President Bush signed FCRA legislation on December 4 ending a year of intense efforts to retain national standards for the U.S. credit reporting system. His signature on the bill occurred just weeks before the several provisions were due to expire.

"Having a national standard is more critical than ever," said AFSA CEO and President Randy Lively of the FCRA. "Over the past 10-15 years, there has been an accelerated reliance on consumer performance data resident in the files of consumer reporting agencies. This data enables fast underwriting and allows credit grantors to price products based on the apparent risk of the consumer."

To understand the importance of having a uniform national standard for credit reporting, Mr. Lively proposed an analogy. "Imagine if there were not a national standard for the gauges on railroad tracks. We would have to change trains at every state because different gauges are used at different states. With the credit reporting system, if individual states had the ability to change their requirements, we would have the same adversity of trying to offer a national standard as would occur if not for the national railroad gauge. "

While the need for a renewal of FCRA is apparent to the financial services industry, the power to establish national preemption lay in the halls of Congress. And that is where this story takes place.

The first major breakthrough for the FCRA renewal came when the House Committee that covers financial services, aptly named the House Financial Services Committee, passed the Fair and Accurate Credit Transaction Act. This bill, passed on July 16, included a provision that granted national preemption of certain standards set in the FCRA.

The bill was nationally commended for its inclusion of provisions that would give consumers the tools they need to fight identity theft and to ensure the accuracy of their credit reports. Consumers would have the right to receive one free credit report per year and to access their credit scores.

This bill did contain a provision that concerned some members of the financial services industry. An amendment offered Representative Barney Frank (D-MA) would require new duties and standards for financial institutions that furnish information to credit bureaus.

Meanwhile, over on the Senate side, the chair of the Senate Banking Committee, Richard Shelby (R-AL), was holding a series of hearings on FCRA renewal where yet another issue was being debated: the accuracy of the voluntary credit reporting system.

The Senate Banking Committee heard testimony on consumers' awareness of credit reporting and scoring, and several leaders of the Committee sharply questioned the reporting practices of some credit card companies.

With hearings being held by the Senate, and the passage of a House bill through the Committee, everything seemed to be going well; until California entered the fray.

On August 19, the California Legislature passed consumer privacy legislation proposed by state senator Jackie Speier. Speier's bill went beyond the federal Gramm-Leach-Bliley Act to propose a hybrid system of affiliate sharing. The bill requires an "opt-in" for the sharing of information with non-affiliated third parties and an "opt-out" for sharing among affiliates.

The debate over affiliate sharing would not remain on one coast for long. From the California Senate floor on the Tuesday morning before the initiative's passage, Speier stated, "this is the first salvo that needs to be heard in the halls of Congress."

But could an initiative started in California really affect the progress of the push for FCRA renewal in DC? "The California law will change the speed of the train in Congress," forewarned Edmund Mierzwinski, the consumer program director at the U.S. Public Interest Research Group.

The debate over privacy and credit reporting reach an apex on September 10, when the House passed its FCRA bill in a landslide vote of 392-30, finishing the first part of the trilogy necessary for FCRA renewal. The measure both guaranteed federal preemption and nullified California attempts to regulate affiliate sharing.

With the House passage complete, it was now up to the Senate to begin its role in the process. On September 15, Shelby released his own legislation addressing FCRA's renewal.

The Senate Banking Committee considered Shelby's legislation and passed the National Consumer Credit System Improvement Act of 2003 on September 23. In exchange for certain reforms included in the bill, a permanent preemption provision was included.

The bill was then passed overwhelmingly by the Senate on November 5 with a vote of 95-2. It turns out that the California privacy initiative did resonate within the walls of Congress, as the two dissenting votes were from the Senators from California who disapproved of the bill's conflict with California's recently passed law on affiliate sharing.

Affiliate sharing is one of the many areas where the House and Senate versions differ. The Senate version would set up a system consumers could use to block solicitations from affiliates of companies with which they do business; allow states to establish tougher laws against identity theft; and it would discourage creditors from withholding customer data from credit bureaus.

The House version not only does not include these items, it also would allow consumers to contact their banks or other furnishers of credit data to initiate investigations into their credit report.

To reconcile these two very different versions of FCRA renewal, conferees were appointed by both the House and the Senate. The conferees exchanged offers to reconcile their bills. While both sides want to achieve the same end result, major differences in the bills caused difficulties in issuing a report.

Despite the differences, the conferees reached an agreement on the legislation on November 21, just hours before the House was due to recess for Thanksgiving break. After the agreement was reached, the House voted to pass the conference report on November 22 with a vote of 379-49. The following day the Senate passed the report by voice vote which signaled the end of Congressional action on the measure.

President Bush ended the year's worth of efforts to permanently preempt the state's actions on the U.S. credit reporting system by signing the bill into law on December 4.

AFSA Government Affairs Representative Beth Frank wrote this article.