Court Ruling Sharply Limits Use
of Credit-Header Data

As of July 1, 2001 credit bureaus will be restricted from selling the consumer identification information at the top of credit reports unless the purchaser has a permissible purpose as defined by the Fair Credit Reporting Act or the consumer has been offered an opportunity to halt the sale. So ruled a federal judge in early May after reviewing a suit filed by the Individual References Services Group (IRSG) against the federal regulatory agencies that issued the privacy regulations triggered by the 1999 Gramm-Leach-Bliley (GLB) financial modernization bill.

The IRSG filed the suit last summer on behalf of companies including Trans Union, Equifax, Experian, Acxiom, First Data Solutions, and Lexis Nexis. The suit challenged the FTC's issuance of GLB privacy rules, particularly the section which extended the definition of personal financial information to include not just information related to creditworthiness in an individual's credit report but also the identifying information at the top of the report (credit-header), including name, address and social security number. The FTC took the position that if such identifying information originated (or was verified) via information stemming from a GLB-covered transaction, then all subsequent use of the information is covered by GLB. Since financial institutions routinely supply credit bureaus with precisely this information on behalf of their customers, the FTC's position is that all subsequent distribution of credit-header information to third parties should be subject to the consumer's opt-out decision as mandated under GLB. The opt-out choice would have to be offered to consumers directly by their financial services firms.

The ruling could be devastating to both the credit bureaus (who stand to lose an important revenue stream) and to the information brokers whose business hinges on access to the credit-header data which they use to compile accurate address data for 200 million U.S. consumers. Ron Plesser, an attorney for the IRSG told The Wall Street Journal that the data is crucial for fighting fraud and enforcing court judgements. "We're disappointed and we will be reviewing our appeal rights," he said. Lou Mastria, a spokesman for the Direct Marketing Association, also told the Journal that the rule will be costly for direct marketers because mailings will be increasingly likely to go to an incorrect or outdated address.