Republican members of the Senate Banking Committee have urged the Federal Reserve Board to drop its controversial proposal to allow banks, financial institutions and credit grantors to collect, use and share sensitive personal information about their customers under the Equal Credit Opportunity Act.
Under the proposal, Credit grantors would be allowed “voluntarily” collect, use and share such personal data as race, sex, religion, and other personal characteristics, including spending habits and the creditworthiness of individuals seeking non-mortgage related consumer and business loans, or responding to previously approved direct mail loan solicitations.
“We strongly object to the Board’s voluntary data collection proposal and we encourage the board not to adopt it,” the Senators, led by Banking Committee Chairman Phil Gramm (R-TX), said in a letter to Federal Reserve Board Chairman Alan Greenspan.
In that letter, the eight senators said that “factors unrelated to creditworthiness, such as race, color, sex, religion and national origin should not be part of the credit decision.” And, they added, “there is simply no justification for removing the existing prohibition” against the collection, use and sharing of such information for credit purposes.
The senators, who endorsed the banking, financial services and credit industry’s opposition to the proposal, noted that since many loans are sought over the phone or via the Internet instead of in person, some consumers, especially those with poor credit might be tempted to provide inaccurate information “if they believe they will benefit from doing so.”
When that happens, they said, credit grantors “have absolutely no opportunity to verify that the data collected from applicants is accurate ” and that data “would, at best, be inaccurate and unreliable.”
A spokesman for Greenspan would not comment on the letter or indicate when the board might act on the proposal. Similarly there was no comment on the proposal or the Republican letter from Banking Committee Democrats.
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