[Federal Register: December 13, 2007 (Volume 72, Number 239)]
[Proposed Rules]
[Page 70943-70986]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13de07-22]
[[Page 70943]]
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Part II
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Part 41
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Federal Reserve System
12 CFR Part 222
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Federal Deposit Insurance Corporation
12 CFR Part 334
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Department of the Treasury
Office of Thrift Supervision
12 CFR Part 571
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National Credit Union Administration
12 CFR Part 717
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Federal Trade Commission
16 CFR Part 660
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Section 312 of the Fair and Accurate Credit Transactions Act; Proposed
Rule
[[Page 70944]]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 41
[Docket ID OCC-2007-0019]
RIN 1557-AC89
FEDERAL RESERVE SYSTEM
12 CFR Part 222
[Docket No. R-1300]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 334
RIN 3064-AC99
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 571
[Docket No. OTS-2007-0022]
RIN 1550-AC01
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 717
FEDERAL TRADE COMMISSION
16 CFR Part 660
RIN 3084-AA94
Interagency Notice of Proposed Rulemaking: Procedures To Enhance
the Accuracy and Integrity of Information Furnished to Consumer
Reporting Agencies Under Section 312 of the Fair and Accurate Credit
Transactions Act
AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC);
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision,
Treasury (OTS); National Credit Union Administration (NCUA); and
Federal Trade Commission (FTC).
ACTION: Notice of proposed rulemaking.
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SUMMARY: The OCC, Board, FDIC, OTS, NCUA, and FTC (Agencies) are
publishing for comment proposed regulations and guidelines to implement
the accuracy and integrity provisions in section 312 of the Fair and
Accurate Credit Transactions Act of 2003 (FACT Act).\1\ The proposed
regulations and guidelines would implement the requirement that the
Agencies issue guidelines for use by furnishers regarding the accuracy
and integrity of the information about consumers that they furnish to
consumer reporting agencies and prescribe regulations requiring
furnishers to establish reasonable policies and procedures for
implementing the guidelines. The Agencies also are publishing for
comment proposed regulations to implement the direct dispute provisions
in section 312. The proposed regulations would implement the
requirement that the Agencies issue regulations identifying the
circumstances under which a furnisher must reinvestigate disputes about
the accuracy of information contained in a consumer report based on a
direct request from a consumer.
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\1\ Pub. L. 108-159, 117 Stat. 1952 (Dec. 4, 2003).
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DATES: Comments must be submitted by February 11, 2008.
ADDRESSES: Because paper mail in the Washington, DC area and at the
Agencies is subject to delay, commenters are encouraged to submit
comments by e-mail, if possible. Commenters are also encouraged to use
the title ``Procedures to Enhance the Accuracy and Integrity of
Information Furnished to Consumer Reporting Agencies'' to facilitate
the organization and distribution of the comments. Comments submitted
to one or more of the Agencies will be made available to all of the
Agencies. Interested parties are invited to submit comments to:
OCC: You may submit comments by any of the following methods:
Federal eRulemaking Portal--``Regulations.gov'': Go to
http://www.regulations.gov, select ``Comptroller of the Currency'' from
the agency drop-down menu, then click ``Submit.'' In the ``Docket ID''
column, select ``OCC-2007-0019'' to submit or view public comments and
to view supporting and related materials for this notice of proposed
rulemaking. The ``User Tips'' link at the top of the Regulations.gov
home page provides information on using Regulations.gov, including
instructions for submitting or viewing public comments, viewing other
supporting and related materials, and viewing the docket after the
close of the comment period.
Mail: Office of the Comptroller of the Currency, 250 E
Street, SW., Mail Stop 1-5, Washington, DC 20219.
E-mail: regs.comments@occ.treas.gov.
Fax: (202) 874-4448.
Hand Delivery/Courier: 250 E Street, SW., Attn: Public
Information Room, Mail Stop 1-5, Washington, DC 20219.
Instructions: You must include ``OCC'' as the agency name and
``Docket Number OCC-2007-0019'' in your comment. In general, OCC will
enter all comments received into the docket and publish them on
Regulations.gov without change, including any business or personal
information that you provide such as name and address information, e-
mail addresses, or phone numbers. Comments received, including
attachments and other supporting materials, are part of the public
record and subject to public disclosure. Do not enclose any information
in your comment or supporting materials that you consider confidential
or inappropriate for public disclosure.
You may review comments and other related materials by any of the
following methods:
Viewing Comments Electronically: Go to http://www.regulations.gov
, select the ``Search for All Documents (Open and
Closed for Comment)'' option, select ``Comptroller of the Currency''
from the agency drop-down menu, then click ``Submit.'' In the ``Docket
ID'' column, select ``OCC-2007-0019'' to view public comments for this
notice of proposed rulemaking.
Viewing Comments Personally: You may personally inspect
and photocopy comments at the OCC's Public Information Room, 250 E
Street, SW., Washington, DC. You can make an appointment to inspect
comments by calling (202) 874-5043.
Docket: You may also view or request available background
documents and project summaries using the methods described above.
Board: You may submit comments, identified by Docket No. R-1300, by
any of the following methods:
Agency Web site: http://www.federalreserve.gov Follow the instructions for submitting comments at http://www.federalreserve.gov/.
.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
FAX: (202) 452-3819 or (202) 452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted,
[[Page 70945]]
unless modified for technical reasons. Accordingly, your comments will
not be edited to remove any identifying or contact information. Public
comments may also be viewed electronically or in paper in Room MP-500
of the Board's Martin Building (20th and C Streets, NW.) between 9 a.m.
and 5 p.m. on weekdays.
FDIC: You may submit comments, identified by the RIN for this
rulemaking, by any of the following methods:
Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html.
Follow instructions for submitting comments on
the Agency Web site.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-Mail: Comments@FDIC.gov. Include the RIN number in the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m.
Public Inspection: All comments received will be posted without
change to http://www.fdic.gov/regulations/laws/federal/propose.html,
including any personal information provided. Comments may be inspected
and photocopied at the FDIC Public Information Center, Room E-1002,
3501 North Fairfax Drive, Arlington, VA 22226, between 9 a.m. and 5
p.m. (EST) on business days. Paper copies of public comments may be
ordered from the Public Information Center by telephone at (877) 275-
3342 or (703) 562-2200.
OTS: You may submit comments, identified by OTS-2007-0022, by any
of the following methods:
Federal eRulemaking Portal: Go to http://www.regulations.gov
, select ``Office of Thrift Supervision'' from the
agency drop-down menu, then click submit. Select Docket ID ``OTS-2007-
0022'' to submit or view public comments and to view supporting and
related materials for this notice of proposed rulemaking. The ``User
Tips'' link at the top of the page provides information on using
Regulations.gov, including instructions for submitting or viewing
public comments, viewing other supporting and related materials, and
viewing the docket after the close of the comment period.
Mail: Regulation Comments, Chief Counsel's Office, Office
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552,
Attention: OTS-2007-0022.
Fax: (202) 906-6518.
Hand Delivery/Courier: Guard's Desk, East Lobby Entrance,
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention:
Regulation Comments, Chief Counsel's Office, Attention: OTS-2007-0022.
Instructions: All submissions received must include the
agency name and docket number for this rulemaking. All comments
received will be entered into the docket and posted on Regulations.gov
without change, including any personal information provided. Comments,
including attachments and other supporting materials received are part
of the public record and subject to public disclosure. Do not enclose
any information in your comment or supporting materials that you
consider confidential or inappropriate for public disclosure.
Viewing Comments Electronically: Go to http://www.regulations.gov
, select ``Office of Thrift Supervision'' from the
agency drop-down menu, then click ``Submit.'' Select Docket ID ``OTS-
2007-0022'' to view public comments for this notice of proposed
rulemaking.
Viewing Comments On-Site: You may inspect comments at the
Public Reading Room, 1700 G Street, NW., by appointment. To make an
appointment for access, call (202) 906-5922, send an e-mail to
public.info@ots.treas.gov, or send a facsimile transmission to (202)
906-6518. (Prior notice identifying the materials you will be
requesting will assist us in serving you.) We schedule appointments on
business days between 10 a.m. and 4 p.m. In most cases, appointments
will be available the next business day following the date we receive a
request.
NCUA: You may submit comments by any of the following methods
(please send comments by one method only):
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
NCUA Web Site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html.
Follow the
instructions for submitting comments.
E-mail: Address to regcomments@ncua.gov. Include ``[Your
name] Comments on Notice of Proposed Rulemaking Part 717, Procedures to
Enhance the Accuracy and Integrity of Information Furnished to Consumer
Reporting Agencies under Section 312 of the Fair and Accurate Credit
Transactions Act'' in the e-mail subject line.
Fax: (703) 518-6319. Use the subject line described above
for e-mail.
Mail: Address to Mary Rupp, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria, VA
22314-3428.
Hand Delivery/Courier: Address to Mary Rupp, Secretary of
the Board, National Credit Union Administration. Deliver to guard
station in the lobby of 1775 Duke Street, Alexandria, VA 22314-3428, on
business days between 8 a.m. and 5 p.m.
All public comments are available on the agency's Web site at http://www.ncua.gov/RegulationsOpinionsLaws/comments
as submitted, except as
may not be possible for technical reasons. Public comments will not be
edited to remove any identifying or contact information. Paper copies
of comments may be inspected in NCUA's law library, at 1775 Duke
Street, Alexandria, VA 22314, by appointment weekdays between 9 a.m.
and 3 p.m. To make an appointment, call (703) 518-6546 or send an e-
mail to OGCMail@ncua.gov.
FTC: Comments should refer to ``Procedures to Enhance the Accuracy
and Integrity of Information Furnished to Consumer Reporting Agencies
under Section 312 of the Fair and Accurate Credit Transactions Act,
Project No. R611017,'' and may be submitted by any of the following
methods. Comments containing confidential material must be filed in
paper form, must be clearly labeled ``Confidential,'' and must comply
with Commission Rule 4.9(c).\2\
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\2\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See Commission Rule 4.9(c),
16 CFR 4.9(c).
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E-mail: https://secure.commentworks.com/ftc-FACTAfurnishers.
To ensure that the Commission considers an electronic
comment, you must file it on the Web-based form found at this Web link
and follow the instructions on that form.
Federal eRulemaking Portal: http://www.regulations.gov.
You may visit this Web site to read this request for public comment and
to file an electronic comment. The Commission will consider all
comments that regulations.gov forwards to it.
Mail or Hand Delivery: A comment filed in paper form
should refer, both in the text and on the envelope, to the name and
project number identified above, and should be mailed or delivered to
the following address:
[[Page 70946]]
Federal Trade Commission/Office of the Secretary, Room 159-H (Annex C),
600 Pennsylvania Avenue, NW., Washington, DC 20580.
The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. All timely and responsive public comments, whether filed
in paper or electronic form, will be considered by the Commission, and
will be available to the public on the FTC Web site, to the extent
practicable, at http://www.ftc.gov/os/publiccomments.htm. As a matter
of discretion, the FTC makes every effort to remove home contact
information for individuals from the public comments it receives before
placing those comments on the FTC Web site. More information, including
routine uses permitted by the Privacy Act, may be found in the FTC's
privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
FOR FURTHER INFORMATION CONTACT:
OCC: Stephen Van Meter, Assistant Director, Community and Consumer
Law Division, (202) 874-5750; Patrick T. Tierney, Senior Attorney,
Legislative and Regulatory Activities Division, (202) 874-5090; or Paul
Utterback, National Bank Examiner, Compliance Policy, (202) 874-4428,
Office of the Comptroller of the Currency, 250 E Street, SW.,
Washington, DC 20219.
Board: David A. Stein, Counsel, Amy E. Burke, Attorney, or Jelena
McWilliams, Attorney, Division of Consumer and Community Affairs, (202)
452-3667 or (202) 452-2412; or Anne B. Zorc, Senior Attorney, (202)
452-3876, or Kara L. Handzlik, Attorney, (202) 452-3852, Legal
Division, Board of Governors of the Federal Reserve System, 20th and C
Streets, NW., Washington, DC 20551.
FDIC: David P. Lafleur, Policy Analyst, (202) 898-6569, or John
Jackwood, Senior Policy Analyst, (202) 898-3991, Division of
Supervision and Consumer Protection; Richard M. Schwartz, Counsel,
(202) 898-7424, or Richard B. Foley, Counsel, (202) 898-3784, Legal
Division; 550 17th St., NW., Washington, DC 20429.
OTS: Suzanne McQueen, Consumer Regulations Analyst, Compliance and
Consumer Protection Division, (202) 906-6459; or Richard Bennett,
Senior Compliance Counsel, Regulations and Legislation Division, (202)
906-7409, at 1700 G Street, NW., Washington, DC 20552.
NCUA: Linda Dent or Regina Metz, Attorneys, Office of General
Counsel, phone (703) 518-6540 or fax (703) 518-6569, National Credit
Union Administration, 1775 Duke Street, Alexandria, VA 22314.
FTC: Clarke W. Brinckerhoff and Pavneet Singh, Attorneys, (202)
326-2252, Bureau of Consumer Protection, Federal Trade Commission, 600
Pennsylvania Avenue, NW., Washington, DC 20580.
SUPPLEMENTARY INFORMATION:
I. Introduction
The Fair Credit Reporting Act (FCRA), which was enacted in 1970,
sets standards for the collection, communication, and use of
information bearing on a consumer's creditworthiness, credit standing,
credit capacity, character, general reputation, personal
characteristics, or mode of living.\3\ In 1996, the Consumer Credit
Reporting Reform Act extensively amended the FCRA.\4\ The FACT Act
further amended the FCRA for various purposes, including to increase
the accuracy of consumer reports.
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\3\ 15 U.S.C. 1681-1681x.
\4\ Pub. L. 104-208, 110 Stat. 3009 (Sept. 20, 1996).
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Section 623 of the FCRA describes the responsibilities of persons
that furnish information about consumers (furnishers) to consumer
reporting agencies (CRAs).\5\ Section 312 of the FACT Act amended
section 623 by requiring the Agencies to issue guidelines for use by
furnishers regarding the accuracy and integrity of the information
about consumers that they furnish to consumer reporting agencies and to
prescribe regulations requiring furnishers to establish reasonable
policies and procedures for implementing the guidelines (referred to in
this proposal as the accuracy and integrity regulations and
guidelines). Section 312 also requires the Agencies to issue
regulations identifying the circumstances under which a furnisher must
reinvestigate disputes concerning the accuracy of information provided
by a furnisher to a CRA and contained in a consumer report based on a
direct request from a consumer (referred to in this proposal as the
direct dispute regulations). The Agencies are proposing to adopt
accuracy and integrity regulations and guidelines and direct dispute
regulations to satisfy the requirements of section 312.\6\
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\5\ Section 623 is codified at 15 U.S.C. 1681s-2.
\6\ The FACT Act also directs the FTC to ``conduct an ongoing
study of the accuracy and completeness of information contained in
consumer reports prepared or maintained by consumer reporting
agencies and methods for improving the accuracy and completeness of
such information.'' See section 319 of the FACT Act. The FTC
submitted its first interim report to Congress on this study on
December 9, 2004, http://www.ftc.gov/reports/facta/041209factarpt.pdf
(last visited Oct. 4, 2007). The FTC submitted
its second interim report to Congress in December 2006, http://www.ftc.gov/reports/FACTACT/FACT_Act_Report_2006.pdf
(last
visited Oct. 4, 2007).
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II. Statutory Requirements
Accuracy and Integrity Regulations and Guidelines
As added by section 312 of the FACT Act, section 623(e)(1)(A) of
the FCRA requires the Agencies to establish and maintain guidelines for
use by each furnisher ``regarding the accuracy and integrity of the
information relating to consumers'' that the furnisher provides to
CRAs. In developing the guidelines, section 623(e)(3) directs the
Agencies to:
Identify patterns, practices, and specific forms of
activity that can compromise the accuracy and integrity of information
furnished to CRAs;
Review the methods (including technological means) used to
furnish information relating to consumers to CRAs;
Determine whether furnishers maintain and enforce policies
to assure the accuracy and integrity of information furnished to CRAs;
and
Examine the policies and processes employed by furnishers
to conduct reinvestigations and correct inaccurate information relating
to consumers that has been furnished to CRAs.
The Agencies also are required to update the guidelines as often as
necessary.
Section 623(e)(1)(B) of the FCRA requires the Agencies to prescribe
regulations requiring furnishers to ``establish reasonable policies and
procedures for implementing the guidelines'' established pursuant to
section 623(e)(1)(A). Section 623(e)(2) of the FCRA provides that the
Agencies must consult and coordinate with one another so that, to the
extent possible, the regulations prescribed by each Agency are
consistent and comparable with the regulations prescribed by each of
the other Agencies.
Direct Disputes
As amended by section 312 of the FACT Act, section 623(a)(8) of the
FCRA directs the Agencies jointly to prescribe regulations that
identify the circumstances under which a furnisher is required to
reinvestigate a dispute concerning the accuracy of information
contained in a consumer report on the consumer, based on a direct
request by the consumer. In prescribing the direct dispute regulations,
section 623(a)(8) directs the Agencies to weigh the following specific
factors:
The benefits to consumers and the costs to furnishers and
the credit reporting system;
[[Page 70947]]
The impact on the overall accuracy and integrity of
consumer reports of any direct dispute requirements;
Whether direct contact by the consumer with the furnisher
would likely result in the most expeditious resolution of any dispute;
and
The potential impact on the credit reporting process if
credit repair organizations are able to circumvent the provisions in
subparagraph G of section 623(a)(8), which generally states that the
direct dispute rules shall not apply when credit repair organizations
provide notices of dispute on behalf of consumers.
III. The Agencies' Consideration of the Statutory Accuracy and
Integrity Criteria and Direct Dispute Factors
The Agencies' Advance Notice of Proposed Rulemaking
In order to obtain information pertaining to the criteria that
Congress directed the Agencies to consider in developing the accuracy
and integrity guidelines and the factors that Congress directed the
Agencies to weigh in prescribing the direct dispute regulations, the
Agencies issued an advance notice of proposed rulemaking (ANPR) in
March 2006.\7\ The ANPR contained detailed requests for comment on ten
issues related to the statutory criteria governing the development of
the accuracy and integrity guidelines, and on eight issues related to
the statutory factors that the Agencies must weigh when promulgating
the direct dispute regulations. The Agencies also specifically
requested comment on how the issues presented by the ANPR might differ
depending on the type of furnisher, the types of information furnished,
the frequency with which a furnisher reports information about
consumers to CRAs, or the type of CRA that receives the furnished
information.
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\7\ 71 FR 14,419 (March 22, 2006).
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The Agencies received a total of 197 comments. Commenters included
depository institutions, other financial services companies, trade
associations, a CRA, a credit score service provider, a mortgage
company, consumer groups, and individual consumers. Key issues
identified and comments received on the accuracy and integrity criteria
and on the direct dispute factors are summarized separately in the next
two sections.
Comments Pertaining to Accuracy and Integrity Regulations and
Guidelines
Burden of accuracy and integrity regulations and guidelines. A
consistent theme among industry commenters on the ANPR was that the
proposed guidelines and regulations should be sensitive to the
voluntary nature of the reporting of information about consumers by
furnishers to CRAs and not create undue burdens on furnishers that
would discourage reporting. These commenters asserted that imposing
burden on furnishers may result in furnishers reporting less
information than they do presently or ceasing to report at all, thereby
decreasing the effectiveness of the current credit reporting system for
both consumers and industry.
Types of errors, omissions, or other problems that may impair the
accuracy and integrity of furnished information. Many commenters
detailed the types of errors that may impair the accuracy of
information furnished to CRAs. Industry commenters, consumer groups,
and individuals stated that some furnishers do not report consumers'
positive payment histories, a practice that can lead to lower credit
scores than consumers may merit. Similarly, commenters also noted that
some furnishers do not report credit limits, which may likewise lead to
lower credit scores. Consumer groups reported that sales of consumer
accounts to collection agencies also result in accounts being ``re-
aged,'' meaning that a debt receives a new origination date when the
collection account is opened, resulting in the debt being included on a
consumer's credit file longer than legally permissible. In addition, a
number of industry commenters mentioned that data entry errors by
furnishers and different data processing procedures by the CRAs can
result in ``mixed files''--files that include information from two or
more consumers. Commenters noted that furnishing inaccurate information
can adversely affect consumer credit scores and result in higher costs
of credit for some consumers and increased credit risk for lenders.
Patterns, practices, and specific forms of activity that can
compromise the accuracy and integrity of furnished information.
Industry commenters and consumer groups stated that a number of
furnishers do not use the industry standard format for reporting
information about consumers to CRAs, which results in the reporting of
inaccurate information. In addition, industry and consumer groups
mentioned that sales of debt to collection agencies or to other
creditors results in inaccurate information reported to the CRAs (e.g.,
duplicative reporting of accounts and re-aged accounts). Consumer
groups and a trade association noted problems with inaccurate
bankruptcy information being reported--some furnishers continue to
report a debt as not included in bankruptcy, fail to record a debt as
discharged, or continue to show a balance owed after bankruptcy
discharge. Several industry commenters stated that some furnishers do
not provide data to CRAs in a timely manner, which may result in
delinquent debtors appearing as current on their loans.
Business, economic, or other reasons for the patterns, practices,
and specific forms of activity that can compromise the accuracy and
integrity of furnished information. A few consumer groups and trade
associations indicated that some creditors omit good payment history or
credit limit information in order to protect their proprietary
underwriting systems and prevent competitors from soliciting business
from their customers. Some commenters also asserted that collection
agencies have little economic incentive to report updated or accurate
information because they typically do not use consumer report
information to determine credit risk.
Recommendations and descriptions of policies and procedures that a
furnisher should implement and maintain to identify, prevent, or
mitigate patterns, practices, and specific forms of activity that can
compromise the accuracy and integrity of information furnished to a
CRA. Some individual and industry commenters recommended that
furnishers report all consumer account information to CRAs and not omit
information. Consumer groups and some industry commenters recommended
that furnishers should report using the Metro 2 format--a standard
reporting format created by the credit reporting industry--or a similar
standardized format. Some depository institutions and trade
associations suggested that the accuracy and integrity guidelines
should be flexible and take into consideration the diversity of
furnishers with regard to size and business complexity.
Methods (including technological means) used to furnish information
about consumers to CRAs. Industry commenters stated that most
furnishers are reporting to the three nationwide CRAs electronically
using the Metro 2 format, although some furnishers transmit information
via magnetic tape, disks, or paper. Some trade associations commented
that errors can be introduced into a consumer's credit file when a CRA
translates the furnisher's raw data into the CRA's database.
[[Page 70948]]
Maintenance and enforcement of policies and procedures to ensure
the accuracy and integrity of information furnished to CRAs. Industry
commenters stated that, in general, furnishers have policies and
procedures in place to ensure the accuracy of information and perform
internal audits to verify accuracy. Industry commenters also stated
that furnishers have a business incentive to maintain and report
accurate information in order to maintain good customer relations.
Methods (including any technological means) that a furnisher should
use to ensure the accuracy and integrity of information about consumers
furnished to CRAs. Industry commenters suggested that furnishers should
use internal reports to verify the accuracy of information transmitted
to the CRAs. Consumer groups recommended that furnishers take
appropriate steps to ensure that they report bankruptcy discharge
information accurately.
Descriptions of policies, procedures, and processes used by
furnishers to conduct reinvestigations and to correct inaccurately
furnished information and recommendations that furnishers should adopt.
Industry commenters indicated that most furnishers use an electronic
automated system (e-OSCAR) for receiving and transmitting consumer
dispute information from and to the three nationwide CRAs. Although
each furnisher has its own procedures for investigating disputes,
furnishers generally review the information provided by the CRA and
compare it to the information in the consumer's file at the furnisher.
A few industry commenters stated that using the e-OSCAR system to
conduct reinvestigations is adequate. One trade association stated that
furnishers should establish better reinvestigation procedures and
provide staff training for processing credit disputes.
Consumer groups commented that furnishers' reinvestigation
procedures are inadequate in that they only verify that the reported
information is consistent with the furnishers' records, not the
underlying accuracy of such information. Consumer groups recommended
that furnishers should perform in-depth investigations beyond verifying
that information reported to CRAs matches furnishers' records,
including contacting consumers to obtain additional information, if
necessary. Consumer groups also noted that CRAs do not provide
furnishers with documentation provided by consumers to support their
claims.
Description of the policies and procedures of CRAs for ensuring the
accuracy and integrity of furnished information and whether and to what
extent those policies, procedures, or other requirements address
particular problems that may affect information accuracy and integrity.
A few industry commenters noted that CRAs have implemented policies to
ensure the accuracy of information that they receive from furnishers.
One industry commenter asserted that once CRAs incorporate data into
their databases, furnishers do not know how CRAs actually apply the
data to consumer credit files or whether the data is applied to the
correct consumers.
Comments Pertaining to Direct Dispute Regulations
Circumstances under which a furnisher should be required to
investigate a dispute. Industry commenters indicated that furnishers
generally are voluntarily investigating disputes that are directly
submitted to them using a process that is similar to the one furnishers
use to investigate disputes that CRAs forward to the furnishers.
Industry commenters, however, also stated that investigations of direct
disputes should be required only in instances of fraud or identity
theft that can be documented by the consumer, or where the consumer has
provided a written detailed dispute to the furnisher. Other industry
commenters believe that investigations of direct disputes should only
be required if the consumer has already disputed the item with the CRA
and received a response. Consumer groups favored a broad application of
the direct dispute rule, noting that many furnishers already have an
obligation to investigate other types of disputes for major product
categories under other laws, such as the Truth in Lending Act, Real
Estate Settlement Procedures Act, and Electronic Fund Transfer Act.
Some individuals commented that furnishers should always be required to
reinvestigate a consumer's account upon the consumer's request.
Benefits or costs to consumers that may result from a direct
dispute right. Consumer groups commented that consumers would benefit
from direct disputes because the dispute requirement would eliminate
the problem of CRAs not forwarding disputes and supporting
documentation to furnishers and would provide furnishers with necessary
documentation to investigate errors or fraud. One individual noted that
consumers would benefit by being able to deal with one entity, the
furnisher, rather than the three nationwide CRAs. Some industry
commenters noted that consumers would benefit from direct disputes in
complex cases or where the consumer needs to provide the furnisher with
supporting documentation.
Benefits to furnishers, consumer reporting agencies, or the credit
reporting system that may result if furnishers are required to
investigate direct disputes. Consumer groups stated that direct
disputes will result in a more accurate credit reporting system and
would afford industry the opportunity to standardize the dispute
resolution process. A few industry commenters stated that direct
disputes would yield faster dispute resolution for consumers. Some
industry commenters mentioned that direct disputes may be beneficial
for providing to furnishers additional documentation for complex
disputes, noting that such information may not be forwarded by CRAs.
Costs to furnishers, consumer reporting agencies, or the credit
reporting system of implementing a direct dispute requirement. Industry
commenters believed that a direct dispute requirement would impose
significant costs on furnishers resulting from an expected increase in
the number of direct disputes. One depository institution reported that
the costs of resolving a direct dispute are related to whether the
disputed information contains derogatory information and the nature of
the consumer's dispute. Some industry commenters noted that reviewing
consumers' lengthy payment histories can be costly. One industry
commenter noted that a direct dispute requirement would shift costs
from CRAs to furnishers.
One consumer group commented that start-up costs should not be
burdensome as many furnishers already have direct dispute
responsibilities for their major products (such as credit cards). This
commenter asserted that the cost for processing a direct dispute ranges
from $25 to $200, and that this cost is exceeded by the harms to
consumers who are adversely affected due to reporting errors.
Impact on the overall accuracy and integrity of consumer reports if
furnishers are required to investigate direct disputes. Some industry
commenters stated that they expect an adverse impact on overall
accuracy and integrity of consumer reports as a result of an increase
in duplicate disputes and costs, decreased efficiency in processing
disputes, and the likelihood that some furnishers would stop reporting
or report less information than they currently do.
Whether direct contact by the consumer with the furnisher would
likely result in the most expeditious
[[Page 70949]]
resolution of a dispute. Industry commenters generally believed that
direct contact by the consumer is most appropriate in instances of
fraud, identity theft, or where detailed information is needed in order
to resolve the consumer dispute. Some industry commenters also stated
that direct contact by the consumer would not be appropriate where the
error lies with the CRA or an aggregator rather than with the
furnisher.
Potential impact on the credit reporting process if credit repair
organizations are able to circumvent the FCRA's prohibition of their
submission of direct disputes. Consumer groups and an individual
commented that attorneys should be permitted to assist consumers with
disputes and not be considered credit repair organizations. Industry
commenters predicted an increase in costs resulting from a significant
increase in the number of direct disputes that would be filed by credit
repair organizations, which, these commenters contended, are often
deliberately vague or overbroad.
Additional, specific comments are mentioned, as appropriate, in the
section-by-section analysis.
The Agencies have carefully considered the comments received in
response to the ANPR in developing the proposed accuracy and integrity
regulations and guidelines and the proposed direct dispute regulations.
The Agencies also reviewed a number of studies that have identified
potential issues that may affect the accuracy of consumer report
information. These studies indicate that consumer report accuracy may
be affected by the presence of stale account information, the practice
of furnishing only negative information about an account, inaccurate or
incomplete public record data, inaccurate or incomplete collection
account data, and unreported credit limits.\8\
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\8\ See Robert B. Avery, Raphael W. Bostic, Paul S. Calem &
Glenn B. Canner, An Overview of Consumer Data and Credit Reporting,
Federal Reserve Bulletin, vol. 89, at 47-73 (Feb. 2003); Robert B.
Avery, Paul S. Calem, Glenn B. Canner & Shannon C. Mok, Credit
Report Accuracy and Access to Credit, Federal Reserve Bulletin, vol.
90, at 297-322 (Summer 2004); Consumer Federation of America &
National Credit Reporting Association, Credit Score Accuracy and
Implications for Consumers (Dec. 17, 2002), http://www.consumerfed.org/pdfs/121702CFA_NCRA_Credit_Score_Report_Final.pdf
(last visited Oct. 4, 2007); Federal Trade Commission and
Board of Governors of the Federal Reserve System, Report to Congress
on the Fair Credit Reporting Act Dispute Process (Aug. 2006).
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IV. Section-by-Section Analysis \9\
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\9\ The OCC, Board, FDIC, OTS and NCUA would place the proposed
regulations and guidelines implementing section 312 in the part of
their regulations that implement the FCRA--12 CFR parts 41, 222,
334, 571, and 717, respectively. For ease of reference, the
discussion in the Supplementary Information section uses the shared
numerical suffix of each of these agency's regulations. The FTC also
would place the proposed regulations and guidelines in the part of
its regulations implementing the FCRA, specifically 16 CFR part 660.
However, the FTC uses different numerical suffixes that equate to
the numerical suffixes discussed in the Supplementary Information
section as follows: Suffix .40 = FTC suffix .1, suffix .41 = FTC
suffix .2, suffix .42 = FTC suffix .3, and suffix .43 = FTC suffix
.4. In addition, Appendix E referenced in the Supplementary
Information section is the FTC's Appendix A.
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The following describes the three components of this rulemaking:
the proposed accuracy and integrity regulations, the proposed accuracy
and integrity guidelines, and the proposed direct dispute regulations.
Proposed Accuracy and Integrity Regulations
Section --.40 Scope
Section --.40 sets forth the scope of each Agency's proposed
regulations requiring furnishers to establish reasonable policies and
procedures for implementing the accuracy and integrity guidelines. Each
of the Agencies has tailored this section to describe those entities to
which this subpart applies. The FDIC requests comment on whether it
would be useful to include a cross-reference in its proposed regulation
to the definition of ``subsidiary'' in the Federal Deposit Insurance
Act.\10\
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\10\ See 12 U.S.C. 1813(w)(4).
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Section --.41 Definitions.
Two approaches to defining the terms ``accuracy'' and
``integrity.''
Section 623(e) of the FCRA requires the Agencies to establish and
maintain guidelines for use by furnishers regarding the accuracy and
integrity of the information about consumers that they furnish to CRAs.
The statute does not define the terms ``accuracy'' or ``integrity.''
Consumer group and industry commenters on the ANPR provided
suggestions for defining the terms ``accuracy'' and ``integrity.''
Consumer groups proposed that the Agencies define the term ``accuracy''
to mean ``conformity to fact,'' rather than conformity to data records.
They said that an accuracy standard should rely not only upon a
furnisher's data records, but also upon original documents such as
credit agreements. Some consumer groups also said that information
should not be considered ``accurate'' if it is overly general,
incomplete, out-of-date, or misleading. Consumer groups also proposed
that the Agencies make clear that information lacks ``integrity'' if it
is technically accurate, but misleads users of consumer reports because
it does not include critical information.
Industry commenters, citing the legislative history of the FACT
Act, suggested that the term ``integrity'' does not mean completeness,
but rather, that the information a furnisher provides to a CRA is
factually correct.
In the Agencies' view, neither the text nor the legislative history
of the FACT Act resolves how the terms ``accuracy'' and ``integrity''
should be defined. Although the terms used in section 623(e) differ
from terms used in other provisions of the FCRA,\11\ the text of
section 623(e) provides no direction to the Agencies about the meaning
or significance of that difference.\12\ The Agencies have reviewed the
legislative history, and note that the Congressional Record includes
post-enrollment statements regarding section 623(e) made by the
Chairman of the House Financial Services Committee and by the Ranking
Member of the Senate Committee on Banking, Housing and Urban
Affairs.\13\ Those statements,
[[Page 70950]]
however, provide different views on the meaning of the terms.
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\11\ See FCRA section 623(b)(1), 15 U.S.C. 1681s-2(b)(1)
(requiring entities that furnish information to CRAs to conduct
investigations in response to complaints regarding the
``completeness or accuracy'' of furnished information); sections
FCRA 623(a)(2)(A)-(B), 15 U.S.C. 1681s-2(a)(2)(A)-(B) (requiring
furnishers to correct and update information that the furnisher
determines is ``not complete or accurate'' and to refrain from
refurnishing information that remains ``not complete or accurate'').
\12\ Earlier versions of the legislation that became the FACT
Act required the agencies to prescribe regulations and guidelines
regarding the ``accuracy and completeness'' of information relating
to consumers. This language also was contained in the bill passed by
the Senate and referred to the Conference Committee. However, the
bill reported by the Conference Committee used the phrase ``accuracy
and integrity.'' Compare 149 Cong. Rec. S13990 (Nov. 5, 2003) (bill
as passed by the Senate) with 149 Cong. Rec. H12198 (Nov. 21, 2003)
(bill as reported by the Conference Committee).
\13\ See 149 Cong. Rec. E2512, E2516 (Nov. 4, 2003) (extension
of remarks of Chairman Michael Oxley, entered into the Congressional
Record on Dec. 9, 2003) (`` `[a]ccuracy and integrity' was selected
[by the Congress] as the relevant standard rather than `accuracy and
completeness' as used in Sections 313 and 319 [of the FACT Act], to
focus on the quality of the information furnished rather than the
completeness of the information furnished.''); 149 Cong. Rec.
S15806-02 (Nov. 24, 2003) (statement of Ranking Member Paul
Sarbanes) (`` `[A]ccuracy' relates to whether the information that
is provided by data furnishers to credit reporting agencies is
factually correct. The term `integrity' relates to whether all
relevant information that is used to assess credit risk and to grant
credit is accurately provided. Integrity of information is not
achieved when furnishers do not fully provide data that, by its
absence, could have a positive or negative effect on a consumer's
credit score, or on his or her ability to obtain credit under the
most favorable terms for which he or she qualifies.'').
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In light of these considerations, the Agencies are proposing for
comment two alternative approaches to defining the terms ``accuracy''
and ``integrity'' in the text of the regulations and guidelines.
Although the definition of ``accuracy'' is the same under both
alternatives, the two approaches differ in terms of both the substance
of the definition of ``integrity'' and the placement of the
definitions. Accordingly, the Agencies request comment on which
definition of ``integrity'' should be adopted in the final rule, and on
whether the definitions of ``accuracy'' and ``integrity'' should be
placed in the regulations or in the guidelines.
A. Regulatory Definition Approach
Under the first approach, the Agencies would provide specific
definitions for the terms ``accuracy'' and ``integrity'' in the
regulations. This approach, labeled ``Regulatory Definition Approach,''
appears at Sec. Sec. --.41(a) and --.41(b) in the text of the proposed
regulations. Under proposed Sec. --.41(a), the term ``accuracy'' means
that any information that a furnisher provides to a CRA about an
account or other relationship with the consumer reflects without error
the terms of and liability for the account or other relationship and
the consumer's performance or other conduct with respect to the account
or other relationship. This proposed definition of ``accuracy'' is
intended to require that furnishers have reasonable procedures in place
to ensure that the information they provide to CRAs is factually
correct. The Agencies solicit comment on whether the definition of
accuracy should specifically provide that accuracy includes updating
information as necessary to ensure that information furnished is
current.
Under proposed Sec. --.41(b), the term ``integrity'' means that
any information that a furnisher provides to a CRA about an account or
other relationship with the consumer does not omit any term, such as a
credit limit or opening date, of that account or other relationship,
the absence of which can reasonably be expected to contribute to an
incorrect evaluation by a user of a consumer report of a consumer's
creditworthiness, credit standing, credit capacity, character, general
reputation, personal characteristics, or mode of living. Thus, the
Regulatory Definition Approach provides that information furnished to a
CRA may be technically ``accurate'' yet lack ``integrity'' because it
presents a misleading picture of the consumer's creditworthiness by
omitting critical information, such as a credit limit on a revolving
credit account.\14\
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\14\ ``A key factor that credit evaluators consider when they
assess the creditworthiness of an individual is credit utilization.
If a creditor fails to report a credit limit for an account, credit
evaluators must either ignore utilization or use a substitute
measure such as the highest-balance level--that is, the largest
amount ever owed on the account. Substituting the highest balance
level for the credit limit generally results in a higher estimate of
credit utilization because the highest-balance amount is typically
lower than the credit limit: the higher estimate leads, in turn, to
a higher perceived level of credit risk for affected consumers.''
Robert B. Avery, Paul S. Calem, Glenn B. Canner, Credit Report
Accuracy and Access to Credit; Federal Reserve Bulletin, Summer
2004, p. 306.
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Under the Regulatory Definition Approach--and as described in
further detail in the section-by-section analysis of the guidelines--
the Agencies would include in the guidelines six objectives that a
furnisher's policies and procedures should be designed to achieve. The
six objectives seek to ensure that: Information is furnished
accurately; information is furnished with integrity; the furnisher
conducts reasonable investigations of consumer disputes about the
accuracy or integrity of information in consumer reports and takes
appropriate actions based on the outcome of such investigations;
information is reported in a form and manner designed to minimize the
likelihood that it will be erroneously reflected in the consumer's
report; information furnished is substantiated by the furnisher's
records; and the furnisher updates information it furnishes as
necessary to reflect the current status of the consumer's account or
other relationship. The first two of these objectives would reflect the
regulatory definitions of ``accuracy'' and ``integrity.''
Thus, under the Regulatory Definition Approach, the guidelines
would provide that a furnisher should have written policies and
procedures reasonably designed to ensure that the information it
furnishes about accounts or other relationships with a consumer:
Accurately identifies the appropriate consumer;
Accurately reports the terms of those accounts or other
relationships; and
Accurately reports the consumer's performance and other
conduct with respect to the account or other relationship.
Further, the guidelines would provide that a furnisher should have
policies and procedures reasonably designed to ensure that the
information it furnishes about accounts or other relationships with a
consumer avoids misleading users of consumer reports about the
consumer's creditworthiness, credit standing, credit capacity,
character, general reputation, personal characteristics, or mode of
living.
Consistent with the FCRA, under which the furnishing of information
about consumers is voluntary, the proposed definitions would apply only
to information that the furnisher elects to report to CRAs. The
Agencies are aware that some furnishers may be subject to separate
obligations to report all available information about an account or
other relationship.\15\ These proposed definitions, however, are not
intended to require furnishers to do so.
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\15\ Furnishers that report information about consumers to CRAs
related to mortgage loans may be required by Freddie Mac, Fannie
Mae, and the Federal Housing Administration to report full-file
information. See Fannie Mae Servicing Guide, Part I, Section 304.09
and Part VII, Section 107; Freddie Mac Service Guide, Section 55.4:
Reports to credit repositories; and the Federal Housing
Administration Servicing Handbook, Section 4330.1(c) (Rev-5)
(incorporating by reference the Fannie Mae Servicing Guide).
Further, the Department of Housing and Urban Development has defined
``Mortgages contrary to good lending practices'' to include a
mortgage or a group or category of mortgages entered into by a
lender and purchased by Fannie Mae or Freddie Mac where it can be
shown that a lender engaged in a practice of failing to report
monthly on borrowers' repayment history to credit repositories on
the status of each loan purchased by Fannie Mae or Freddie Mac that
a lender is servicing. 24 CFR 81.2(b).
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B. Guidelines Definition Approach
The second approach contained in the proposal, labeled the
``Guidelines Definition Approach,'' would define the terms ``accuracy''
and ``integrity'' in the guidelines--rather than in the regulations--
with reference to the objectives that a furnisher's policies and
procedures should be designed to accomplish.
Under the Guidelines Definition Approach, the Agencies have
identified four objectives that pertain to the accuracy and integrity
of information furnished and related matters. Definitions for the terms
``accuracy'' and ``integrity'' would be incorporated into the first two
of these objectives. Thus, the guidelines would provide that a
furnisher should have written policies and procedures reasonably
designed to ensure that the information it furnishes about accounts or
other relationships with a consumer is accurate. The guidelines would
define ``accuracy'' to mean that any information that a furnisher
provides to a CRA about an account or other relationship with the
consumer reflects without error the terms of and liability for the
account or other relationship and the consumer's performance or other
conduct with
[[Page 70951]]
respect to the account or other relationship. This is the same
definition of ``accuracy'' used in the Regulatory Definition Approach.
Additionally, the guidelines would provide that a furnisher's
policies and procedures should ensure that the information it furnishes
about accounts or other relationships with a consumer is furnished with
integrity. The guidelines would define ``integrity'' to mean that any
information that a furnisher provides to a CRA about an account or
other relationship with the consumer: (1) Is reported in a form and
manner that is designed to minimize the likelihood that the
information, although accurate, may be erroneously reflected in a
consumer report; and (2) should be substantiated by the furnisher's own
records. In addition to being placed in a different location, this
definition is substantively different from that used in the Regulatory
Definition Approach.
Under the Guidelines Definition Approach, the definition of
``integrity'' does not address the omission of any term the absence of
which could contribute to an incorrect evaluation by a user of a
consumer's creditworthiness. Instead, the proposed definition of
``integrity'' addresses two potential issues with furnished
information. First, accurate information may be attributed to the wrong
consumer or the wrong account, or may be associated with an erroneous
date. Second, if the accuracy of the furnished information is disputed,
the furnisher should be able to substantiate, or verify, the
information through its own records. The Regulatory Definition Approach
also includes these two concepts in the guidelines as objectives that a
furnisher's policies and procedures should be designed to achieve. The
Guidelines Definition Approach, like the Regulatory Definition
Approach, also includes as objectives: Ensuring that the furnisher
conducts reasonable investigations of consumer disputes about the
accuracy or integrity of information in consumer reports and takes
appropriate actions based on the outcome of such investigations; and
ensuring that the furnisher updates information it furnishes as
necessary to reflect the current status of the consumer's account or
other relationship.
As noted above, the Agencies invite comment on these alternative
definitions of ``integrity,'' and on whether the definitions of
``accuracy'' and ``integrity'' should be placed in the regulatory text
or in the guidelines.
Furnisher
Proposed Sec. --.41(c) would define the term ``furnisher'' to mean
an entity other than an individual consumer that furnishes information
relating to consumers to one or more CRAs. An entity is not a furnisher
under the proposed definition when it provides information to a CRA
solely to obtain a consumer report under sections 604(a) and (f) of the
FCRA, which enumerate the circumstances under which a CRA may provide a
consumer report and prohibit persons from obtaining or using consumer
reports for impermissible purposes. Users of consumer reports may
provide information about consumers to CRAs in order to obtain such
reports, but they do not do so for the purpose of having such
information included in consumer reports. Although the user's request
for the report may be reflected in the consumer report as an inquiry,
the Agencies do not believe it would be appropriate to subject such
furnishing of information to the regulations and guidelines proposed
here. In addition, by defining the term ``furnisher'' in terms of an
entity other than an individual consumer, the proposal makes clear that
consumers are not furnishers, even if they self-report information
about themselves to a CRA.
Identity Theft
Proposed Sec. --.41(d) provides that the term ``identity theft''
has the same meaning as in the FTC's regulations at 16 CFR 603.2(a).
Section 603.2(a), which was adopted pursuant to section 111 of the FACT
Act,\16\ defines the term ``identity theft'' to mean ``a fraud
committed or attempted using the identifying information of another
person without authority.'' This definition also is used in the
interagency regulations implementing section 114 of the FACT Act (Red
Flags).
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\16\ Section 111 provides for a definition of the term
``identity theft,'' and authorizes the FTC to refine that
definition. See section 603(q)(3) of the FCRA, 15 U.S.C.
1681a(q)(3).
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Direct Dispute
Proposed Sec. --.41(e) defines ``direct dispute'' to mean a
dispute submitted directly to a furnisher by a consumer concerning the
accuracy of any information contained in a consumer report relating to
the consumer. Although the definition of ``direct dispute'' uses the
term accuracy, the proposed Regulatory Definition Approach provides a
definition of accuracy for purposes of the definition of ``direct
dispute,'' but the Guidelines Definition Approach does not.
The Agencies solicit comment on whether the definition of
``accuracy'' should be made applicable to direct disputes, if the
Guidelines Definition Approach is adopted. The Agencies also solicit
comment on whether the proposed definition of ``accuracy'' is
appropriate for the direct dispute provision.\17\
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\17\ The Agencies note that section 623(a)(8) only requires a
furnisher to handle direct disputes about ``accuracy.'' In contrast,
section 611(a) requires a CRA to handle disputes about
``completeness or accuracy'' and section 623(b) requires furnishers
to reinvestigate disputes about ``completeness or accuracy'' if the
disputes come through a CRA. The Agencies particularly request
comment on whether the definition of ``accuracy'' needs to be
clarified in order to more clearly delineate those disputes that,
while subject to the CRA dispute process, would not be subject to
the direct disputes rule.
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Section --.42 Reasonable Policies and Procedures Concerning the
Accuracy and Integrity of Furnished Information
Paragraph (a) of proposed Sec. --.42 would require each furnisher
to establish and implement reasonable written policies and procedures
regarding the accuracy and integrity of the information about consumers
that it furnishes to a CRA. The policies and procedures must be
appropriate to the nature, size, complexity, and scope of the
furnisher's activities.
The requirement that furnishers' policies and procedures be written
facilitates effective implementation and enables the Agencies to assess
furnishers' compliance with the rules. The Agencies do not believe that
the requirement for written policies and procedures will be unduly
burdensome, particularly since, under the guidelines, a furnisher may
include any of its existing policies and procedures that are relevant
and appropriate. As noted previously, industry commenters responding to
the ANPR noted that, in general, furnishers have policies and
procedures in place to ensure the accuracy of information furnished to
CRAs. The Agencies invite comment on any burden and effects on
furnishers, particularly small furnishers, regarding the requirement
that the policies and procedures be written.
The Agencies recognize that there is substantial diversity among
furnishers with respect to their structure, operations, and the types
of business they conduct, such that a ``one-size-fit-all'' approach to
the implementation of the guidelines is inappropriate. The requirement
that the furnisher's policies and procedures must be appropriate to the
nature, size, complexity, and scope of the furnisher's activities
permits furnishers to tailor their policies and procedures to their
business activities.
[[Page 70952]]
The Agencies expect, for example, that the policies and procedures for
a small retail entity would differ from those of a multi-billion dollar
financial services company.
Proposed Sec. --.42(b) requires each furnisher to consider the
accuracy and integrity guidelines in developing its policies and
procedures and to incorporate those guidelines that are appropriate.
Furnishers should consider the guidelines in the context of the nature,
size, complexity, and scope of their activities and incorporate the
guidelines that are appropriate to ensure the accuracy and integrity of
the information about consumers that they provide to CRAs.
Some of the commenters on the ANPR specifically suggested that the
Agencies require furnishers to review or audit their furnishing
policies and procedures in order to ensure that the information about
consumers continues to be furnished accurately and with integrity.
Proposed Sec. --.42(c) incorporates these commenters' suggestions and
would require each furnisher to review its policies and procedures
periodically and update them as necessary to ensure their continued
effectiveness.
Proposed Accuracy and Integrity Guidelines
The accuracy and integrity guidelines appear as Appendix E to the
appropriate part of each Agency's regulations. In the introductory
language to the guidelines, the Agencies encourage voluntary furnishing
of information about consumers to CRAs. This reflects the recognition
that the voluntary system of consumer reporting produces substantial
benefits for consumers, users of consumer reports, and the economy as a
whole. The introduction also reminds furnishers that Sec. --.42 of the
proposed regulations would require each furnisher to establish and
implement reasonable written policies and procedures concerning the
accuracy and integrity of the information about consumers it furnishes
to CRAs and to consider the guidelines in developing those policies and
procedures.
Section I--Nature, Scope, and Objectives of Policies and Procedures
The Nature and Scope section of the guidelines references the
requirement, at proposed Sec. --.42(a), that a furnisher's policies
and procedures must be appropriate to the nature, size, complexity, and
scope of the furnisher's activities and provides the following examples
of aspects of a furnisher's business activities that its policies and
procedures should reflect: The types of business activities in which
the furnisher engages; the nature and frequency of the information
about consumers the furnisher provides to CRAs; and the technology used
by the furnisher to provide information to CRAs.
The Objectives section of the guidelines provides that a furnisher
should have written policies and procedures reasonably designed to
accomplish the specified objectives. As described earlier in the
discussion of the terms ``accuracy'' and ``integrity,'' the wording of
some of the objectives set out in the guidelines is related to the
alternative approaches to construing the term ``integrity'' that the
Agencies are proposing in the text.
In connection with the Regulatory Definition Approach, the first
two objectives of the guidelines would provide that a furnisher should
have written policies and procedures reasonably designed to ensure that
the information it furnishes about accounts or other relationships with
a consumer accurately identifies the appropriate consumer; accurately
reports the terms of those accounts or other relationships; accurately
reports the consumer's performance and other conduct with respect to
the account or other relationship; and designed to ensure that the
information it furnishes about accounts or other relationships with a
consumer avoids misleading a consumer report user as to the consumer's
creditworthiness, credit standing, credit capacity, character, general
reputation, personal characteristics, or mode of living.
Under the Guidelines Definition Approach, definitions of
``accuracy'' and ``integrity'' would be incorporated into the first two
objectives. Thus, the guidelines would provide that a furnisher should
have written policies and procedures reasonably designed to ensure that
the information it furnishes about accounts or other relationships with
a consumer is accurate. The guidelines would define ``accuracy'' to
mean that with respect to any information that a furnisher provides
about an account or other relationship with the consumer to a CRA
reflects without error the terms of and liability for the account or
other relationship and the consumer's performance and other conduct
with respect to the account or other relationship.
Additionally, under the Guidelines Definition Approach, the
guidelines would provide that a furnisher's written policies and
procedures should be reasonably designed to ensure that the information
it furnishes about accounts or other relationships with a consumer is
furnished with integrity. The guidelines would define ``integrity'' to
mean, that any information that a furnisher provides to a CRA about an
account or other relationship with the consumer is:
Reported in a form and manner that is designed to minimize
the likelihood that the information, although accurate, may be
erroneously reflected in a consumer report, for example, by ensuring
that the information is: (A) Reported with appropriate identifying
information about the consumer to which it pertains; (B) reported in a
standardized and clearly understandable form and manner; and (C)
reported with a date specifying the time period to which the
information pertains; and
Substantiated by the furnisher's own records.
As indicated in the discussion of the proposed accuracy and
integrity regulations, the Agencies invite comment on the alternative
approaches to defining the term ``integrity'' and the appropriate
placement of the definitions. When responding to these issues raised by
the Agencies, commenters may wish to address, among other relevant
factors, how the approaches would impact the quality of information in
consumer reports, the burdens on furnishers, and the relative benefits
to consumers, the credit reporting system, and users of consumer
reports.
The third proposed objective under both approaches states that a
furnisher's policies and procedures should ensure that the furnisher
conducts reasonable investigations of consumer disputes about the
accuracy or integrity of information in consumer reports and takes
appropriate actions based on the outcome of such investigations. This
objective addresses concerns raised by commenters that some furnishers
perform perfunctory investigations of consumer disputes in cases where
a proper investigation would require reviewing information beyond the
account status listed in the furnisher's electronic records, and that
some furnishers do not update their own records when errors are
discovered, resulting in incorrect information being reported again to
the CRAs.
The fourth proposed objective under both approaches states that a
furnisher should have written policies and procedures reasonably
designed to ensure that the furnisher updates information it furnishes
as necessary to reflect the current status of the consumer's account or
other relationship, including: (a) Any transfer of an account (e.g., by
sale or assignment for collection) to a third
[[Page 70953]]
party; and (b) any cure of the consumer's failure to abide by the terms
of the account or other relationship.
The fifth proposed objective under the Regulatory Definition
Approach states that the information a furnisher furnishes about
accounts or other relationships with a consumer is reported in a form
and manner that is designed to minimize the likelihood that the
information, although accurate, may be erroneously reflected in a
consumer report, for example, by ensuring that the information is
reported with appropriate identifying information about the consumer to
which it pertains, in a standardized and clearly understandable form
and manner, with a date specifying the time period to which the
information pertains.
The sixth proposed objective under the Regulatory Definition
Approach states that the information a furnisher furnishes about
accounts or other relationships with a furnisher should be
substantiated by the furnisher's own records.
Section II--Accuracy and Integrity Duties of Furnishers Under the FCRA
This section reminds furnishers of their statutory duties that
relate to the accuracy and integrity of the information about consumers
they provide to CRAs. This section states that a furnisher's policies
and procedures should address compliance with all applicable
requirements imposed on the furnisher under the FCRA and lists certain
of those requirements, including the duty to investigate direct
disputes as required by proposed Sec. --.43 and section 623(a)(8) of
the FCRA. This section also lists requirements such as the duty to
provide to CRAs corrections or additional information necessary to make
furnished information complete and accurate under the circumstances
specified under section 623(a)(2) of the FCRA.
Section III--Establishing and Implementing Policies and Procedures
This section identifies three steps that furnishers should take
when establishing accuracy and integrity policies and procedures.
First, a furnisher should identify its practices or activities that can
compromise the accuracy and integrity of information about consumers
furnished to CRAs. Methods appropriate for this purpose include:
Reviewing the furnisher's existing practices and
activities;
Reviewing historical records relating to accuracy or
integrity or to disputes, or other information relating to the accuracy
and integrity of information provided by the furnisher to CRAs and the
types of errors, omissions, or other problems that may have affected
the accuracy and integrity of such information about consumers; and
Obtaining feedback from CRAs, consumers, the furnisher's
staff, or other appropriate parties.
Second, a furnisher should evaluate the effectiveness of its
existing policies and procedures regarding the accuracy and integrity
of information about consumers furnished to CRAs and consider whether
additions or modifications to the policies and procedures are
necessary. As is specifically mentioned in the introduction to the
guidelines, a furnisher may incorporate in its accuracy and integrity
policies and procedures any of its existing policies and procedures
that are relevant and appropriate.
Third, a furnisher should evaluate the effectiveness of specific
methods (including technological means) the furnisher uses to provide
information about consumers to CRAs and determine whether changes to
those methods are appropriate to enhance the accuracy and integrity of
that information.
Section IV--Specific Components of Policies and Procedures
This section serves to address specific problems raised by
commenters on the ANPR, studies regarding the consumer reporting
system, and other information gathered by the Agencies in the course of
developing this proposal. The proposed guidelines detail specific
components that should be addressed in a furnisher's policies and
procedures. These include:
Establishing and implementing a system for furnishing
information about consumers to CRAs that is appropriate to the nature,
size, complexity, and scope of the furnisher's business operations.
Using standard data reporting formats and standard
procedures for compiling and furnishing data, where feasible, such as
the electronic transmission of information about consumers to CRAs.
Ensuring that the furnisher maintains its own records for
a reasonable period of time, not less than any applicable recordkeeping
requirement, in order to substantiate the accuracy of any information
about consumers it furnishes that may be subject to a direct dispute.
Thus, a furnisher's policies and procedures should incorporate any
applicable recordkeeping requirements such as those contained in
regulations implementing the Truth in Lending Act and the Equal Credit
Opportunity Act,\18\ or agency-specific requirements.\19\ The Agencies
note that section 611(a)(5) of the FCRA contains no time limit on the
requirement that if a CRA reinvestigates a consumer dispute, it must
modify or delete items that cannot be verified. The Agencies seek
comment on whether a specific time period for recordkeeping should be
incorporated in the final regulations.
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\18\ See 12 CFR 226.25(a) and 12 CFR 202.11(b).
\19\ See, e.g., 12 CFR 561.2 (savings associations must retain
accurate and complete records of all business transactions) and OTS
Examination Handbook Sec. 310 (savings associations should retain
original business transaction records until the savings association
has two regular examinations and has resolved any supervisory
matters raised in the examinations).
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Establishing and implementing appropriate internal
controls regarding the accuracy and integrity of information about
consumers furnished to CRAs, such as by implementing standard
procedures, verifying random samples, and conducting regular reviews of
information provided to CRAs.
Training staff that participates in activities related to
the furnishing of information about consumers to CRAs to implement the
policies and procedures.
Providing for appropriate and effective oversight of
relevant service providers whose activities may affect the accuracy and
integrity of information about consumers furnished to CRAs to ensure
compliance with the policies and procedures.
Furnishing information about consumers to CRAs following
mergers, portfolio acquisitions or sales, or other acquisitions or
transfers of accounts or other debts, in a manner that prevents re-
aging of information, duplicative reporting, or other problems
affecting the accuracy or integrity of the information furnished.
Attempting to obtain the information listed in Sec.
--.43(d) from a consumer before determining that the consumer's dispute
is frivolous or irrelevant.
Ensuring that deletions, updates, and corrections
furnished to CRAs are reflected in business systems to avoid furnishing
erroneous information.
Conducting investigations of direct disputes in a manner
that promotes the efficient resolution of such disputes.
Ensuring that technological and other means of
communication with CRAs are designed to prevent duplicative reporting
of accounts, erroneous association of information with the wrong
consumer(s), and other
[[Page 70954]]
occurrences that may compromise the accuracy and integrity of
information contained in consumer reports.
Providing CRAs with sufficient identifying information in
the furnisher's possession about each consumer about whom information
is furnished to enable the CRA properly to identify the consumer.
Conducting a periodic evaluation of its own practices, CRA
practices of which the furnisher is aware, investigations of disputed
information, corrections of inaccurate information, means of
communication, and other factors that may affect the accuracy and
integrity of information furnished to CRAs.
Proposed Regulations Concerning Direct Disputes
The third component of this notice of proposed rulemaking comprises
the Agencies' proposed regulations implementing section 623(a)(8) of
the FCRA, which directs the Agencies jointly to prescribe regulations
that identify the circumstances under which a furnisher is required to
reinvestigate a dispute concerning the accuracy of information about
the consumer contained in a consumer report,\20\ based on a direct
request by the consumer. The statute sets forth procedural and other
requirements applicable to any such reinvestigations.
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\20\ For purposes of the proposed Sec. --.43(c) and (d) of the
direct disputes provision, a ``consumer report'' means a disclosure
a CRA provides to a consumer as referenced in section 609(a) of the
FCRA. CRAs may provide such disclosures in a different format than a
consumer report they provide to a third party and refer to them as
``file disclosures.''
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We note that a number of industry commenters on the ANPR indicated
that they are already voluntarily investigating direct disputes as a
matter of good customer relations and sound business practices. The
Agencies encourage furnishers to continue voluntary investigations of
consumer disputes as one way to enhance the accuracy and integrity of
the information about consumers they provide to CRAs.\21\
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\21\ The Agencies note that many entities, including depository
institutions and their affiliates, also investigate disputes about
information they furnish to CRAs that consumers raise through the
consumer complaint processes established by their respective
supervisory agencies. See generally FRB, ``How to File a Consumer
Complaint Against a Bank,'' http://www.federalreserveconsumerhelp.gov
(last visited October 26, 2007);
FDIC, ``Consumer Affairs Brochure: Fostering Consumer Confidence in
Banking, How to file a Written Complaint'' (October 2005), http://www.fdic.gov/consumers/questions/consumer/complaint.html
(last
visited November 1, 2007); OTS, ``How to Resolve a Consumer
Complaint'' (February 2007), http://www.ots.treas.gov/docs/4/480924.pdf
(last visited October 24, 2007); and OCC, ``Assistance
for Customers of National Banks'' (April 2005), http://www.occ.gov/customer.pdf
(last visited October 24, 2007).
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Section --.43(a) General Rule
The proposed general rule would require a furnisher to investigate
a direct dispute if it relates to:
The consumer's liability for a credit account or other
debt with the furnisher, such as direct disputes relating to whether
there is or has been identity theft or fraud against the consumer,
whether there is individual or joint liability on an account, or
whether the consumer is an authorized user of a credit account;
The terms of a credit account or other debt with the
furnisher, such as direct disputes relating to the type of account,
principal balance, scheduled payment amount on an account, or the
amount of the reported credit limit on an open-end account;
The consumer's performance or other conduct concerning a
credit account or other debt with the furnisher, such as direct
disputes relating to the current payment status, high balance, date a
payment was made, the amount of a payment made, or the date an account
was opened or closed; or
Any other information contained in a consumer report
regarding an account or other relationship with the furnisher that
bears on the consumer's creditworthiness, credit standing, credit
capacity, character, general reputation, personal characteristics, or
mode of living attributed to the furnisher on the consumer report.
The proposed rule is designed to permit direct disputes in
virtually all circumstances involving disputes with respect to the
types of information typically provided by the furnisher to a CRA,
while excepting out certain types of information from the direct
dispute process. The Agencies are proposing this approach in light of
the considerations set forth in the statute to be weighed by the
Agencies, including the benefits to consumers, the impact on the
overall accuracy and integrity of consumer reports, and whether direct
disputes would lead to the most expeditious resolutions of consumer
disputes. The exceptions in the proposed rule relate to information
where the disputes are more appropriately directed to the CRA, such as
information derived from public records, which may be obtained directly
from public sources,\22\ and information about requests for consumer
reports (``inquiries''). The Agencies specifically request comment on
whether this approach appropriately weighs all of the relevant
considerations.
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\22\ The public records exception applies only to information
``derived'' by the CRA from public records. It would not exempt a
consumer's dispute of the accuracy of a furnisher's reference to a
particular account being included in bankruptcy, for example.
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In developing the proposed rule, the Agencies considered more
targeted approaches based, for example, on commenters' suggestions that
fraud and identity theft should be the only circumstances when a
furnisher must investigate a direct dispute. The Agencies also
considered other commenters' suggestions about when investigations of a
direct dispute would be appropriate, such as for disputing account
ownership and complex issues requiring analysis of supporting
documentation. The Agencies are not proposing these approaches,
however, as these approaches would likely present at least one
disadvantage, namely, that it would be difficult for consumers and
furnishers to know whether there is a direct dispute right in any
particular circumstance.
In addition, the Agencies considered another commenter's suggestion
to require investigation of direct disputes only where the consumer
first raises the dispute with a CRA, but that process does not resolve
the matter to the consumer's satisfaction. The Agencies are not
proposing such an approach, however, because it could impose
unnecessary barriers and delays for consumers wishing to avoid the CRA
dispute process and bring disputes immediately to the furnisher.\23\
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\23\ The Agencies note further that section 623(a)(8)(F) states
that the obligation to reinvestigate direct disputes shall not apply
if the dispute is ``frivolous or irrelevant'' because the consumer
submitted a dispute that is substantially the same as a dispute
previously submitted to a furnisher or through a CRA. The Agencies
note that under the proposed rule, a direct dispute is not
substantially the same if a consumer's dispute includes information
listed in Sec. --.43(d) that had not previously been provided to
the furnisher.
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The Agencies believe that the approach adopted by the proposed rule
more closely comports with consumer expectations that they be able to
submit a dispute directly to the furnisher (with certain exceptions)
when the issue in dispute relates to information for which the
furnisher is responsible. The Agencies request comment on whether a
more targeted approach would represent a more appropriate balancing of
relevant policy considerations.
The Agencies also specifically invite comment on how direct dispute
requirements would affect furnishers to smaller and specialty CRAs,
such as CRAs that report medical information,
[[Page 70955]]
check writing history, apartment rental history, or insurance claim
filings.
Section --.43(b) Exceptions
A consumer report may include identifying information about a
consumer (e.g., names, addresses), trade line information (e.g., name
of creditor, payment history, loan amount), past and present employer
information, and public record information (e.g., information received
from courts or other governmental authorities that are related to
bankruptcies, judgments, or liens). Any given furnisher is the source
of some, but not all, of the information included on a consumer report.
A furnisher should only be responsible for investigating disputes about
information regarding an account or other relationship between the
furnisher and the consumer. Accordingly, the proposal requires a
furnisher to investigate direct disputes only with respect to the types
of information that it typically provides to CRAs. In most cases, the
information subject to direct dispute will be part of a furnisher's
trade line entry or entries on a consumer report.
Proposed Sec. --.43(b) excepts from the investigation requirement
any direct dispute that relates to:
The consumer's identifying information (other than a
direct dispute relating to a consumer's liability for a credit account
or other debt with the furnisher, as provided in Sec.
--.43(a)(1)),\24\ such as name(s), date of birth, Social Security
number, telephone number(s), or address(es);
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\24\ A direct dispute that relates both to identifying
information and a consumer's liability for a credit account or other
debt with the furnisher, such as in cases of identity theft, must be
investigated by a furnisher pursuant to Sec. --.43(a)(1).
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The identity of past or present employers; \25\
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\25\ For this category of information concerning the identity of
past or present employers, the Agencies believe that direct contact
by the consumer would be unlikely to result in the most expeditious
resolution of an employer identity-related dispute. For example,
consumer reports sometimes contain certain ``employment history''
information, which is typically obtained from sources other than
employers (such as credit applications). In those cases, an
identified employer would be unable to correct disputed information
because it was provided by another source.
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Inquiries or requests for a consumer report;
Information derived from public records, such as
judgments, bankruptcies, liens, and other legal matters (unless
provided by a furnisher having a relationship with the consumer); or
Information related to fraud alerts or active duty alerts.
Proposed Sec. --.43(b) also excepts from the investigation
requirement any direct dispute if the notice of dispute is submitted
by, is prepared on behalf of the consumer by, or is submitted on a form
supplied to the consumer by, a credit repair organization as defined in
15 U.S.C. 1679a(3),\26\ or an entity that would be a credit repair
organization but for 15 U.S.C. 1679a(3)(B)(i), which excludes tax-
exempt section 501(c)(3) organizations.
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\26\ Under this provision of the Credit Repair Organizations
Act, the term ``credit repair organization''--
(A) means any person who uses any instrumentality of interstate
commerce or the mails to sell, provide, or perform (or represent
that such person can or will sell, provide, or perform) any service,
in return for the payment of money or other valuable consideration,
for the express or implied purpose of--
(i) improving any consumer's credit record, credit history, or
credit rating; or
(ii) providing advice or assistance to any consumer with regard
to any activity or service described in clause (i).
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Section --.43(c) Direct Dispute Address
As added by section 312 of the FACT Act, section 623(a)(8)(D) of
the FCRA requires a consumer to provide a direct dispute notice ``at
the address specified'' by the furnisher. The statute and legislative
history provide no guidance about how this address is to be specified
by furnishers and effectively communicated to consumers. The Agencies
believe that, in order for the direct dispute right to be implemented
and to operate as Congress intended, it is necessary to clarify how a
furnisher's direct dispute address is to be specified and communicated
to consumers.
Proposed Sec. --.43(c) would require a furnisher to investigate a
direct dispute only if a consumer submits a dispute notice to the
furnisher at:
The address of the furnisher provided by a furnisher and
set forth on a consumer report relating to the consumer (i.e., the
disclosure under section 609(a) of the FCRA);
An address clearly and conspicuously specified by the
furnisher for submitting direct disputes that is provided in writing or
electronically (if the consumer has agreed to the electronic delivery
of information from the furnisher); or
Any business address of the furnisher, if the furnisher
has not so specified and provided an address for submitting direct
disputes.
Thus, a consumer would always be able to submit a direct dispute to the
appropriate address appearing on the consumer report. The consumer
would also be able to submit a direct dispute to any other business
address of the furnisher unless the furnisher has separately specified
an address to the consumer in accordance with the regulation. A
furnisher choosing to specify an address must do so in a manner that is
both reasonably understandable and designed to call the consumer's
attention to the fact that the address is the one to use for submitting
direct disputes about the accuracy of information in a consumer report.
The Agencies note that a furnisher that specifies such an address for
this purpose will not be deemed to have specified an address for
purposes of section 623(a)(1)(B) of the FCRA, relating to the general
duty to provide accurate information to the CRAs.
The Agencies believe that it will benefit consumers and be
operationally feasible to allow consumers to submit a dispute notice to
the address of the furnisher specified on the consumer report. The
Agencies understand that in a large majority of cases, the consumer
report includes an address supplied by the furnisher and the furnisher
can control such address.\27\ In addition, the Agencies believe that
allowing consumers to submit dispute notices to the address of the
furnisher set forth on the consumer report will increase the likelihood
that the consumers will know where to send that dispute (because that
address will be seen by consumers contemporaneous in time and location
with the disputed information) and will encourage consumers to obtain
and review their consumer reports prior to submitting a dispute to a
furnisher. A furnisher will not be in violation of this provision for
failure to investigate a dispute submitted to the address set forth on
the consumer report if that address is incorrect due to an error by the
CRA and does not reflect any business address of the furnisher.
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\27\ Allowing consumers to submit dispute notices to the address
of the furnisher set forth on the consumer report is consistent with
existing Federal and some state laws because these laws already
impose related obligations. Section 611(a)(6)(B)(iii) of the FCRA
requires the CRA to provide, upon the consumer's request, the
business name and address, and phone number if reasonably available,
of any furnisher the CRA contacts in connection with information
reinvestigated in response to a consumer complaint filed with the
CRA. California law requires that upon request of the consumer, the
CRA must provide the consumer with the ``names, addresses and, if
provided by the sources of information, the telephone numbers
identified for customer service for the sources of information.''
Cal. Civil Code Sec. 1785.10(c). It is the Agencies' understanding
that CRAs commonly include the furnisher's business name, address,
and telephone number on the consumer report (where the furnisher
provides it) so that consumers will automatically learn how to
contact the furnisher about a dispute upon receipt of the consumer
report without the need to request that information from the CRA.
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[[Page 70956]]
The Agencies request comment on whether there are circumstances
under which it would not be appropriate for a consumer to submit a
dispute notice to the address of the furnisher set forth on the
consumer report. The Agencies also invite comment on whether Sec.
--.43(c)(3) should exclude certain types of business addresses, such as
a business address that is used for reasons other than for receiving
correspondence from consumers or business locations where business is
not conducted with consumers.
In addition, the Agencies request comment on whether Sec.
--.43(c)(2) should be amended to permit furnishers to notify consumers
orally of the address for direct disputes. The agencies also request
comment on whether and, if so, how an oral notice can be provided
clearly and conspicuously.
Section --.43(d) Direct Dispute Notice Contents
Section 623(a)(8)(D) of the FCRA provides that a furnisher is not
required to investigate a dispute unless a consumer provides the
furnisher with a notice of dispute that:
Identifies the specific information that is being
disputed;
Explains the basis for the dispute; and
Includes all supporting documentation required by the
furnisher to substantiate the basis of the dispute.
Proposed Sec. --.43(d) would implement 623(a)(8)(D) by requiring
that a notice of dispute include:
The name, address, and telephone number of the consumer;
Sufficient information to identify the account or other
relationship that is in dispute, such as an account number;
The specific information that the consumer is disputing
and an explanation of the basis for the dispute; and
All supporting documentation or other information
reasonably required by the furnisher to substantiate the basis of the
dispute, such as a copy of the consumer report that contains the
allegedly inaccurate information, a police report, a fraud or identity
theft affidavit, a court order, or account statements.
Section 609(c)(2) of the FCRA requires the FTC to promulgate, and
CRAs to disseminate with their provision of consumer reports to
consumers, a ``General Summary of Consumer Rights.'' The FTC intends to
update the existing General Summary of Consumer Rights to reflect
additional rights provided to consumers by the FACT Act and the
implementing rules, including consumers' direct dispute rights. The
Agencies invite comment on what additional mechanisms should be
required, if any, for informing consumers of their direct dispute
rights.
Section --.43(e) Frivolous or Irrelevant Disputes
Section 623(a)(8)(F) of the FCRA provides that a furnisher is not
required to investigate a dispute that a furnisher reasonably
determines to be frivolous or irrelevant. That statutory provision
states that a frivolous or irrelevant dispute includes situations
involving:
The failure of a consumer to provide sufficient
information to investigate the disputed information; or
The submission by a consumer of a dispute that is
substantially the same as a dispute previously submitted by or on
behalf of the consumer, either directly to the furnisher or through a
CRA under section 623(b) of the FCRA, with respect to which the
furnisher already completed its investigation duties.
Proposed Sec. --.43(e) implements these statutory provisions,
including these two types of frivolous or irrelevant disputes. Under
the statute, when a furnisher determines that a dispute is frivolous or
irrelevant, it must send a notice of that determination (including the
reasons for the determination) to the consumer. In cases involving
insufficient information, furnishers should make a good faith attempt
to obtain sufficient information from a consumer before sending such a
notice to the consumer as noted in section IV(I) of the guidelines.
The Agencies note that the language of section 623(a)(8)(F)
specifies two situations, but does not limit frivolous or irrelevant
disputes solely to those two situations. The Agencies are proposing to
specify a third situation involving a frivolous or irrelevant dispute.
Under proposed Sec. --.43(e)(1)(iii), a dispute would be frivolous or
irrelevant if the furnisher is not otherwise required to investigate
the direct dispute under the proposed regulation.\28\ This provision is
intended to provide clarity for furnishers regarding their duty to
investigate direct disputes and their responsibilities when no such
investigation is required. This provision also would ensure that
consumers in this situation receive notice from the furnisher that
their dispute was deemed frivolous or irrelevant, as required by the
FCRA in sections 623(a)(8)(F)(ii) and (iii).\29\
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\28\ For example, under proposed Sec. --.43(b)(2), a furnisher
would not be required to investigate a direct dispute that is
submitted by, is prepared on behalf of the consumer by, or is
submitted on a form supplied to the consumer by, a credit repair
organization. Thus, such a dispute would be frivolous or irrelevant
under proposed Sec. --.43(e)(1)(iii).
\29\ 15 U.S.C. 1681s-2(a)(8)(F)(ii) and (iii). Those provisions
of the FCRA generally set out a furnisher's responsibilities
regarding the notice it must provide to a consumer once it
determines that a dispute is frivolous or irrelevant.
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Section --.43(e)(2) would incorporate the FCRA's section
623(a)(8)(F)(ii) requirement that a furnisher must notify a consumer of
its determination that a dispute is frivolous or irrelevant not later
than five business days after making the determination. Section
--.43(e)(3) likewise would incorporate from section 623(a)(8)(F)(iii)
of the FCRA the content requirements for a notice of determination that
a dispute is frivolous or irrelevant. Such notices are to include the
reasons for the determination and identify any information required to
investigate the disputed information.
V. Request for Comment
The Agencies invite comment on all aspects of the proposed accuracy
and integrity regulations and guidelines and of the proposed direct
dispute regulations, on the factors to be considered by the Agencies
under sections 623(a)(8) and 623(e) of the FCRA, and on the specific
issues on which comment is solicited elsewhere in the Supplementary
Information, including the following:
The alternative definitions of ``integrity'' and the
alternative placement of the definitions of ``accuracy'' and
``integrity'' in regulatory text or in the guidelines;
Whether the definition of accuracy should specifically
provide that ``accuracy'' includes updating information as necessary to
ensure that information furnished is current;
Whether the definition of ``accuracy'' should be made
applicable to direct disputes if the Guidelines Definition Approach is
adopted;
Whether the proposed definition of ``accuracy'' is
appropriate for the direct dispute rule, and, in particular, whether
the definition of ``accuracy'' needs to be clarified in order to more
clearly delineate those disputes that, while subject to the CRA dispute
process, would not be subject to the direct dispute rule;
Whether the Agencies' approach to direct disputes
appropriately reflects the relevant considerations, or whether a more
targeted approach would represent a more appropriate balancing of
relevant policy considerations;
Whether proposed Sec. --.43(c)(2) should be amended to
permit furnishers to notify consumers orally of the
[[Page 70957]]
address for direct disputes and, if so, how an oral notice can be
provided clearly and conspicuously;
What additional mechanisms should be required, if any, for
informing consumers of their direct dispute rights;
How direct dispute requirements would affect furnishers to
smaller and specialty CRAs, such as CRAs that report medical
information, check writing history, apartment rental history, or
insurance claim filings;
Whether the guidelines should incorporate a specific time
period for retaining records in order to provide for meaningful
investigations of direct disputes, and, if so, what record retention
time period would be appropriate; and
Whether Sec. --.42(c)(2) should exclude certain types of
business addresses, such as a business address that is used for reasons
other than for receiving correspondence from consumers or business
locations where business is not conducted with consumers.
In addition, the Agencies specifically invite comment as follows:
The Agencies invite comment from individuals and public interest
and consumer advocacy organizations on the effect this proposal may
have on consumers and the credit reporting industry.
The Agencies recognize that small institutions operate with more
limited resources than larger institutions. Thus, the Agencies
specifically request comment on the impact of this proposal on small
institutions' current resources, including personnel resources, and
whether the goals of the proposal could be achieved for small
institutions through an alternative approach.
The Agencies invite comment from businesses other than depository
institutions that furnish information about consumers to CRAs,
including non-depository institution mortgage lenders, debt collectors,
consumer finance companies, and retailers. The Agencies also invite
comment from persons who furnish information about consumers to
specialized types of CRAs, such as CRAs that collect information for
the purpose of making decisions regarding insurance, employment or
tenant screening, or check verification. Similarly, the Agencies
request comments from CRAs, including nontraditional CRAs that may only
provide information to a limited class of businesses (e.g., medical
information providers and tenant screening services).
The Agencies also invite comment on ways to minimize the burden of
the final rule.
VI. Regulatory Analysis
A. Paperwork Reduction Act
Request for Comment on Proposed Information Collection
In accordance with section 3512 of the Paperwork Reduction Act of
1995, 44 U.S.C. 3501-3521 (``PRA''), the Agencies may not conduct or
sponsor, and the respondent is not required to respond to, an
information collection unless it displays a currently valid Office of
Management and Budget (``OMB'') control number. The information
collection requirements contained in this joint notice of proposed
rulemaking have been submitted by the OCC, FDIC, OTS, NCUA, and FTC to
OMB for review and approval under section 3506 of the PRA and Sec.
1320.11 of OMB's implementing regulations (5 CFR Part 1320). The review
and authorization information for the Board is provided later in this
section along with the Board's burden estimates. The proposed rule
contains requirements subject to the PRA. The requirements are found in
12 CFR Sec. Sec. --.42(a), --.43(e)(2), and --.43(e)(3) and 16 CFR
Sec. Sec. 660.3(a), 660.4(e)(2), and 660.4(e)(3).
Comments are invited on:
(a) Whether the collection of information is necessary for the
proper performance of the Agencies' functions, including whether the
information has practical utility;
(b) The accuracy of the estimates of the burden of the information
collection, including the validity of the methodology and assumptions
used;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of the information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) Estimates of capital or start up costs and costs of operation,
maintenance, and purchase of services to provide information.
All comments will become a matter of public record.
Comments should be addressed to:
OCC: Communications Division, Office of the Comptroller of the
Currency, Public Information Room, Mailstop 1-5, Attention: 1557-NEW,
250 E Street, SW., Washington, DC 20219. In addition, comments may be
sent by fax to (202) 874-4448, or by electronic mail to
regs.comments@occ.treas.gov. You can inspect and photocopy comments at
the OCC's Public Information Room, 250 E Street, SW., Washington, DC
20219. For security reasons, the OCC requires that visitors make an
appointment to inspect comments. You may do so by calling (202) 874-
5043. Upon arrival, visitors will be required to present valid
government-issued photo identification and submit to security screening
in order to inspect and photocopy comments.
Board: You may submit comments, identified by R-1300, by any of the
following methods:
Agency Web Site: http://www.federalreserve.gov Follow the instructions for submitting comments on the http://.
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include docket
number in the subject line of the message.
Fax: 202-452-3819 or 202-452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper in Room MP-500 of the Board's Martin Building (20th and C
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.
FDIC: You may submit written comments, which should refer to 3064-
AC99, by any of the following methods:
Agency Web Site: http://www.fdic.gov/regulations/laws/federal/propose.html.
Follow the instructions for submitting comments
on the FDIC Web site.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: Comments@FDIC.gov.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, FDIC, 550 17th Street, NW., Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m.
Public Inspection: All comments received will be posted without
change to http://www.fdic.gov/regulations/laws/federal/propose/html
including any
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personal information provided. Comments may be inspected at the FDIC
Public Information Center, Room E-1007, 3501 North Fairfax Drive,
Arlington, Virginia, between 9 a.m. and 4:30 p.m. on business days.
OTS: Information Collection Comments, Chief Counsel's Office,
Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552;
send a facsimile transmission to (202) 906-6518; or send an e-mail to
infocollection.comments@ots.treas.gov. OTS will post comments and the
related index on the OTS Internet site at http://www.ots.treas.gov. In
addition, interested persons may inspect the comments at the Public
Reading Room, 1700 G Street, NW., by appointment. To make an
appointment, call (202) 906-5922, send an e-mail to
public.info@ots.treas.gov, or send a facsimile transmission to (202)
906-7755.
NCUA: You may submit comments by any of the following methods
(Please send comments by one method only):
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
NCUA Web Site: http://www.ncua.gov/RegulationsOpinionsLaws/proposedregs/proposedregs.html.
Follow the
instructions for submitting comments.
E-mail: Address to regcomments@ncua.gov. Include ``[Your
name] Comments on Notice of Proposed Rulemaking Part 717, Procedures to
Enhance the Accuracy and Integrity of Information Furnished to Consumer
Reporting Agencies under Section 312 of the Fair and Accurate Credit
Transactions Act'' in the e-mail subject line.
Fax: (703) 518-6319. Use the subject line described above
for e-mail.
Mail: Address to Neil McNamara, Deputy Chief Information
Officer, National Credit Union Administration, 1775 Duke Street,
Alexandria, VA 22314-3428.
Hand Delivery/Courier: Same as mail address.
Additionally, you should send a copy of your comments to the OMB Desk
Officer for the Agencies, by mail to U.S. Office of Management and
Budget, 725 17th Street, NW., 10235, Washington, DC 20503, or by fax to
(202) 395-6974.
FTC: Comments should refer to ``Furnisher Rules, Project No.
R611017,'' and may be submitted by any of the following methods.
However, if the comment contains any material for which confidential
treatment is requested, it must be filed in paper form, and the first
page of the document must be clearly labeled ``Confidential.'' \30\
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\30\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be
accompanied by an explicit request for confidential treatment,
including the factual and legal basis for the request, and must
identify the specific portions of the comment to be withheld from
the public record. The request will be granted or denied by the
Commission's General Counsel, consistent with applicable law and the
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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E-mail: Comments filed in electronic form should be
submitted by clicking on the following Web link: https://secure.commentworks.com/ftc-FACTAfurnishers
and following the
instructions on the Web-based form. To ensure that the Commission
considers an electronic comment, you must file it on the Web-based form
at https://secure.commentworks.com/ftc-FACTAfurnishers.
Federal eRulemaking Portal: If this notice appears at
http://www.regulations.gov, you may also file an electronic comment
through that Web site. The Commission will consider all comments that
regulations.gov forwards to it.
Mail or Hand Delivery: A comment filed in paper form
should include ``Furnisher Rules: Project No. R611017,'' both in the
text and on the envelope and should be mailed or delivered, with two
complete copies, to the following address: Federal Trade Commission/
Office of the Secretary, Room H-135 (Annex M), 600 Pennsylvania Avenue,
NW., Washington, DC 20580. Because paper mail in the Washington area
and at the Commission is subject to delay, please consider submitting
your comments in electronic form, as prescribed above. The FTC is
requesting that any comment filed in paper form be sent by courier or
overnight service, if possible.
Comments on any proposed filing, recordkeeping, or disclosure
requirements that are subject to paperwork burden review under the
Paperwork Reduction Act should additionally be submitted to: Office of
Management and Budget, Attention: Desk Officer for the Federal Trade
Commission. Comments should be submitted via facsimile to (202) 395-
6974 because U.S. Postal Mail is subject to lengthy delays due to
heightened security precautions.
The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. All timely and responsive public comments, whether filed
in paper or electronic form, will be considered by the Commission, and
will be available to the public on the FTC Web site, to the extent
practicable, at http://www.ftc.gov/os/publiccomments.htm. As a matter
of discretion, the FTC makes every effort to remove home contact
information for individuals from the public comments it receives before
placing those comments on the FTC Web site. More information, including
routine uses permitted by the Privacy Act, may be found in the FTC's
privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Proposed Information Collection
Title of Information Collection: Accuracy and Integrity of
Information Furnished to Consumer Reporting Agencies.
Frequency of Response: On occasion.
Affected Public:
OCC: National banks, Federal branches and agencies of foreign
banks, and their respective operating subsidiaries that are not
functionally regulated within the meaning of section 5(c)(5) of the
Bank Holding Company Act of 1956, as amended (12 U.S.C. 1844(c)(5)).
Board: State member banks, uninsured state agencies and branches of
foreign banks, commercial lending companies owned or controlled by
foreign banks, and Edge and agreement corporations.
FDIC: Insured nonmember banks, insured state branches of foreign
banks, and certain subsidiaries of these entities.
OTS: Savings associations and certain of their subsidiaries.
NCUA: Federally-chartered credit unions.
FTC: Businesses that furnish information to a consumer reporting
agency, and are subject to administrative enforcement by the FTC
pursuant to section 621(a)(1) of the FCRA (15 U.S.C. 1681s(a)(1).
Abstract: Proposed section .42(a) \31\ would require a furnisher to
implement reasonable written policies and procedures regarding the
accuracy and integrity of information relating to consumers that it
provides to a CRA. Furnishers already have an ongoing responsibility
under section 623 of the FCRA for accurate reporting, which has been in
place for several years, long before the FACT Act. This proposed rule
would require furnishers to put into writing policies and procedures
that address their section 312 responsibilities regarding the accuracy
and integrity of information. Furnishers' accuracy and integrity
policies and
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procedures may include their existing policies and procedures that are
reasonable and appropriate. The Agencies estimate it would take
furnishers a total of 21 hours per institution to comply with this
requirement.
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\31\ For purposes of the FTC regulations, this proposed section
is 16 CFR 660.3(a).
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Proposed section .43(a) \32\ would allow consumers to initiate
disputes directly with the furnishers, instead of using the existing
FCRA process through the CRAs. This gives consumers a new way to
dispute consumer report information; instead of having to go through a
CRA, consumers would have the right to go directly to the furnisher in
certain circumstances. Furnishers already have affirmative
responsibilities to research and respond and, if necessary, make any
corrections when a dispute is initiated by consumers through a CRA.
Under this proposed rule, furnishers would have to follow a
substantially similar process for disputes consumers submit directly to
furnishers. Furnishers would need to amend their procedures to ensure
that disputes received directly from consumers are handled the same way
as complaints from CRAs. The Agencies estimate that furnishers would
have to devote four hours per institution to amend their procedures in
this manner. Proposed section --.43(e)(2) \33\ incorporates the section
312 requirement that a furnisher must notify a consumer by mail or
other means (if authorized by the consumer) within five business days
after making a determination that a dispute is frivolous or irrelevant.
Proposed section --.43(e)(3) \34\ incorporates the content requirements
of such notices as specified by section 312. The Agencies estimate that
furnishers would have to devote four hours per institution to implement
this notice requirement, including the time necessary to develop
policies and procedures regarding the provision of the notices to
consumers and to initially prepare the notices.
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\32\ 16 CFR 660.4(a) in the FTC regulations.
\33\ 16 CFR 660.4(e)(2) in the FTC regulations.
\34\ CFR 660.4(e)(3) in the FTC regulations.
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With respect to estimating the potential burden associated with
providing the notices to consumers, the Agencies received one comment
on the ANPR from a financial institution stating that it is estimated
that 50% of disputes received are frivolous or irrelevant. In contrast,
one trade association commented that in only 25% of disputes is the
information in the consumer report being challenged verified as
correct; thus, even assuming that every time the infor