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Harmonization of Legislative Measures for Credit Reporting In Canada Stakeholder Consultation June 15, 2007 Federal, Provincial and Territorial Consumer Measures Committee cmcweb.ca BACKGROUND The Consumer Measures Committee (CMC), which includes a representative from the federal government as well as from every province and territory, was created under Chapter Eight of the Agreement on Internal Trade. The CMC provides a federal- provincial-territorial forum for national cooperation to improve the marketplace for Canadian consumers, through harmonization of laws, regulations and practices and through actions to raise public awareness. The CMC also provides support and develops policy proposals for Federal-Provincial-Territorial Ministers Responsible for Consumer Affairs. The objective of this consultation is to share information and solicit feedback from key stakeholders on proposals to harmonize consumer reporting legislation across Canada. A consumer report is a written, oral or other form of communication regarding the credit or personal information of a consumer. The most widely known form is the traditional credit report, but many other examples exist. A wide variety of organizations, such as insurance underwriters, residential leasers or employers use the reports as part of their decision making process when managing risks. Any person who supplies reports about consumers, regardless of status as a corporation or non-profit organization, is considered a reporting agency and must meet the requirements of relevant federal and provincial legislation. This includes, but is not limited to, the major national credit reporting agencies and reporting agencies specialized in areas such as investment, insurance, and tenancy. In Canada, the reporting industry is regulated under provincial and/or federal privacy legislation, and, in some cases, under provincial consumer protection legislation. The federal Personal Information Protection and Electronic Documents Act (PIPEDA) regulates the collection, use and disclosure of personal information. Some provinces have enacted their own broader privacy legislation that reflects substantially similar principles. It must be noted, however, that provincial consumer reporting legislation does not always align with PIPEDA and most of the provincial privacy laws, as the consumer reporting laws pre-date the privacy laws. Consumer reporting legislation is broadly similar across Canada. Provincial laws define what qualifies as a reporting agency, and, depending on the province, establish the nature of the information that cannot be included in a report, the length of time it can be included, the purposes for which a report can be requested, basic mechanisms for correcting errors, and methods of consumer consent and access. However, there are some inconsistencies that could result in consumer information being treated differently by reporting agencies, based on the province. This can also create costs for reporting agencies in having to administer different rules, province by province. For example, businesses and individuals that access information from reporting agencies must adjust to different limitations on the nature of the information available to them, and on the length of time information may remain on a report. The Consumer Measures Committee (CMC) is reviewing consumer reporting legislation to establish a template for harmonized legislation to protect consumers and reduce the regulatory burden on reporting agencies. Measures to combat identity theft related to credit reporting were the subject of a CMC consultation in 2005. These are not addressed in this consultation document, but amendments to consumer reporting legislation in regard to identity theft may arise as a result of that previous CMC consultation. PART I. DEFINITIONS File: All of the information pertaining to an individual that is recorded and retained by a reporting agency, regardless of the manner, form or location in which the information is stored. Personal information: Information about an identifiable individual, including but not limited to information about an individual‟s name, age, character, health, medical information, reputation, physical or personal characteristics, mode of living, credit information, occupation, current and previous employers, place or places of residence, marital status, dependents, educational or professional qualifications, financial details or history, assets or any other matter concerning the individual. Report: Includes any release of personal information from a file, whether in written, oral, electronic or other form. Reporting agency: Any person who, related to a business transaction or that carries out the activities of providing reports, personally or through a representative, establishes files on other persons and prepares and communicates to third parties reports bearing on character, reputation or solvency of persons to whom the information contained in the files pertains. PART II. BASIC PROVISIONS, NOT SUBJECT TO CONSULTATION There are basic provisions that are already included in the provincial legislation governing reporting agencies in a majority of provinces, and for which no substantive changes are proposed, or are considered by the CMC to be central elements in the regulation of reporting agencies. As such, no options for consultation are provided on these provisions: 1. Information regarding judgments against the consumer cannot be reported unless it includes the name and address of the creditor and amount of the judgment. 2. Information regarding court actions cannot be reported unless it includes the current status of the court action. 3. Information regarding criminal convictions must be expunged from the file if an absolute discharge or pardon is granted. 4. Information regarding criminal charges cannot be reported unless the current status of the charge is included. Charges on which an individual has been found not guilty and charges that have been withdrawn or are otherwise no longer before the courts cannot be reported. 5. Information regarding race, creed, colour, ancestry, ethnic origin, political affiliation and sexual orientation cannot be reported. 6. The source of information must be disclosed in all reports and maintained in the file until the information is purged. 7. Reporting agencies are prohibited from requiring consumers to waive any rights or release the reporting agency from liability before receiving a report or file. 8. Data accuracy requirements are addressed by privacy legislation (for example, PIPEDA, Schedule 1, 4.6 Principle 6 – Accuracy). 9. Health care and medical information should be excluded from files and reports, except for debts relating to medical goods and services. Health care and medical debts may not identify the services or include details related to the health care or medical status of the individual. 10. The end-user of a report (as opposed to the entity that provides the end-user with access to a report) must notify an individual when a report results in or plays a significant role in the denial of a benefit or service or an increase in the cost of a benefit or service. The end-user must also notify an individual when information from a third party (i.e., not a reporting agency) results in, or plays a significant role in, the denial of a benefit or service, or an increase in the cost of a benefit or service. PART III. PROVISIONS FOR CONSULTATION Your views are being sought on the issues outlined in this Part. Please place an X beside the appropriate response and provide comments. There are 10 sections. Section 1. Information to be Excluded From Reports After Six Years Personal and credit information, particularly when adverse, is central to determining if credit will be made available. It is also central for creditors when determining whether an individual is a good credit „risk.‟ The period covered by a credit history plays an important role in this determination. A national standard of reporting adverse information for a maximum of six years is proposed. It is proposed that the following types of information be excluded from reports after six years: 1a) Debts, from the date of last payment or the date of first default, which ever is later. __ Agree __ Disagree Comments: 1b) Judgments, from the date of the judgement, unless the creditor or the creditor‟s agent confirms in writing that the judgment remains unpaid in whole or in part and the confirmation appears in the file. __ Agree __ Disagree Comments: 1c) Convictions for offences against a law of any jurisdiction, from the date of conviction, or, where the conviction resulted in imprisonment, from the date of release, or, if parole is granted, from the completion of parole. __ Agree __ Disagree Comments: 1d) Lawfully imposed fines, taxes or premiums, from the date they were imposed, unless confirmed in writing every six years as unpaid by the government or government agency responsible for collection. __ Agree __ Disagree Comments: 1e) Other adverse personal information, from the date of the event which lead to the adverse information appearing in the report. __ Agree __ Disagree Comments: 1f) Currently, the most common time frame among provinces for reporting adverse information is six years. This is also the shortest period. Is a national standard of six years for reporting adverse information the most appropriate time frame? __ Yes __ No Comments: Section 2. Bankruptcy Information Bankruptcies are reported in consumer reports and are key factors in determining if credit will be made available. How bankruptcies are reported is of great importance to both the business and the individual, particularly in cases where an individual has declared bankruptcy more than once. Most Canadian jurisdictions have reporting legislation that addresses this issue in broad terms. For example, in Ontario, the Consumer Reporting Act currently restricts the release of information on a bankruptcy to seven years after the date of discharge, except where the individual has been bankrupt more than once, with no secondary limitation. It is proposed that if an individual is declaring bankruptcy for the first time, information regarding that bankruptcy may not be reported after six years from the date of discharge. A question arises when a consumer declares bankruptcy more than once. Users of reports would benefit from having more information about the credit history of an individual with a current bankruptcy on file (that is, a bankruptcy that is still within the six-year post-discharge period), including the existence of one or more bankruptcies in the past which may have been removed from the file once their own six-year reporting period ended. On the other hand, the individual would benefit if any previous bankruptcy could not be reported past its own six-year exclusion period, under any circumstance. Please indicate which standard you feel should apply if an individual is declaring bankruptcy and has done so before: __ Information regarding a bankruptcy cannot be reported more than six years after the date of discharge of that specific bankruptcy, regardless of subsequent bankruptcies. __ Information regarding all previous bankruptcies can be reported up until six years after the date of discharge of the most recent bankruptcy in the file. Please indicate why. Comments: Section 3. Information Related to a Consumer Proposal, Orderly Payment of Debts (OPD) Program / Consolidation Order and “Substantially Similar” Arrangements Part III of the Bankruptcy and Insolvency Act sets out the process for consumer proposals, whereby a consumer can make a proposal for repayment of debt to creditors when the amount owed is under an amount set in the statute; Part X of the Act details the Orderly Payment of Debts procedure, which allows a person to pay debts under the governance of provincial courts. In 2002, the Personal Insolvency Task Force stated that: …current credit rating practices yield a result that is directly contrary to the policy choice of Parliament to encourage proposals by personal debtors. The adverse credit scores of individuals who have made proposals will almost invariably remain on their credit records longer, and sometimes substantially longer, than they remain on the records of those who choose bankruptcy. In a review of the Bankruptcy and Insolvency Act in 2003, the Standing Senate Committee on Banking, Trade and Commerce reached a similar conclusion: …the current credit rating system contains perverse elements and does not reward efforts by insolvent debtors to honour a greater portion of their obligations than would be the case if such debtors were to go into bankruptcy. In some sense, fairness is lacking [in the credit reporting system].1 In response to these concerns, the following retention periods are proposed: 3a) For consumers successfully completing a consumer proposal (as per Part III of the Bankruptcy and Insolvency Act): three years from successful completion of the proposal, with a maximum retention period capped at 6 years from the date of filing. __ Agree __ Disagree __ A shorter cap should be considered for those who successfully complete a consumer proposal. Please specify: 1 Debtors and Creditors Sharing the Burden: A Review of the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act (Report of the Standing Senate Committee on Banking, Trade and Commerce, November 2003), pg. 78-79. Comments: 3b) For consumers successfully completing an orderly payment of debt (OPD) program or consolidation order (as per Part X of the Bankruptcy and Insolvency Act): removed upon successful completion. __ Agree __ Disagree Comments: Part X of the Bankruptcy and Insolvency Act is not in force in all provinces in Canada; a consumer does not have access to this legislative option in those provinces where it is not in force. However, in at least one province that has not opted in to Part X, a non- legislative debt repayment program is offered in the marketplace that is substantially similar to Part X (i.e. the consumer is required to repay 100% of their debts over a specified period of time). 3c) For consumers successfully completing a debt repayment program that is substantially similar to Part X: removed upon successful completion. __ Agree __ Disagree Comments: Section 4. Disputes and Redress Ensuring that the information collected is limited to the purposes for which it was collected and regulating the use and disclosure of that information is essential under privacy law. There is also the need for the ability of individuals to access and correct inaccurate information in a timely fashion. Creditors and their agents vary in the frequency and diligence with which they provide or confirm credit information to reporting agencies. The end result is that reports provided by reporting agencies can have information that is incorrect, out-of-date, or in the wrong file altogether. Individuals may also feel that an item in their report needs to be explained or put into context. Individuals need to be able to have incorrect or misleading information fixed or removed from their file or to provide an explanation that will be included in their report. PIPEDA requires that amended information in a report or a dispute statement involving an unresolved challenge be transmitted to third parties who have access, where appropriate. Consumer reporting legislation in many provinces requires that all parties that have received a report in a period (often of one year) prior to the correction receive copies with the corrected information. Schedule 1 of PIPEDA requires: 4.9.5 When an individual successfully demonstrates the inaccuracy or incompleteness of personal information, the organization shall amend the information as required. Depending upon the nature of the information challenged, amendment involves the correction, deletion, or addition of information. Where appropriate, the amended information shall be transmitted to third parties having access to the information in question. 4.9.6 When a challenge is not resolved to the satisfaction of the individual, the substance of the unresolved challenge shall be recorded by the organization. When appropriate, the existence of the unresolved challenge shall be transmitted to third parties having access to the information in question. 4a) What requirements should there be for reporting agencies and reports with regard to responding to consumer disputes about information on their report? __ Privacy legislation provides sufficient protection for individuals. __ Consumer reporting legislation should specifically require that reporting agencies inform previous recipients that corrections have been made. __ Consumer reporting legislation should require that the reporting agency notify the consumer that the correction has been made and that the consumer has the right to request that corrected reports be sent to recipients over the past year. __ Consumer reporting legislation should establish a standard with regard to correcting reports and providing previous recipients with corrected reports that goes beyond what is in the option immediately above (please indicate what standard should be established). Comments: 4b) A consumer statement (of an unresolved dispute) must be kept on file with the item(s) it relates to and be provided with all reports that include the relevant item(s). PIPEDA requires that a file include the substance of the dispute but does not place an express limit on the details of the consumer statement that are provided in a report. Consumer reporting legislation in several provinces specifies a limit to the number of words for a consumer statement (of an unresolved dispute), which exists alongside a requirement that the consumer statement be included in all reports that include the disputed record. For example, the US Fair Credit Reporting Act, 15 U.S.C. § 1681, Section 611 (b), permits a limit on the number of words in a consumer statement: (b) Statement of dispute. If the reinvestigation does not resolve the dispute, the consumer may file a brief statement setting forth the nature of the dispute. The consumer reporting agency may limit such statements to not more than one hundred words if it provides the consumer with assistance in writing a clear summary of the dispute. A longer consumer statement (of an unresolved dispute) increases the costs relating to furnishing reports, and industry and business stakeholders have indicated that disputes are only occasionally considered by end-users. Should a consumer statement (of an unresolved dispute) be required to be included with all reports that include the relevant item, and should there be a limit on the number of words that a consumer statement can include? __ PIPEDA requirements for recording and reporting the substance of a dispute are appropriate. __ Disputes should be included in reports but have a limit of _____ words to reduce the length and costs of reports, if the reporting agency provides the consumer with assistance in writing a clear summary of the dispute. __ The existence of disputes should be noted on the report, and full descriptions be made available only upon request. Comments: Section 5. Consumer Consent and Consumer Notification The release of information by a reporting agency can not only determine if an individual gains access to a service or benefit, but can impact terms on which transactions are entered, including their cost. To ensure that individuals can exercise control over their personal information and that they are aware that a report will play a role in the decision, individuals need to be aware that a report will be requested. Currently, reporting agencies rely on the requesting organization‟s assertion of consent. Provincial reporting legislation may set specific requirements with regard to the nature of consent. The Fair Trading Act in Alberta sets out the circumstances in which consent is required and states that: 44 (2.1) The express consent of an individual referred to in subsection (1) must be in a verifiable form, including but not limited to writing and audio recordings. Privacy law addresses the issue of consent; for example, Schedule 1 of PIPEDA states: 4.3.1 Consent is required for the collection of personal information and the subsequent use or disclosure of this information. Typically, an organization will seek consent for the use or disclosure of the information at the time of collection. 4.3.2 The principle requires "knowledge and consent". Organizations shall make a reasonable effort to ensure that the individual is advised of the purposes for which the information will be used. To make the consent meaningful, the purposes must be stated in such a manner that the individual can reasonably understand how the information will be used or disclosed. 4.3.3 An organization shall not, as a condition of the supply of a product or service, require an individual to consent to the collection, use, or disclosure of information beyond that required to fulfil the explicitly specified, and legitimate purposes. 5a) Please indicate which of the following options you support: __ Specific requirements should be set in consumer reporting legislation to ensure that the consent of an individual is obtained before a report can be released. Please indicate what specific requirements should be in place. __ Consumer consent is already required under privacy law and does not need to be addressed in consumer reporting legislation. Comments: 5b) In order to determine if the information in their file is being used appropriately according to privacy and reporting legislation, and that consent has been obtained, if required, individuals need to be aware that a report has been issued, and to whom. Upon request from a consumer, reporting agencies are required to disclose to that consumer the identity of persons who have requested or who have received a report on that consumer, excluding requests from law enforcement agencies. Schedule 1 of PIPEDA states: 4.9.3 In providing an account of third parties to which it has disclosed personal information about an individual, an organization should attempt to be as specific as possible. When it is not possible to provide a list of the organizations to which it has actually disclosed information about an individual, the organization shall provide a list of organizations to which it may have disclosed information about the individual. A reporting agency should provide this information covering what time frame? __ The previous year __ Other time period (please specify): Comments: Section 6. Clarity of Information in Report / Communication with Reporting Agencies 6a) Individuals may not fully understand the contents of their report. To this end, PIPEDA establishes requirements for providing background on the content of reports, including the requirement that information be in a form that is generally understandable. Schedule 1 states: 4.9.4 The requested information shall be provided or made available in a form that is generally understandable. For example, if the organization uses abbreviations or codes to record information, an explanation shall be provided. Is the PIPEDA standard with respect to the clarity of information sufficient for a consumer report? __ Yes __ No. Please indicate why the PIPEDA standard applying to records that are produced in response to access requests is insufficient with respect to a consumer report, and indicate what standard would be more appropriate. Comments: 6b) Consumer reporting legislation in the provinces varies with respect to how reporting agencies must communicate with consumers who are seeking information about the contents of their own credit file or related matters. Alberta, for example, requires that agencies have “properly trained staff available and accessible to explain to the individual any information furnished.” Establishing specific requirements may be onerous for smaller reporting agencies if they are too prescriptive. What standards should reporting agencies be expected to meet with respect to communicating with consumers? __ Reporting agencies should be required to communicate with consumers using the same method(s) they use to communicate with end-users. __ Specific standards should be established for consumer reporting agencies, such as having trained staff and a toll-free number. Please indicate the standards you feel should be required. Comments: Section 7. Consumer Access to Own File or Report Consumer access to reports is central to allowing individuals to ensure that the information in files relating to them is correct and that their information is not misused. Allowing individuals to monitor and respond to the information in their file is an important aspect for both consumer protection and in the credit granting process. End-users are required to inform an individual when a consumer report has contributed to a decision to deny or increase the cost of a benefit or service for an individual. Such information can alert consumers to potential ID fraud, encourage them to work to improve their credit rating, and allow them to identify errors in information in their file and seek to correct them. Schedule 1 of PIPEDA states: 4.9.4 An organization shall respond to an individual's request within a reasonable time and at minimal or no cost to the individual. See also 4.9.5 (cited above, in the discussion under question 4) in regard to error correction. Provincial consumer reporting legislation, however, often requires that individuals have access to their report for free in specific circumstances. The following three questions address the number of times a consumer may obtain a free copy of their own report, and the format in which it is to be provided. 7a) Should reporting agencies be required to provide one free report annually upon a request in writing, and whenever the individual is subject to an adverse decision stemming from their report and makes a request in writing? __ Agree __ Disagree Comments: 7b) Recognizing the high number of credit transactions completed in one year, and the associated potential for an error to appear on a consumer report, some stakeholders argue that consumers should have more frequent access - or even unlimited access - to a free consumer report. However, more frequent free access would present a higher burden on reporting agencies. Considering this, is one free report annually the most appropriate limit/time frame? __ Yes __ No, free access to a consumer report should be unlimited. __ No, free access to a consumer report should be more frequent than one time per year, but should not be unlimited. Please identify what limit should be placed on free access. Comments: 7c) Nova Scotia has taken the stance that a consumer should have free access to a consumer report regardless of the manner in which they ask to receive it (e.g. both mail and electronic access should be free). Other provinces require free disclosure only by mail. Reporting agencies claim that the costs associated with providing electronic access to consumer reports justify the charging of a fee for this type of access. With respect to consumer reports, should there be different rules depending on the method used by a consumer to access them? __ Yes. Please indicate what rules should exist for each method of access. __ No, there should be one set of rules (and all methods of access should be free). Comments: Section 8. Access to Files Access to files containing personal and credit information is limited to protect consumers. Many provinces limit the sale of files (as opposed to reports) to other registered or licensed reporting agencies; other provinces limit access according to privacy legislation. Federal privacy legislation may also restrict the sale of consumer files without consumer consent. Should the sale of files (as opposed to reports) by a reporting agency be limited? __ Yes, to recognized reporting agencies __ Yes, according to privacy law __ Barred, except in the case of the sale of the reporting agency Comments: Section 9. Access to Reports The process of furnishing a report is an important one, as is the understanding of what a report is being used for. Accordingly, consumer reporting legislation often places direct limitations on the reasons for which a report can be furnished and requires that consumers consent to the release or be notified of it. In Alberta, the Fair Trading Act limits the release of a report to situations in which there are reasonable grounds to believe that it is being provided: in relation to the extension of credit, for the collection of a debt, for employment purposes, in connection with the underwriting of insurance for that individual, to determine the eligibility of an individual under a law, as a result of a direct business requirement (and with the consent of the individual), or to a government agent. In most cases, the express consent of the individual is required. Should consumer reporting legislation establish specific rules for the furnishing of reports, or should it be directed towards ensuring the informed, express consent of the individual? __ Consumer reporting legislation should have specific limitations on the purposes for which a report can be furnished, and require informed, expressed consent (please specify the limitations). __ Consumer reporting legislation should require that the individual expressly and specifically consent to the furnishing of a report and be specifically informed as to the use and retention of the report by the requesting person. Legislation should not place any further limits concerning furnishing of reports. Comments: Section 10. Credit scores Credit scores can play a key role in determining whether a consumer will have access to a service or benefit. Reporting agencies have noted that credit scores are not kept in the file and are not determined by the reporting agency, but rather by the lenders, often based on proprietary formulas. Consumers often do not understand the concept of credit scores or are interested in seeing a sample score so as to have an indication of how creditors will respond to requests for services or benefits. Industry has indicated there are technical and commercial barriers to including credit scores with reports. Should the Consumer Measures Committee undertake future work examining the issue of credit scores? __ Yes. Please indicate why. __ No Comments: If you have additional comments on any of the issues included in this discussion paper, or any other issues related to consumer reporting legislation, please use the space below or attach another piece of paper to the end of the discussion paper. If your comments are a continuation of your response to a question in the comments section, please indicate the question number related to your comment. Comments: Please be sure to complete the following two pages Your information 1. Please indicate the following: Full Name: Organization (if applicable): Full Mailing Address: Telephone Number: ( ) Email address: Preferred Language of Correspondence: 2. Please indicate to which group you belong: __ Private Business or Industry Association/Group Please indicate the sector:____________________ __ Consumer Association __ Academic __ Provincial Government __ Private Citizen __ Other (specify): 3. Please note that the Consumer Measures Committee (CMC) may publish consultation responses. A. Please choose one of the following: __ I give CMC permission to publish this submission in its entirety. __ I give CMC permission to publish this submission with the exception of the responses to the following questions: __ Section 1 __ Section 5 __ Section 8 __ Section 2 __ Section 6 __ Section 9 __ Section 3 __ Section 7 __ Section 10 __ Section 4 __ I refuse to give CMC permission to publish this submission. B. Please choose one of the following if you have chosen one of the first two options from Section A: __ CMC may publish my name, and the name of the organization I represent. __ CMC may publish the name of the organization I represent, but not my name. __ I am responding as an individual private citizen. I give CMC permission to publish my name. __ I am responding as an individual private citizen. I do not give CMC permission to publish my name. Thank you for your participation in this consultation.
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