FACTA Burden

No matter how you feel about FACTA, it is clearly going to be the source of more regulatory burden. This is one of the more complicated laws to come down in recent years. It affects many participants in the credit industry and creates new responsibilities and new interactions between types of credit-related businesses.

It's all for a good purpose. We want to limit or even eliminate identity theft. We want to save the costs of identity theft to both victims and those, such as creditors, who end up absorbing many of the expenses. We want to create a world in which credit transactions and information about them is fair and accurate.

Given this laudable goal, how are we doing? A quick read through the new act is a real eye-opener - or closer, depending on how you feel when you read complicated stuff. This is a complicated statute. It is loaded with provisions and requirements intended to meet those laudable goals. What does it actually achieve?

FACTA is not easy reading. FACTA is the result of disparate points of view, conflicting goals, protracted negotiations, and many committees. The goals are laudable, but it is difficult to read the act without the sensation of being in a swirling maze. In fact, it is regulatory burden realized. Simply trying to read it is burdensome. Wait until we try to implement it.

When consumer protection laws happen, the process is complicated. There are parties with similar goals and some with conflicting goals. And there are parties who don't want the law at all. All of it has to get through Congress.

The legislative process hammers out the differences and comes up with a compromise that everyone can agree to vote on. However, compromises often involve strange results. For example, consumers wanted "opt-in" instead of "opt-out" for solicitations while industry wanted opt-out or even nothing at all. The result is "enhanced disclosures" of opt-out. Creditors and reporters must do more, consumers didn't get what they wanted, and we all have to live with the result.

The forces behind FACTA were diverse. Consumers wanted greater protections from advertising solicitations. And they wanted help with preventing and correcting identity theft. The credit industry wanted national uniformity in credit reporting. Both sides got much of what they wanted, but both groups had to make compromises.

The resulting law, FACTA, is a complex and tedious series of amendments to the FCRA. It is not an act that can be read in one sitting. In fact, it's sort of a mess that compliance managers and attorneys are going to spend much time sorting out in 2004 and beyond. It could have been named the Compliance Manager's Permanent Employment Act of 2003.

What is the bottom line of FACTA? In fact, what is the bottom line of most consumer protection? Businesses tend to measure bottom lines as profit or loss. The numerous consumer protection laws tell us that this is simplistic and short-sighted.

Businesses should look not simply at making profits, but also look at the context in which those profits are made. The context must be considered in any business strategy. And in today's world, the context includes the customer. In a service industry, the customer can be the most important component. When we provide what the customer wants, we win and so does the customer. When we fail to listen to the customer, we get more compliance.

In the case of the issues driving FACTA, the message to the industry is clear. Give consumers a break from unwanted advertising or at least give them some control over it. Otherwise, we will eventually have an opt-in law making marketing much more difficult. And help consumers prevent identity theft. It is in your interest as much as your customers'. It is never the thief who pays the costs.

Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 8, No. 15, 1/04