Reputation under Regulation: The Fair Credit Reporting Act at 40 and Lessons for the Internet...
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Executive Summary More than 40 years ago, Sen. William Proxmire (D-WI) guided the Fair Credit Reporting Act (FCRA) through Congress, seeking to improve the operations of the credit reporting industry. The complexities and tensions in a reputation system like credit reporting are formidable, how- ever, and the FCRA has not satisfied consumer- group demands for accurate, responsive, fair, and confidential credit reporting. In fact, new prob- lems have emerged, such as credit repair fraud and identity fraud. Credit reporting today is anything but the confi- dential service Proxmire hoped for. Passed in tandem with a financial surveillance law called the Bank Se- crecy Act, the FCRA has been turned toward govern- ment and corporate surveillance, providing little or no privacy or control for consumers. As economic theory predicts, the credit re- porting industry appears to have benefited from the ossifying effects of regulation. Though the information and technology environments have changed dramatically over the last four decades, the credit reporting and reputation marketplace has seen little change or innovation. A potential related market for identity services is also stagnant thanks in part to government policies. When Congress chose to preempt common law remedies for wrongs done by credit bureaus, it withdrew a tool that could have guided credit reporting toward better service to consumers and a more innovative and vibrant marketplace. With uniform national regulations, we cannot know how credit reporting might have evolved for the better. These 40 years of information regulation un- der the Fair Credit Reporting Act hold lessons for present-day debates. Foremost: legislators, regulators, and advocates lack the knowledge that it takes to anticipate and guide the direction of technology, privacy, or the information economy. These things should be left to the people and busi- nesses who are together building the future. Reputation under Regulation The Fair Credit Reporting Act at 40 and Lessons for the Internet Privacy Debate by Jim Harper No. 690 December 8, 2011 Jim Harper is director of information policy studies at the Cato Institute and author of Identity Crisis: How Identification Is Overused and Misunderstood.
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