserves advantages
of simplicity and uniformity. The worse scenario for credit agencies
and consumers would be for fifty different states to each have its
own law. There is little doubt that without federal preemption,
reporting agencies, their information providers and consumers would
struggle to comply with different, overlapping, and inconsistent
state laws. This could result in higher costs to creditors, confusion
of borrowers due to excess documentation, disparity of regulation,
and even the possibility of double recovery by consumers entitled
to both state and federal remedies.
with all eyes focused on the efforts of the legislative and executive
branches, many are blind to the fact that the future of the FCRA
may lie with the U.S. Supreme Court.
Court is set to rule this term in Nike, Inc. v. Kasky (No.
02-575), a First Amendment case that could provide a clear distinction
between what constitutes commercial and noncommercial speech and
the level of protection afforded commercial speech under the First
Amendment. For background information about the Nike case,
courts have yet to reach a consensus on whether credit reports count
as commercial speech. The Supreme Court failed to answer this question
in Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc.,
472 U.S. 749 (1985), a credit bureau defamation case, and then declined
review in Trans Union LLC v. FTC, cert. denied, 122 S. Ct.
2383 (2002), which concerns whether credit reports constituted commercial
treatment of public statements at issue in the Nike case
may be telling for credit reports. The level of protection afforded
credit reports, whether designated as commercial or noncommercial
speech, would significantly affect whether credit bureaus can overcome
tort and FCRA liability by raising a First Amendment defense. This
may ultimately affect the extent to which legislators may protect
consumers from dissemination of credit reports. Although the Supreme
Court has had little opportunity to rule on the issue of data protection
as a constitutional right, the Court did note in Whalen v. Roe,
429 U.S. 589, 605 (1977), that there is a "threat to privacy implicit
in the accumulation of vast amounts of personal information in computerized
data banks or other massive government files."
Eugene Volokh of UCLA Law School makes a learned argument that broader
information privacy rules will place a heavy burden on existing
free speech law. In his article, Cyberspace and Privacy: A New
Legal Paradigm? Freedom of Speech and Information Privacy: The Troubling
Implications of a Right to Stop People From Speaking About You,
52 Stan. L. Rev. 1049, 1122-23 (2000), Professor Volokh cautions
that "[t]he analogies between the arguments used to support information
privacy speech restrictions and the arguments used to support the
other restrictions are direct and powerful. And accepting the principles
that the government should enforce a right to stop others from speaking
about us and that it's the government's job to create 'codes of
fair information practices' controlling private parties' speech
may shift courts and the public to an attitude that is more accepting
of government policing of speech generally."
attempts to protect information privacy thus presents quite a conundrum
for the credit reporting industry, consumers and legislators. If
credit reports are deemed to deserve greater First Amendment protection
than traditional forms of commercial speech, then some restrictions
on commercial speech may be impermissible when applied to credit
reports. This strategic business related issue will eventually
demand attention from all branches of government.
January 23, 2003]