Privacy: The Horror Side of Credit

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A man can live with the thought that his baby footprints are in the records of the state, that his fingerprints are on file with the FBI and that much of his private life, probably including a psychological report, resides in the files of his company. As invasions of privacy go, these are tolerable—at least compared with some of those perpetrated by consumer-credit bureaus. Last week, for the second time in less than a year, credit-bureau activities came under investigation by a committee of the U.S. Congress. This time it was the Senate Subcommittee on Antitrust and Monopoly, headed by Michigan Democrat Philip A. Hart. Two days of testimony produced enough horror stories to suggest that credit activities are urgently in need of regulation and reform.

For practical purposes, the more than 2,500 credit bureaus in the U.S. exist to protect their clients against the 4% of consumers who are "slow pays" and the 1% who try to "skip" without paying at all. As such, they are essential in a country that lives on credit. More than 60% of an average American's net income is spent on credit obligations of one sort or another. Each month in the U.S. some $8 billion worth of credit is extended, and the current total of outstanding consumer bills is estimated to be $105 billion—or 12% of the annual gross national product.

Hearsay and Fact. It is hardly surprising that the credit bureaus themselves have become big business. Operating on a membership-and-fee basis —a flat rate of $10 to $50 per year, plus anywhere from 75¢ to $50 for a credit analysis—they provide creditors with data on an individual's working, purchasing and paying habits. The Associated Credit Bureaus Inc., a sort of cooperative that represents 2,400 local bureaus that have files on about 160 million Americans is computerizing its nationwide operation. By 1973, credit information on a shopper from Rochester, N.Y., will be instantly available to a storekeeper in Redlands, Calif.

That information may be startlingly complete. The first time a man applies for credit of any sort, the facts of his life are collected and fed to the com puter; forever after, his file grows and grows. In addition to such basics as his name, address, bank references, marital status and bill-paying habits, credit bureaus keep track of his employment record, living accommodations and bank balance. They record his debts and how he pays them, and his legal involvements. They scour newspapers and public records for data on births, deaths, divorces, business failures, tax liens and court actions. They may even dispatch a field agent to interrogate an individual's acquaintances, friends and foes.

Scatterbrained. The result is a file that can contain hearsay as well as fact, and an account of a man's life that can be misleading, inaccurate—and incredibly damaging. What is more, the clients of credit bureaus include Government agencies, insurance companies and employers in private business. Examples from last week's testimony:

· An Alabama man had a dispute with a Montgomery store over the final payment in a layaway plan for Christmas toys; 16 years later, in Florida, the report of that dispute nearly cost him a job with a large company.