[Federal Register Volume 74, Number 125 (Wednesday, July 1, 2009)]
[Rules and Regulations]
[Pages 31484-31528]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-15323]
[[Page 31483]]
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Part II
Department of the Treasury
Office of the Comptroller of the Currency
Office of Thrift Supervision
12 CFR Parts 41 and 571
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Federal Reserve System
12 CFR Part 222
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Federal Deposit Insurance Corporation
12 CFR Parts 334
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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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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; Final Rule; Guidelines for
Furnishers of Information to Consumer Reporting Agencies; Proposed Rule
Federal Register / Vol. 74, No. 125 / Wednesday, July 1, 2009 / Rules
and Regulations
[[Page 31484]]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 41
[Docket ID OCC-2008-0023]
RIN 1557-AC89
FEDERAL RESERVE SYSTEM
12 CFR Part 222
[Docket No. R-1300]
RIN 7100-AD18
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Parts 334
RIN 3064-AC99
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 571
[Docket No. OTS-2008-0025]
RIN 1550-AC01
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 717
FEDERAL TRADE COMMISSION
16 CFR Part 660
RIN 3084-AA94
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: Final rules.
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SUMMARY: The OCC, Board, FDIC, OTS, NCUA, and FTC (Agencies) are
publishing these final rules to implement the accuracy and integrity
and direct dispute provisions in section 312 of the Fair and Accurate
Credit Transactions Act of 2003 (FACT Act) that amended section 623 of
the Fair Credit Reporting Act (FCRA). The final rules 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 (CRAs) and prescribe
regulations requiring furnishers to establish reasonable policies and
procedures for implementing the guidelines. These final rules also
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.
DATES: These rules are effective on July 1, 2010.
FOR FURTHER INFORMATION CONTACT:
OCC: Stephen Van Meter, Assistant Director, Community and Consumer
Law Division, (202) 874-5750; Patrick T. Tierney, Senior Attorney, Carl
Kaminski, Senior Attorney, Legislative and Regulatory Activities
Division, (202) 874-5090; or Malloy T. Harris, Jr., National Bank
Examiner, Compliance Policy, (202) 874-4851, Office of the Comptroller
of the Currency, 250 E Street, SW., Washington, DC 20219.
Board: David A. Stein, Managing Counsel, Amy E. Burke, Senior
Attorney, or Jelena McWilliams, Attorney, Division of Consumer and
Community Affairs, (202) 452-3667 or (202) 452-2412; or Anne B. Zorc,
Counsel, (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: Glenn S. Gimble, Senior Policy Analyst, (202) 898-6865,
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: April Breslaw, Director, Consumer Regulations, (202) 906-6989;
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.\1\ In 1996, the Consumer Credit
Reporting Reform Act extensively amended the FCRA.\2\ The FACT Act \3\
further amended the FCRA for various purposes, including improved
accuracy of consumer reports.
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\1\ 15 U.S.C. 1681-1681x.
\2\ Public Law 104-208, 110 Stat. 3009 (Sept. 20, 1996).
\3\ Public Law 108-159, 117 Stat. 1952 (Dec. 4, 2003).
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Section 623 of the FCRA describes the responsibilities of persons
that furnish information about consumers (furnishers) to CRAs.\4\
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 CRAs and to prescribe regulations requiring furnishers to
establish reasonable policies and procedures for implementing the
guidelines (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 contained in a consumer report
based on a direct request from a consumer (the direct dispute
regulations). The Agencies are issuing these final accuracy and
integrity regulations and guidelines and final direct dispute
regulations to satisfy the requirements of section 312 of the FACT Act.
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\4\ Section 623 is codified at 15 U.S.C. 1681s-2.
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The final rules include the accuracy and integrity regulations,
which contain definitions of key terms such as ``accuracy,''
``integrity,'' ``direct dispute,'' and ``furnisher'' and require
furnishers to establish and implement reasonable written policies and
procedures regarding the accuracy and integrity of consumer information
provided to a CRA. The final rules also include guidelines concerning
the accuracy and integrity of information furnished to CRAs that
furnishers must
[[Page 31485]]
consider in developing their policies and procedures. The Agencies
believe that the final accuracy and integrity rules and guidelines
strike an appropriate balance that affords furnishers the flexibility
to establish policies and procedures that are appropriate to the
nature, size, complexity, and scope of each furnisher's activities
while enhancing the accuracy and integrity of consumer information
provided to CRAs.
The final direct dispute regulations: Set forth the circumstances
under which a furnisher must reinvestigate a consumer's direct dispute;
provide exceptions to the requirements imposed; detail the direct
dispute address and dispute notice content requirements; specify
furnishers' duties after receiving a direct dispute; and establish when
a furnisher may deem a direct dispute to be frivolous or irrelevant.
The final direct dispute rule is designed to permit direct disputes in
virtually all circumstances involving disputes about the accuracy of
furnished information typically provided by a furnisher to a CRA. This
approach enables consumers 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.
II. Statutory Requirements
A. Accuracy and Integrity Regulations and Guidelines
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 other
Agency. These consistent and comparable final rules are being issued
following extensive consultation and coordination among the Agencies.
B. Direct Disputes
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;
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 published an advance notice of proposed rulemaking
(ANPR) in the Federal Register in March 2006 \5\ 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 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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\5\ 71 FR 14419 (March 22, 2006).
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The Agencies collectively received a total of 197 comment letters
on the ANPR, including multiple copies of the same letter sent by
commenters to more than one Agency. Commenters included depository
institutions, other financial services companies, trade associations,
consumer reporting and credit scoring companies, a mortgage company,
consumer organizations, and individual consumers.
IV. The Notice of Proposed Rulemaking
On December 13, 2007, the Agencies published a notice of proposed
rulemaking (NPRM) in the Federal Register containing proposed rules to
implement section 312 of the FACT Act.\6\ The NPRM summarized key
issues identified in the comment letters received on the ANPR
concerning accuracy and integrity criteria and on the direct dispute
factors.\7\ The proposal contained the section 312 statutory
requirement that each furnisher must establish reasonable policies and
procedures regarding the accuracy and integrity of the information
about consumers that it furnishes to a CRA. The proposal stated that
the policies and procedures must be written and be appropriate to the
nature, size, complexity, and scope of the furnisher's activities. The
proposal provided that each furnisher would have to consider the
accuracy and integrity guidelines in developing its policies and
procedures and review its policies and procedures periodically and
update them as necessary to ensure their continued effectiveness.
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\6\ 72 FR 70944 (December 13, 2007).
\7\ 72 FR 70947-949 (December 13, 2007).
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The proposal included an appendix to each Agency's regulations
containing accuracy and integrity guidelines that: (1) Set forth the
nature, scope, and objectives of a furnisher's policies and procedures;
(2) enumerated the accuracy and integrity duties of furnishers under
the FCRA; (3) identified the steps that furnishers should take when
establishing accuracy and integrity policies and procedures; and (4)
detailed specific components that
[[Page 31486]]
should be addressed in a furnisher's policies and procedures.
The proposal included two approaches for defining the terms
``accuracy'' and ``integrity,'' terms that are not defined by section
312: \8\ A ``Regulatory Definition Approach'' and a ``Guidelines
Definition Approach.'' The Regulatory Definition Approach included
definitions for both terms in regulations. The Guidelines Definition
Approach defined the terms in guidelines--rather than regulations--with
reference to the objectives that a furnisher's policies and procedures
should be designed to accomplish.
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\8\ In addition, the Agencies noted in the NPRM that the
legislative history of the FACT Act does not resolve how the terms
``accuracy'' and ``integrity'' should be defined. See 72 FR 70949-
950 (December 13, 2007).
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Both proposed approaches defined the term ``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 and other conduct with respect to the account or
other relationship.
The proposed Regulatory Definition Approach provided that
information furnished to a CRA could be technically ``accurate'' yet
lack ``integrity'' if it presented a misleading picture of the
consumer's creditworthiness by omitting critical information, such as a
credit limit on a revolving credit account. In contrast, the proposed
Guidelines Definition Approach provided that furnished information
would have ``integrity'' if it: (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) is substantiated by the furnisher's own records.\9\ The
objectives included in the Agencies' respective appendices also
differed in a manner that reflected these alternative definitions.
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\9\ Key components of the definition of ``integrity'' proposed
under the Guidelines Definition Approach were incorporated into the
Regulatory Definition Approach as objectives set forth in the
proposed guidelines.
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Both approaches proposed consistent definitions for other key terms
such as ``furnisher'' and ``direct dispute.''
Finally, the proposal included regulations that would implement
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 \10\ a dispute concerning the
accuracy of information about a consumer contained in a consumer
report, based on a direct request by the consumer. The proposal
specified the circumstances under which a furnisher must investigate a
direct dispute; included certain exceptions; set forth requirements
regarding a furnisher's address for receiving direct dispute notices;
specified the content requirements for direct dispute notices from
consumers; and addressed frivolous and irrelevant disputes, which,
pursuant to section 623(a)(8)(F) of the FCRA, furnishers are not
required to investigate.
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\10\ Section 312 uses the terms ``reinvestigate'' and
``investigate'' interchangeably to apply to direct disputes. Compare
15 U.S.C. 1681s-2(a)(8)(A) with 15 U.S.C. 1681s-2(a)(8)(E). The
Agencies believe that, as applied to section 312, there is no
difference in the meaning of these two terms, and, therefore, have
used only the term ``investigate'' in the final regulations and
guidelines for ease of comprehension, to provide clarity to
consumers who file direct disputes, and to assist furnishers with
the implementation of the regulations and guidelines.
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In addition, the NPRM requested specific comment on the following
issues: The definitions of the terms ``accuracy'' and ``integrity'' and
their placement in either the regulatory text or guidelines; whether
the proposed definition of ``accuracy'' should include updating
information as necessary to ensure that the information furnished is
current; whether the proposed definition of ``accuracy'' is appropriate
to the direct dispute rule; whether the proposed direct dispute rules
appropriately reflect the relevant statutory considerations or whether
a more targeted approach would be more appropriate; whether to permit
furnishers to provide oral notice for a direct dispute address; whether
certain types of business addresses should be excluded from receiving
direct dispute notices; what mechanisms should be required, if any, for
informing consumers of their direct dispute rights; how the proposed
direct dispute requirements would affect furnishers to smaller and
specialty CRAs; and whether the guidelines should incorporate a
specific record retention time period.
A more detailed discussion of the provisions of the NPRM is
contained in the Section-by-Section Analysis.
V. Overview of the Comments Received in Response to the NPRM
Each agency received the following number of comment letters: OCC--
23, Board--25, FDIC--19, OTS--16, NCUA--17, and FTC--27. Many
commenters sent copies of the same letter to more than one Agency. The
Agencies received comments from a variety of banks, thrifts, credit
unions, credit card companies, mortgage lenders, other non-bank
creditors, and trade associations. The Agencies also received comments
from consumer organizations and individual consumers.
In general, consumer organizations supported the specificity of the
Regulatory Definition Approach while industry commenters favored the
flexibility provided by the Guidelines Definition Approach to permit a
furnisher to adopt policies and procedures that are suitable to their
specific circumstances. Consumer organization and industry commenters
also differed in their opinions regarding the level of detail and
applicability of the proposed guidelines. Consumer organizations
generally supported more detailed guidelines that should apply to all
furnishers while industry commenters generally supported less detailed
guidelines that do not impose requirements on all furnishers. A number
of industry commenters and most consumer organizations generally
supported the proposed direct dispute regulations.
The Agencies have carefully considered all comments received and
have decided to modify the proposal and adopt the final rules and
guidelines as described below in the Section-by-Section Analysis.
VI. Section-by-Section Analysis \11\
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\11\ The OCC, Board, FDIC, OTS, and NCUA are placing the final
regulations and guidelines implementing section 312 in the part of
their regulations that implements 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
is placing the final 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 parts of these final rulemaking
actions: The accuracy and integrity regulations, the accuracy and
integrity guidelines, and the direct dispute regulations.
A. Accuracy and Integrity Regulations
Section --.40 Scope
Section --.40 of the proposal set forth the scope of each Agency's
regulations. Each of the Agencies has tailored this section to describe
the entities to which its respective subpart applies and have adopted
this section in the final rules
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without change. The Agencies did not receive comments on this section.
Section --.41 Definitions
Placement of Definitions
As described in section IV of this SUPPLEMENTARY INFORMATION, the
Agencies proposed two alternative approaches in the NPRM for defining
the terms ``accuracy'' and ``integrity''--a Regulatory Definition
Approach and a Guidelines Definition Approach. Although the proposed
definition of ''accuracy'' was the same under both alternatives, the
two approaches differed with respect to the substance of the definition
of ``integrity'' and the placement of the definitions. The substantive
aspects of each approach, and the significant comments the Agencies
received on each, are described in the discussion of the definitions
later in this section. This portion of the discussion addresses the
placement of the definitions which, in the final rules, appear in the
regulation text.
Under the proposed Regulatory Definition Approach, the definitions
for the terms ``accuracy'' and ``integrity'' appeared in the regulation
text. In order to be accurate, furnished information would have to
reflect 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. Furnished
information would have ``integrity'' if it did not omit any term, such
as a credit limit or opening date, of that account or other
relationship, the absence of which could reasonably be expected to
contribute to an incorrect evaluation by a user of a consumer report
about a consumer's creditworthiness, credit standing, credit capacity,
character, general reputation, personal characteristics, or mode of
living.
Under the proposed Guidelines Definition Approach, the Agencies
identified four objectives pertaining to the ``accuracy'' and
``integrity'' of information furnished and placed these objectives in
the guidelines, rather than the text of the regulation. Definitions for
the terms ``accuracy'' and ``integrity'' were incorporated into the
first two objectives. The guidelines would have defined ``accuracy'' in
substantially the same manner as under the Regulatory Definition
Approach; however, the definition of ``integrity'' was different from
that in the Regulatory Definition Approach. Under the proposed
Guidelines Definition Approach, furnished information would have
``integrity'' if it: (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) is
substantiated by the furnisher's own records.
Generally, consumer organizations supported the Regulatory
Definition Approach because they believed that locating the definitions
in the regulations, rather than the guidelines, would enhance the
substantive requirements applicable to furnishers. They believed this,
in turn, would result in more accurate consumer reports and improved
assessments of consumers' creditworthiness. One industry commenter also
supported this approach, stating that it would ensure that important
credit terms are provided by furnishers to CRAs and thus promote
correct credit evaluations of consumers by users of consumer reports.
On the other hand, industry commenters generally favored the
Guidelines Definition Approach. These commenters preferred a less
prescriptive approach enabling furnishers' policies and procedures to
reflect the nature, size, complexity, and scope of their respective
business activities.
The Agencies have decided to place the definitions of the terms
``accuracy'' (Sec. --.41(a)) and ``integrity'' (Sec. --.41(e)) in the
text of the final regulations. This approach more clearly establishes
that these definitions apply for purposes not only of the guidelines,
but also to the requirement in the regulations that furnishers must
establish and implement reasonable written policies and procedures
regarding the ``accuracy'' and ``integrity'' of furnished information.
Furthermore, the Agencies note that 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 about the consumer
contained in a consumer report, based on a direct request by the
consumer. In light of section 623(a)(8), the Agencies have determined
that the term accuracy should be defined in the text of the regulation.
Some industry commenters expressed concern that placement of the
definitions in the text of the regulations would increase the risk of
litigation initiated by plaintiffs asserting that furnished information
failed to meet the accuracy and integrity standards included in the
proposal. To address these concerns, the Agencies have, as was proposed
in the NPRM, limited the applicability of defined terms in Sec. --.41,
including ``accuracy'' and ``integrity,'' to each Agency's regulations
in subpart E--Duties of Furnishers of Information and the accompanying
guidelines in Appendix E. The definitions do not impose stand-alone
obligations on furnishers but guide and inform the duties otherwise
imposed on furnishers under the regulations. The Agencies' promulgation
of the definitions of the terms ``accuracy'' and ``integrity'' in Sec.
--.41 of the final regulations does not mean that they intend to use
the same definitions in any other context. The Agencies further note
that section 623(c) of the FCRA limits private rights of action for a
furnisher's noncompliance with the rules issued pursuant to section 312
of the FACT Act, which include the definitions of ``accuracy'' and
``integrity.''
Accuracy
Both the proposed Regulatory Definition Approach and the proposed
Guidelines Definition Approach defined ``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 and other conduct with respect to the account or
other relationship.
In the final rules, the Agencies have revised the proposed
definition of ``accuracy.'' Under Sec. --.41(a) of the final rules,
``accuracy'' means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer correctly:
Reflects the terms of and liability for the account or
other relationship;
Reflects the consumer's performance and other conduct with
respect to the account or other relationship; and
Identifies the appropriate consumer.
This definition differs from the proposed definition in two ways.
First, the phrase ``without error'' that was included in the
proposal has been removed from the definition in the final rules.
Industry commenters stated that, in general, the proposed definition of
``accuracy'' would create an unrealistic standard and that the
``without error'' standard, in particular, was unworkable. These
commenters stated that adopting such a standard would effectively
require providing information to a CRA with perfect precision, which
the commenters asserted is not feasible and could subject furnishers to
criticism and potential litigation risks even for honest mistakes that
are promptly corrected.
[[Page 31488]]
The Agencies agree that the ``without error'' standard could be
read to imply an expectation that information be reported according to
unreasonably high standards. Such an unrealistic and potentially
burdensome standard could lead some furnishers to cease or limit their
furnishing of information to CRAs or act as an obstacle to entities
becoming furnishers. Accordingly, to address the concerns raised by the
commenters, the standard has been modified to provide that accuracy
means that information furnished ``correctly reflects'' the terms of
and liability for an account or other relationship and other relevant
factors. This standard reflects the goal of providing information with
a high degree of precision, but provides greater flexibility than the
proposed standard and should mitigate unforeseen litigation risk.
The second change from the proposed definition is the addition of a
reference to the consumer's identity in the definition of ``accuracy.''
In the final rules, ``accuracy'' means, among other things as noted
above, that ``information that a furnisher provides to a consumer
reporting agency about an account or other relationship with the
consumer correctly * * * identifies the appropriate consumer.'' This
change makes the regulatory text consistent with section I.(b)(1)(i) of
the final guidelines' objectives, which provides that ``[a] furnisher's
policies and procedures should be reasonably designed to * * * furnish
information about accounts or other relationships with a consumer that
is accurate, such that the furnished information: (i) Identifies the
appropriate consumer * * *.'' The Agencies expect that the addition of
this ``consumer identity'' element to the definition of ``accuracy''
will reinforce the objectives' goal of decreasing the incidence of data
matching or other errors in which information about one consumer is
mistakenly linked to another consumer's file maintained by the CRAs.
Consumer and public interest organizations advocated that the
definition of ``accuracy'' include the concepts of ``completeness'' and
``integrity.'' These commenters noted that the direct dispute rules
only require furnishers to investigate disputes regarding the
accuracy--and not the integrity--of furnished information. Therefore,
excluding the concepts of ``completeness'' and ``integrity'' from the
term ``accuracy'' would preclude consumers from directly disputing
issues with a furnisher for lack of completeness and integrity.
The Agencies believe that defining ``accuracy'' without
incorporating concepts of ``completeness'' and ``integrity'' best
comports with the text and structure of section 312 of the FACT Act and
the FCRA.\12\ The text of section 312 uses the terms ``accuracy and
integrity'' as separate and distinct concepts. A similar observation
applies with respect to the use of the term ``completeness'' in other
provisions of the FCRA. The legislative history does not compel a
different conclusion. 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. That language was also contained in the bill
passed by the Senate and referred to the Conference Committee. However,
the bill reported by the Conference Committee and enacted into law
replaced the term ``completeness'' with ``integrity.'' \13\
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\12\ See 72 FR 70949-50.
\13\ 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).
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Two industry commenters stated that the final rules should not
define ``accuracy'' at all. One of these commenters noted that neither
the FCRA nor the FACT Act defines ``accuracy,'' and that Congress did
not direct the Agencies to do so. This commenter recommended that,
instead of defining those terms in this rulemaking action, the Agencies
advise furnishers to look to case law for guidance on the meaning of
the term ``accuracy.''
The Agencies believe that a definition of ``accuracy'' is important
to achieve the purposes of this rulemaking. As a threshold matter, no
express statutory direction is needed to allow the Agencies to define
terms important to the implementation of section 312 of the FACT Act.
Moreover, defining the term ``accuracy'' will assist furnishers in
establishing the required reasonable policies and procedures while
reducing uncertainty about their appropriate scope and content. In
addition, the definition provides clear direction to consumers and
furnishers regarding which issues can be disputed directly with a
furnisher under Sec. --.43 of the final rules. For these reasons the
Agencies believe, and many commenters agreed, that the term
``accuracy'' should be defined for the purposes of the rules and
guidelines implementing section 312 of the FACT Act. Using this
definition in Sec. --.43 of the rules, however, does not cause it to
apply for purposes of any other provision of the FCRA or other
provisions of the Agencies' rules.
Consumer organizations and industry commenters raised other issues
with the definition of ``accuracy.'' For example, one industry
commenter expressed concern that the scope of the proposed definition
of ``accuracy'' was too broad, and suggested that the Agencies limit
the application of this definition to credit reports (and similar
reports of financial transactions) so that it would not apply to
descriptions of the characteristics of individuals or their employment
histories.
Neither the statutory language of section 312 of the FACT Act nor
its legislative history supports limiting the scope of ``accuracy'' to
credit reports (and similar reports of financial transactions) so that
the definition would not apply to the descriptions of characteristics
of individuals or their employment histories. However, to address the
commenter's concern that the proposed definition of ``accuracy'' was
too broad and difficult to apply to an ``investigative consumer
report,'' \14\ the Agencies in Sec. --.41(c)(4) have excluded from the
definition of ``furnisher'' certain individuals (e.g., a neighbor,
friend, or associate who may have knowledge about the consumer) who may
provide information to a CRA in this context. The Agencies also note
that, under Sec. --.43(b)(1)(ii), the direct dispute rules do not
apply to a furnisher if the dispute relates to the identity of past or
present employers.
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\14\ Section 603(e) (codified at 15 U.S.C. 1681a(e)) defines an
``investigative consumer report'' to mean a consumer report or
portion thereof in which information on a consumer's character,
general reputation, personal characteristics, or mode of living is
obtained through personal interviews with neighbors, friends, or
associates of the consumer reported on or with others with whom the
consumer is acquainted or who may have knowledge concerning any such
items of information. However, this information does not include
information on a consumer's credit record obtained directly from a
consumer's creditor or from a CRA that obtained the information
directly from a consumer's creditor or the consumer.
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In both proposed approaches, the Agencies included a guideline
providing that furnishers should update information provided to CRAs as
necessary to reflect the current status of the consumer's account or
other relationship. In connection with the proposed definition of
``accuracy,'' the Agencies asked for comment on whether the definition
of ``accuracy'' should specifically provide that, in order to be
``accurate,'' furnished information must be updated as necessary to
ensure that it is current.
Most industry commenters opposed including any updating standards
in the
[[Page 31489]]
definition of ``accuracy.'' They generally stated that if the final
rules require updating, they should specify that updating should be
consistent with standard business practices: That is, a furnisher
should only be required to update information with its regular
submission of data to a CRA. Several industry commenters expressed
concern that the updating standard described in the Agencies' request
for comment could be read to include a requirement to provide daily
updates. These commenters stated that it would be impossible for some
furnishers to do this and unnecessarily costly and burdensome for
others. One industry commenter suggested that furnishers should be
expected to ``periodically update'' the information, rather than to
update information as necessary to ensure that the information is
current.
Three commenters stated that the definition of ``accuracy'' should
not include an updating requirement at all because it is implicit in
the concept of ``accuracy.'' Two of these commenters noted that an
updating requirement already is encompassed within the FCRA and
elsewhere in the guidelines.
Consumer organizations stated that the definition of ``accuracy''
should require that information is updated so that it is, and remains,
current.
The Agencies recognize that the nature, size, complexity, and scope
of a furnisher's activities affect the type of information it
voluntarily provides to a CRA, as well as the frequency with which it
updates the information. Given the voluntary nature of the reporting
system, the diversity of furnishers, the differences in the types of
information furnishers report to CRAs, and the disparities in the
frequencies with which furnishers voluntarily update information, the
Agencies believe it is more appropriate to follow a less prescriptive
approach and address issues related to updating in the guidelines,
rather than in the text of the regulations as an element of
``accuracy.'' At the same time, the Agencies believe that the overall
accuracy of information is improved when, for information that a
furnisher elects to provide to a CRA, it is updated to reflect the
current status of an account or relationship. Therefore, section
I.(b)(4) of the final guidelines states that a furnisher's policies and
procedures ``should be reasonably designed * * * to update the
information it furnishes as necessary to reflect the current status of
the consumer's account or other relationship, including * * * any
transfer of an account * * * and * * * any cure of the consumer's
failure to abide by the terms of the account or other relationship.''
Integrity
The proposed Regulatory Definition Approach provided 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. The proposed Regulatory
Definition Approach defined the term ``integrity'' to mean 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 about a consumer's
creditworthiness, credit standing, credit capacity, character, general
reputation, personal characteristics, or mode of living.
Under the proposed Guidelines Definition Approach, the definition
of ``integrity'' did not address the omission of any term the absence
of which could contribute to an incorrect evaluation of a consumer's
creditworthiness by a user of a credit report. Instead, the proposed
definition of ``integrity'' addressed two specific issues pertaining to
furnished information. The proposed Guidelines Definition Approach
defined ``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 (form and manner provision);
and (2) should be substantiated by the furnisher's own records
(substantiation provision). The form and manner provision included the
following three examples of methods furnishers could use to comply with
that provision: Reporting the furnished information with appropriate
identifying information about the consumer; reporting the information
in a ``standardized and clearly understandable form and manner;'' and
including in the information a date specifying the time period to which
it pertained. Thus, in addition to being placed in a different
location, the guidelines definition was substantively different from
that proposed in the Regulatory Definition Approach.
The final rules place the definition of ``integrity'' in the text
of the regulations, at Sec. --.41(e), and define ``integrity'' to mean
that information that a furnisher provides to a CRA about an account or
other relationship with the consumer:
Is substantiated by the furnisher's records at the time it
is furnished;
Is furnished in a form and manner that is designed to
minimize the likelihood that the information may be incorrectly
reflected in a consumer report; and
Includes the information in the furnisher's possession
about the account or other relationship that the relevant Agency has:
--Determined that the absence of which would likely be materially
misleading in evaluating a consumer's creditworthiness, credit
standing, credit capacity, character, general reputation, personal
characteristics, or mode of living; and
--Listed in section I.(b)(2)(iii) of the guidelines. Section
I.(b)(2)(iii) provides one item on this list: The credit limit, if
applicable and in the furnisher's possession.
Most industry commenters recommended that the Agencies adopt the
definition of ``integrity'' in the Guidelines Definition Approach. Many
of these commenters objected to the content of the definition proposed
in the Regulatory Definition Approach. They said that the definition
would create substantial uncertainty about what information must be
furnished because furnishers may not know or be able to ascertain how
other entities use credit report data. Some of these commenters said
that the Regulatory Definition Approach, in effect, would impose on
furnishers a burdensome ``full-file'' reporting requirement in order to
satisfy the integrity standard. These commenters indicated that,
because users of consumer reports are diverse and may evaluate consumer
reports differently, defining the parameters of the information that
must be furnished by reference to how third-party users of a consumer
report might evaluate a consumer's creditworthiness is an unworkable,
unclear, and burdensome standard that would discourage voluntary
reporting under the FCRA. These commenters noted, among other things,
that most credit scoring models are confidential, and that the wide
variety of users of consumer reports exacerbates the difficulty of
knowing what information users will consider material. One industry
commenter suggested that if the Agencies choose to adopt the Regulatory
Definition Approach, they should itemize the specific credit terms they
believe must be reported to achieve ``integrity.'' Several industry
commenters also
[[Page 31490]]
asserted that the Regulatory Definition Approach conflicted with the
legislative history of section 312 of the FACT Act because it equated
``integrity'' with ``completeness.''
Consumer organizations generally supported the proposed Regulatory
Definition Approach. As a general matter, consumer organizations
believed that this approach essentially equated ``integrity'' with
``completeness'' and would enhance the requirements applicable to
furnishers, the effectiveness of the credit reporting system, and
assessments of consumers' creditworthiness.\15\
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\15\ As discussed above, however, some of these commenters
stated that the concept of ``integrity'' should be included in the
definition of ``accuracy.''
---------------------------------------------------------------------------
Substantively, the final rules incorporate, in revised form, the
elements of the definition of ``integrity'' that were included in both
the proposed Regulatory Definition Approach and Guidelines Definition
Approach. First, the definition of ``integrity'' in the final rules
includes a substantiation provision. Some commenters requested that the
regulations include a substantiation requirement, and the Agencies
agree that the ``integrity'' of furnished information depends, in part,
on its consistency with the furnisher's own records. A timing component
has been added to the provision in the final rules requiring furnished
information to be substantiated by the furnisher's records at the time
it is furnished so that the information provided to a CRA reflects, and
is supported by, the furnisher's records at that time.
Second, the Agencies are adopting the form and manner provision as
part of the definition of ``integrity'' to address omissions and data
transmission and similar errors that may lead to information being
incorrectly reflected on a credit report. This provision contemplates,
for example, that information will be furnished in a form and manner
that would permit a CRA to accept data regarding a consumer and link it
appropriately to the consumer.
Two industry commenters expressed concern about the phrase
``standardized and clearly understandable form,'' as used in the
examples provided in connection with the guidelines' definition. These
commenters stated that the Agencies should recognize that not every
furnisher provides information in the same manner or format. One of
these commenters suggested the phrase instead be revised to encourage
furnishers to achieve standardization to the extent reasonably
possible. The Agencies have not included the phrase ``standardized and
clearly understandable form'' in the definition of ``integrity'' but
have included it in the objectives at section I.(b)(2)(ii)(B) of the
guidelines.
Finally, the Agencies have modified the definition of ``integrity''
that was proposed under the Regulatory Definition Approach while
retaining the key concept that the omission of certain information
affects the integrity of that information. In light of the range and
diversity of users of consumer reports, the information that such users
may find relevant and material, and the use of various proprietary
credit scoring models and underwriting methodologies, it could be
difficult or impossible for furnishers to predict what information
third parties would find relevant or material to make credit or other
determinations based on consumer reports. Given these impediments, the
Agencies conclude that the proposed regulatory definition of
``integrity'' would have created an unworkable standard because
furnishers cannot be expected to identify all types of information
that, if omitted, could reasonably be expected to contribute to an
incorrect evaluation of a consumer's creditworthiness by a user of a
consumer report. Accordingly, the Agencies have determined to retain
the ``material omission'' concept that informed the Regulatory
Definition Approach in a manner that does not place the burden of
making that determination on furnishers.
Under the final rules, in order to satisfy the definition of
``integrity,'' furnished information must include items in the
furnisher's possession about the account or other relationship only if
the relevant Agency has determined that its absence would likely be
materially misleading in evaluating a consumer's creditworthiness,
credit standing, credit capacity, character, general reputation,
personal characteristics, or mode of living; and has listed that item
of information in the Agency's guidelines. Thus, each Agency, in
consultation and coordination with the other Agencies, will determine,
and list in its guidelines, the types of information in a furnisher's
possession about a consumer's account or other relationship that the
furnisher will be expected to provide to promote the integrity of the
information. This list will be based on the Agency's determination that
the absence of the information would likely be materially misleading in
evaluating a consumer's creditworthiness, credit standing, credit
capacity, character, general reputation, personal characteristics, or
mode of living.
Consistent with this approach, the Agencies have listed in the
guidelines the consumer's credit limit, if applicable and in the
furnisher's possession. A consumer's credit limit was one of the items
used in the proposed regulatory text to illustrate the type of
information covered by the standard contained in the definition of
``integrity'' as proposed.
As the Agencies noted in the NPRM, one key factor for evaluating
the creditworthiness of an individual is credit utilization. If a
creditor fails to furnish a credit limit for an account, credit
evaluators must either ignore credit utilization data in the evaluation
model or use a substitute measure for the credit limit, such as the
highest balance (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. A higher
credit utilization estimate generally leads, in turn, to a higher
perceived level of credit risk for some consumers.\16\
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\16\ See Robert B. Avery, Paul S. Calem, Glenn B. Canner, Credit
Report Accuracy and Access to Credit; Federal Reserve Bulletin,
Summer 2004, p. 306.
---------------------------------------------------------------------------
Therefore, the revised ``integrity'' provision requires that
furnishers provide a credit limit to a CRA, if applicable and in the
furnisher's possession, in order for the furnished information to have
``integrity.'' The qualifying phrase reflects the Agencies' recognition
that some credit products may not have a credit limit, in which case it
is appropriate for the furnisher not to provide credit limit
information because a credit limit would not be ``applicable.''
However, if the furnisher subsequently establishes a credit limit for
the consumer's account or other relationship, then the furnisher is
expected to provide the information with its next regular data
transmission to a CRA. Likewise, if a furnisher changes a credit limit
for the consumer's account, then the furnisher also is expected to
furnish that change with its next regular data transmission to a CRA.
Additionally, a furnisher may have acquired a consumer account or
relationship through a sale or transfer, and the credit limit data may
not have been provided to the acquiring furnisher. In those instances,
a furnisher also would not be expected to provide credit limit
information since it is not in its possession. Consistent with the
FCRA, under which the furnishing of information about consumers is
voluntary, the definition of ``integrity''
[[Page 31491]]
applies only to information that the furnisher elects to provide to a
CRA. Furnishers should note that they may be subject to separate
obligations to furnish all available information about an account or
other relationship.\17\
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\17\ Furnishers that provide information about consumers to CRAs
related to mortgage loans also may be subject to requirements
imposed by Freddie Mac, Fannie Mae, and the Federal Housing
Administration. 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).
---------------------------------------------------------------------------
The proposed definition of ``integrity'' that was included in the
Regulatory Definition Approach also included the opening date of an
account or other relationship as an example of a type of data that, if
omitted, reasonably could be expected to contribute to an incorrect
evaluation by a user of a consumer report of a consumer's
creditworthiness. The Agencies do not have sufficient information to
determine whether, and under what circumstances, the omission of an
account opening date undermines the ``integrity'' of furnished
information. Therefore, the Agencies have not incorporated any
reference to account opening dates into the definition of ``integrity''
in the final rules and have not listed it in section I.(b)(2)(iii) of
the guidelines. However, the Agencies are publishing an advance notice
of proposed rulemaking in this same issue of the Federal Register for
the purpose of obtaining information that would assist the Agencies in
determining whether, and under what circumstances, it would be
appropriate to propose any additions to the guidelines, including
whether and under what circumstances the Agencies should include an
account opening date as an item furnishers would be expected to provide
to a CRA to promote the integrity of the information.
Direct Dispute
Proposed Sec. --.41(e) defined ``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.
The Agencies have revised the definition of ``direct dispute'' to
mean a dispute submitted directly to a furnisher (including a furnisher
that is a debt collector) by a consumer concerning the accuracy of any
information contained in a consumer report and pertaining to an account
or other relationship that the furnisher has or had with the consumer.
The definition in the final rules includes a parenthetical clause that
clarifies that a ``furnisher'' also includes a debt collector that
provides information to a CRA. This clarifying language has been added
in response to a number of commenters that stated information furnished
by a collection agency, which may be collecting a debt on behalf of
another furnisher, should be covered by the direct dispute regulation.
Section 623(a)(8)(A) of the FCRA requires the Agencies to jointly
prescribe regulations that identify the circumstances under which a
furnisher shall be required to investigate a direct dispute. This is
accomplished in part through the definition of ``direct dispute.''
Under the final rules, a direct dispute includes only a dispute
concerning the accuracy of information contained in a consumer report
that pertains to an account or other relationship that the furnisher
has or had with the consumer. This revision addresses comments made by
several industry commenters that expressed concern that the scope of
the proposed direct dispute definition was too broad. They suggested
limiting the definition of ``direct dispute'' to include only those
disputes about information in a consumer report that relate to
information provided by the furnisher, rather than disputes about any
information contained in the report.\18\
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\18\ While the final definition of direct dispute pertains to
information about an account or other relationship that the
furnisher has or had with the consumer rather than whether the
furnisher provided the information, in response to these comments,
the Agencies also have added an exception to the circumstances under
which a furnisher must investigate a direct dispute. Section
--.43(b)(1)(vi) of the final rule states that the investigation
requirements do not apply to a furnisher if the dispute relates to
information provided to a CRA by another furnisher.
---------------------------------------------------------------------------
The Agencies note that the phrase ``consumer report,'' as used in
the definition of ``direct dispute,'' includes a ``file disclosure''
from a CRA toa consumer.\19\
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\19\ Under section 609(a) of the FCRA, CRAs are required to
provide certain information to consumers upon request. CRAs
generally provide such disclosures in a different format than a
consumer report they provide to a third party, and refer to them as
``file disclosures,'' rather than consumer reports.
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Furnisher
Proposed Sec. --.41(c) defined the term ``furnisher'' to mean an
entity other than an individual consumer that furnishes information
relating to consumers to one or more CRAs. The proposed definition of
``furnisher'' excluded entities that provide information to a CRA
solely to obtain a consumer report under sections 604(a) and (f) of the
FCRA, which, respectively, enumerate the circumstances under which a
CRA may provide a consumer report and prohibit persons from obtaining
or using consumer reports for impermissible purposes.
The final regulations at Sec. --.41(c) define ``furnisher'' to
mean an entity that furnishes information relating to consumers to one
or more CRAs for inclusion in a consumer report. The definition also
provides that an entity is not a furnisher when it:
Provides information to a CRA solely to obtain a consumer
report in accordance with sections 604(a) and (f) of the FCRA;
Is acting as a CRA as defined in section 603(f) of the
FCRA;
Is a consumer to whom the furnished information pertains;
or
Is a neighbor, friend, or associate of the consumer, or
another individual with whom the consumer is acquainted or who may have
knowledge about the consumer, and who provides information about the
consumer's character, general reputation, personal characteristics, or
mode of living in response to a specific request from a CRA.
The final rules continue to exclude from the definition of
``furnisher'' entities that provide information to a CRA solely to
obtain a consumer report in accordance with sections 604(a) and (f) of
the FCRA. As discussed in the NPRM, users of consumer reports may
provide information about consumers to CRAs to obtain such reports, but
not for the purpose of having that information included in consumer
reports. For this reason, although the user's request for the report
may be reflected in the consumer report as an inquiry, furnishing
information related to such an inquiry is not subject to the final
regulations and guidelines. The final rules revise the wording of the
definition to make clear that an entity is a ``furnisher'' only when it
furnishes information for purposes of inclusion in a consumer report.
The final rules are intended to avoid discouraging entities that use
consumer reports from obtaining or using consumer reports for
permissible purposes.
The Agencies also have added three other exclusions from the
definition of ``furnisher'' in response to comments indicating that the
proposed definition was too broad. For example, one
[[Page 31492]]
industry commenter urged the Agencies to exempt resellers of consumer
report information because those entities already are subject to
dispute requirements under section 611(f) of the FCRA. The final rules
include an exemption for entities acting in the capacity of a
``consumer reporting agency'' as defined in section 603(f) of the FCRA.
This exemption covers ``resellers'' acting in that capacity because,
under section 603(u) of the FCRA, resellers are a type of CRA.
In addition, the Agencies note that increasing numbers of consumers
are self-reporting certain types of information, such as rent or
utility payments, to alternative consumer reporting agencies. To
address this development and encourage consumers to provide information
to CRAs, the final rules explicitly exempt from the ``furnisher''
definition in Sec. --.41(c)(3) a consumer who provides to a CRA
information pertaining to himself or herself.
Finally, the Agencies have added an exception that excludes from
the definition of ``furnisher'' a neighbor, friend, or associate of a
consumer, or another individual with whom the consumer is acquainted or
who may have knowledge about the consumer, and who provides information
about the consumer's character, general reputation, personal
characteristics, or mode of living in response to a specific request
from a CRA (excepted persons). This new exception parallels the types
of information that are collected in connection with an ``investigative
consumer report'' as described in section 603(e) of the FCRA. The
Agencies believe that this exception is necessary to avoid disrupting
the information collection processes that have been established for
creating investigative consumer reports. These excepted persons play a
crucial role by providing information used in connection with matters
such as insurance applications and employment-related background
checks.
Identity Theft
The Agencies proposed to define ``identity theft'' as having 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,\20\ defines the term ``identity theft'' to mean ``a fraud
committed or attempted using the identifying information of another
person without authority.'' \21\ This definition also is used in the
interagency regulations implementing section 114 of the FACT Act,
relating to identity theft prevention, detection, and mitigation
programs. The Agencies received no comments on the definition of
``identity theft'' and adopt the definition without change in the final
rules.
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\20\ Section 111 of the FACT Act 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).
\21\ See 16 CFR 603.2(b) for the FTC's definition of
``identifying information.'' The FTC's definition of ``identifying
information'' includes any name or number that may be used, alone or
in conjunction with any other information, to identify a specific
person, including any: Name, social security number, date of birth,
official State or government issued driver's license or
identification number, alien registration number, government
passport number, employer or taxpayer identification number; unique
biometric data, such as fingerprint, voice print, retina or iris
image, or other unique physical representation; unique electronic
identification number, address, or routing code; or
telecommunication identifying information or access device (as
defined in 18 U.S.C. 1029(e)).
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Section --.42 Reasonable policies and procedures concerning the
accuracy and integrity of furnished information
Policies and Procedures
Proposed Sec. --.42(a) stated that each furnisher must 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 proposal provided that the policies and
procedures must be appropriate to the nature, size, complexity, and
scope of the furnisher's activities. The final rules retain this
provision without change.
Most industry commenters supported the Agencies' proposal to permit
each furnisher the flexibility to adopt policies and procedures suited
to their individual circumstances, but several industry commenters
opposed the requirement that furnishers establish ``written'' policies
and procedures. One industry commenter stated that not all community
banks have written policies and procedures for reporting customer data.
Three industry commenters suggested that some furnishers should be
allowed to meet the ``writing'' requirement by simply acknowledging,
where applicable, that the furnisher is reporting data in the Metro 2
format, the consumer data reporting industry's standard electronic
format for submitting information to CRAs. One industry commenter
stated that requiring written policies and procedures was reasonable
and would not be unduly burdensome. Consumer organizations strongly
supported the proposed requirement that policies and procedures be
``written.''
The final rules retain the requirement that furnishers' policies
and procedures be written because the Agencies have concluded that it
is necessary both to ensure effective implementation of the final rules
and to enable the Agencies to assess furnishers' compliance with the
rules. The Agencies do not expect that the requirement for written
policies and procedures will be unduly burdensome, especially since,
under the guidelines, a furnisher may incorporate any of its existing
policies and procedures that are relevant and appropriate. In response
to commenters' suggestions that a particular approach to the policies
and procedures be deemed sufficient, the Agencies note that whether any
particular set of policies and procedures are adequate to satisfy the
rule, including the extent to which any particular guideline should be
reflected in such policies and procedures, depends upon the nature,
size, complexity, and scope of the furnisher's activities.
Guidelines
Proposed Sec. --.42(b) stated that each furnisher must consider
the accuracy and integrity guidelines in developing its policies and
procedures and incorporate those guidelines that are appropriate.
Section .--42(b) is adopted without change in the final rules. The
Agencies note that 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 promote the
accuracy and integrity of the information about consumers that they
provide to CRAs.
A number of consumer organizations stated that furnishers should be
required to implement all of the guidelines. As discussed in the NPRM,
the Agencies recognize that there is substantial diversity among
furnishers with respect to their structure, operations, and the types
of business they conduct. The Agencies believe that a ``one-size-fits-
all'' approach that requires all furnishers to implement all of the
guidelines would not appropriately reflect these differences. For that
reason, the final rules include, at Sec. --.42(a), a requirement that
a furnisher's policies and procedures must be appropriate to the
nature, size, complexity, and scope of the furnisher's activities,
which permits furnishers to tailor their policies and procedures to
their business activities. The Agencies expect, for example, that the
written policies and procedures for a small retail entity will differ
substantially from, and be significantly less complex than, those of
[[Page 31493]]
a multi-billion dollar financial services company.
Reviewing and Updating Policies and Procedures
Proposed Sec. --.42(c) stated that each furnisher must review its
policies and procedures periodically and update them as necessary to
ensure their continued effectiveness. Section --.42(c) is adopted
without change in the final rules.
Industry commenters expressed concern with the potential burden
that could be imposed by the requirement to review policies and
procedures periodically. One industry commenter recommended that annual
reviews of policies and procedures be described as a best practice,
rather than a requirement in the regulation. On the other hand,
consumer organizations stated that the regulations should require all
furnishers regularly to review and update their policies and
procedures. These commenters added that the Agencies should require
large furnishers to conduct annual audits, furnish information in the
standard reporting format, and update their technology on a regular
basis.
The Agencies have concluded that the requirement for a furnisher to
review policies and procedures periodically and to update them as
necessary is essential to ensure their continued effectiveness. Section
--.42(c) does not impose an audit requirement on a furnisher to conduct
an official examination and verification of consumer accounts and
records regarding its policies and procedures. However, the Agencies do
expect a furnisher to be able to demonstrate to its regulator that it
has established and implemented policies and procedures consistent with
the final rules. The Agencies also expect that a furnisher would engage
in a periodic review of its policies and procedures when there is a
significant substantive change in its business plan or furnishing
activities, or when it has identified significant deficiencies in the
accuracy or integrity of the information it has provided to CRAs. A
furnisher also may choose to review its policies and procedures
periodically when it engages in a general review of FCRA compliance or
general compliance with consumer protection laws and regulations.
B. Accuracy and Integrity Guidelines
The proposed accuracy and integrity guidelines appeared in the
appendix to the appropriate part of each Agency's proposed regulations.
In the introductory language to the proposed guidelines, the Agencies
encouraged voluntary furnishing of information about consumers to CRAs,
reflecting 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
reminded furnishers that Sec. --.42 of the proposed regulations would
require each furnisher (1) to establish and implement reasonable
written policies and procedures concerning the accuracy and integrity
of the information about consumers that it furnishes to CRAs and (2) to
consider the guidelines in developing those policies and procedures.
The introduction to the guidelines is adopted in the final rules
substantially as proposed, with the addition of a sentence that reminds
furnishers that Sec. --.42 also requires each furnisher to review its
policies and procedures periodically and update them as necessary to
ensure their continued effectiveness.
Several industry commenters objected to the use of the term
``ensure'' in the guidelines. These commenters asserted that, instead
of expecting furnishers to ``ensure'' that reporting is free from
errors or other defects, it would be more appropriate for the Agencies
to promulgate regulations that require furnishers to have policies and
procedures reasonably designed to maximize the accuracy of information
furnished. The commenters argued that it would be sufficient that a
furnisher's policies and procedures be reasonably designed to
accomplish the objectives listed. In response to these comments, the
Agencies have removed the ``ensuring'' language and substituted
language indicating that furnishers should reasonably design their
policies and procedures to achieve specified objectives.
Section I--Nature, Scope, and Objectives of Policies and Procedures
Nature and Scope
The proposed Nature and Scope section noted that Sec. --.42(a) of
the proposed rule requires that a furnisher's policies and procedures
must be appropriate to the nature, size, complexity, and scope of the
furnisher's activities. In the final guidelines, this provision is
retained without change. Additionally, the proposed nature and scope
section provided three examples of what a furnisher's policies and
procedures should reflect: The types of business activities in which
the furnisher engages; the nature and frequency of the information the
furnisher provides to CRAs; and the technology used by the furnisher to
furnish information to CRAs. This language has been revised in the
final guidelines to make clear that while the examples of the nature
and scope provisions are not mandatory, they are factors that a
furnisher should consider when developing its policies and procedures.
Objectives
The proposed Objectives section of the guidelines provided that a
furnisher should have written policies and procedures reasonably
designed to accomplish the specified objectives. The proposal set forth
alternative lists of specified objectives for the Regulatory Definition
Approach and the Guidelines Definition Approach, and the wording of
some of the proposed objectives in the guidelines was related to the
alternative approaches for construing the term ``integrity'' that the
Agencies proposed.
In connection with the proposed Regulatory Definition Approach, the
first two objectives of the guidelines provided 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 is 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 proposed Guidelines Definition Approach, definitions of
``accuracy'' and ``integrity'' were incorporated into the first two
objectives. Thus, the proposed guidelines provided 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 defined
``accuracy'' to mean that any information that a furnisher provides
about an account or other relationship with the consumer to a CRA
reflects without error the terms of the account or other relationship
and the consumer's performance and other conduct with respect to the
account or other relationship.
[[Page 31494]]
Additionally, under the proposed Guidelines Definition Approach,
the guidelines provided 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 defined ``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.
The third proposed objective under both approaches stated 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.
The fourth proposed objective under both approaches stated 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 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 stated that the information a furnisher provides about
accounts or other relationships with a consumer should be 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, and with a date specifying the time period to which the
information pertains.
The sixth proposed objective under the Regulatory Definition
Approach stated that the information a furnisher provides about
accounts or other relationships with a consumer should be substantiated
by the furnisher's own records. The fifth and sixth proposed objectives
under the Regulatory Definition Approach incorporated the two-part
definition of ``integrity'' used in the Guidelines Definition
Approach.\22\
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\22\ Comments received regarding the definitions of ``accuracy''
and ``integrity'' and their placement in either rules or guidelines
and the Agencies' responses to the comments are discussed earlier in
this SUPPLEMENTARY INFORMATION.
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The final guidelines have four objectives. The first two objectives
address how information should be furnished with ``accuracy'' and
``integrity,'' terms that are defined in the regulations at Sec. Sec.
--.41(a) and (e), respectively, and described earlier in this Section-
by-Section Analysis.
The first objective states that a furnisher's policies and
procedures should be reasonably designed to promote the furnishing of
information about accounts or other relationships with a consumer that
is accurate, such that the information:
Identifies the appropriate consumer;
Reflects the terms of and liability for those accounts or
other relationships; and
Reflects the consumer's performance and other conduct with
respect to the account or other relationship.
This first objective is substantially similar to what the Agencies
proposed, but has been revised to conform to the definition of
``accuracy'' that has been adopted in Sec. --.41(a) of the
regulations.
The second objective has been revised to conform to the final
definition of ``integrity'' that has been adopted in Sec. --.41(e) of
the regulations and incorporates language that was proposed in the
fifth and sixth objectives of the Regulatory Definition Approach and
the second objective of the Guidelines Definition Approach.
The third objective provides that a furnisher's policies and
procedures should be reasonably designed to promote the conduct of
reasonable investigations of consumer disputes and the taking of
appropriate actions based on the outcome of such investigations. This
objective is similar to an objective included in both the proposed
Regulatory Definition Approach and the proposed Guidelines Definition
Approach.
The fourth and final objective provides that a furnisher's policies
and procedures should be reasonably designed to promote the updating of
the information furnished as necessary to reflect the current status of
the consumer's account or other relationship, including, for example:
Any transfer of an account (e.g., by sale or assignment
for collection) to a third party; and
Any cure of the consumer's failure to abide by the terms
of the account or other relationship.
The Agencies do not expect that furnishers should update
information any more frequently than already is required by section
623(a)(2) of the FCRA.
The final objective related to updating is substantively the same
as what the Agencies proposed.
One industry commenter expressed concern that, under the proposal,
the obligations of an account seller with respect to updating account
information are unclear. This commenter stated that once an account is
sold, the seller has no ability to update the account to reflect its
current status, beyond noting that the account has been transferred.
This commenter stated that the obligation to prevent future problems
with providing information to a CRA about an account that was sold must
rest with the acquiring party, not the selling party. The Agencies
expect furnishers to provide information to a CRA prior to the transfer
of an account to a third party consistent with the furnisher's policies
and procedures regarding accuracy and integrity. However, the Agencies
do not expect that after transferring an account to a third party a
furnisher would update the current status of the account beyond
providing information to a CRA that the account has been transferred.
Another industry commenter stated that the proposal could be viewed
as requiring furnishers to update information regularly based on every
type of event that may occur following a charge-off of an account. This
commenter stated that furnishers typically cease to routinely furnish
information about an account at the time of a charge-off. The commenter
noted that although most furnishers will, as appropriate, update
information provided to CRAs at the time a charge-off is paid in full
or a settlement is reached after charge-off, many furnishers do not
report interim changes based on a payment schedule agreed to as part of
recovery efforts, nor do they report a revised status based on
bankruptcy proceedings that take place after a charge-off. This
commenter
[[Page 31495]]
stated that the final rules should make clear that furnishers do not
have a duty to report changes to account status once regular reporting
ceases, provided that the data furnished was accurate at the time it
was furnished.
The Agencies expect that, to the extent that a consumer cures a
failure to abide by the terms of the account or relationship, a
furnisher should, consistent with section I.(b)(4) of the guidelines,
provide an update of the cured status to a CRA. For example, if a
consumer pays off the full balance owed on a charged-off account, a
furnisher should provide an update to the CRA with the furnisher's next
regular reporting cycle that the account has a zero balance. A
furnisher would not, however, have to request that the CRA delete the
information that the account was a charge-off.
Proposed Section II--Accuracy and Integrity Duties of Furnishers Under
the FCRA
Proposed section II of the guidelines reminded furnishers of their
statutory duties relating to the accuracy and integrity of the
information about consumers they provide to CRAs. It stated that a
furnisher's policies and procedures should address compliance with all
applicable requirements imposed on the furnisher under the FCRA and
listed 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. It also listed 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.
A number of commenters objected to proposed section II of the
guidelines by stating that the summarized list of FCRA requirements
would have created uncertainty regarding furnishers' obligations under
the FCRA. The Agencies have removed proposed section II from the final
guidelines in response to these comments and have renumbered subsequent
sections accordingly. Additionally, in section III.(m) of the final
guidelines, the Agencies have included, as a specific component that a
furnisher's policies and procedures should address, ``[c]omplying with
applicable requirements under the Fair Credit Reporting Act and its
implementing regulations.''
Section II--Establishing and Implementing Policies and Procedures
The proposed guidelines identified three steps that furnishers
should take when establishing and implementing 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. A furnisher could
satisfy this step by, for example:
Reviewing its 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.
As outlined above, the second clause of this proposed guideline
encouraged furnishers, among other things, to ``review historical
records relating to accuracy or integrity of disputes.'' Some
commenters noted that, for some accounts (e.g., purchased accounts),
such historical records may not be available. In response to these
comments, the Agencies have revised the second clause to clarify that
it is referring only to a furnisher's review of historical records of
its own account activities.
The third clause of the proposed guideline encouraged furnishers to
obtain feedback from CRAs, consumers, the furnisher's staff, or other
appropriate parties. A number of commenters objected to this element of
the guideline on the grounds that it would cost furnishers a fee to
obtain information from CRAs, and that the CRAs did not always provide
information requested by furnishers. These commenters also were
concerned that furnishers would be required to survey consumers to
obtain the relevant feedback, which, they stated, would be another
costly undertaking.
With respect to this third clause, the Agencies have revised the
final guidelines to encourage furnishers to consider any feedback they
may receive from CRAs, consumers, or other appropriate parties. There
is no requirement that furnishers affirmatively seek out such
information, but the Agencies expect furnishers to review any such
feedback in their possession, including reports or ``score cards'' that
furnishers may receive from a CRA regarding dispute histories processed
through communication channels such as e-OSCAR.\23\
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\23\ e-OSCAR is a Web-based system that permits furnishers and
CRAs to create and respond to consumer credit history disputes and
to send ``out-of-cycle'' credit history updates to CRAs. See http://www.e-oscar.org/about.htm (last visited March 3, 2009).
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The fourth clause of the final guideline does recommend, however,
that furnishers take affirmative action to obtain feedback from their
staff in order to identify practices or activities of the furnisher
that can compromise accuracy or integrity.
The final guideline also includes a fifth clause, which states
that, when establishing and implementing policies and procedures, a
furnisher should consider their potential impact on consumers.
Consideration of these impacts should result in increasing the accuracy
and integrity of consumers' information provided by furnishers to CRAs.
The Agencies proposed that the second step that a furnisher should
take when establishing and implementing accuracy and integrity policies
and procedures is to 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 or the
implementation of such policies and procedures are necessary.
Commenters raised no issues with respect to this provision, and it is
adopted without change in the final guidelines.
The Agencies proposed that a furnisher's third step should be to
evaluate the effectiveness of specific methods (including technological
means) the furnisher uses to provide information about consumers to
CRAs, and how those methods may affect accuracy and integrity, and
determine whether changes to those methods should be made to enhance
the accuracy and integrity of that information. Commenters raised no
issues with respect to this provision, and it is adopted without change
in the final guidelines.
Section III--Specific Components of Policies and Procedures
The proposed guidelines described specific components that should
be addressed in a furnisher's policies and procedures. These components
included:
Establishing and implementing a system for furnishing
information about
[[Page 31496]]
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.
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 \24\ of information, duplicative reporting, or other problems
affecting the accuracy or integrity of the information furnished.
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\24\ Re-aging of an account occurs when an account is sold or
transferred to a third party that resets the account opening date to
the date the account was received by the third party. Re-aged
accounts may result in adverse credit information staying on a
consumer's credit report longer than what is permissible by the
FCRA, which for accounts that are placed in collection or charged
off is typically no more than seven years. See section 605 of the
FCRA.
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Attempting to obtain the information listed in
Sec. --.43(d) (direct dispute notice content requirements) 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 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.
Commenters raised few issues about the content of the proposed
components, and most are adopted without change in the final
guidelines. However, the Agencies have adopted some technical and other
changes to the proposed components, as described below.\25\
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\25\ For the reasons discussed above, and in response to
commenters' suggestions, the Agencies have removed the language
recommending that a commenter ``ensure'' a particular result where
it appeared in the specific components. The Agencies agree that this
terminology is less appropriate for guidelines than language focused
on the matters that furnishers' policies and procedures should
address.
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Most significantly, the Agencies have removed from the final
guidelines the component encouraging a furnisher to obtain the
information listed in proposed Sec. --.43(d) of the regulations
(direct dispute notice content requirements) from a consumer before
determining that the consumer's dispute is frivolous or irrelevant. The
Agencies have determined that adoption of this component is
inconsistent with section 623(a)(8) of the FCRA, which, among other
things, provides that a furnisher must notify the consumer of a
determination that a dispute is frivolous or irrelevant, and that a
dispute would be considered frivolous or irrelevant when a consumer
does not provide sufficient information to investigate the disputed
information.
Some commenters suggested that the proposed component relating to
furnishing information after mergers and other transactions should more
specifically direct furnishers to (1) instruct CRAs to delete accounts
after sale or transfer to decrease the incidence of duplicate accounts
and (2) follow industry standard reporting guidelines not to change
account numbers, ID numbers, portfolio types, or account opening dates.
Some commenters noted that the problems of duplicative reporting and
re-aging of account information are common for accounts that have been
sold or placed with debt collectors. Section III.(g) of the final
guidelines encourages furnishers to provide information about consumers
to CRAs following acquisitions or transfers of accounts or other
obligations in a manner that prevents re-aging of information,
duplicative reporting, or other problems similarly affecting the
accuracy or integrity of the information furnished. The final rules use
the broader term ``obligations'' rather than ``debts,'' as was
proposed, because acquired or transferred information may relate to not
only debts that arise from agreements, but also other obligations such
as court-ordered judgments. The Agencies believe that it is sufficient
for a furnisher to address these issues in its policies and procedures,
as applicable, in a manner it determines will be effective and
appropriate to the nature, size, complexity, and scope of its
activities.
With respect to the third proposed component, which focused on
maintaining relevant records, the Agencies requested comment on whether
a specific time period for recordkeeping should be incorporated in the
final regulations.
Most industry commenters opposed any new recordkeeping
requirements. However, two industry commenters stated that they would
not oppose guidelines governing the length of time furnishers should
retain records in truncated formats, so long as the standard did not
apply to original documents. One industry commenter requested that the
Agencies clarify in the final rules that any recordkeeping requirement
would not require a furnisher to maintain data other than data it would
maintain in the normal course of business. This commenter stated that
the final rules should require only that record retention practices be
reasonable (and not require a furnisher to maintain records
indefinitely).
Consumer organizations supported the addition of a recordkeeping
requirement. These commenters generally recommended that the Agencies
require records to be kept, at a minimum, as long as information about
an account or other relationship with a consumer is furnished to a CRA.
These commenters stated that if furnishers fail to keep records to
substantiate furnished information, they should report the results of a
dispute as
[[Page 31497]]
unverifiable and instruct the CRA to delete the information.
The Agencies have addressed the recordkeeping issue by evaluating
both the need for additional recordkeeping requirements and the
potential adverse consequences of imposing such requirements. First, in
their experience assisting consumers with disputes, the Agencies have
found that the vast majority of consumer disputes involve recent
transactions with furnishers and that furnishers generally have records
available to perform reasonable investigations of the disputes. Because
of this, the Agencies believe that any benefits from adopting the
extended recordkeeping requirement proposed by consumer organizations
would likely be outweighed by the significant administrative and cost
burdens such a requirement would impose on furnishers. Such a
recordkeeping requirement also might create an incentive for furnishers
to cease reporting information to CRAs, which would adversely affect
the quality of the credit reporting system.
The final rules do not impose any additional recordkeeping
requirements on furnishers, and the final guidelines at section III.(c)
pertaining to the maintenance of records has been adopted without
substantive change. As noted in the NPRM, and adopted in section
III.(c) of the guidelines, a furnisher's policies and procedures should
address maintaining records for a reasonable period of time, not less
than any applicable recordkeeping requirements, for example,
recordkeeping requirements contained in regulations implementing the
Truth in Lending Act, the Equal Credit Opportunity Act,\26\ or any
other agency-specific requirement.\27\
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\26\ See 12 CFR 226.25(a) and 12 CFR 202.12(b).
\27\ See, e.g., 12 CFR 563.170(c) (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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C. Final Regulations Concerning Direct Disputes
Section --.43 Direct Disputes
The third component of this rulemaking comprises the Agencies'
final 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 contained in a consumer
report on a consumer, based on a direct request of a consumer. The
statute sets forth procedural and other requirements applicable to such
reinvestigation.
As noted in the NPRM, a number of furnishers have indicated that
they already voluntarily investigate direct disputes as a matter of
good customer relations and sound business practices. The Agencies
encourage all furnishers, as a best practice, to conduct voluntary
investigations of consumer disputes and enhance the accuracy and
integrity of the information about consumers they provide to CRAs.\28\
As noted above, the accuracy and integrity guidelines adopted by the
Agencies contemplate that furnishers' policies and procedures will
address the reasonable investigation of all consumer disputes, whether
or not legally required. The guidelines state that conducting such
investigations (and taking any appropriate remedial actions) should be
an objective of furnishers' accuracy and integrity policies and
procedures.
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\28\ 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 the Agencies. See
generally Board, ``How do I file a Complaint?,'' http://www.federalreserveconsumerhelp.gov/complaintinfo.cfm?info=1 (last
visited March 3, 2009); FDIC, ``How to file a Written Complaint,''
http://www.fdic.gov/consumers/questions/consumer/complaint.html
(last visited March 3, 2009); OTS, ``How to Resolve a Consumer
Complaint'' (May 2008), http://www.ots.treas.gov/docs/4/480924.pdf
(last visited March 3, 2009); and OCC, ``Assistance for Customers of
National Banks'' (April 2005), http://www.occ.gov/customer.pdf (last
visited March 3, 2009).
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Section --.43(a) General Rule
The proposed general rule required 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.
Section --.43(a) of the final rules differs from the proposal in
two respects. First, the Agencies have revised the introductory
language of the provision to state that a furnisher must conduct a
``reasonable investigation'' of a direct dispute if it relates to one
of the enumerated circumstances. The Agencies have added the term
``reasonable'' because it is consistent with courts' interpretation of
a similar duty imposed on furnishers that receive a notice of dispute
from a CRA.\29\ In the Agencies' view, a furnisher's investigation
resulting from a direct dispute would be required to meet the same
standard of reasonableness as it would if the notice of dispute were
received through a CRA. Accordingly, this revision clarifies the nature
of furnishers' direct dispute reinvestigation duties, consistent with
suggestions made by some commenters.
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\29\ See Johnson v. MBNA America Bank, N.A., 357 F.3d 426 (4th
Cir. 2004); Schaffhausen v. Bank of America, N.A., 393 F.Supp.2d 853
(D. Minn. 2005).
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Second, the final direct dispute rule clarifies, in response to
commenters' suggestions, that debt collectors that are furnishers are
subject to the rules. The final rules add a parenthetical clause to the
definition of ``direct dispute'' to explicitly cover debt
collectors.\30\
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\30\ An industry commenter representing debt collectors raised
concerns about a potential conflict between the Fair Debt Collection
Practices Act (FDCPA) and the Sec. --.43 direct dispute rule as it
applies to debt collectors. The direct dispute rule requires
furnishers of information to CRAs to report the results of a direct
dispute to the consumer (Sec. --.43(e)(3)) or notify the consumer
if the furnisher determines the dispute is frivolous or irrelevant
(Sec. --.43(f)(2)). Section 805(c) of the FDCPA provides that if a
consumer has notified a debt collector in writing that ``the
consumer wishes the debt collector to cease further communication
with the consumer, the debt collector shall not communicate with the
consumer with respect to such debt'' (with some exceptions not
applicable to the Sec. --.43 direct dispute rule). The concern
raised by the commenter is that if a consumer has written the debt
collector to cease communication, but at some future time, or at the
same time, submits a direct dispute about information the debt
collector has provided to a CRA, the debt collector may risk
violating the FDCPA prohibition on contacting the consumer when it
provides the notices required by the Sec. --.43 direct dispute
rule. The purpose of the notices required by the direct dispute rule
is either to report the results of a direct dispute to the consumer
or to notify the consumer if the furnisher determines the dispute is
frivolous or irrelevant. Contemporaneously with the publication of
this final rule, the FTC is publishing an advisory opinion stating
that a notice provided to the consumer solely for the purpose of
complying with the Sec. --.43 direct dispute rule (the FTC rule is
16 CFR 660.4), without conveying any other message, does not violate
section 805(c) of the FDCPA. In addition, the Agencies will enforce
section 805(c) of the FDCPA consistent with such advisory opinion.
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[[Page 31498]]
The final direct dispute rules are designed to permit direct
disputes in virtually all circumstances involving disputes about the
accuracy of furnished information typically provided by a furnisher to
a CRA. The Agencies believe that the approach adopted by the final
rules enables consumers to submit a dispute directly to the furnisher
(with certain exceptions) when the issue in dispute relates to
information pertaining to the consumer's account or other relationship
with that furnisher.
A number of industry commenters supported the general approach of
the direct dispute proposal. A few industry commenters suggested that
the direct dispute provision should be narrower than the proposed rule,
such as by limiting the direct dispute right to disputes related to
identity theft. The final rules do not narrow the types of disputes
that a furnisher must investigate. The Agencies have concluded that the
broader approach of the proposal and final rules is more consistent
with the statutory considerations that the Agencies must weigh pursuant
to section 623(a)(8)(B) of the FCRA, including whether direct contact
with a furnisher would likely result in the most expeditious resolution
of direct disputes. The Agencies believe that the expeditious dispute
resolutions likely to be afforded by a direct dispute right should not
be limited to a narrow class or limited types of disputes. Also, it may
be impossible for a consumer to tell whether an error is the result of
identity theft or some other cause.
Consumer organizations urged the Agencies to require furnishers to
communicate to consumers the process for filing a direct dispute with
the furnisher and to provide such information on their Web sites. The
direct dispute rule-writing authority, at section 623(a)(8)(A) of the
FCRA, does not include establishing a requirement for furnishers to
notify consumers about the process for filing a direct dispute.
However, the Agencies encourage furnishers, as a best practice, to
provide consumers with appropriate information regarding the process
for filing a direct dispute, for example by posting such information on
their Web sites, as applicable. In addition, the Agencies note that
section 609(c)(2) of the FCRA requires the FTC to promulgate, and CRAs
to disseminate with their provision of file disclosures to consumers, a
``General Summary of Consumer Rights.'' When the FTC next updates the
General Summary of Consumer Rights to reflect the additional rights
provided to consumers by the FACT Act and its implementing rules,\31\
it will include consumers' direct dispute rights in the summary.
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\31\ The first update of that Summary (16 CFR 698, Appendix F)
was published on November 30, 2004 (69 FR 69788-789).
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Section --.43(b) Exceptions
The proposed exceptions related primarily to information with
respect to which any consumer dispute would be more appropriately
directed to the CRA, such as information derived from public records,
which may be obtained directly from public sources,\32\ and information
about requests for consumer reports (``inquiries'').
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\32\ The public records exception applies only to information
``derived'' by the CRA from public records. It would not exempt a
consumer's dispute concerning the accuracy of a furnisher's
reference to a particular account being included in bankruptcy, for
example.
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A consumer report may include identifying information about a
consumer (e.g., name, address), 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 in a consumer report.
The Agencies believe that a furnisher should be responsible for
investigating disputes only about information regarding an account or
other relationship between the furnisher and the consumer. The standard
appropriately balances the benefits to consumers with the costs of
furnishers as required by section 623(a)(8)(B)(i) of the FCRA.
Accordingly, the proposal stated that a furnisher would have 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 the proposed direct dispute rule would be a part
of a furnisher's trade line entry or entries on a consumer report.
Proposed Sec. --.43(b)(1) excepted from the general 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)),\33\ such as name(s), date of birth, Social Security
number, telephone number(s), or address(es);
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\33\ 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; \34\
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\34\ 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.
Commenters generally supported these exceptions and the final
regulation adopts these exceptions without substantive change.
In response to comments, the Agencies are including one additional
exception. A number of commenters suggested that a furnisher should
have to investigate only information that it provides to a CRA and not
information provided by third parties that may be compiled and reported
by a CRA. In this regard, the Agencies note that a furnisher would not
likely have access to third party information that would be necessary
to perform the investigation. Accordingly, the Agencies have added a
new exception at Sec. --.43(b)(1)(vi), which states that the general
direct dispute investigation requirement does not apply to information
provided to a CRA by another furnisher.
Proposed Sec. --.43(b)(2) also excepted 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 (CRO) as
defined in 15 U.S.C. 1679a(3),\35\ or an
[[Page 31499]]
entity that would be a CRO but for 15 U.S.C. 1679a(3)(B)(i), which
excludes tax-exempt section 501(c)(3) organizations. This proposed
exception was derived directly from an exception set forth in the
statute.\36\
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\35\ Under this provision of the Credit Repair Organizations
Act, the term ``credit repair organization''--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).
\36\ See 15 U.S.C. 1681s-2(a)(8)(G).
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Many industry commenters noted that it is very difficult to
determine with certainty whether a dispute is prepared or otherwise
assisted by a CRO. These commenters also noted that the narrow scope of
the proposed CRO exception would subject the furnishers to litigation
risks. To remedy this problem, these commenters requested that the CRO
exception be modified to apply whenever a furnisher reasonably believes
the dispute has been submitted by, prepared on behalf of the consumer
by, or submitted on a form supplied to the consumer by, a CRO.
The Agencies agree that it would be unnecessarily restrictive to
require furnishers to determine with certainty that a CRO participated
in the preparation or submission of a dispute. Such a standard would
not accomplish the purpose of the statutory exception. Thus, the Sec.
--.43(b)(2) CRO exception has been revised to incorporate a
``reasonable belief'' standard.
Section --.43(c) Direct Dispute Address
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 Agencies proposed to provide guidance about how this address should
be specified by furnishers and effectively communicated to consumers.
Accordingly, proposed Sec. --.43(c) stated that a furnisher must
investigate a direct dispute only if a consumer submits a direct
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 (e.g., on the
consumer file disclosures CRAs are required to provide to consumers
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 always would be able to submit a direct dispute to
the appropriate address of the furnisher appearing on the consumer
report. The consumer also would be able to submit a direct dispute to
any other business address of the furnisher but only if the furnisher
has not separately specified an address for receiving notices of direct
disputes on a consumer report or by other written or electronic
communication. A furnisher choosing to specify an address for direct
dispute notices would have to 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
also noted in the proposal that a furnisher that specifies 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 final rules adopt
the proposed direct dispute address provision at Sec. --.43(c).
Section --.43(c)(3) of the NPRM would have required a furnisher to
investigate a direct dispute submitted by a consumer at any business
address of the furnisher if it had not specified and provided an
address pursuant to proposed Sec. --.43(c)(2). Some commenters stated
that this obligation would be burdensome and may delay efficient
resolution of the consumer's dispute. In response to these comments,
the final rules only require a furnisher to investigate a direct
dispute submitted by a consumer to any of its business addresses if the
furnisher did not either (1) provide a direct dispute address that is
set forth on a consumer report relating to the consumer or (2) clearly
and conspicuously specify a direct dispute address and provide it to
the consumer either in writing or electronically (if the consumer has
agreed to the electronic delivery of information from the furnisher).
The Agencies specifically requested comment on whether there are
circumstances under which it would not be appropriate for a consumer to
submit a direct dispute notice to the address of the furnisher set
forth on the consumer report, and on whether proposed 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.
Consumer organizations generally recommended that a direct dispute
should be accepted at any business address of a furnisher in all
circumstances. The Agencies note that the language of section
623(a)(8)(D) states that a consumer `` * * * shall provide a dispute
notice directly to [a furnisher] at the address specified by the
[furnisher] for such notices. * * * '' Permitting consumers to use any
business address of a furnisher would not be consistent with this
statutory provision.
Most industry commenters stated that it would be appropriate only
to receive direct disputes at the address a furnisher specifies for
that purpose. Some of these commenters also stated that, at a minimum,
a furnisher should not have to respond to direct disputes if the CRA
supplies the wrong address on the consumer report. Industry commenters
opposed the idea that direct disputes should be accepted ``at any
business address'' of the furnisher, noting that such a requirement
would be extremely difficult to implement, produce inefficient
resolutions of consumer disputes, and be costly.
The Agencies believe that it will benefit consumers and be
operationally feasible to allow consumers to submit a direct dispute
notice to the address of the furnisher specified on the consumer report
(or otherwise specified by the furnisher). The Agencies understand that
in a large majority of cases, the consumer report includes an address
supplied by the furnisher.\37\ In addition, the Agencies believe that
allowing consumers to submit direct 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 notice
(because it will appear on the same document containing the disputed
information) and will encourage consumers to obtain and review their
[[Page 31500]]
consumer reports prior to submitting a notice to a furnisher. As the
Agencies noted in the proposal, 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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\37\ As noted in the proposal, allowing consumers to submit
direct 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'' (emphasis added). 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 know 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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The final rules also permit a consumer to submit a direct dispute
notice to any business address of the furnisher, but only if the
furnisher has not specified an address for receiving notices of direct
disputes on a consumer report or by other written or electronic notice
to the consumer. Thus, furnishers can avoid the burden of having to
accept notices of disputes at any business address simply by specifying
a direct dispute address for such purpose to be provided to consumers
on a consumer report or by other written or electronic notice to the
consumer.
The Agencies also requested comment on whether Sec. --.43(c)(2)
should be amended to permit furnishers to notify consumers orally of
the address for direct disputes, and on whether, and, if so, how an
oral notice can be provided clearly and conspicuously. A majority of
industry commenters and consumer organizations stated that oral notice
of a direct dispute address should not be permitted. These commenters
noted that written notices of an address provide more certainty that
the direct disputes process will work appropriately for furnishers and
consumers. In response to these comments, the final rules require
written notifications to consumers of a direct dispute address.
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) implemented section 623(a)(8)(D) of the
statute 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.
The final direct dispute notice content requirement is adopted as
proposed with two substantive changes. First, the final rules merge the
proposed provisions requiring that the notice include the name,
address, and telephone number of the consumer and sufficient
information to identify the account or other relationship in dispute.
Revised Sec. --.43(d)(1) now provides that a dispute notice must
include ``[s]ufficient information to identify the account or other
relationship that is in dispute, such as an account number and the
name, address, and telephone number of the consumer, if applicable.''
The Agencies note that, in most circumstances, address and telephone
number information will be readily available to the furnisher, and to
require a consumer to provide it again before the furnisher will begin
its investigation will result in unnecessary delay. The Agencies also
note that some consumers may not have an address or telephone number.
For these reasons, consumer identifying information must be provided
only if applicable and to the extent necessary to identify the account
or relationship that is the subject of the dispute. Consumers will have
to provide information sufficient for furnishers to inform them of the
results of an investigation.
The second substantive change occurs in one of the examples in
Sec. --.43(d)(3) of supporting documentation or other information
reasonably required by the furnisher to substantiate the basis of the
dispute. The proposal stated that such documentation may include a copy
of the consumer report that contains the allegedly inaccurate
information. Upon further review, the Agencies determined that the
example should be revised to recommend that the dispute include ``a
copy of the relevant portion'' of such a consumer report because the
provision of an entire consumer report may raise privacy concerns for
consumers.
Although commenters generally supported Sec. --.43(d) as proposed,
several industry commenters said that the Agencies should require
consumers to indicate that a dispute is a ``direct dispute'' submitted
under the FCRA. Some industry commenters also suggested that the
Agencies issue a model direct dispute complaint form, with some
advocating that consumers be required to use the model complaint form.
The Agencies decline to adopt these suggestions because such
requirements would cause otherwise valid disputes to be rejected as
frivolous or irrelevant due solely to the consumer's failure to meet a
technical requirement that probably would be unknown to the consumer.
Section --.43(e) Duty Of Furnisher After Receiving a Direct Dispute
Notice
As an implementation aid for furnishers and consumers, the final
rules add a new provision at Sec. --.43(e) that incorporates the
FCRA's section 623(a)(8)(E) statutory duties required of furnishers
after receiving a direct dispute notice. With one clarification
discussed below, the addition of this section tracks the statutory
language of section 623(a)(8)(E). Pursuant to Sec. --.43(e) of the
final rules, after receiving a valid dispute notice from a consumer,
the furnisher must:
Conduct a reasonable investigation with respect to the
disputed information;
Review all relevant information provided by the consumer
with the dispute notice;
Complete its investigation of the dispute and report the
results of the investigation to the consumer before the expiration of
the period under section 611(a)(1) of the FCRA (15 U.S.C. 1681i(a)(1))
within which a CRA would be required to complete its action if the
consumer had elected to dispute the information under that section; and
If the investigation finds that the information reported
was inaccurate, promptly notify each CRA to which the furnisher
provided inaccurate information of that determination and provide to
the CRA any correction to that information that is necessary to make
the information provided by the furnisher accurate.
Section 623(a)(8)(E)(i) of the FCRA requires a furnisher to conduct
an investigation with respect to the disputed information. The final
rules at Sec. --.43(e)(1) require that the furnisher must conduct a
reasonable investigation. As discussed above in connection with Sec.
--.43(a), the inclusion of this reasonableness standard is consistent
with how courts have interpreted the nature of a furnisher's duty to
conduct other investigations of disputes under the FCRA.
Section --.43(e)(3), among other things, states that a furnisher
must report the results of the direct dispute
[[Page 31501]]
investigation to the consumer. The Agencies deem that it is permissible
to report the results of the investigation to the consumer by mail, or
electronically if the consumer consents, in accordance with the
identifying information supplied by the consumer.
Pursuant to Sec. --.43(e)(4), if a furnisher's investigation finds
that information it provided to a CRA was inaccurate, the furnisher
must promptly notify each CRA to which the furnisher provided the
inaccurate information. Additionally, the furnisher must provide to
such CRAs any correction necessary to make the information accurate.
Therefore, if the furnisher provided incorrect information to one or
more CRAs, the furnisher would comply with this provision of the final
rules by indicating to the CRA that the prior information was
inaccurate, and by providing the corrected information. A furnisher's
investigation may reveal that, despite being furnished accurately,
information in dispute was not properly reflected on a consumer report.
After reaching such a conclusion, a furnisher should notify the
consumer that the results of its investigation confirm that the
information is not properly reflected on the consumer report obtained
from the consumer; it would not be adequate in these circumstances for
a furnisher simply to notify a consumer that its investigation
indicates that it provided accurate information to a CRA. In this
situation, the Agencies strongly encourage furnishers, as a best
practice, to suggest that the consumer contact the relevant CRA to
obtain a correction.\38\
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\38\ Furnishers also are encouraged to provide consumers with
the Summary of Rights under the Fair Credit Reporting Act issued by
the FTC pursuant to section 609(c) of the FCRA, although this is not
required by the FCRA or these final rules. This step would be
particularly helpful to consumers in circumstances in which a
consumer received the inaccurate consumer report information from a
source other than a CRA, such as from a potential lender. In such
cases, the consumer may not have received the Summary of Rights in
connection with the consumer's review of that information.
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Section --.43(f) 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. The statute 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) incorporated the statutory provisions,
including identifying these two types of frivolous or irrelevant
disputes, using wording consistent with the statute. The final rules
adopt these provisions as proposed at Sec. Sec. -- .43(f)(1)(i) and
(ii).
Section 623(a)(8)(F) specifies the two situations described above,
but does not limit frivolous or irrelevant disputes solely to those two
situations. The Agencies proposed to include a third situation when a
furnisher could deem a dispute to be frivolous or irrelevant. Under
proposed Sec. --.43(e)(1)(iii), a dispute would be considered
frivolous or irrelevant if the furnisher is otherwise not required to
investigate it under the regulation.\39\ This provision was intended to
clarify furnishers' duty to investigate direct disputes and their
responsibilities when no such investigation is required. Under the
proposed provision, consumers in this situation would receive notice
from the furnisher that their dispute was deemed frivolous or
irrelevant, including the reasons for such determination, as required
by the FCRA in sections 623(a)(8)(F)(ii) and (iii).\40\
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\39\ 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).
\40\ 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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After additional consideration, the Agencies in the final rules
revised this third situation in which a direct dispute may be deemed to
be frivolous or irrelevant. Section --.43(f)(1)(iii) of the final rules
provides that a dispute qualifies as frivolous or irrelevant where
``the furnisher is not required to investigate the direct dispute
because one or more of the exceptions [to the direct dispute
investigation duty] applies.'' This provision is intended to clarify
that consumers will receive notice that their dispute will not be
investigated because one of the exceptions applies, without requiring
furnishers to provide such notices for consumer disputes that either
(1) do not meet the definition of ``direct dispute'' or (2) do not
relate to the matters described in Sec. --.43(a) that would trigger a
direct dispute investigation.\41\
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\41\ For example, a furnisher that reasonably believes a dispute
was submitted by a credit repair organization would need to provide
a notice to the consumer that the dispute is frivolous or
irrelevant. In contrast, a furnisher would not have to provide a
notice to the consumer if the consumer submits a dispute about
information pertaining to an account with a different furnisher that
was provided to a consumer reporting agency by that other furnisher,
since such a dispute would not meet the definition of ``direct
dispute.''
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Proposed Sec. --.43(e)(2) incorporated the FCRA's requirement, at
section 623(a)(8)(F)(ii) of the statute, 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.
Proposed Sec. --.43(e)(3) likewise incorporated 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. The proposal
required such notices to include the reasons for the determination and
identify any information required to investigate the disputed
information. These two provisions are adopted in the final rules
without change at Sec. Sec. --.43(f)(2) and (3) respectively.
One industry commenter recommended that the Agencies make clear
that the frivolous or irrelevant dispute provision includes a list of
non-exclusive examples and that there may be other reasons why a
dispute could be frivolous or irrelevant. An industry commenter
recommended revising the rule text regarding the two examples of
frivolous or irrelevant disputes that are provided for by statute to
track the language of the statute and make clear that those examples
are unconditional exceptions to the direct dispute investigation
requirement. The Agencies agree with these commenters and have revised
the regulation to provide that Sec. --.43(f)(1) is a non-exclusive
list of three types of frivolous or irrelevant disputes. The Agencies
acknowledge that a furnisher is not required to investigate a direct
dispute if the furnisher reasonably determines that the dispute is
frivolous or irrelevant for other reasons.
One industry commenter suggested that limits should be placed on
how far back in time a furnisher should be required to investigate a
dispute (for example, a limit based on a record retention period). The
Agencies decline to deem a dispute frivolous or irrelevant because it
involves older records that, for instance, a furnisher may no longer
have readily available or be required to retain. The Agencies believe
that the age of records underlying a dispute should
[[Page 31502]]
not be the sole factor used by a furnisher to reasonably determine that
a dispute is frivolous or irrelevant.
One industry commenter believed that the addition of the proposed
third example to Sec. --.43(e)(1)(iii), that would have deemed a
dispute to be frivolous or irrelevant if the furnisher is not required
to investigate the direct dispute, would create confusion and
unnecessary compliance burdens. As discussed above, the Agencies have
revised Sec. --.43(f)(1)(iii) and other provisions in a manner that
relieves furnishers from having to provide frivolous or irrelevant
dispute determination notices for disputes that do not meet the
definition of ``direct dispute'' or do not relate to matters that would
trigger a direct dispute investigation duty.
Another industry commenter recommended that the Agencies clarify
that, unless a consumer identifies an additional problem with an
account or provides additional information regarding an existing
dispute, the furnisher should not be required to send another frivolous
or irrelevant dispute determination notice to the consumer. Similarly,
another commenter stated that the Agencies should permit furnishers to
refuse to investigate disputes from consumers who have ``abused the
process.'' The Agencies note that section 623(a)(8)(F)(i) of the FCRA
deems disputes to be frivolous or irrelevant if they lack sufficient
information or are duplicative. As required by section 623(a)(8)(F)(ii)
of the FCRA, a furnisher must provide a consumer with a notice that the
furnisher has determined that a dispute is frivolous or irrelevant.
VII. Regulatory Analysis
A. Paperwork Reduction Act
Notice of Action on NPRM
In conjunction with the NPRM, the OCC, FDIC, OTS, NCUA, and FTC
submitted the information collection requirements contained therein to
OMB for review under the PRA. In response, OMB filed comments with each
of these Agencies in accordance with 5 CFR 1320.11(c). The comments
indicated that OMB was withholding approval at that time. These
Agencies were directed to examine public comment in response to the
NPRM and describe in the preamble to the final rule how these Agencies
have maximized the practical utility of the collection and minimized
the burden. An explanation of how these Agencies have responded to OMB
and the public's comments has been provided elsewhere in the preamble
to this final rule.
Comment Summary
Of the comments received in response to the NPRM, four industry
commenters specifically addressed PRA burden and an additional five
industry commenters generally addressed burden issues. Some commenters
noted that if the final rule would require furnishers to engage in
certain activities in response to a direct consumer dispute, the number
of disputes received from consumers would likely increase
significantly. Commenters also noted that the Summary of Rights under
the FCRA \42\ (currently provided to consumers) instructs consumers to
direct their disputes to the CRA that provided them with a copy of
their file, which may explain why most disputes are directed to
CRAs.\43\ It is reasonable to assume that changes to the disclosures
made by CRAs to consumers (due to the changes the FTC will make to the
Summary of Rights to include information about consumers' section 312
direct dispute rights) will likely increase the number of disputes
furnishers receive directly from consumers.
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\42\ See section 609(c) of the FCRA (15 U.S.C. 1681g(c)).
\43\ Commenters' reporting of the extent to which furnishers
currently receive direct disputes varied, and in the case of
financial institutions, the size of the institution may be a factor.
One industry commenter noted that a small portion of disputes
currently come directly from consumers. However, another industry
commenter indicated that community bankers report that, on average,
40 percent of disputes are received directly from consumers.
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Accuracy of Estimates
One industry commenter questioned the Agencies' estimates. The
commenter stated that, until furnishers begin implementing the
proposal, it will be impossible to determine whether the Agencies'
estimates to implement the final rule are understated. In addition, the
commenter stated that, until a final rule is published, it is
impossible to estimate the time required to comply with its
requirements. The commenter further stated that it is ``probably''
unreasonable to estimate that it will take only 5 minutes to prepare
and send a notice since it is likely to take much longer to review and
investigate a dispute. The Agencies acknowledge that furnishers are
likely to spend more than 5 minutes reviewing and investigating
disputes received directly from consumers. The estimated PRA disclosure
burden per notice published in the NPRM represented strictly the 5
minutes it would take a furnisher to prepare and distribute each
notice; but it did not include the time required to review and
investigate a dispute. However, given that each notice will be
consumer-specific, and that the amount of automation used to send each
notice will vary based on each dispute, the Agencies have decided to
re-estimate the average time furnishers will devote to preparing and
sending notices. The Agencies have increased the estimated burden for
preparing and sending each notice from 5 minutes to an average of 14
minutes per dispute to prepare and send a notice to a consumer. Our
estimate of 14 minutes per dispute is based upon an estimate of the
average time required to respond to three different types or categories
of frivolous or irrelevant disputes. For purposes of estimating
paperwork burden, we assume that disputes based on form letters from
credit repair organizations will make up 25 percent of all frivolous or
irrelevant disputes and, on average, furnishers will devote 8 minutes
to each notice. We assume that duplicate credit reporting agency
disputes will make up 60 percent of frivolous or irrelevant disputes,
and we estimate this category will require an average of 15 minutes for
each notice. Disputes that are frivolous or irrelevant for other
reasons are assumed to make up 15 percent of frivolous or irrelevant
disputes, and we estimate these other categories of disputes will
require an average of 20 minutes each.
Another commenter stated that, while most furnishers would only
make minor modifications, if any, to their existing practices to
develop and implement the accuracy and integrity program, even these
minor modifications will require significantly more than 21 hours,
especially for furnishers of significant amounts of data from a wide
range of business lines.
Review of Furnishing Practices
Two commenters expressed concern that furnishers would be required
to audit their furnishing practice. One of them stated that it could
take several days for furnishers to design an audit of their furnishing
practices and additional time to perform it and provide an audit
report. The commenter urged the Agencies to consider the impact of the
requirements, keeping in mind accumulating burden and cost. The
commenter stated that it is critical that the Agencies regulating
financial institutions convey clearly and publicly to their respective
examiners their expectations of the implementation process, given the
Agencies' stated view that the final rule will not impose significant
burden or cost upon furnishers.
Another commenter opined that the suggested actions a furnisher
should take to establish and maintain a
[[Page 31503]]
compliance program should be reduced or eliminated. The commenter
stated it was unclear how the suggested actions could be considered and
documented, let alone designed and implemented, in 21 hours, even for
small furnishers. The commenter expressed the concern that examiners of
financial institutions will treat suggestions--such as the one that
furnishers audit their existing furnishing activities--as requirements,
and added that it is unclear whether any furnisher needs to audit its
existing program to comply with the final rules. The commenter
additionally observed that the Agencies' burden estimate of 21 hours to
comply with the final rule would be inconsistent with additionally
having to conduct such audits. The commenter asserted that it would
require more than 21 hours simply to conduct an audit of a mid-sized
furnisher, and additional time beyond that to evaluate the audit
results before drafting a compliance program. Finally, the commenter
predicted that the costs of an audit may lead some institutions not to
furnish information. Based on the comments received, the Agencies have
decided to increase the burden associated with this requirement from 21
hours to 24 hours (three business days). In doing so, however, we note
that, as stated earlier in the SUPPLEMENTARY INFORMATION section, the
requirement for a furnisher to periodically review policies and
procedures and update them as necessary is not an audit requirement.
The final rule does not impose an audit requirement on a furnisher to
conduct an official examination and verification of consumer accounts
and records regarding its policies and procedures. In fact, the
Agencies believe that an audit would impose undue burden on furnishers,
especially small furnishers, and result in less information being
provided into the credit reporting system.
Impact on Small Institutions
One commenter stated that the impact of the proposal on small
institutions' current resources would be severe and that they would
have to use significant resources to comply with the proposed
requirements. The commenter added that its member companies spend about
one hour verifying each dispute, and it expects a substantial increase
in direct disputes once the rule is implemented. The commenter
anticipates that consumers will choose to use direct disputes over
contacting CRAs.
As discussed earlier in the SUPPLEMENTARY INFORMATION section, the
Agencies recognize that a ``one-size-fits-all'' approach for
implementing the guidelines is inappropriate. The final rule specifies
that a furnisher's policies and procedures must be appropriate to the
nature, size, complexity, and scope of the furnisher's activities. The
Agencies expect that the written policies and procedures for a small
retail entity will differ substantially from, and be significantly less
complex than, those of a multi-billion dollar financial services
company. The Agencies have also addressed furnishers' implementation
burden for Sec. --.43 \44\ of the final rule by permitting furnishers
to specify a direct dispute address for receiving such disputes. The
address may be provided to consumers either by a CRA setting forth the
address, which is provided by the furnisher, on a consumer report or by
other means to consumers in writing or electronically (if the consumer
has agreed to the electronic delivery of information from the
furnisher).
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\44\ 16 CFR 660.3 in the FTC regulations.
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PRA Submission to OMB for Final Rule
The information collection requirements contained in this joint
final rule 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 Agencies may not
conduct or sponsor, and an organization is not required to respond to,
a collection of information unless it displays a currently valid OMB
control number. The final rule requirements subject to the PRA are
found in 12 CFR ----.42(a), ----.43(a), ----.43(f)(2), and --
--.43(f)(3) and 16 CFR 660.3(a), 660.4(a), 660.4(f)(2), and
660.4(f)(3).
Proposed Information Collection
Title of Information Collection: Accuracy and Integrity of
Information Furnished to Consumer Reporting Agencies.
Frequency of Response: On occasion; frequent for large entities.
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))
that furnish or have furnished information to CRAs.
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: Federal credit unions.
FTC: Businesses that furnish information to a CRA, 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: Section .42(a) \45\ of the final regulations requires 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. The policies and procedures must
be appropriate to the nature, size, complexity, and scope of each
furnisher's activities. Furnishers already have an ongoing
responsibility under section 623 of the FCRA for accurate reporting,
which has been in place long before enactment of the FACT Act. This
final rule would require furnishers to draft policies and procedures
that address their section 312 responsibilities regarding the accuracy
and integrity of information. Furnishers' accuracy and integrity
policies and procedures may include their existing policies and
procedures that are reasonable and appropriate. As mentioned earlier,
the Agencies have reassessed the burden for section .42(a) and
increased their estimate from 21 hours to 24 hours.
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\45\ 16 CFR 660.3(a) in the FTC's regulations.
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Section .43(a) \46\ allows consumers, in certain circumstances, to
initiate disputes directly with furnishers, instead of using the
existing FCRA process through CRAs. 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 final rule, furnishers would have to follow a substantially
similar process for disputes consumers submit directly to them.
Furnishers would need to amend their procedures to ensure that disputes
received directly from consumers are processed in a substantially
similar manner as complaints received from CRAs. In the NPRM, the
Agencies estimated that furnishers would devote four hours to amend
their procedures. Based on comments received, the Agencies have
increased the burden
[[Page 31504]]
estimate to eight hours (one business day).
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\46\ 16 CFR 660.4(a) in the FTC's regulations.
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Section .43(f)(2) \47\ 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.
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\47\ 16 CFR 660.4(f)(2) in the FTC's regulations.
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Section .43(f)(3) \48\ incorporates the content requirements from
section 312 for a notice of determination that a dispute is frivolous
or irrelevant. In the NPRM, the Agencies estimated that furnishers
would devote four hours to implement this notice requirement. Based on
comments received, the Agencies have increased the burden estimate to
eight hours (one business day).
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\48\ 16 CFR 660.4(f)(3) in the FTC's regulations.
---------------------------------------------------------------------------
Regarding estimated potential burden for providing the notices to
consumers for frivolous or irrelevant disputes,\49\ the Agencies
received an industry comment that estimated 50 percent of disputes
received are frivolous or irrelevant. A second industry commenter
stated that CRAs have estimated that as many as one third of the
disputes they received are illegitimate efforts at credit repair. In
contrast, another industry commenter stated that in only 25 percent of
disputes is the challenged information in the consumer report verified
as correct. However, a fourth industry commenter reported that some of
its members suggested that only six to seven percent of disputes
regarding their trade lines prove to be valid and result in information
being blocked from appearing on subsequent credit reports. Thus, based
on these various commenters' estimates, and assuming that all disputes
are frivolous or irrelevant when information in the consumer report is
verified as correct, the percentage of frivolous or irrelevant disputes
could range from 25 percent to 94 percent of all disputes. At this time
the Agencies know neither the number nor rate of frivolous or
irrelevant disputes currently being received by CRAs, nor the extent to
which furnishers currently receive and provide notices in response to
frivolous or irrelevant disputes. The Agencies have considered all of
the comments and available information and have increased their
estimates for the number of written notices that furnishers will
provide to consumers in response to direct disputes that are frivolous
or irrelevant.\50\ The Agencies estimate that furnishers would devote
an average of 14 minutes per dispute to prepare and send a notice to a
consumer.\51\
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\49\ Frivolous or irrelevant disputes also include incomplete
and duplicate disputes. See Sec. --.43(f)(1).
\50\ Frivolous or irrelevant disputes will generally fall into
one of three categories: (i) Disputes based on, or influenced by,
form letters from credit repair organizations, (ii) duplicate or
serial disputes, and (iii) disputes that are incomplete or
classified as frivolous or irrelevant for other reasons.
\51\ Fourteen minutes is the estimated time required to send a
notice to a consumer as required by the final rule and, when
appropriate, for a furnisher to transmit information to CRAs through
e-OSCAR. The estimated burden per notice does not include the time a
company's staff may spend locating or evaluating original documents
or resolving the dispute.
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Estimated Burden: \52\
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\52\ Based upon comments received and upon consideration of data
regarding current numbers of disputes, the agencies have increased
their burden estimates from those provided in the NPRM.
---------------------------------------------------------------------------
Thus, the burden associated with this collection of information may
be summarized as follows.
OCC
Number of respondents: 1,508.
Number of frivolous or irrelevant disputes: 2.8 million.
Number of additional non-frivolous or irrelevant disputes:
1,874,010 million.\53\
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\53\ A dispute related to one trade line may require more than
one notice. For example, a notice may be sent by a furnisher for the
same trade line to a consumer in response to a frivolous or
irrelevant dispute, and after the dispute is re-submitted with
additional information another notice would be required in response
to the non-frivolous dispute. Absent input to further inform the
estimated time to prepare and distribute non-frivolous or irrelevant
dispute notices, the OCC will assume the same time estimates as
applied to frivolous or irrelevant dispute notices.
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Estimated annual burden associated with direct disputes: 1,094,892
hours.
Estimated burden per respondent: 24 hours to implement written
policies and procedures and training associated with the written
policies and procedures, 8 hours to amend procedures for handling
complaints received directly from consumers, 8 hours to implement the
new dispute notice requirement, and 14 minutes per notice for
distribution.
Total estimated annual burden: 1,147,447 hours.
Board
In accordance with the PRA (44 U.S.C. 3506; 5 CFR part 1320,
Appendix A.1), the Board, under its delegated authority from OMB, has
approved the implementation of this information collection. The
information collection associated with this rulemaking will be
incorporated into the Recordkeeping and Disclosure Requirements
Associated with Regulation V (Fair Credit Reporting) and will be
assigned OMB No. 7100-0308. The burden estimates provided below pertain
only to the information collections associated with this final rule.
Number of respondents: 1,172.
Number of frivolous or irrelevant dispute notices: 611,966.
Estimated burden per respondent: 24 hours to implement written
policies and procedures and training associated with the written
policies and procedures, 8 hours to amend procedures for handling
complaints received directly from consumers, 8 hours to implement the
new dispute notice requirement, and 14 minutes per notice for
distribution.
Total estimated annual burden: 189,672 hours.
FDIC
Number of respondents: 5,104.
Number of frivolous or irrelevant dispute notices: 100,100.
Estimated burden per respondent: 24 hours to implement written
policies and procedures and training associated with the written
policies and procedures, 8 hours to amend procedures for handling
complaints received directly from consumers, 8 hours to implement the
new dispute notice requirement, and 14 minutes per notice for
distribution.
Total estimated annual burden: 227,517 hours.
OTS
Number of respondents: 804.
Number of frivolous or irrelevant dispute notices: 15,001.
Estimated burden per respondent: 24 hours to implement written
policies and procedures and training associated with the written
policies and procedures, 8 hours to amend procedures for handling
complaints received directly from consumers, 8 hours to implement the
new dispute notice requirement, and 14 minutes per notice for
distribution.
Total estimated annual burden: 35,610 hours.
NCUA
Number of respondents: 4,909.
Estimated burden per respondent: 24 hours to implement written
policies and procedures and training associated with the written
policies and procedures, 8 hours to amend procedures for handling
complaints received directly from consumers, 8 hours to implement the
new dispute notice requirement, and 14 minutes per notice for
distribution.
Number of frivolous or irrelevant dispute notices: 153,072.
Total estimated annual burden: 232,076 hours.
FTC \54\
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\54\ Due to the varied nature of the entities subject to the
jurisdiction of the FTC, this Estimated Burden section reflects only
the view of the FTC. The banking regulatory agencies have jointly
prepared a separate analysis.
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Number of respondents: 6,133.
[[Page 31505]]
Number of frivolous or irrelevant dispute notices: 21,720.
Estimated burden per respondent: 24 hours in the first year of the
rule's existence to implement written policies and procedures and
training associated with the written policies and procedures, another 8
hours in the first year to amend procedures for handling complaints
received directly from consumers, and 8 hours to implement the new
dispute notice requirement, and 14 minutes per notice for preparation
and distribution. Recurring burden, if any, in subsequent years are
further detailed below.
Total estimated annual burden: 95,000 hours (rounded to the nearest
thousand)
Section 660.3:
Estimated Hours Burden:
As discussed above, the final rule requires furnishers to establish
and implement reasonable written policies and procedures regarding the
accuracy and integrity of the information relating to consumers that it
furnishes to a CRA. The final rule defines ``furnisher'' to mean an
entity that furnishes information relating to consumers to one or more
CRAs for inclusion in a consumer report, but provides that an entity is
not a furnisher when it: Provides information to a CRA solely to obtain
a consumer report for a permissible purpose under the FCRA; \55\ is
acting as a CRA as defined in section 603(f) of the FCRA; is an
individual consumer to whom the furnished information pertains; or is a
neighbor, friend, or associate of the consumer, or another individual
with whom the consumer is acquainted or who may have knowledge about
the consumer's character, general reputation, personal characteristics,
or mode of living in response to a specific request from a CRA.
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\55\ 15 U.S.C. 1681b(a).
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Given the broad scope of furnishers, it is difficult to determine
precisely the number of furnishers that are subject to the FTC's
jurisdiction. Nonetheless, FTC staff estimates that the final
regulations in Sec. 660.3 will affect approximately 6,133 furnishers
subject to the FTC's jurisdiction.\56\ As detailed below, FTC staff
estimates that the average annual information collection burden during
the three-year period for which OMB clearance is sought will be 57,000
hours (rounded to the nearest thousand).
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\56\ This estimate is derived from the number of furnishers
reporting to the three nationwide CRAs (approximately 18,000), minus
the number of entities subject to jurisdiction of the Federal
financial agencies and the NCUA (14,167 combined), and adding the
number of furnishers to medical information bureaus (approximately
500) and the number of insurance companies furnishing information to
other types of CRAs (approximately 1,800).
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The final rule is drafted in a flexible manner that allows entities
to establish and implement different types of written policies and
procedures based upon the nature, size, complexity, and scope of their
activities. A furnisher may include any of its existing policies and
procedures in place to ensure the accuracy of information. The FTC
believes that many entities have already implemented a significant
portion of the policies and procedures required by the final rule.
Entities have had an ongoing requirement under section 623 of the FCRA
to provide accurate information when they choose to furnish data to
CRAs. The written policies and procedures in the rule formalize the
processes and controls necessary for accurate reporting. Accordingly,
FTC staff estimates that entities will require 24 hours to establish
and implement written policies and procedures, including the
incremental time to train staff to implement these policies and
procedures, with an annual recurring burden of 2 hours; thus, as
annualized over a 3-year clearance period, 9.33 hours (28 hours / 3).
Accordingly, cumulative annualized burden for 6,133 furnishers
subject to the FTC's jurisdiction to establish and implement written
policies and procedures is 57,000 hours (rounded to the nearest
thousand).
Estimated Cost Burden:
The FTC staff derived labor costs by applying appropriate estimated
hourly cost figures to the burden hours described above. It is
difficult to calculate with precision the labor costs associated with
the final regulations, as they entail varying compensation levels of
management and/or professional technical staff among companies of
different sizes. In calculating the cost figures, staff assumes that
managerial and/or professional technical personnel will draft the
written policies and procedures and train staff. In the NPRM analysis,
FTC staff estimated labor cost for such employees to be $38.93, based
on 2006 BLS data for management occupations. However, based on more
current available BLS data, the FTC is revising upward this prior
estimate to $41.\57\
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\57\ This revised hourly wage rate is based on http://www.bls.gov/ncs/ncswage2007.htm (last visited March 3, 2009)
(National Compensation Survey: Occupational Earnings in the United
States 2007, US Department of Labor released August 2008, Bulletin
2704, Table 3 (``Full-time civilian workers,'' mean and median
hourly wages) for management occupations.
---------------------------------------------------------------------------
Based on the above estimates and assumptions, the total annual
labor costs for all categories of covered entities under the final
regulations in Sec. 660.3 are $2,337,000 (rounded to the nearest
thousand) [(57,000 hours x $41)].
Section 660.4:
Estimated Hours Burden:
The final regulations would also require entities that furnish
information about consumers to respond to direct disputes from
consumers. FTC staff estimates that the final regulations in Sec.
660.4 will also affect approximately 6,133 furnishers subject to the
FTC's jurisdiction. As detailed below, FTC staff estimates that the
average annual information collection burden during the three-year
period for which OMB clearance is sought will cumulatively be 38,000
hours (rounded to the nearest thousand).
In response to public comments and in concurrence with the
Agencies' modified estimate noted above, the FTC staff estimates that
it will take furnishers eight hours to amend their procedures to ensure
that disputes received directly from consumers are handled the same way
as complaints from CRAs. FTC staff believes that furnishers of
information to CRAs will have automated the process of responding to
direct disputes in the first year of the clearance, therefore, there
will be no annual recurring burden. Accordingly, the associated
annualized burden hours over a projected three-year OMB clearance would
be approximately 2.67 hours. Similarly, FTC staff also estimates that
it will take furnishers eight hours in the first year to implement the
requirement to 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. FTC staff believes that
furnishers will also automate this process in the first year of
clearance, so there will be no annual recurring burden. Likewise,
annualized burden hours would be approximately 2.67 hours.
In response to public comments and in concurrence with the
Agencies' modified estimate noted above, the FTC staff now estimates
that to prepare and distribute a notice to a consumer after a furnisher
determines that a dispute is frivolous or irrelevant will require
approximately 14 minutes per notice. FTC staff does not know the
current extent to which furnishers are already directly receiving
disputes and sending
[[Page 31506]]
related notices to consumers. Nevertheless, FTC staff assumes that 50
percent of all disputes will be filed directly with the furnisher after
the rule is in effect. As a result of these factors, FTC staff projects
that furnishers under its jurisdiction would directly receive 21,720
frivolous or irrelevant disputes requiring a notice each year.\58\
Thus, FTC staff estimates it will take furnishers 5,068 hours,
cumulatively, for each of the three years for which OMB clearance is
sought to prepare and distribute these notices.
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\58\ This number is derived from an estimate of disputes per
year that relate to information provided by an entity under the
FTC's jurisdiction (108,600), an estimated 50% of which will be
received directly by furnishers, and the Agencies' estimated 40%
increase of the number of written notices that furnishers will
provide to consumers in response to direct disputes that are
frivolous or irrelevant.
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Estimated Cost Burden
As with its PRA analysis for Sec. 660.3, the FTC staff derived
labor costs by applying appropriate estimated hourly cost figures to
the burden hours described above. Again, it is difficult to calculate
with precision the labor costs associated with the final regulations,
as they entail varying compensation levels of different types of
support staff among companies of different sizes. Nonetheless, in
calculating the cost figures, staff assumes managerial and/or
professional technical personnel will amend procedures to ensure that
disputes received directly from consumers are handled the same way as
complaints from CRAs and will implement the requirement to notify a
consumer by mail or other means, after making a determination that a
dispute is frivolous or irrelevant, at an hourly rate of $41.\59\ Staff
now assumes that skilled administrative support personnel will provide
the required notices to consumers, and has revised upward the estimated
hourly rate from $13.50 to $18.50.\60\
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\59\ See supra note 57 regarding FTC costing under Sec. 660.3
for management occupations.
\60\ See http://www.bls.gov/ncs/ncswage2007.htm (last visited
March 3, 2009) (National Compensation Survey: Occupational Earnings
in the United States 2007, US Department of Labor released August
2008, Bulletin 2704, Table 3 (``Full-time civilian workers,'' mean
and median hourly wages). This estimate is based on rates appearing
therein for a combination of potentially analogous employee types
(e.g., first-line supervisors of office support, accounting and
auditing clerks, brokerage clerks, eligibility reviewers of
government programs).
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Based on the above estimates and assumptions, the total average
annual labor costs for all categories of covered entities under the
final regulations in section 660.4 are $1,437,000 (rounded to the
nearest thousand) [((2.67 hours) x 6,133 x $41) + ((2.67 hours) x 6,133
x $41) + (5,073 hours x $18.50) (for preparing and distributing
frivolous or irrelevant dispute notices)].
B. Regulatory Flexibility Act
OCC: The Regulatory Flexibility Act (RFA) generally requires an
agency that is issuing a final rule to prepare and make available a
final regulatory flexibility analysis that describes the impact of the
final rule on small entities, 5 U.S.C.604. However, the RFA provides
that an agency is not required to prepare and make available a final
regulatory flexibility analysis if the agency certifies that the final
rule will not have a significant economic impact on a substantial
number of small entities. 5 U.S.C. 605(b). For purposes of the RFA and
OCC-regulated entities, a ``small entity'' is a national bank with
assets of $175 million or less (small national bank). Based on its
analysis and for the reason stated below, OCC certifies that these
final rules will not have a significant economic impact on a
substantial number of small entities. Based on two tests used to
evaluate the impact of the final rules (compliance costs as a
percentage of labor costs and compliance costs as a percentage of non-
interest expenses) the OCC estimates that the final rules would have a
significant economic impact on 16 of 676 small national banks
(approximately two percent of small national banks); the OCC does not
consider this to be a substantial number of small entities.
Board: The Board prepared an initial regulatory flexibility
analysis as required by the Regulatory Flexibility Act (RFA) (5 U.S.C.
601 et seq.) in connection with the proposed rule. The Board received
three comment letters addressing its initial regulatory flexibility
analysis.
Under section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory
flexibility analysis otherwise required under section 604 of the RFA is
not required if an agency certifies, along with a statement providing
the factual basis for such certification, that the rule will not have a
significant economic impact on a substantial number of small entities
(defined for purposes of the RFA to include commercial banks and other
depository institutions with $175 million or less in assets). Based on
its analysis and for the reasons stated below, the Board certifies that
these final rules will not have a significant economic impact on a
substantial number of small entities.
1. Statement of the Need for, and Objectives of, the Final Rules.
Section 312 of the FACT Act (which amends section 623 of the FCRA)
requires the Agencies to issue regulations and guidelines relating to
the responsibilities of furnishers of information about consumers to
CRAs for the purpose of enhancing the accuracy and integrity of the
information furnished. In addition, the Agencies must prescribe joint
regulations that identify the circumstances, if any, under which
furnishers must investigate disputes about the accuracy of the
information contained in a consumer report on the consumer based on a
direct request by a consumer, rather than requiring consumers to
initiate a dispute through a consumer reporting agency.
The SUPPLEMENTARY INFORMATION above contains information on the
objectives of the final rules.
2. Summaries of Issues Raised by Comments in Response to the
Initial Regulatory Flexibility Analysis.
In accordance with section 3(a) of the RFA, the Board conducted an
initial regulatory flexibility analysis in connection with the proposed
rule. The Agencies estimated in the proposed rule that it would take
furnishers approximately 21 hours on average to implement the written
policies and procedures regarding accuracy and integrity, including
appropriate staff training. One commenter, Independent Community
Bankers of America (ICBA), questioned the Agencies' estimate, noting
that the compliance burdens will be significantly more than the 21
hours estimated by the Agencies. Another commenter, MasterCard
Worldwide, also questioned the Agencies' 21 hours estimate, but this
comment did not apply uniquely to small entities. Another commenter,
The American Financial Services Association (AFSA), predicted that the
impact on small institutions current resources would be severe. AFSA
stated that it anticipated that direct disputes would increase
significantly and thus believed that the ``Estimated Hours Burden'' and
``Estimated Cost Burden'' are extremely low.
The Agencies estimated that it would take furnishers approximately
four hours to adjust procedures for handling disputes received directly
from consumers, another four hours to implement the new dispute
process, and approximately another five minutes to send each notice of
direct dispute. ICBA noted that it is probably unreasonable to believe
that it will take only five minutes to prepare and send a notice of
direct dispute since it will likely take much longer than that merely
to review and investigate a dispute.
3. Description and Estimate of Small Entities Affected by the Final
Rules.
[[Page 31507]]
The final rules apply to all banks that are members of the Federal
Reserve System (other than national banks) and their respective
operating subsidiaries, branches and Agencies of foreign banks (other
than Federal branches, Federal Agencies, and insured State branches of
foreign banks), commercial lending companies owned or controlled by
foreign banks, and organizations operating under section 25 or 25A of
the Federal Reserve Act (12 U.S.C. 601 et seq., and 611 et seq.). The
Board's final rules will apply to the following institutions (numbers
approximate): State member banks (881), 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 (877), U.S. branches and
agencies of foreign banks (219), commercial lending companies owned or
controlled by foreign banks (3), and Edge and agreement corporations
(64), for a total of approximately 2,044 institutions. The Board
estimates that more than 1,448 of these institutions could be
considered small entities with assets of $175 million or less.
All small entities covered by the Board's rule potentially will be
subject to the final rules. However, the final rules will not impose
any requirements on small entities that do not furnish information
about consumers to CRAs.
4. Recordkeeping, Reporting and Other Compliance Requirements.
The final rules require small entities that are furnishers subject
to the rule to establish and implement reasonable policies and
procedures regarding the accuracy and integrity of the information
relating to consumers that they furnish to a CRA. Such furnishers are
required to consider the guidelines in Appendix E to the proposed rule
in developing these policies and procedures, and to incorporate those
guidelines that are appropriate. The final rules also require small
entities that are furnishers to investigate direct disputes received
from a consumer that relate to an account or other relationship that
the furnisher has with the consumer. The final rules require small
entities to notify consumers who submit direct disputes of the results
of the investigation or of the determination that the dispute is
frivolous or irrelevant.
5. Steps Taken To Minimize the Economic Impact on Small Entities.
The Board believes the rule will not have a significant economic
impact on a substantial number of small entities. The Board and the
other Agencies have sought to minimize the economic impact on small
entities by adopting consistent rules; affording furnishers the
flexibility to establish policies and procedures that are appropriate
to the nature, size, complexity, and scope of each furnisher's
activities; permitting furnishers to include in their accuracy and
integrity policies and procedures any of their existing policies and
procedures that are relevant and appropriate; and affording furnishers
the flexibility not to investigate disputes they reasonably believe
have been submitted by a credit repair organization.
The Board believes that many institutions' existing policies and
procedures already address significant portions of the requirements
related to furnishing information to CRAs. Similarly, the Board
believes that many furnishers are already investigating direct disputes
as good business practice. Furthermore, the Board notes that furnishers
investigate disputes brought directly to a consumer reporting agency,
which then directs the disputes to the furnisher, as appropriate,
pursuant to existing FCRA law.
FDIC: The FDIC prepared an initial regulatory flexibility analysis
as required by the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et
seq.) in connection with the December 13, 2007 proposed rule. The FDIC
received three comment letters addressing its initial regulatory
flexibility analysis.
Under section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory
flexibility analysis otherwise required under section 604 of the RFA is
not required if an agency certifies, along with a statement providing
the factual basis for such certification, that the rule will not have a
significant economic impact on a substantial number of small entities
(defined for purposes of the RFA to include commercial banks and other
depository institutions with $175 million or less in assets). Based on
its analysis and for the reasons stated below, the FDIC certifies that
these final rules will not have a significant economic impact on a
substantial number of small entities.
Under the final rules, which implement section 312 of the FACT Act
(which amends section 623 of the FCRA), the FDIC has issued regulations
and guidelines relating to the responsibilities of furnishers of
information about consumers to consumer reporting agencies for the
purpose of enhancing the accuracy and integrity of the information
furnished. In addition, the FDIC has prescribed joint regulations (with
the other Agencies) that identify the circumstances under which
furnishers must investigate disputes about the accuracy of the
information contained in a consumer report on the consumer based on a
direct request by a consumer, rather than requiring consumers to
initiate a dispute through a consumer reporting agency. The
SUPPLEMENTARY INFORMATION above contains information on the objectives
of the final rules.
The final rules apply to most FDIC-insured state nonmember banks,
approximately 3,400 of which are small entities. Under the rule,
financial institutions that furnish information about consumers to one
or more consumer reporting agencies must have written policies and
procedures regarding the accuracy and integrity of that information.
The program must be appropriate to the nature, size, complexity, and
scope of the furnishing activities. A furnisher may include any of its
existing policies and procedures in place to ensure the accuracy of
information. Institutions have had an ongoing requirement under section
623 of the FCRA to provide accurate information when they choose to
furnish data to consumer reporting agencies. The written policies and
procedures in the rule would formalize the processes and controls
necessary for accurate reporting. Federal Financial Institutions
Examination Council examination procedures exist and have been used for
years to evaluate compliance with the aspects of section 623 of the
FCRA. Based on our examination of the financial institutions we
supervise, the FDIC believes that many of these institutions have
already implemented a significant portion of the policies and
procedures required by the rule. The process of furnishing information
to consumer reporting agencies is largely automated.
The final rules also require financial institutions that furnish
information about consumers to respond to direct dispute requests from
consumers with regard to certain perceived inaccuracies. While the
final rules would require new procedural requirements, including direct
dispute notices, the FDIC believes that investigating direct disputes
will not create significant additional burdens on small banks, for a
number of reasons.
First, most furnishers are already investigating similar disputes,
which under the current law are brought directly to the relevant
consumer reporting agency, which then contacts the furnisher for an
investigation. Under this procedure, furnishers are already required to
review all relevant information provided by the consumer reporting
agency along with the notice; report the results of the investigation
to the consumer reporting agency; if the disputed information is found
to be
[[Page 31508]]
incomplete or inaccurate, report those results to all nationwide
consumer reporting agencies to which the financial institution
previously provided the information; and if the disputed information is
incomplete, inaccurate, or not verifiable by the financial institution,
promptly, for purposes of reporting to the consumer reporting agency,
modify the item of information, delete the item of information, or
permanently block the reporting of that item of information.
Second, many of these furnishers are already investigating direct
disputes as a matter of good customer relations and sound business
practices or under other consumer protection laws.
Third, the final rules do not require investigation in cases that
are frivolous or irrelevant.
OTS: The Regulatory Flexibility Act (RFA) generally requires an
agency that is issuing a final rule to prepare and make available a
final regulatory flexibility analysis that describes the impact of the
final rule on small entities. 5 U.S.C. 604. However, the RFA provides
that an agency is not required to prepare and make available a final
regulatory flexibility analysis if the agency certifies, along with a
statement providing the factual basis for such certification, that the
rule will not have a significant economic impact on a substantial
number of small entities. For purposes of the RFA and OTS-regulated
entities, a ``small entity'' is a savings association with $175 million
or less in assets (small savings association). Based on its analysis
and for the reasons stated below, OTS certifies that these final rules
will not have a significant economic impact on a substantial number of
small entities.
1. Reasons for Final Rules.
The FACT Act amends the FCRA and was enacted, in part, for the
purpose of enhancing the accuracy and integrity of information
furnished to CRAs. Section 312 of the FACT Act generally requires 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 prescribe regulations
requiring furnishers to establish reasonable policies and procedures
for implementing the guidelines. Section 312 also requires the Agencies
to prescribe 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. OTS is issuing these final rules to implement section 312 of
the FACT Act.
2. Statement of Objectives and Legal Basis.
The objectives of the final rules are described in the
SUPPLEMENTARY INFORMATION section. In sum, the objectives are: (1) To
implement the general statutory provision that requires 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 prescribe regulations requiring
furnishers to establish reasonable policies and procedures for
implementing the guidelines and (2) to fulfill the statutory mandate
requiring the Agencies to prescribe 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. The primary legal basis for the final
rules is the Fair Credit Reporting Act found at 15 U.S.C. 1681 et seq.
3. Description and Estimate of Small Entities Affected by the Final
Rules.
The final rules apply to savings associations and operating
subsidiaries of Federal savings associations 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)).
OTS estimates that its final rules will apply to 391 small savings
associations with assets of $175 million or less.
4. Projected Recordkeeping, Reporting, and Other Compliance
Requirements.
The compliance requirements of the final rules are described in the
SUPPLEMENTARY INFORMATION above.
In general, the final rules require each furnisher subject to the
rule to establish and implement reasonable policies and procedures
regarding the accuracy and integrity of the information relating to
consumers that it furnishes to a consumer reporting agency. Furnishers
will be required to consider the guidelines in Appendix E to the final
rules in developing these policies and procedures and to incorporate
those guidelines that are appropriate.
In response to comments about potential burden, the Agencies have
sought to reduce the burden associated with these accuracy and
integrity regulations and guidelines in several ways.
First, the Agencies have adopted consistent rules.
Second, the final rules provide substantial flexibility and
minimize burden to allow any thrift, regardless of size, to tailor its
practices to its individual needs. The program must be appropriate to
the nature, size, complexity, and scope of the furnishing activities.
Third, a furnisher may include any of its existing policies and
procedures in place to ensure the accuracy of information. Furnishers
have a preexisting obligation under section 623 of the FCRA to provide
accurate information when they furnish data to consumer reporting
agencies. OTS believes that many furnishers are likely to have existing
policies and procedures regarding accurate reporting in order to
satisfy their obligations under section 623, and that these policies
and procedures could be incorporated in the policies and procedures
required by the final rules.
Furnishers subject to the final rules also will be required, under
certain circumstances, to investigate disputes concerning the accuracy
of information about the consumer contained in a consumer report based
on a direct request of a consumer. While the rule requires new
procedural requirements, OTS believes that investigating direct
disputes will not create significant additional burdens on small
institutions, for a number of reasons.
First, most savings association furnishers already investigate
similar disputes that are provided to them by a consumer reporting
agency pursuant to the existing dispute provisions contained in section
611 of the FCRA.
Second, commenters on the ANPR and NPRM noted that many furnishers
already investigate direct disputes as a matter of good customer
relations, sound business practices, or because they are required to do
so by other consumer protection laws. Savings associations also
investigate disputes brought to the institution through OTS's customer
complaint system.
Third, the final rules do not require investigation of direct
disputes when such disputes are frivolous or irrelevant.
Fourth, savings associations already have mechanisms and processes
in place to handle consumer complaints brought under other laws such as
the Truth in Lending Act, Real Estate Settlement Procedures Act, and
Electronic Funds Transfer Act. OTS believes many of these mechanisms
and processes can be readily adapted to handle consumer disputes about
their consumer reports.
5. Identification of Duplicative, Overlapping, or Conflicting
Federal Rules.
OTS is unable to identify any statutes or rules which would overlap
or conflict with the final rules.
[[Page 31509]]
6. Discussion of Significant Alternatives.
As required by the FACT Act, the final rules and guidelines apply
to all covered institutions, regardless of the size of the institution.
One approach to minimizing the burden on small entities would have been
to provide a specific exemption for small institutions. However, OTS
has no authority under section 312 of the FACT Act to grant an
exception that would remove small institutions from the scope of the
rule.
The final rules do, however, provide substantial flexibility so
that any savings association, regardless of size, may tailor its
practices to its individual needs. For example, to minimize burden the
final rules permit institutions to include in their accuracy and
integrity policies and procedures their existing policies and
procedures that are relevant and appropriate. Furthermore, OTS and
other Agencies have attempted to minimize burden by: adopting
consistent rules; incorporating into the final rules at Sec. 571.42(a)
a statement that policies and procedures should be appropriate to the
nature, size, complexity, and scope of a furnisher's activities; and
providing furnishers with three options for providing their direct
disputes address to consumers under Sec. 571.43(c).
NCUA: The Regulatory Flexibility Act (RFA) requires NCUA to prepare
an analysis to describe any significant economic impact a proposed
regulation may have on a substantial number of small entities. 5 U.S.C.
601-612. NCUA considers credit unions having less than ten million
dollars in assets to be small for purposes of RFA. NCUA Interpretive
Ruling and Policy Statement (IRPS) 87-2 as amended by IRPS 03-2. In
connection with the December 13, 2007 proposed rule, NCUA certified
that the proposed rule would not have a significant economic impact on
a substantial number of small credit unions and therefore, a regulatory
flexibility analysis was not required. Upon further review, the NCUA
now certifies that the final rules also will not have a significant
economic impact on a substantial number of small credit unions. The
final rules will apply to all Federal credit unions regardless of asset
size.
FTC: The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-612,
requires that the FTC provide an Initial Regulatory Flexibility
Analysis (``IRFA'') with a proposed rule and a Final Regulatory
Flexibility Analysis (``FRFA''), if any, with the final rule, unless
the FTC certifies that the rule will not have a significant economic
impact on a substantial number of small entities. See 5 U.S.C. 603-605.
The FTC hereby certifies that the final regulations will not have a
significant economic impact on a substantial number of small business
entities. The FTC continues to believe that a precise estimate of the
number of small entities that fall under the final regulations is not
currently feasible. Based on changes made to the final regulations in
response to comments received, and the FTC's own experience and
knowledge of industry practices, the FTC continues to believe that the
cost and burden of complying with the final regulations are minimal.
Accordingly, this document serves as notice to the Small Business
Administration of the agency's certification of no effect. Nonetheless,
the FTC has decided to publish a FRFA with these final regulations.
Therefore, the FTC has prepared the following analysis:
1. Need for and Objectives of the Rule.
The FTC is charged with enforcing the requirements of section 312
of the Fair and Accurate Credit Transactions Act of 2003 (FACT Act) (15
U.S.C. 1681a-2(a)(8) and 1681a-2(e)). Section 312 of the FACT Act
generally requires 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
prescribe regulations requiring furnishers to establish reasonable
policies and procedures for implementing the guidelines. Section 312
also requires the Agencies to prescribe regulations identifying the
circumstances under which a furnisher must reinvestigate disputes about
accuracy of information contained in a consumer report based on a
direct request from a consumer. In this action, the FTC promulgates
final rules that would implement these requirements of the FACT Act.
2. Significant Issues Received by Public Comment.
The FTC received a number of comments on the effect of the proposed
regulations. Some of the comments addressed the effect of the proposed
regulations on businesses generally, and did not identify small
businesses as a particular category. The FTC staff, therefore, has
included all comments in this FRFA that raised potential compliance
issues for small businesses, regardless of whether the commenter
identified small businesses as being an affected category.
The FTC estimated in the proposed rule that it would take
furnishers approximately 21 hours on average to establish and implement
the written policies and procedures regarding accuracy and integrity,
including the incremental time to train staff. The FTC also estimated
that it would take furnishers approximately four hours to adjust
procedures for handling disputes received directly from consumers,
another four hours to implement the new dispute process, and
approximately five minutes to send each notice of direct dispute.
One commenter questioned these estimates, stating it is impossible
to verify whether it will take more time to implement the final rules.
This commenter also stated that it is unreasonable to believe it will
take only five minutes to prepare and sent a notice since it is likely
to take longer simply to review and investigate a dispute. Another
commenter stated that the compliance burdens will be significantly more
than 21 hours, but this comment did not apply uniquely to small
entities. The FTC also received a comment predicting that the impact of
the proposed rules on small institutions would be severe, but noting
that it is impossible to estimate the full impact. This comment noted
that they expect that direct disputes would increase significantly and
thus believed that the ``Estimated Hours Burden'' and ``Estimated Cost
Burden'' are extremely low. The commenter also disputed that the bulk
of disputes received would be handled by a clerical level employee.
As noted in the PRA analysis, the Agencies have revised the
estimate of 21 hours on average to establish and implement the written
policies and procedures regarding accuracy and integrity to 24 hours.
The Agencies have also revised the estimates of four hours to adjust
procedures for handling direct disputes and another four hours to
implement the new dispute process to eight hours in both instances.
Moreover, the estimated burden per notice represents the time it will
take a furnisher to prepare notices as required by the final rules, and
does not include the time required to review and investigate a dispute.
However, the Agencies have revised the estimate of time to provide a
notice to a consumer from five minutes to fourteen minutes.
In addition, one commenter noted that smaller entities may not have
established policies and procedures, and requested that the final rules
permit furnishers to adapt or rely on the instructions of CRAs or
service providers in lieu of establishing policies and procedures.
Another commenter also requested that the Agencies eliminate the
requirement for written policies and procedures to minimize the burden
of the final rules. As discussed
[[Page 31510]]
in the SUPPLEMENTARY INFORMATION, the final rules specify that a
furnisher's policies and procedures must be appropriate to the nature,
size, complexity, and scope of the furnisher's activities. The Agencies
expect that the written policies and procedures for a small retail
entity will differ substantially from, and be significantly less
complex, than those of a multi-billion dollar financial services
company.
The FTC received additional comments suggesting that the agencies
minimize the burden of the final rules by: Ensuring adequate time for
implementation; more clearly distinguishing the responsibilities of
furnishers from the responsibilities of CRAs; ``[e]liminat[ing]
liability from `accuracy' and `integrity' ''; removing any obligation
to update information that was accurate when furnished; and clarifying
that there is no need for a furnisher to continue reporting on a debt
once the debt is sold. The Agencies have set a mandatory compliance
deadline of July 1, 2010, thereby providing all entities with at least
one year within which to implement the final regulations. As discussed
in the SUPPLEMENTARY INFORMATION, the definitions of ``accuracy'' and
``integrity'' do not impose stand-alone obligations on furnishers but
guide and inform the duties otherwise imposed on furnishers under the
regulations. The Agencies further note that section 623(c) of the FCRA
limits private rights of actions for a furnisher's noncompliance with
the rules issued pursuant to section 312 of the FACT Act, which include
the definitions of ``accuracy'' and ``integrity.'' Finally, with
respect to debt that is sold, as discussed in the SUPPLEMENTARY
INFORMATION, the Agencies do not expect that after transferring an
account to a third party a furnisher would update the current status of
the account beyond providing information to a CRA that the account has
been transferred.
3. Small Entities to Which the Final Rules Will Apply.
The FTC's final rules will apply to ``an entity that furnishes
information relating to consumers to one or more consumer reporting
agencies for inclusion in a consumer report,'' except when it ``(1)
Provides information to a consumer reporting agency solely to obtain a
consumer report in accordance with sections 604(a) and (f) of the Fair
Credit Reporting Act; (2) Is acting as a ``consumer reporting agency''
as defined in section 603(f) of the Fair Credit Reporting Act; (3) Is a
consumer to whom the furnished information pertains; or (4) Is a
neighbor, friend, or associate of the consumer, or another individual
with whom the consumer is acquainted or who may have knowledge about
the consumer, and who provides information about the consumer's
character, general reputation, personal characteristics, or mode of
living in response to a specific request from a consumer reporting
agency.'' In short, the rule would apply to any entity that (1) is
under the FTC's jurisdiction pursuant to the FCRA and (2) furnishes
information relating to consumers to one or more consumer reporting
agencies.
Generally, the final regulations would apply to financial
institutions, creditors, and other entities that furnish information
relating to consumers to consumer reporting agencies. In particular,
entities under FTC's jurisdiction covered by section 312 include state-
chartered credit unions, non-bank lenders, insurers, debt collectors,
and any other entity other than an individual consumer that furnishes
information relating to consumers to one or more consumer reporting
agencies. The FTC requested but did not receive any comments on its
IRFA relating to the number and type of small entities affected by the
proposed rule. The FTC continues to believe that the available data is
not sufficient for it to realistically estimate the number of entities
the FTC regulates that would be subject to the final rules and that are
small as defined by the Small Business Administration.\61\
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\61\ The size standard to be considered a small business for the
majority of the non-bank creditors, insurers, and debt collectors
that are subject to the Commission's jurisdiction is to have average
annual receipts that are $6.5 million or less. A list of the SBA's
size standards for all industries can be found at http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (last visited March 3, 2009).
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4. Projected Reporting, Recordkeeping, and Other Compliance
Requirements.
The final rules require each furnisher subject to the rule to
establish and implement reasonable written policies and procedures
regarding the accuracy and integrity of the information relating to
consumers that it furnishes to a consumer reporting agency. Furnishers
will be required to consider the guidelines in Appendix A to the final
rules in developing these policies and procedures and to incorporate
those guidelines that are appropriate. The policies and procedures must
be appropriate to the nature, size, complexity, and scope of the
furnishing activities. A furnisher may include any of its existing
policies and procedures in place to ensure the accuracy of information.
Entities have had an ongoing requirement under section 623 of the FCRA
to provide accurate information when they choose to furnish data to
consumer reporting agencies. The FTC believes that many furnishers are
likely to have existing policies and procedures regarding accurate
reporting in order to satisfy their obligations under section 623, and
that these policies and procedures could be incorporated in the
policies and procedures required by the final rules.
Entities under the FTC's jurisdiction covered by this rule include
state-chartered credit unions, non-bank lenders, insurers, debt
collectors, and any other entity other than an individual consumer that
furnishes information relating to consumers to one or more consumer
reporting agencies. In calculating costs, FTC staff assumes that for
all entities, managerial and/or professional technical personnel will
draft the written policies and procedures regarding the accuracy and
integrity of furnished information.
The FTC believes that many entities have already implemented a
significant portion of the policies and procedures required by the
final rules, as discussed above. Accordingly, the impact of the final
rules would be merely incremental and not significant.
Furnishers subject to the final rules will also be required, under
certain circumstances, to investigate disputes concerning the accuracy
of information about the consumer contained in a consumer report based
on a direct request of a consumer. While the rule requires new
procedural requirements, including direct dispute notices, the FTC
believes that investigating direct disputes will not create significant
additional burdens on small entities.
Entities under the FTC's jurisdiction covered by this rule include
state-chartered credit unions, non-bank lenders, insurers, debt
collectors, and any other entity other than an individual consumer that
furnishes information relating to consumers to one or more consumer
reporting agencies. In calculating costs, FTC staff assumes that
managerial and/or professional technical personnel will adapt
mechanisms and processes to handle consumer disputes about their
consumer reports and now assumes that skilled administrative support
personnel will provide any required notices to consumers.
The FTC believes that investigating direct disputes will not create
significant additional burdens on covered entities for a number of
reasons.
First, most furnishers are already investigating similar disputes,
which
[[Page 31511]]
under the current law are brought directly to the relevant consumer
reporting agency, which then contacts the furnisher for an
investigation. Under this procedure, furnishers are already required to
review all relevant information provided by the consumer reporting
agency along with the notice of dispute; report the results of the
investigation to the consumer reporting agency; if the disputed
information is found to be incomplete or inaccurate, report those
results to all nationwide consumer reporting agencies to which the
furnisher previously provided the information; and if the disputed
information is incomplete, inaccurate, or not verifiable by the
financial institution, promptly, for the purposes of reporting to the
consumer reporting agency to modify the item of information, delete the
item of information, or permanently block the reporting of that item of
information.
Second, many of these furnishers are already investigating direct
disputes as a matter of good customer relations and sound business
practices.
Third, the final rules do not require investigation for disputes
that are frivolous or irrelevant.
Fourth, many furnishers already have mechanisms and processes in
place to handle consumer disputes brought under other laws such as the
Fair Debt Collection Practices Act (15 U.S.C. 1692-1692p), Truth in
Lending Act (15 U.S.C. 1601-1665b), Fair Credit Billing Act (15 U.S.C.
1666-1666j), Real Estate Settlement Procedures Act (12 U.S.C. 2601-
2627), and Electronic Funds Transfer Act (15 U.S.C. 1693-1693r). The
FTC believes that many of these mechanisms and processes can be readily
adapted to handle consumer disputes about their consumer reports.
The final rules contain no requirement to report information to the
FTC.
5. Steps Taken to Minimize Significant Economic Impact of the Rule
on Small Entities.
The FTC considered whether any significant alternatives, consistent
with the purposes of the FACT Act, could further minimize the final
rules' impact on small entities. The FTC asked for comment on this
issue. The standards in the final rules are flexible so that a covered
entity, regardless of size, may tailor its practices to its individual
needs. For example, to minimize the burden the final rules would permit
entities to include in their accuracy and integrity policies and
procedures their existing policies and procedures that are relevant and
appropriate. Furthermore, the FTC and other Agencies have attempted to
minimize the burden by: Adopting consistent rules; incorporating into
the final rules at Sec. 660.3 a statement that policies and procedures
should be appropriate to the nature, size, complexity, and scope of a
furnisher's activities; and providing furnishers with three options for
providing their direct disputes address to consumers under Sec. 660.4.
C. OCC and OTS Executive Order 12866 Determinations
The OCC and OTS each determined that its portion of the final rules
is not a significant regulatory action under Executive Order 12866.
D. OCC and OTS Executive Order 13132 Determinations
The OCC and the OTS each determined that its portion of the final
rules does not have any Federalism implications for purposes of
Executive Order 13132.
E. NCUA Executive Order 13132 Determination
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on State and local interests. In
adherence to fundamental Federalism principles, the NCUA, an
independent regulatory agency as defined in 44 U.S.C. 3502(5)
voluntarily complies with the Executive Order. The final rules and
guidelines apply only to Federally chartered credit unions and would
not have substantial direct effects on the States, on the connection
between the national government and the States, or on the distribution
of power and responsibilities among the various levels of government.
The NCUA has determined that these final rules and guidelines do not
constitute a policy that has Federalism implications for purposes of
the Executive Order.
F. OCC and OTS Unfunded Mandates Reform Act of 1995 Determinations
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4 (UMRA) requires that an agency prepare a budgetary impact
statement before promulgating a rule that includes a Federal mandate
that may result in the expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector of $100 million
or more (adjusted annually for inflation) in any one year. (The
inflation adjusted threshold is $133 million or more.) If a budgetary
impact statement is required, section 205 of the UMRA also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. The OCC and OTS each
determined that its final rules will not result in expenditures by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $133 million or more in any one year. Accordingly,
neither OCC nor OTS has prepared a budgetary impact statement or
specifically addressed the regulatory alternatives considered.
G. NCUA: The Treasury and General Government Appropriations Act, 1999-
Assessment of Federal Regulations and Policies on Families
The NCUA has determined that these final rules do not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, 1999, Public Law 105-277, 112
Stat. 2681 (1998).
List of Subjects
12 CFR Part 41
Banks, Banking, Consumer protection, National Banks, Reporting and
recordkeeping requirements.
12 CFR Part 222
Banks, Banking, Holding companies, state member banks.
12 CFR Part 334
Administrative practice and procedure, Bank deposit insurance,
Banks, Banking, Reporting and recordkeeping requirements, Safety and
soundness.
12 CFR Part 571
Consumer protection, Credit, Fair Credit Reporting Act, Privacy,
Reporting and recordkeeping requirements, Savings associations.
12 CFR Part 717
Consumer protection, Credit unions, Fair credit reporting, Privacy,
Reporting and recordkeeping requirements.
16 CFR Part 660
Fair Credit Reporting Act, Consumer reports, Consumer reporting
agencies, Information furnishers, Identity theft, Trade practices.
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Chapter I
Authority and Issuance
0
For the reasons discussed in the joint preamble, the Office of the
Comptroller of the Currency amends chapter I of title 12 of the Code of
Federal Regulations by amending 12 CFR part 41 as follows:
[[Page 31512]]
PART 41--FAIR CREDIT REPORTING
0
1. Revise the authority citation for part 41 to read as follows:
Authority: 12 U.S.C. 1 et seq., 24 (Seventh), 93a, 481, 484, and
1818; 15 U.S.C. 1681a, 1681b, 1681c, 1681m, 1681s, 1681s-2, 1681s-3,
1681t, 1681w, Sec. 214, Pub. L. 108-159, 117 Stat. 1952.
0
2. Add a new subpart E to part 41 to read as follows:
Subpart E--Duties of Furnishers of Information
Sec.
41.40 Scope.
41.41 Definitions.
41.42 Reasonable policies and procedures concerning the accuracy and
integrity of furnished information.
41.43 Direct disputes.
Sec. 41.40 Scope.
This subpart applies to a national bank, Federal branch and agency
of a foreign bank, 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)).
Sec. 41.41 Definitions.
For purposes of this subpart and Appendix E of this part, the
following definitions apply:
(a) Accuracy means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer correctly:
(1) Reflects the terms of and liability for the account or other
relationship;
(2) Reflects the consumer's performance and other conduct with
respect to the account or other relationship; and
(3) Identifies the appropriate consumer.
(b) Direct dispute means a dispute submitted directly to a
furnisher (including a furnisher that is a debt collector) by a
consumer concerning the accuracy of any information contained in a
consumer report and pertaining to an account or other relationship that
the furnisher has or had with the consumer.
(c) Furnisher means an entity that furnishes information relating
to consumers to one or more consumer reporting agencies for inclusion
in a consumer report. An entity is not a furnisher when it:
(1) Provides information to a consumer reporting agency solely to
obtain a consumer report in accordance with sections 604(a) and (f) of
the Fair Credit Reporting Act;
(2) Is acting as a ``consumer reporting agency'' as defined in
section 603(f) of the Fair Credit Reporting Act;
(3) Is a consumer to whom the furnished information pertains; or
(4) Is a neighbor, friend, or associate of the consumer, or another
individual with whom the consumer is acquainted or who may have
knowledge about the consumer, and who provides information about the
consumer's character, general reputation, personal characteristics, or
mode of living in response to a specific request from a consumer
reporting agency.
(d) Identity theft has the same meaning as in 16 CFR 603.2(a).
(e) Integrity means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer:
(1) Is substantiated by the furnisher's records at the time it is
furnished;
(2) Is furnished in a form and manner that is designed to minimize
the likelihood that the information may be incorrectly reflected in a
consumer report; and
(3) Includes the information in the furnisher's possession about
the account or other relationship that the OCC has:
(i) Determined that the absence of which would likely be materially
misleading in evaluating a consumer's creditworthiness, credit
standing, credit capacity, character, general reputation, personal
characteristics, or mode of living; and
(ii) Listed in section I.(b)(2)(iii) of Appendix E of this part.
Sec. 41.42 Reasonable policies and procedures concerning the accuracy
and integrity of furnished information.
(a) Policies and procedures. Each furnisher must establish and
implement reasonable written policies and procedures regarding the
accuracy and integrity of the information relating to consumers that it
furnishes to a consumer reporting agency. The policies and procedures
must be appropriate to the nature, size, complexity, and scope of each
furnisher's activities.
(b) Guidelines. Each furnisher must consider the guidelines in
Appendix E of this part in developing its policies and procedures
required by this section, and incorporate those guidelines that are
appropriate.
(c) Reviewing and updating policies and procedures. Each furnisher
must review its policies and procedures required by this section
periodically and update them as necessary to ensure their continued
effectiveness.
Sec. 41.43 Direct disputes.
(a) General rule. Except as otherwise provided in this section, a
furnisher must conduct a reasonable investigation of a direct dispute
if it relates to:
(1) 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;
(2) 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
credit limit on an open-end account;
(3) The consumer's performance or other conduct concerning an
account or other relationship 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
(4) 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.
(b) Exceptions. The requirements of paragraph (a) of this section
do not apply to a furnisher if:
(1) The direct dispute relates to:
(i) 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 paragraph (a)(1) of this
section) such as name(s), date of birth, Social Security Number,
telephone number(s), or address(es);
(ii) The identity of past or present employers;
(iii) Inquiries or requests for a consumer report;
(iv) Information derived from public records, such as judgments,
bankruptcies, liens, and other legal matters (unless provided by a
furnisher with an account or other relationship with the consumer);
(v) Information related to fraud alerts or active duty alerts; or
(vi) Information provided to a consumer reporting agency by another
furnisher; or
(2) The furnisher has a reasonable belief that the direct 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), or an entity that
[[Page 31513]]
would be a credit repair organization, but for 15 U.S.C.
1679a(3)(B)(i).
(c) Direct dispute address. A furnisher is required to investigate
a direct dispute only if a consumer submits a dispute notice to the
furnisher at:
(1) The address of a furnisher provided by a furnisher and set
forth on a consumer report relating to the consumer;
(2) An address clearly and conspicuously specified by the furnisher
for submitting direct disputes that is provided to the consumer in
writing or electronically (if the consumer has agreed to the electronic
delivery of information from the furnisher); or
(3) Any business address of the furnisher if the furnisher has not
so specified and provided an address for submitting direct disputes
under paragraphs (c)(1) or (2) of this section.
(d) Direct dispute notice contents. A dispute notice must include:
(1) Sufficient information to identify the account or other
relationship that is in dispute, such as an account number and the
name, address, and telephone number of the consumer, if applicable;
(2) The specific information that the consumer is disputing and an
explanation of the basis for the dispute; and
(3) All supporting documentation or other information reasonably
required by the furnisher to substantiate the basis of the dispute.
This documentation may include, for example: A copy of the relevant
portion 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.
(e) Duty of furnisher after receiving a direct dispute notice.
After receiving a dispute notice from a consumer pursuant to paragraphs
(c) and (d) of this section, the furnisher must:
(1) Conduct a reasonable investigation with respect to the disputed
information;
(2) Review all relevant information provided by the consumer with
the dispute notice;
(3) Complete its investigation of the dispute and report the
results of the investigation to the consumer before the expiration of
the period under section 611(a)(1) of the Fair Credit Reporting Act (15
U.S.C. 1681i(a)(1)) within which a consumer reporting agency would be
required to complete its action if the consumer had elected to dispute
the information under that section; and
(4) If the investigation finds that the information reported was
inaccurate, promptly notify each consumer reporting agency to which the
furnisher provided inaccurate information of that determination and
provide to the consumer reporting agency any correction to that
information that is necessary to make the information provided by the
furnisher accurate.
(f) Frivolous or irrelevant disputes. (1) A furnisher is not
required to investigate a direct dispute if the furnisher has
reasonably determined that the dispute is frivolous or irrelevant. A
dispute qualifies as frivolous or irrelevant if:
(i) The consumer did not provide sufficient information to
investigate the disputed information as required by paragraph (d) of
this section;
(ii) The direct dispute is substantially the same as a dispute
previously submitted by or on behalf of the consumer, either directly
to the furnisher or through a consumer reporting agency, with respect
to which the furnisher has already satisfied the applicable
requirements of the Act or this section; provided, however, that a
direct dispute is not substantially the same as a dispute previously
submitted if the dispute includes information listed in paragraph (d)
of this section that had not previously been provided to the furnisher;
or
(iii) The furnisher is not required to investigate the direct
dispute because one or more of the exceptions listed in paragraph (b)
of this section applies.
(2) Notice of determination. Upon making a determination that a
dispute is frivolous or irrelevant, the furnisher must notify the
consumer of the determination not later than five business days after
making the determination, by mail or, if authorized by the consumer for
that purpose, by any other means available to the furnisher.
(3) Contents of notice of determination that a dispute is frivolous
or irrelevant. A notice of determination that a dispute is frivolous or
irrelevant must include the reasons for such determination and identify
any information required to investigate the disputed information, which
notice may consist of a standardized form describing the general nature
of such information.
0
3. Add a new appendix E to part 41 to read as follows:
Appendix E to Part 41--Interagency Guidelines Concerning the Accuracy
and Integrity of Information Furnished to Consumer Reporting Agencies
The OCC encourages voluntary furnishing of information to
consumer reporting agencies. Section 41.42 of this part requires
each furnisher to establish and implement reasonable written
policies and procedures concerning the accuracy and integrity of the
information it furnishes to consumer reporting agencies. Under Sec.
41.42(b), a furnisher must consider the guidelines set forth below
in developing its policies and procedures. In establishing these
policies and procedures, a furnisher may include any of its existing
policies and procedures that are relevant and appropriate. Section
41.42(c) requires each furnisher to review its policies and
procedures periodically and update them as necessary to ensure their
continued effectiveness.
I. Nature, Scope, and Objectives of Policies and Procedures
(a) Nature and Scope. Section 41.42(a) of this part requires
that a furnisher's policies and procedures be appropriate to the
nature, size, complexity, and scope of the furnisher's activities.
In developing its policies and procedures, a furnisher should
consider, for example:
(1) The types of business activities in which the furnisher
engages;
(2) The nature and frequency of the information the furnisher
provides to consumer reporting agencies; and
(3) The technology used by the furnisher to furnish information
to consumer reporting agencies.
(b) Objectives. A furnisher's policies and procedures should be
reasonably designed to promote the following objectives:
(1) To furnish information about accounts or other relationships
with a consumer that is accurate, such that the furnished
information:
(i) Identifies the appropriate consumer;
(ii) Reflects the terms of and liability for those accounts or
other relationships; and
(iii) Reflects the consumer's performance and other conduct with
respect to the account or other relationship;
(2) To furnish information about accounts or other relationships
with a consumer that has integrity, such that the furnished
information:
(i) Is substantiated by the furnisher's records at the time it
is furnished;
(ii) Is furnished in a form and manner that is designed to
minimize the likelihood that the information may be incorrectly
reflected in a consumer report; thus, the furnished information
should:
(A) Include appropriate identifying information about the
consumer to whom it pertains; and
(B) Be furnished in a standardized and clearly understandable
form and manner and with a date specifying the time period to which
the information pertains; and
(iii) Includes the credit limit, if applicable and in the
furnisher's possession;
(3) To conduct reasonable investigations of consumer disputes
and take appropriate actions based on the outcome of such
investigations; and
(4) To update the information it furnishes as necessary to
reflect the current status of the consumer's account or other
relationship, including, for example:
(i) Any transfer of an account (e.g., by sale or assignment for
collection) to a third party; and
(ii) Any cure of the consumer's failure to abide by the terms of
the account or other relationship.
[[Page 31514]]
II. Establishing and Implementing Policies and Procedures
In establishing and implementing its policies and procedures, a
furnisher should:
(a) Identify practices or activities of the furnisher that can
compromise the accuracy or integrity of information furnished to
consumer reporting agencies, such as by:
(1) Reviewing its existing practices and activities, including
the technological means and other methods it uses to furnish
information to consumer reporting agencies and the frequency and
timing of its furnishing of information;
(2) Reviewing its historical records relating to accuracy or
integrity or to disputes; reviewing other information relating to
the accuracy or integrity of information provided by the furnisher
to consumer reporting agencies; and considering the types of errors,
omissions, or other problems that may have affected the accuracy or
integrity of information it has furnished about consumers to
consumer reporting agencies;
(3) Considering any feedback received from consumer reporting
agencies, consumers, or other appropriate parties;
(4) Obtaining feedback from the furnisher's staff; and
(5) Considering the potential impact of the furnisher's policies
and procedures on consumers.
(b) Evaluate the effectiveness of existing policies and
procedures of the furnisher regarding the accuracy and integrity of
information furnished to consumer reporting agencies; consider
whether new, additional, or different policies and procedures are
necessary; and consider whether implementation of existing policies
and procedures should be modified to enhance the accuracy and
integrity of information about consumers furnished to consumer
reporting agencies.
(c) Evaluate the effectiveness of specific methods (including
technological means) the furnisher uses to provide information to
consumer reporting agencies; how those methods may affect the
accuracy and integrity of the information it provides to consumer
reporting agencies; and whether new, additional, or different
methods (including technological means) should be used to provide
information to consumer reporting agencies to enhance the accuracy
and integrity of that information.
III. Specific Components of Policies and Procedures
In developing its policies and procedures, a furnisher should
address the following, as appropriate:
(a) Establishing and implementing a system for furnishing
information about consumers to consumer reporting agencies that is
appropriate to the nature, size, complexity, and scope of the
furnisher's business operations.
(b) 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
consumer reporting agencies.
(c) Maintaining 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 is subject to a direct dispute.
(d) Establishing and implementing appropriate internal controls
regarding the accuracy and integrity of information about consumers
furnished to consumer reporting agencies, such as by implementing
standard procedures and verifying random samples of information
provided to consumer reporting agencies.
(e) Training staff that participates in activities related to
the furnishing of information about consumers to consumer reporting
agencies to implement the policies and procedures.
(f) Providing for appropriate and effective oversight of
relevant service providers whose activities may affect the accuracy
or integrity of information about consumers furnished to consumer
reporting agencies to ensure compliance with the policies and
procedures.
(g) Furnishing information about consumers to consumer reporting
agencies following mergers, portfolio acquisitions or sales, or
other acquisitions or transfers of accounts or other obligations in
a manner that prevents re-aging of information, duplicative
reporting, or other problems that may similarly affect the accuracy
or integrity of the information furnished.
(h) Deleting, updating, and correcting information in the
furnisher's records, as appropriate, to avoid furnishing inaccurate
information.
(i) Conducting reasonable investigations of disputes.
(j) Designing technological and other means of communication
with consumer reporting agencies to prevent duplicative reporting of
accounts, erroneous association of information with the wrong
consumer(s), and other occurrences that may compromise the accuracy
or integrity of information provided to consumer reporting agencies.
(k) Providing consumer reporting agencies with sufficient
identifying information in the furnisher's possession about each
consumer about whom information is furnished to enable the consumer
reporting agency properly to identify the consumer.
(l) Conducting a periodic evaluation of its own practices,
consumer reporting agency 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 or integrity of information furnished to
consumer reporting agencies.
(m) Complying with applicable requirements under the Fair Credit
Reporting Act and its implementing regulations.
Board of Governors of the Federal Reserve System
12 CFR Chapter II
Authority and Issuance
0
For the reasons set forth in the joint preamble, part 222 of title 12,
chapter II, of the Code of Federal Regulations is amended as follows:
PART 222--FAIR CREDIT REPORTING (REGULATION V)
0
1. The authority citation for part 222 is revised to read as follows:
Authority: 15 U.S.C. 1681b, 1681c, 1681m, 1681s, 1681s-2, and
1681w; Secs. 3 and 214, Pub. L. 108-159, 117 Stat. 1952.
0
2. A new subpart E is added to part 222 to read as follows:
Subpart E--Duties of Furnishers of Information
Sec.
222.40 Scope.
222.41 Definitions.
222.42 Reasonable policies and procedures concerning the accuracy
and integrity of furnished information.
222.43 Direct disputes.
Subpart E--Duties of Furnishers of Information
Sec. 222.40 Scope.
Subpart E of this part applies to member banks of the Federal
Reserve System (other than national 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, as amended
(12 U.S.C. 1844(c)(5)), branches and Agencies of foreign banks (other
than Federal branches, Federal Agencies, and insured State branches of
foreign banks), commercial lending companies owned or controlled by
foreign banks, and organizations operating under section 25 or 25A of
the Federal Reserve Act (12 U.S.C. 601 et seq., and 611 et seq.).
Sec. 222.41 Definitions.
For purposes of this subpart and Appendix E of this part, the
following definitions apply:
(a) Accuracy means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer correctly:
(1) Reflects the terms of and liability for the account or other
relationship;
(2) Reflects the consumer's performance and other conduct with
respect to the account or other relationship; and
(3) Identifies the appropriate consumer.
(b) Direct dispute means a dispute submitted directly to a
furnisher (including a furnisher that is a debt collector) by a
consumer concerning the accuracy of any information contained in a
consumer report and pertaining to an account or other relationship that
the furnisher has or had with the consumer.
(c) Furnisher means an entity that furnishes information relating
to
[[Page 31515]]
consumers to one or more consumer reporting agencies for inclusion in a
consumer report. An entity is not a furnisher when it:
(1) Provides information to a consumer reporting agency solely to
obtain a consumer report in accordance with sections 604(a) and (f) of
the Fair Credit Reporting Act;
(2) Is acting as a ``consumer reporting agency'' as defined in
section 603(f) of the Fair Credit Reporting Act;
(3) Is a consumer to whom the furnished information pertains; or
(4) Is a neighbor, friend, or associate of the consumer, or another
individual with whom the consumer is acquainted or who may have
knowledge about the consumer, and who provides information about the
consumer's character, general reputation, personal characteristics, or
mode of living in response to a specific request from a consumer
reporting agency.
(d) Identity theft has the same meaning as in 16 CFR 603.2(a).
(e) Integrity means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer:
(1) Is substantiated by the furnisher's records at the time it is
furnished;
(2) Is furnished in a form and manner that is designed to minimize
the likelihood that the information may be incorrectly reflected in a
consumer report; and
(3) Includes the information in the furnisher's possession about
the account or other relationship that the Board has:
(i) Determined that the absence of which would likely be materially
misleading in evaluating a consumer's creditworthiness, credit
standing, credit capacity, character, general reputation, personal
characteristics, or mode of living; and
(ii) Listed in section I.(b)(2)(iii) of Appendix E of this part.
Sec. 222.42 Reasonable policies and procedures concerning the
accuracy and integrity of furnished information.
(a) Policies and procedures. Each furnisher must establish and
implement reasonable written policies and procedures regarding the
accuracy and integrity of the information relating to consumers that it
furnishes to a consumer reporting agency. The policies and procedures
must be appropriate to the nature, size, complexity, and scope of each
furnisher's activities.
(b) Guidelines. Each furnisher must consider the guidelines in
Appendix E of this part in developing its policies and procedures
required by this section, and incorporate those guidelines that are
appropriate.
(c) Reviewing and updating policies and procedures. Each furnisher
must review its policies and procedures required by this section
periodically and update them as necessary to ensure their continued
effectiveness.
Sec. 222.43 Direct disputes.
(a) General rule. Except as otherwise provided in this section, a
furnisher must conduct a reasonable investigation of a direct dispute
if it relates to:
(1) 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;
(2) 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
credit limit on an open-end account;
(3) The consumer's performance or other conduct concerning an
account or other relationship 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
(4) 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.
(b) Exceptions. The requirements of paragraph (a) of this section
do not apply to a furnisher if:
(1) The direct dispute relates to:
(i) 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 paragraph (a)(1) of this
section) such as name(s), date of birth, Social Security number,
telephone number(s), or address(es);
(ii) The identity of past or present employers;
(iii) Inquiries or requests for a consumer report;
(iv) Information derived from public records, such as judgments,
bankruptcies, liens, and other legal matters (unless provided by a
furnisher with an account or other relationship with the consumer);
(v) Information related to fraud alerts or active duty alerts; or
(vi) Information provided to a consumer reporting agency by another
furnisher; or
(2) The furnisher has a reasonable belief that the direct 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), or an entity that would
be a credit repair organization, but for 15 U.S.C. 1679a(3)(B)(i).
(c) Direct dispute address. A furnisher is required to investigate
a direct dispute only if a consumer submits a dispute notice to the
furnisher at:
(1) The address of a furnisher provided by a furnisher and set
forth on a consumer report relating to the consumer;
(2) An address clearly and conspicuously specified by the furnisher
for submitting direct disputes that is provided to the consumer in
writing or electronically (if the consumer has agreed to the electronic
delivery of information from the furnisher); or
(3) Any business address of the furnisher if the furnisher has not
so specified and provided an address for submitting direct disputes
under paragraphs (c)(1) or (2) of this section.
(d) Direct dispute notice contents. A dispute notice must include:
(1) Sufficient information to identify the account or other
relationship that is in dispute, such as an account number and the
name, address, and telephone number of the consumer, if applicable;
(2) The specific information that the consumer is disputing and an
explanation of the basis for the dispute; and
(3) All supporting documentation or other information reasonably
required by the furnisher to substantiate the basis of the dispute.
This documentation may include, for example: a copy of the relevant
portion 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.
(e) Duty of furnisher after receiving a direct dispute notice.
After receiving a dispute notice from a consumer pursuant to paragraphs
(c) and (d) of this section, the furnisher must:
(1) Conduct a reasonable investigation with respect to the disputed
information;
(2) Review all relevant information provided by the consumer with
the dispute notice;
(3) Complete its investigation of the dispute and report the
results of the investigation to the consumer before the expiration of
the period under section
[[Page 31516]]
611(a)(1) of the Fair Credit Reporting Act (15 U.S.C. 1681i(a)(1))
within which a consumer reporting agency would be required to complete
its action if the consumer had elected to dispute the information under
that section; and
(4) If the investigation finds that the information reported was
inaccurate, promptly notify each consumer reporting agency to which the
furnisher provided inaccurate information of that determination and
provide to the consumer reporting agency any correction to that
information that is necessary to make the information provided by the
furnisher accurate.
(f) Frivolous or irrelevant disputes. (1) A furnisher is not
required to investigate a direct dispute if the furnisher has
reasonably determined that the dispute is frivolous or irrelevant. A
dispute qualifies as frivolous or irrelevant if:
(i) The consumer did not provide sufficient information to
investigate the disputed information as required by paragraph (d) of
this section;
(ii) The direct dispute is substantially the same as a dispute
previously submitted by or on behalf of the consumer, either directly
to the furnisher or through a consumer reporting agency, with respect
to which the furnisher has already satisfied the applicable
requirements of the Act or this section; provided, however, that a
direct dispute is not substantially the same as a dispute previously
submitted if the dispute includes information listed in paragraph (d)
of this section that had not previously been provided to the furnisher;
or
(iii) The furnisher is not required to investigate the direct
dispute because one or more of the exceptions listed in paragraph (b)
of this section applies.
(2) Notice of determination. Upon making a determination that a
dispute is frivolous or irrelevant, the furnisher must notify the
consumer of the determination not later than five business days after
making the determination, by mail or, if authorized by the consumer for
that purpose, by any other means available to the furnisher.
(3) Contents of notice of determination that a dispute is frivolous
or irrelevant. A notice of determination that a dispute is frivolous or
irrelevant must include the reasons for such determination and identify
any information required to investigate the disputed information, which
notice may consist of a standardized form describing the general nature
of such information.
0
3. A new appendix E to part 222 is added to read as follows:
Appendix E to Part 222--Interagency Guidelines Concerning the Accuracy
and Integrity of Information Furnished to Consumer Reporting Agencies
The Board encourages voluntary furnishing of information to
consumer reporting agencies. Section 222.42 of this part requires
each furnisher to establish and implement reasonable written
policies and procedures concerning the accuracy and integrity of the
information it furnishes to consumer reporting agencies. Under Sec.
222.42(b) of this part, a furnisher must consider the guidelines set
forth below in developing its policies and procedures. In
establishing these policies and procedures, a furnisher may include
any of its existing policies and procedures that are relevant and
appropriate. Section 222.42(c) requires each furnisher to review its
policies and procedures periodically and update them as necessary to
ensure their continued effectiveness.
I. Nature, Scope, and Objectives of Policies and Procedures
(a) Nature and Scope. Section 222.42(a) of this part requires
that a furnisher's policies and procedures be appropriate to the
nature, size, complexity, and scope of the furnisher's activities.
In developing its policies and procedures, a furnisher should
consider, for example:
(1) The types of business activities in which the furnisher
engages;
(2) The nature and frequency of the information the furnisher
provides to consumer reporting agencies; and
(3) The technology used by the furnisher to furnish information
to consumer reporting agencies.
(b) Objectives. A furnisher's policies and procedures should be
reasonably designed to promote the following objectives:
(1) To furnish information about accounts or other relationships
with a consumer that is accurate, such that the furnished
information:
(i) Identifies the appropriate consumer;
(ii) Reflects the terms of and liability for those accounts or
other relationships; and
(iii) Reflects the consumer's performance and other conduct with
respect to the account or other relationship;
(2) To furnish information about accounts or other relationships
with a consumer that has integrity, such that the furnished
information:
(i) Is substantiated by the furnisher's records at the time it
is furnished;
(ii) Is furnished in a form and manner that is designed to
minimize the likelihood that the information may be incorrectly
reflected in a consumer report; thus, the furnished information
should:
(A) Include appropriate identifying information about the
consumer to whom it pertains; and
(B) Be furnished in a standardized and clearly understandable
form and manner and with a date specifying the time period to which
the information pertains; and
(iii) Includes the credit limit, if applicable and in the
furnisher's possession;
(3) To conduct reasonable investigations of consumer disputes
and take appropriate actions based on the outcome of such
investigations; and
(4) To update the information it furnishes as necessary to
reflect the current status of the consumer's account or other
relationship, including, for example:
(i) Any transfer of an account (e.g., by sale or assignment for
collection) to a third party; and
(ii) Any cure of the consumer's failure to abide by the terms of
the account or other relationship.
II. Establishing and Implementing Policies and Procedures
In establishing and implementing its policies and procedures, a
furnisher should:
(a) Identify practices or activities of the furnisher that can
compromise the accuracy or integrity of information furnished to
consumer reporting agencies, such as by:
(1) Reviewing its existing practices and activities, including
the technological means and other methods it uses to furnish
information to consumer reporting agencies and the frequency and
timing of its furnishing of information;
(2) Reviewing its historical records relating to accuracy or
integrity or to disputes; reviewing other information relating to
the accuracy or integrity of information provided by the furnisher
to consumer reporting agencies; and considering the types of errors,
omissions, or other problems that may have affected the accuracy or
integrity of information it has furnished about consumers to
consumer reporting agencies;
(3) Considering any feedback received from consumer reporting
agencies, consumers, or other appropriate parties;
(4) Obtaining feedback from the furnisher's staff; and
(5) Considering the potential impact of the furnisher's policies
and procedures on consumers.
(b) Evaluate the effectiveness of existing policies and
procedures of the furnisher regarding the accuracy and integrity of
information furnished to consumer reporting agencies; consider
whether new, additional, or different policies and procedures are
necessary; and consider whether implementation of existing policies
and procedures should be modified to enhance the accuracy and
integrity of information about consumers furnished to consumer
reporting agencies.
(c) Evaluate the effectiveness of specific methods (including
technological means) the furnisher uses to provide information to
consumer reporting agencies; how those methods may affect the
accuracy and integrity of the information it provides to consumer
reporting agencies; and whether new, additional, or different
methods (including technological means) should be used to provide
information to consumer reporting agencies to enhance the accuracy
and integrity of that information.
III. Specific Components of Policies and Procedures
In developing its policies and procedures, a furnisher should
address the following, as appropriate:
(a) Establishing and implementing a system for furnishing
information about consumers
[[Page 31517]]
to consumer reporting agencies that is appropriate to the nature,
size, complexity, and scope of the furnisher's business operations.
(b) 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
consumer reporting agencies.
(c) Maintaining 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 is subject to a direct dispute.
(d) Establishing and implementing appropriate internal controls
regarding the accuracy and integrity of information about consumers
furnished to consumer reporting agencies, such as by implementing
standard procedures and verifying random samples of information
provided to consumer reporting agencies.
(e) Training staff that participates in activities related to
the furnishing of information about consumers to consumer reporting
agencies to implement the policies and procedures.
(f) Providing for appropriate and effective oversight of
relevant service providers whose activities may affect the accuracy
or integrity of information about consumers furnished to consumer
reporting agencies to ensure compliance with the policies and
procedures.
(g) Furnishing information about consumers to consumer reporting
agencies following mergers, portfolio acquisitions or sales, or
other acquisitions or transfers of accounts or other obligations in
a manner that prevents re-aging of information, duplicative
reporting, or other problems that may similarly affect the accuracy
or integrity of the information furnished.
(h) Deleting, updating, and correcting information in the
furnisher's records, as appropriate, to avoid furnishing inaccurate
information.
(i) Conducting reasonable investigations of disputes.
(j) Designing technological and other means of communication
with consumer reporting agencies to prevent duplicative reporting of
accounts, erroneous association of information with the wrong
consumer(s), and other occurrences that may compromise the accuracy
or integrity of information provided to consumer reporting agencies.
(k) Providing consumer reporting agencies with sufficient
identifying information in the furnisher's possession about each
consumer about whom information is furnished to enable the consumer
reporting agency properly to identify the consumer.
(l) Conducting a periodic evaluation of its own practices,
consumer reporting agency 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 or integrity of information furnished to
consumer reporting agencies.
(m) Complying with applicable requirements under the Fair Credit
Reporting Act and its implementing regulations.
Federal Deposit Insurance Corporation
12 CFR Chapter III
Authority and Issuance
0
For the reasons discussed in the joint preamble, the Federal Deposit
Insurance Corporation amends chapter III of title 12 of the Code of
Federal Regulations by amending 12 CFR part 334 as follows:
PART 334--FAIR CREDIT REPORTING
0
1. The authority citation for part 334 is revised to read as follows:
Authority: 12 U.S.C. 1818, 1819 (Tenth), and 1831p-1; 15 U.S.C.
1681a, 1681b, 1681c, 1681m, 1681s, 1681s-2, 1681s-3, 1681t, 1681w,
6801 et seq., Pub. L. 108-159, 117 Stat. 1952.
0
2. Add subpart E to part 334 to read as follows:
Subpart E--Duties of Furnishers of Information
Sec.
334.40 Scope.
334.41 Definitions.
334.42 Reasonable policies and procedures concerning the accuracy
and integrity of furnished information.
334.43 Direct disputes.
Subpart E--Duties of Furnishers of Information
Sec. 334.40 Scope.
This subpart applies to a financial institution or creditor that is
an insured state nonmember bank, insured state licensed branch of a
foreign bank, or a subsidiary of such entities (except dealers, persons
providing insurance, investment companies, and investment advisers).
Sec. 334.41 Definitions.
For purposes of this subpart and Appendix E of this part, the
following definitions apply:
(a) Accuracy means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer correctly:
(1) Reflects the terms of and liability for the account or other
relationship;
(2) Reflects the consumer's performance and other conduct with
respect to the account or other relationship; and
(3) Identifies the appropriate consumer.
(b) Direct dispute means a dispute submitted directly to a
furnisher (including a furnisher that is a debt collector) by a
consumer concerning the accuracy of any information contained in a
consumer report and pertaining to an account or other relationship that
the furnisher has or had with the consumer.
(c) Furnisher means an entity that furnishes information relating
to consumers to one or more consumer reporting agencies for inclusion
in a consumer report. An entity is not a furnisher when it:
(1) Provides information to a consumer reporting agency solely to
obtain a consumer report in accordance with sections 604(a) and (f) of
the Fair Credit Reporting Act;
(2) Is acting as a ``consumer reporting agency'' as defined in
section 603(f) of the Fair Credit Reporting Act;
(3) Is a consumer to whom the furnished information pertains; or
(4) Is a neighbor, friend, or associate of the consumer, or another
individual with whom the consumer is acquainted or who may have
knowledge about the consumer, and who provides information about the
consumer's character, general reputation, personal characteristics, or
mode of living in response to a specific request from a consumer
reporting agency.
(d) Identity theft has the same meaning as in 16 CFR 603.2(a).
(e) Integrity means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer:
(1) Is substantiated by the furnisher's records at the time it is
furnished;
(2) Is furnished in a form and manner that is designed to minimize
the likelihood that the information may be incorrectly reflected in a
consumer report; and
(3) Includes the information in the furnisher's possession about
the account or other relationship that the FDIC has:
(i) Determined that the absence of which would likely be materially
misleading in evaluating a consumer's creditworthiness, credit
standing, credit capacity, character, general reputation, personal
characteristics, or mode of living; and
(ii) Listed in section I.(b)(2)(iii) of Appendix E of this part.
Sec. 334.42 Reasonable policies and procedures concerning the
accuracy and integrity of furnished information.
(a) Policies and procedures. Each furnisher must establish and
implement reasonable written policies and procedures regarding the
accuracy and integrity of the information relating to consumers that it
furnishes to a consumer reporting agency. The policies and procedures
must be appropriate to the nature, size, complexity, and scope of each
furnisher's activities.
(b) Guidelines. Each furnisher must consider the guidelines in
Appendix E of this part in developing its policies and procedures
required by this section,
[[Page 31518]]
and incorporate those guidelines that are appropriate.
(c) Reviewing and updating policies and procedures. Each furnisher
must review its policies and procedures required by this section
periodically and update them as necessary to ensure their continued
effectiveness.
Sec. 334.43 Direct disputes.
(a) General rule. Except as otherwise provided in this section, a
furnisher must conduct a reasonable investigation of a direct dispute
if it relates to:
(1) 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;
(2) 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
credit limit on an open-end account;
(3) The consumer's performance or other conduct concerning an
account or other relationship 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
(4) 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.
(b) Exceptions. The requirements of paragraph (a) of this section
do not apply to a furnisher if:
(1) The direct dispute relates to:
(i) 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 paragraph (a)(1) of this
section) such as name(s), date of birth, Social Security number,
telephone number(s), or address(es);
(ii) The identity of past or present employers;
(iii) Inquiries or requests for a consumer report;
(iv) Information derived from public records, such as judgments,
bankruptcies, liens, and other legal matters (unless provided by a
furnisher with an account or other relationship with the consumer);
(v) Information related to fraud alerts or active duty alerts; or
(vi) Information provided to a consumer reporting agency by another
furnisher; or
(2) The furnisher has a reasonable belief that the direct 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), or an entity that would
be a credit repair organization, but for 15 U.S.C. 1679a(3)(B)(i).
(c) Direct dispute address. A furnisher is required to investigate
a direct dispute only if a consumer submits a dispute notice to the
furnisher at:
(1) The address of a furnisher provided by a furnisher and set
forth on a consumer report relating to the consumer;
(2) An address clearly and conspicuously specified by the furnisher
for submitting direct disputes that is provided to the consumer in
writing or electronically (if the consumer has agreed to the electronic
delivery of information from the furnisher); or
(3) Any business address of the furnisher if the furnisher has not
so specified and provided an address for submitting direct disputes
under paragraphs (c)(1) or (2) of this section.
(d) Direct dispute notice contents. A dispute notice must include:
(1) Sufficient information to identify the account or other
relationship that is in dispute, such as an account number and the
name, address, and telephone number of the consumer, if applicable;
(2) The specific information that the consumer is disputing and an
explanation of the basis for the dispute; and
(3) All supporting documentation or other information reasonably
required by the furnisher to substantiate the basis of the dispute.
This documentation may include, for example: a copy of the relevant
portion 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.
(e) Duty of furnisher after receiving a direct dispute notice.
After receiving a dispute notice from a consumer pursuant to paragraphs
(c) and (d) of this section, the furnisher must:
(1) Conduct a reasonable investigation with respect to the disputed
information;
(2) Review all relevant information provided by the consumer with
the dispute notice;
(3) Complete its investigation of the dispute and report the
results of the investigation to the consumer before the expiration of
the period under section 611(a)(1) of the Fair Credit Reporting Act (15
U.S.C. 1681i(a)(1)) within which a consumer reporting agency would be
required to complete its action if the consumer had elected to dispute
the information under that section; and
(4) If the investigation finds that the information reported was
inaccurate, promptly notify each consumer reporting agency to which the
furnisher provided inaccurate information of that determination and
provide to the consumer reporting agency any correction to that
information that is necessary to make the information provided by the
furnisher accurate.
(f) Frivolous or irrelevant disputes. (1) A furnisher is not
required to investigate a direct dispute if the furnisher has
reasonably determined that the dispute is frivolous or irrelevant. A
dispute qualifies as frivolous or irrelevant if:
(i) The consumer did not provide sufficient information to
investigate the disputed information as required by paragraph (d) of
this section;
(ii) The direct dispute is substantially the same as a dispute
previously submitted by or on behalf of the consumer, either directly
to the furnisher or through a consumer reporting agency, with respect
to which the furnisher has already satisfied the applicable
requirements of the Act or this section; provided, however, that a
direct dispute is not substantially the same as a dispute previously
submitted if the dispute includes information listed in paragraph (d)
of this section that had not previously been provided to the furnisher;
or
(iii) The furnisher is not required to investigate the direct
dispute because one or more of the exceptions listed in paragraph (b)
of this section applies.
(2) Notice of determination. Upon making a determination that a
dispute is frivolous or irrelevant, the furnisher must notify the
consumer of the determination not later than five business days after
making the determination, by mail or, if authorized by the consumer for
that purpose, by any other means available to the furnisher.
(3) Contents of notice of determination that a dispute is frivolous
or irrelevant. A notice of determination that a dispute is frivolous or
irrelevant must include the reasons for such determination and identify
any information required to investigate the disputed information, which
notice may consist of a standardized form describing the general nature
of such information.
0
3. Add a new appendix E to part 334 to read as follows:
[[Page 31519]]
Appendix E to Part 334--Interagency Guidelines Concerning the Accuracy
and Integrity of Information Furnished to Consumer Reporting Agencies
The FDIC encourages voluntary furnishing of information to
consumer reporting agencies. Section 334.42 of this part requires
each furnisher to establish and implement reasonable written
policies and procedures concerning the accuracy and integrity of the
information it furnishes to consumer reporting agencies. Under Sec.
334.42(b), a furnisher must consider the guidelines set forth below
in developing its policies and procedures. In establishing these
policies and procedures, a furnisher may include any of its existing
policies and procedures that are relevant and appropriate. Section
334.42(c) requires each furnisher to review its policies and
procedures periodically and update them as necessary to ensure their
continued effectiveness.
I. Nature, Scope, and Objectives of Policies and Procedures
(a) Nature and Scope. Section 334.42(a) of this part requires
that a furnisher's policies and procedures be appropriate to the
nature, size, complexity, and scope of the furnisher's activities.
In developing its policies and procedures, a furnisher should
consider, for example:
(1) The types of business activities in which the furnisher
engages;
(2) The nature and frequency of the information the furnisher
provides to consumer reporting agencies; and
(3) The technology used by the furnisher to furnish information
to consumer reporting agencies.
(b) Objectives. A furnisher's policies and procedures should be
reasonably designed to promote the following objectives:
(1) To furnish information about accounts or other relationships
with a consumer that is accurate, such that the furnished
information:
(i) Identifies the appropriate consumer;
(ii) Reflects the terms of and liability for those accounts or
other relationships; and
(iii) Reflects the consumer's performance and other conduct with
respect to the account or other relationship;
(2) To furnish information about accounts or other relationships
with a consumer that has integrity, such that the furnished
information:
(i) Is substantiated by the furnisher's records at the time it
is furnished;
(ii) Is furnished in a form and manner that is designed to
minimize the likelihood that the information may be incorrectly
reflected in a consumer report; thus, the furnished information
should:
(A) Include appropriate identifying information about the
consumer to whom it pertains; and
(B) Be furnished in a standardized and clearly understandable
form and manner and with a date specifying the time period to which
the information pertains; and
(iii) Includes the credit limit, if applicable and in the
furnisher's possession;
(3) To conduct reasonable investigations of consumer disputes
and take appropriate actions based on the outcome of such
investigations; and
(4) To update the information it furnishes as necessary to
reflect the current status of the consumer's account or other
relationship, including, for example:
(i) Any transfer of an account (e.g., by sale or assignment for
collection) to a third party; and
(ii) Any cure of the consumer's failure to abide by the terms of
the account or other relationship.
II. Establishing and Implementing Policies and Procedures
In establishing and implementing its policies and procedures, a
furnisher should:
(a) Identify practices or activities of the furnisher that can
compromise the accuracy or integrity of information furnished to
consumer reporting agencies, such as by:
(1) Reviewing its existing practices and activities, including
the technological means and other methods it uses to furnish
information to consumer reporting agencies and the frequency and
timing of its furnishing of information;
(2) Reviewing its historical records relating to accuracy or
integrity or to disputes; reviewing other information relating to
the accuracy or integrity of information provided by the furnisher
to consumer reporting agencies; and considering the types of errors,
omissions, or other problems that may have affected the accuracy or
integrity of information it has furnished about consumers to
consumer reporting agencies;
(3) Considering any feedback received from consumer reporting
agencies, consumers, or other appropriate parties;
(4) Obtaining feedback from the furnisher's staff; and
(5) Considering the potential impact of the furnisher's policies
and procedures on consumers.
(b) Evaluate the effectiveness of existing policies and
procedures of the furnisher regarding the accuracy and integrity of
information furnished to consumer reporting agencies; consider
whether new, additional, or different policies and procedures are
necessary; and consider whether implementation of existing policies
and procedures should be modified to enhance the accuracy and
integrity of information about consumers furnished to consumer
reporting agencies.
(c) Evaluate the effectiveness of specific methods (including
technological means) the furnisher uses to provide information to
consumer reporting agencies; how those methods may affect the
accuracy and integrity of the information it provides to consumer
reporting agencies; and whether new, additional, or different
methods (including technological means) should be used to provide
information to consumer reporting agencies to enhance the accuracy
and integrity of that information.
III. Specific Components of Policies and Procedures
In developing its policies and procedures, a furnisher should
address the following, as appropriate:
(a) Establishing and implementing a system for furnishing
information about consumers to consumer reporting agencies that is
appropriate to the nature, size, complexity, and scope of the
furnisher's business operations.
(b) 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
consumer reporting agencies.
(c) Maintaining 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 is subject to a direct dispute.
(d) Establishing and implementing appropriate internal controls
regarding the accuracy and integrity of information about consumers
furnished to consumer reporting agencies, such as by implementing
standard procedures and verifying random samples of information
provided to consumer reporting agencies.
(e) Training staff that participates in activities related to
the furnishing of information about consumers to consumer reporting
agencies to implement the policies and procedures.
(f) Providing for appropriate and effective oversight of
relevant service providers whose activities may affect the accuracy
or integrity of information about consumers furnished to consumer
reporting agencies to ensure compliance with the policies and
procedures.
(g) Furnishing information about consumers to consumer reporting
agencies following mergers, portfolio acquisitions or sales, or
other acquisitions or transfers of accounts or other obligations in
a manner that prevents re-aging of information, duplicative
reporting, or other problems that may similarly affect the accuracy
or integrity of the information furnished.
(h) Deleting, updating, and correcting information in the
furnisher's records, as appropriate, to avoid furnishing inaccurate
information.
(i) Conducting reasonable investigations of disputes.
(j) Designing technological and other means of communication
with consumer reporting agencies to prevent duplicative reporting of
accounts, erroneous association of information with the wrong
consumer(s), and other occurrences that may compromise the accuracy
or integrity of information provided to consumer reporting agencies.
(k) Providing consumer reporting agencies with sufficient
identifying information in the furnisher's possession about each
consumer about whom information is furnished to enable the consumer
reporting agency properly to identify the consumer.
(l) Conducting a periodic evaluation of its own practices,
consumer reporting agency 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 or integrity of information furnished to
consumer reporting agencies.
(m) Complying with applicable requirements under the Fair Credit
Reporting Act and its implementing regulations.
[[Page 31520]]
Department of the Treasury
Office of Thrift Supervision
12 CFR Chapter V
Authority and Issuance
0
For the reasons discussed in the joint preamble, the Office of Thrift
Supervision amends chapter V of title 12 of the Code of Federal
Regulations by amending 12 CFR Part 571 as follows:
PART 571--FAIR CREDIT REPORTING
0
1. The authority citation for part 571 is revised to read as follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1828, 1831p-1,
and 1881-1884; 15 U.S.C. 1681b, 1681c, 1681m, 1681s, 1681s-2, 1681s-
3, 1681t, and 1681w; 15 U.S.C. 6801 and 6805; Sec. 214 Pub. L. 108-
159, 117 Stat. 1952.
Subpart A--General Provisions
0
2. Amend Sec. 571.1 by adding a new paragraph (b)(5) to read as
follows:
Sec. 571.1 Purpose and scope.
* * * * *
(b) * * *
(5) The scope of subpart E of this part is stated in Sec. 571.40
of this part.
* * * * *
0
3. Add a new subpart E to part 571 to read as follows:
Subpart E--Duties of Furnishers of Information
Sec.
571.40 Scope.
571.41 Definitions.
571.42 Reasonable policies and procedures concerning the accuracy
and integrity of furnished information.
571.43 Direct disputes.
Subpart E--Duties of Furnishers of Information
Sec. 571.40 Scope.
Subpart E of this part applies to savings associations whose
deposits are insured by the Federal Deposit Insurance Corporation or,
in accordance with Sec. 559.3(h)(1) of this chapter, Federal savings
association 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)).
Sec. 571.41 Definitions.
For purposes of this subpart and Appendix E of this part, the
following definitions apply:
(a) Accuracy means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer correctly:
(1) Reflects the terms of and liability for the account or other
relationship;
(2) Reflects the consumer's performance and other conduct with
respect to the account or other relationship; and
(3) Identifies the appropriate consumer.
(b) Direct dispute means a dispute submitted directly to a
furnisher (including a furnisher that is a debt collector) by a
consumer concerning the accuracy of any information contained in a
consumer report and pertaining to an account or other relationship that
the furnisher has or had with the consumer.
(c) Furnisher means an entity that furnishes information relating
to consumers to one or more consumer reporting agencies for inclusion
in a consumer report. An entity is not a furnisher when it:
(1) Provides information to a consumer reporting agency solely to
obtain a consumer report in accordance with sections 604(a) and (f) of
the Fair Credit Reporting Act;
(2) Is acting as a ``consumer reporting agency'' as defined in
section 603(f) of the Fair Credit Reporting Act;
(3) Is a consumer to whom the furnished information pertains; or
(4) Is a neighbor, friend, or associate of the consumer, or another
individual with whom the consumer is acquainted or who may have
knowledge about the consumer, and who provides information about the
consumer's character, general reputation, personal characteristics, or
mode of living in response to a specific request from a consumer
reporting agency.
(d) Identity theft has the same meaning as in 16 CFR 603.2(a).
(e) Integrity means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer:
(1) Is substantiated by the furnisher's records at the time it is
furnished;
(2) Is furnished in a form and manner that is designed to minimize
the likelihood that the information may be incorrectly reflected in a
consumer report; and
(3) Includes the information in the furnisher's possession about
the account or other relationship that OTS has:
(i) Determined that the absence of which would likely be materially
misleading in evaluating a consumer's creditworthiness, credit
standing, credit capacity, character, general reputation, personal
characteristics, or mode of living; and
(ii) Listed in section I.(b)(2)(iii) of Appendix E of this part.
Sec. 571.42 Reasonable policies and procedures concerning the
accuracy and integrity of furnished information.
(a) Policies and procedures. Each furnisher must establish and
implement reasonable written policies and procedures regarding the
accuracy and integrity of the information relating to consumers that it
furnishes to a consumer reporting agency. The policies and procedures
must be appropriate to the nature, size, complexity, and scope of each
furnisher's activities.
(b) Guidelines. Each furnisher must consider the guidelines in
Appendix E of this part in developing its policies and procedures
required by this section, and incorporate those guidelines that are
appropriate.
(c) Reviewing and updating policies and procedures. Each furnisher
must review its policies and procedures required by this section
periodically and update them as necessary to ensure their continued
effectiveness.
Sec. 571.43 Direct disputes.
(a) General rule. Except as otherwise provided in this section, a
furnisher must conduct a reasonable investigation of a direct dispute
if it relates to:
(1) 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;
(2) 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
credit limit on an open-end account;
(3) The consumer's performance or other conduct concerning an
account or other relationship 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
(4) 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.
(b) Exceptions. The requirements of paragraph (a) of this section
do not apply to a furnisher if:
(1) The direct dispute relates to:
(i) The consumer's identifying information (other than a direct
dispute
[[Page 31521]]
relating to a consumer's liability for a credit account or other debt
with the furnisher, as provided in paragraph (a)(1) of this section)
such as name(s), date of birth, Social Security number, telephone
number(s), or address(es);
(ii) The identity of past or present employers;
(iii) Inquiries or requests for a consumer report;
(iv) Information derived from public records, such as judgments,
bankruptcies, liens, and other legal matters (unless provided by a
furnisher with an account or other relationship with the consumer);
(v) Information related to fraud alerts or active duty alerts; or
(vi) Information provided to a consumer reporting agency by another
furnisher; or
(2) The furnisher has a reasonable belief that the direct 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), or an entity that would
be a credit repair organization, but for 15 U.S.C. 1679a(3)(B)(i).
(c) Direct dispute address. A furnisher is required to investigate
a direct dispute only if a consumer submits a dispute notice to the
furnisher at:
(1) The address of a furnisher provided by a furnisher and set
forth on a consumer report relating to the consumer;
(2) An address clearly and conspicuously specified by the furnisher
for submitting direct disputes that is provided to the consumer in
writing or electronically (if the consumer has agreed to the electronic
delivery of information from the furnisher); or
(3) Any business address of the furnisher if the furnisher has not
so specified and provided an address for submitting direct disputes
under paragraphs (c)(1) or (2) of this section.
(d) Direct dispute notice contents. A dispute notice must include:
(1) Sufficient information to identify the account or other
relationship that is in dispute, such as an account number and the
name, address, and telephone number of the consumer, if applicable;
(2) The specific information that the consumer is disputing and an
explanation of the basis for the dispute; and
(3) All supporting documentation or other information reasonably
required by the furnisher to substantiate the basis of the dispute.
This documentation may include, for example: A copy of the relevant
portion 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.
(e) Duty of furnisher after receiving a direct dispute notice.
After receiving a dispute notice from a consumer pursuant to paragraphs
(c) and (d) of this section, the furnisher must:
(1) Conduct a reasonable investigation with respect to the disputed
information;
(2) Review all relevant information provided by the consumer with
the dispute notice;
(3) Complete its investigation of the dispute and report the
results of the investigation to the consumer before the expiration of
the period under section 611(a)(1) of the Fair Credit Reporting Act (15
U.S.C. 1681i(a)(1)) within which a consumer reporting agency would be
required to complete its action if the consumer had elected to dispute
the information under that section; and
(4) If the investigation finds that the information reported was
inaccurate, promptly notify each consumer reporting agency to which the
furnisher provided inaccurate information of that determination and
provide to the consumer reporting agency any correction to that
information that is necessary to make the information provided by the
furnisher accurate.
(f) Frivolous or irrelevant disputes. (1) A furnisher is not
required to investigate a direct dispute if the furnisher has
reasonably determined that the dispute is frivolous or irrelevant. A
dispute qualifies as frivolous or irrelevant if:
(i) The consumer did not provide sufficient information to
investigate the disputed information as required by paragraph (d) of
this section;
(ii) The direct dispute is substantially the same as a dispute
previously submitted by or on behalf of the consumer, either directly
to the furnisher or through a consumer reporting agency, with respect
to which the furnisher has already satisfied the applicable
requirements of the Act or this section; provided, however, that a
direct dispute is not substantially the same as a dispute previously
submitted if the dispute includes information listed in paragraph (d)
of this section that had not previously been provided to the furnisher;
or
(iii) The furnisher is not required to investigate the direct
dispute because one or more of the exceptions listed in paragraph (b)
of this section applies.
(2) Notice of determination. Upon making a determination that a
dispute is frivolous or irrelevant, the furnisher must notify the
consumer of the determination not later than five business days after
making the determination, by mail or, if authorized by the consumer for
that purpose, by any other means available to the furnisher.
(3) Contents of notice of determination that a dispute is frivolous
or irrelevant. A notice of determination that a dispute is frivolous or
irrelevant must include the reasons for such determination and identify
any information required to investigate the disputed information, which
notice may consist of a standardized form describing the general nature
of such information.
0
3. Add a new Appendix E to part 571 to read as follows:
Appendix E to Part 571--Interagency Guidelines Concerning the Accuracy
and Integrity of Information Furnished to Consumer Reporting Agencies
OTS encourages voluntary furnishing of information to consumer
reporting agencies. Section 571.42 of this part requires each
furnisher to establish and implement reasonable written policies and
procedures concerning the accuracy and integrity of the information
it furnishes to consumer reporting agencies. Under Sec. 571.42(b),
a furnisher must consider the guidelines set forth below in
developing its policies and procedures. In establishing these
policies and procedures, a furnisher may include any of its existing
policies and procedures that are relevant and appropriate. Section
571.42(c) requires each furnisher to review its policies and
procedures periodically and update them as necessary to ensure their
continued effectiveness.
I. Nature, Scope, and Objectives of Policies and Procedures
(a) Nature and Scope. Section 571.42(a) of this part requires
that a furnisher's policies and procedures be appropriate to the
nature, size, complexity, and scope of the furnisher's activities.
In developing its policies and procedures, a furnisher should
consider, for example:
(1) The types of business activities in which the furnisher
engages;
(2) The nature and frequency of the information the furnisher
provides to consumer reporting agencies; and
(3) The technology used by the furnisher to furnish information
to consumer reporting agencies.
(b) Objectives. A furnisher's policies and procedures should be
reasonably designed to promote the following objectives:
(1) To furnish information about accounts or other relationships
with a consumer that is accurate, such that the furnished
information:
(i) Identifies the appropriate consumer;
(ii) Reflects the terms of and liability for those accounts or
other relationships; and
(iii) Reflects the consumer's performance and other conduct with
respect to the account or other relationship;
(2) To furnish information about accounts or other relationships
with a consumer that
[[Page 31522]]
has integrity, such that the furnished information:
(i) Is substantiated by the furnisher's records at the time it
is furnished;
(ii) Is furnished in a form and manner that is designed to
minimize the likelihood that the information may be incorrectly
reflected in a consumer report; thus, the furnished information
should:
(A) Include appropriate identifying information about the
consumer to whom it pertains; and
(B) Be furnished in a standardized and clearly understandable
form and manner and with a date specifying the time period to which
the information pertains; and
(iii) Includes the credit limit, if applicable and in the
furnisher's possession;
(3) To conduct reasonable investigations of consumer disputes
and take appropriate actions based on the outcome of such
investigations; and
(4) To update the information it furnishes as necessary to
reflect the current status of the consumer's account or other
relationship, including, for example:
(i) Any transfer of an account (e.g., by sale or assignment for
collection) to a third party; and
(ii) Any cure of the consumer's failure to abide by the terms of
the account or other relationship.
II. Establishing and Implementing Policies and Procedures
In establishing and implementing its policies and procedures, a
furnisher should:
(a) Identify practices or activities of the furnisher that can
compromise the accuracy or integrity of information furnished to
consumer reporting agencies, such as by:
(1) Reviewing its existing practices and activities, including
the technological means and other methods it uses to furnish
information to consumer reporting agencies and the frequency and
timing of its furnishing of information;
(2) Reviewing its historical records relating to accuracy or
integrity or to disputes; reviewing other information relating to
the accuracy or integrity of information provided by the furnisher
to consumer reporting agencies; and considering the types of errors,
omissions, or other problems that may have affected the accuracy or
integrity of information it has furnished about consumers to
consumer reporting agencies;
(3) Considering any feedback received from consumer reporting
agencies, consumers, or other appropriate parties;
(4) Obtaining feedback from the furnisher's staff; and
(5) Considering the potential impact of the furnisher's policies
and procedures on consumers.
(b) Evaluate the effectiveness of existing policies and
procedures of the furnisher regarding the accuracy and integrity of
information furnished to consumer reporting agencies; consider
whether new, additional, or different policies and procedures are
necessary; and consider whether implementation of existing policies
and procedures should be modified to enhance the accuracy and
integrity of information about consumers furnished to consumer
reporting agencies.
(c) Evaluate the effectiveness of specific methods (including
technological means) the furnisher uses to provide information to
consumer reporting agencies; how those methods may affect the
accuracy and integrity of the information it provides to consumer
reporting agencies; and whether new, additional, or different
methods (including technological means) should be used to provide
information to consumer reporting agencies to enhance the accuracy
and integrity of that information.
III. Specific Components of Policies and Procedures
In developing its policies and procedures, a furnisher should
address the following, as appropriate:
(a) Establishing and implementing a system for furnishing
information about consumers to consumer reporting agencies that is
appropriate to the nature, size, complexity, and scope of the
furnisher's business operations.
(b) 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
consumer reporting agencies.
(c) Maintaining 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 is subject to a direct dispute.
(d) Establishing and implementing appropriate internal controls
regarding the accuracy and integrity of information about consumers
furnished to consumer reporting agencies, such as by implementing
standard procedures and verifying random samples of information
provided to consumer reporting agencies.
(e) Training staff that participates in activities related to
the furnishing of information about consumers to consumer reporting
agencies to implement the policies and procedures.
(f) Providing for appropriate and effective oversight of
relevant service providers whose activities may affect the accuracy
or integrity of information about consumers furnished to consumer
reporting agencies to ensure compliance with the policies and
procedures.
(g) Furnishing information about consumers to consumer reporting
agencies following mergers, portfolio acquisitions or sales, or
other acquisitions or transfers of accounts or other obligations in
a manner that prevents re-aging of information, duplicative
reporting, or other problems that may similarly affect the accuracy
or integrity of the information furnished.
(h) Deleting, updating, and correcting information in the
furnisher's records, as appropriate, to avoid furnishing inaccurate
information.
(i) Conducting reasonable investigations of disputes.
(j) Designing technological and other means of communication
with consumer reporting agencies to prevent duplicative reporting of
accounts, erroneous association of information with the wrong
consumer(s), and other occurrences that may compromise the accuracy
or integrity of information provided to consumer reporting agencies.
(k) Providing consumer reporting agencies with sufficient
identifying information in the furnisher's possession about each
consumer about whom information is furnished to enable the consumer
reporting agency properly to identify the consumer.
(l) Conducting a periodic evaluation of its own practices,
consumer reporting agency 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 or integrity of information furnished to
consumer reporting agencies.
(m) Complying with applicable requirements under the Fair Credit
Reporting Act and its implementing regulations.
National Credit Union Administration
12 CFR Chapter VII
Authority and Issuance
0
For the reasons discussed in the joint preamble, the National Credit
Union Administration amends chapter VII of title 12 of the Code of
Federal Regulations by amending 12 CFR part 717 as follows:
PART 717--FAIR CREDIT REPORTING
0
1. Revise the authority citation for part 717 to read as follows:
Authority: 12 U.S.C. 1751 et seq.; 15 U.S.C. 1681a, 1681b,
1681c, 1681m, 1681s, 1681s-1, 1681t, 1681w, 6801 and 6805, Public
Law 108-159, 117 Stat. 1952.
0
2. Add a new subpart E to part 717 to read as follows:
Subpart E--Duties of Furnishers of Information
717.40 Scope.
717.41 Definitions.
717.42 Reasonable policies and procedures concerning the accuracy
and integrity of furnished information.
717.43 Direct disputes.
Subpart E--Duties of Furnishers of Information
Sec. 717.40 Scope.
This subpart applies to a Federal credit union that furnishes
information to a consumer reporting agency.
Sec. 717.41 Definitions.
For purposes of this subpart and Appendix E of this part, the
following definitions apply:
(a) Accuracy means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer correctly:
(1) Reflects the terms of and liability for the account or other
relationship;
(2) Reflects the consumer's performance and other conduct with
respect to the account or other relationship; and
[[Page 31523]]
(3) Identifies the appropriate consumer.
(b) Direct dispute means a dispute submitted directly to a
furnisher (including a furnisher that is a debt collector) by a
consumer concerning the accuracy of any information contained in a
consumer report and pertaining to an account or other relationship that
the furnisher has or had with the consumer.
(c) Furnisher means an entity that furnishes information relating
to consumers to one or more consumer reporting agencies for inclusion
in a consumer report. An entity is not a furnisher when it:
(1) Provides information to a consumer reporting agency solely to
obtain a consumer report in accordance with sections 604(a) and (f) of
the Fair Credit Reporting Act;
(2) Is acting as a ``consumer reporting agency'' as defined in
section 603(f) of the Fair Credit Reporting Act;
(3) Is a consumer to whom the furnished information pertains; or
(4) Is a neighbor, friend, or associate of the consumer, or another
individual with whom the consumer is acquainted or who may have
knowledge about the consumer, and who provides information about the
consumer's character, general reputation, personal characteristics, or
mode of living in response to a specific request from a consumer
reporting agency.
(d) Identity theft has the same meaning as in 16 CFR 603.2(a).
(e) Integrity means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer:
(1) Is substantiated by the furnisher's records at the time it is
furnished;
(2) Is furnished in a form and manner that is designed to minimize
the likelihood that the information may be incorrectly reflected in a
consumer report; and
(3) Includes the information in the furnisher's possession about
the account or other relationship that the NCUA has:
(i) Determined that the absence of which would likely be materially
misleading in evaluating a consumer's creditworthiness, credit
standing, credit capacity, character, general reputation, personal
characteristics, or mode of living; and
(ii) Listed in section I.(b)(2)(iii) of Appendix E of this part.
Sec. 717.42 Reasonable policies and procedures concerning the
accuracy and integrity of furnished information.
(a) Policies and procedures. Each furnisher must establish and
implement reasonable written policies and procedures regarding the
accuracy and integrity of the information relating to consumers that it
furnishes to a consumer reporting agency. The policies and procedures
must be appropriate to the nature, size, complexity, and scope of each
furnisher's activities.
(b) Guidelines. Each furnisher must consider the guidelines in
Appendix E of this part in developing its policies and procedures
required by this section, and incorporate those guidelines that are
appropriate.
(c) Reviewing and updating policies and procedures. Each furnisher
must review its policies and procedures required by this section
periodically and update them as necessary to ensure their continued
effectiveness.
Sec. 717.43 Direct disputes.
(a) General rule. Except as otherwise provided in this section, a
furnisher must conduct a reasonable investigation of a direct dispute
if it relates to:
(1) 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;
(2) 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
credit limit on an open-end account;
(3) The consumer's performance or other conduct concerning an
account or other relationship 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
(4) 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.
(b) Exceptions. The requirements of paragraph (a) of this section
do not apply to a furnisher if:
(1) The direct dispute relates to:
(i) 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 paragraph (a)(1) of this
section) such as name(s), date of birth, Social Security number,
telephone number(s), or address(es);
(ii) The identity of past or present employers;
(iii) Inquiries or requests for a consumer report;
(iv) Information derived from public records, such as judgments,
bankruptcies, liens, and other legal matters (unless provided by a
furnisher with an account or other relationship with the consumer);
(v) Information related to fraud alerts or active duty alerts; or
(vi) Information provided to a consumer reporting agency by another
furnisher; or
(2) The furnisher has a reasonable belief that the direct 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), or an entity that would
be a credit repair organization, but for 15 U.S.C. 1679a(3)(B)(i).
(c) Direct dispute address. A furnisher is required to investigate
a direct dispute only if a consumer submits a dispute notice to the
furnisher at:
(1) The address of a furnisher provided by a furnisher and set
forth on a consumer report relating to the consumer;
(2) An address clearly and conspicuously specified by the furnisher
for submitting direct disputes that is provided to the consumer in
writing or electronically (if the consumer has agreed to the electronic
delivery of information from the furnisher); or
(3) Any business address of the furnisher if the furnisher has not
so specified and provided an address for submitting direct disputes
under paragraphs (c)(1) or (2) of this section.
(d) Direct dispute notice contents. A dispute notice must include:
(1) Sufficient information to identify the account or other
relationship that is in dispute, such as an account number and the
name, address, and telephone number of the consumer, if applicable;
(2) The specific information that the consumer is disputing and an
explanation of the basis for the dispute; and
(3) All supporting documentation or other information reasonably
required by the furnisher to substantiate the basis of the dispute.
This documentation may include, for example: a copy of the relevant
portion 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.
(e) Duty of furnisher after receiving a direct dispute notice.
After receiving a dispute notice from a consumer
[[Page 31524]]
pursuant to paragraphs (c) and (d) of this section, the furnisher must:
(1) Conduct a reasonable investigation with respect to the disputed
information;
(2) Review all relevant information provided by the consumer with
the dispute notice;
(3) Complete its investigation of the dispute and report the
results of the investigation to the consumer before the expiration of
the period under section 611(a)(1) of the Fair Credit Reporting Act (15
U.S.C. 1681i(a)(1)) within which a consumer reporting agency would be
required to complete its action if the consumer had elected to dispute
the information under that section; and
(4) If the investigation finds that the information reported was
inaccurate, promptly notify each consumer reporting agency to which the
furnisher provided inaccurate information of that determination and
provide to the consumer reporting agency any correction to that
information that is necessary to make the information provided by the
furnisher accurate.
(f) Frivolous or irrelevant disputes. (1) A furnisher is not
required to investigate a direct dispute if the furnisher has
reasonably determined that the dispute is frivolous or irrelevant. A
dispute qualifies as frivolous or irrelevant if:
(i) The consumer did not provide sufficient information to
investigate the disputed information as required by paragraph (d) of
this section;
(ii) The direct dispute is substantially the same as a dispute
previously submitted by or on behalf of the consumer, either directly
to the furnisher or through a consumer reporting agency, with respect
to which the furnisher has already satisfied the applicable
requirements of the Act or this section; provided, however, that a
direct dispute is not substantially the same as a dispute previously
submitted if the dispute includes information listed in paragraph (d)
of this section that had not previously been provided to the furnisher;
or
(iii) The furnisher is not required to investigate the direct
dispute because one or more of the exceptions listed in paragraph (b)
of this section applies.
(2) Notice of determination. Upon making a determination that a
dispute is frivolous or irrelevant, the furnisher must notify the
consumer of the determination not later than five business days after
making the determination, by mail or, if authorized by the consumer for
that purpose, by any other means available to the furnisher.
(3) Contents of notice of determination that a dispute is frivolous
or irrelevant. A notice of determination that a dispute is frivolous or
irrelevant must include the reasons for such determination and identify
any information required to investigate the disputed information, which
notice may consist of a standardized form describing the general nature
of such information.
0
3. Add a new appendix E to part 717 to read as follows:
Appendix E to Part 717--Interagency Guidelines Concerning the Accuracy
and Integrity of Information Furnished to Consumer Reporting Agencies
The NCUA encourages voluntary furnishing of information to
consumer reporting agencies. Section 717.42 of this part requires
each furnisher to establish and implement reasonable written
policies and procedures concerning the accuracy and integrity of the
information it furnishes to consumer reporting agencies. Under Sec.
717.42(b), a furnisher must consider the guidelines set forth below
in developing its policies and procedures. In establishing these
policies and procedures, a furnisher may include any of its existing
policies and procedures that are relevant and appropriate. Section
717.42(c) requires each furnisher to review its policies and
procedures periodically and update them as necessary to ensure their
continued effectiveness.
I. Nature, Scope, and Objectives of Policies and Procedures
(a) Nature and Scope. Section 717.42(a) of this part requires
that a furnisher's policies and procedures be appropriate to the
nature, size, complexity, and scope of the furnisher's activities.
In developing its policies and procedures, a furnisher should
consider, for example:
(1) The types of business activities in which the furnisher
engages;
(2) The nature and frequency of the information the furnisher
provides to consumer reporting agencies; and
(3) The technology used by the furnisher to furnish information
to consumer reporting agencies.
(b) Objectives. A furnisher's policies and procedures should be
reasonably designed to promote the following objectives:
(1) To furnish information about accounts or other relationships
with a consumer that is accurate, such that the furnished
information:
(i) Identifies the appropriate consumer;
(ii) Reflects the terms of and liability for those accounts or
other relationships; and
(iii) Reflects the consumer's performance and other conduct with
respect to the account or other relationship;
(2) To furnish information about accounts or other relationships
with a consumer that has integrity, such that the furnished
information:
(i) Is substantiated by the furnisher's records at the time it
is furnished;
(ii) Is furnished in a form and manner that is designed to
minimize the likelihood that the information may be incorrectly
reflected in a consumer report; thus, the furnished information
should:
(A) Include appropriate identifying information about the
consumer to whom it pertains; and
(B) Be furnished in a standardized and clearly understandable
form and manner and with a date specifying the time period to which
the information pertains; and
(iii) Includes the credit limit, if applicable and in the
furnisher's possession;
(3) To conduct reasonable investigations of consumer disputes
and take appropriate actions based on the outcome of such
investigations; and
(4) To update the information it furnishes as necessary to
reflect the current status of the consumer's account or other
relationship, including, for example:
(i) Any transfer of an account (e.g., by sale or assignment for
collection) to a third party; and
(ii) Any cure of the consumer's failure to abide by the terms of
the account or other relationship.
II. Establishing and Implementing Policies and Procedures
In establishing and implementing its policies and procedures, a
furnisher should:
(a) Identify practices or activities of the furnisher that can
compromise the accuracy or integrity of information furnished to
consumer reporting agencies, such as by:
(1) Reviewing its existing practices and activities, including
the technological means and other methods it uses to furnish
information to consumer reporting agencies and the frequency and
timing of its furnishing of information;
(2) Reviewing its historical records relating to accuracy or
integrity or to disputes; reviewing other information relating to
the accuracy or integrity of information provided by the furnisher
to consumer reporting agencies; and considering the types of errors,
omissions, or other problems that may have affected the accuracy or
integrity of information it has furnished about consumers to
consumer reporting agencies;
(3) Considering any feedback received from consumer reporting
agencies, consumers, or other appropriate parties;
(4) Obtaining feedback from the furnisher's staff; and
(5) Considering the potential impact of the furnisher's policies
and procedures on consumers.
(b) Evaluate the effectiveness of existing policies and
procedures of the furnisher regarding the accuracy and integrity of
information furnished to consumer reporting agencies; consider
whether new, additional, or different policies and procedures are
necessary; and consider whether implementation of existing policies
and procedures should be modified to enhance the accuracy and
integrity of information about consumers furnished to consumer
reporting agencies.
(c) Evaluate the effectiveness of specific methods (including
technological means) the furnisher uses to provide information to
consumer reporting agencies; how those methods may affect the
accuracy and integrity of the information it provides to
[[Page 31525]]
consumer reporting agencies; and whether new, additional, or
different methods (including technological means) should be used to
provide information to consumer reporting agencies to enhance the
accuracy and integrity of that information.
III. Specific Components of Policies and Procedures
In developing its policies and procedures, a furnisher should
address the following, as appropriate:
(a) Establishing and implementing a system for furnishing
information about consumers to consumer reporting agencies that is
appropriate to the nature, size, complexity, and scope of the
furnisher's business operations.
(b) 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
consumer reporting agencies.
(c) Maintaining 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 is subject to a direct dispute.
(d) Establishing and implementing appropriate internal controls
regarding the accuracy and integrity of information about consumers
furnished to consumer reporting agencies, such as by implementing
standard procedures and verifying random samples of information
provided to consumer reporting agencies.
(e) Training staff that participates in activities related to
the furnishing of information about consumers to consumer reporting
agencies to implement the policies and procedures.
(f) Providing for appropriate and effective oversight of
relevant service providers whose activities may affect the accuracy
or integrity of information about consumers furnished to consumer
reporting agencies to ensure compliance with the policies and
procedures.
(g) Furnishing information about consumers to consumer reporting
agencies following mergers, portfolio acquisitions or sales, or
other acquisitions or transfers of accounts or other obligations in
a manner that prevents re-aging of information, duplicative
reporting, or other problems that may similarly affect the accuracy
or integrity of the information furnished.
(h) Deleting, updating, and correcting information in the
furnisher's records, as appropriate, to avoid furnishing inaccurate
information.
(i) Conducting reasonable investigations of disputes.
(j) Designing technological and other means of communication
with consumer reporting agencies to prevent duplicative reporting of
accounts, erroneous association of information with the wrong
consumer(s), and other occurrences that may compromise the accuracy
or integrity of information provided to consumer reporting agencies.
(k) Providing consumer reporting agencies with sufficient
identifying information in the furnisher's possession about each
consumer about whom information is furnished to enable the consumer
reporting agency properly to identify the consumer.
(l) Conducting a periodic evaluation of its own practices,
consumer reporting agency 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 or integrity of information furnished to
consumer reporting agencies.
(m) Complying with applicable requirements under the Fair Credit
Reporting Act and its implementing regulations.
Federal Trade Commission
16 CFR Chapter I
Authority and Issuance
0
For the reasons discussed in the joint preamble, the Federal Trade
Commission adds a new part 660 to title 16 of the Code of Federal
Regulations to read as follows:
PART 660--DUTIES OF FURNISHERS OF INFORMATION TO CONSUMER REPORTING
AGENCIES
Sec.
660.1 Scope.
660.2 Definitions.
660.3 Reasonable policies and procedures concerning the accuracy and
integrity of furnisher information.
660.4 Direct disputes.
Appendix A to Part 660--Interagency Guidelines Concerning the
Accuracy and Integrity of Information Furnished to Consumer
Reporting Agencies
Authority: 15 U.S.C. 1681s-2(a)(8) and 1681s-2(e); Sec. 312,
Pub. L. 108-159, 117 Stat. 1989.
Sec. 660.1 Scope.
This part applies to furnishers of information to consumer
reporting agencies that are subject to administrative enforcement of
the FCRA by the Federal Trade Commission pursuant to 15 U.S.C.
1681s(a)(1) (referred to as ``furnishers'').
Sec. 660.2 Definitions.
For purposes of this part and Appendix A of this part, the
following definitions apply:
(a) Accuracy means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer correctly:
(1) Reflects the terms of and liability for the account or other
relationship;
(2) Reflects the consumer's performance and other conduct with
respect to the account or other relationship; and
(3) Identifies the appropriate consumer.
(b) Direct dispute means a dispute submitted directly to a
furnisher (including a furnisher that is a debt collector) by a
consumer concerning the accuracy of any information contained in a
consumer report and pertaining to an account or other relationship that
the furnisher has or had with the consumer.
(c) Furnisher means an entity that furnishes information relating
to consumers to one or more consumer reporting agencies for inclusion
in a consumer report. An entity is not a furnisher when it:
(1) Provides information to a consumer reporting agency solely to
obtain a consumer report in accordance with sections 604(a) and (f) of
the Fair Credit Reporting Act;
(2) Is acting as a ``consumer reporting agency'' as defined in
section 603(f) of the Fair Credit Reporting Act;
(3) Is a consumer to whom the furnished information pertains; or
(4) Is a neighbor, friend, or associate of the consumer, or another
individual with whom the consumer is acquainted or who may have
knowledge about the consumer, and who provides information about the
consumer's character, general reputation, personal characteristics, or
mode of living in response to a specific request from a consumer
reporting agency.
(d) Identity theft has the same meaning as in 16 CFR 603.2(a).
(e) Integrity means that information that a furnisher provides to a
consumer reporting agency about an account or other relationship with
the consumer:
(1) Is substantiated by the furnisher's records at the time it is
furnished;
(2) Is furnished in a form and manner that is designed to minimize
the likelihood that the information may be incorrectly reflected in a
consumer report; and
(3) Includes the information in the furnisher's possession about
the account or other relationship that the Commission has:
(i) Determined that the absence of which would likely be materially
misleading in evaluating a consumer's creditworthiness, credit
standing, credit capacity, character, general reputation, personal
characteristics, or mode of living; and (ii) Listed in section
I.(b)(2)(iii) of Appendix A of this part.
Sec. 660.3 Reasonable policies and procedures concerning the accuracy
and integrity of furnished information.
(a) Policies and procedures. Each furnisher must establish and
implement reasonable written policies and procedures regarding the
accuracy and integrity of the information relating to consumers that it
furnishes to a consumer reporting agency. The policies and procedures
must be appropriate to the nature, size, complexity, and scope of each
furnisher's activities.
(b) Guidelines. Each furnisher must consider the guidelines in
Appendix A
[[Page 31526]]
of this part in developing its policies and procedures required by this
section, and incorporate those guidelines that are appropriate.
(c) Reviewing and updating policies and procedures. Each furnisher
must review its policies and procedures required by this section
periodically and update them as necessary to ensure their continued
effectiveness.
Sec. 660.4 Direct disputes.
(a) General rule. Except as otherwise provided in this section, a
furnisher must conduct a reasonable investigation of a direct dispute
if it relates to:
(1) 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;
(2) 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
credit limit on an open-end account;
(3) The consumer's performance or other conduct concerning an
account or other relationship 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
(4) 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.
(b) Exceptions. The requirements of paragraph (a) of this section
do not apply to a furnisher if:
(1) The direct dispute relates to:
(i) 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 paragraph (a)(1) of this
section) such as name(s), date of birth, Social Security number,
telephone number(s), or address(es);
(ii) The identity of past or present employers;
(iii) Inquiries or requests for a consumer report;
(iv) Information derived from public records, such as judgments,
bankruptcies, liens, and other legal matters (unless provided by a
furnisher with an account or other relationship with the consumer);
(v) Information related to fraud alerts or active duty alerts; or
(vi) Information provided to a consumer reporting agency by another
furnisher; or
(2) The furnisher has a reasonable belief that the direct 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), or an entity that would
be a credit repair organization, but for 15 U.S.C. 1679a(3)(B)(i).
(c) Direct dispute address. A furnisher is required to investigate
a direct dispute only if a consumer submits a dispute notice to the
furnisher at:
(1) The address of a furnisher provided by a furnisher and set
forth on a consumer report relating to the consumer;
(2) An address clearly and conspicuously specified by the furnisher
for submitting direct disputes that is provided to the consumer in
writing or electronically (if the consumer has agreed to the electronic
delivery of information from the furnisher); or
(3) Any business address of the furnisher if the furnisher has not
so specified and provided an address for submitting direct disputes
under paragraphs (c)(1) or (2) of this section.
(d) Direct dispute notice contents. A dispute notice must include:
(1) Sufficient information to identify the account or other
relationship that is in dispute, such as an account number and the
name, address, and telephone number of the consumer, if applicable;
(2) The specific information that the consumer is disputing and an
explanation of the basis for the dispute; and
(3) All supporting documentation or other information reasonably
required by the furnisher to substantiate the basis of the dispute.
This documentation may include, for example: a copy of the relevant
portion 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.
(e) Duty of furnisher after receiving a direct dispute notice.
After receiving a dispute notice from a consumer pursuant to paragraphs
(c) and (d) of this section, the furnisher must:
(1) Conduct a reasonable investigation with respect to the disputed
information;
(2) Review all relevant information provided by the consumer with
the dispute notice;
(3) Complete its investigation of the dispute and report the
results of the investigation to the consumer before the expiration of
the period under section 611(a)(1) of the Fair Credit Reporting Act (15
U.S.C. 1681i(a)(1)) within which a consumer reporting agency would be
required to complete its action if the consumer had elected to dispute
the information under that section; and
(4) If the investigation finds that the information reported was
inaccurate, promptly notify each consumer reporting agency to which the
furnisher provided inaccurate information of that determination and
provide to the consumer reporting agency any correction to that
information that is necessary to make the information provided by the
furnisher accurate.
(f) Frivolous or irrelevant disputes. (1) A furnisher is not
required to investigate a direct dispute if the furnisher has
reasonably determined that the dispute is frivolous or irrelevant. A
dispute qualifies as frivolous or irrelevant if:
(i) The consumer did not provide sufficient information to
investigate the disputed information as required by paragraph (d) of
this section;
(ii) The direct dispute is substantially the same as a dispute
previously submitted by or on behalf of the consumer, either directly
to the furnisher or through a consumer reporting agency, with respect
to which the furnisher has already satisfied the applicable
requirements of the Act or this section; provided, however, that a
direct dispute is not substantially the same as a dispute previously
submitted if the dispute includes information listed in paragraph (d)
of this section that had not previously been provided to the furnisher;
or
(iii) The furnisher is not required to investigate the direct
dispute because one or more of the exceptions listed in paragraph (b)
of this section applies.
(2) Notice of determination. Upon making a determination that a
dispute is frivolous or irrelevant, the furnisher must notify the
consumer of the determination not later than five business days after
making the determination, by mail or, if authorized by the consumer for
that purpose, by any other means available to the furnisher.
(3) Contents of notice of determination that a dispute is frivolous
or irrelevant. A notice of determination that a dispute is frivolous or
irrelevant must include the reasons for such determination and identify
any information required to investigate the disputed information, which
notice may consist of a standardized form
[[Page 31527]]
describing the general nature of such information.
Appendix A to Part 660--Interagency Guidelines Concerning the Accuracy
and Integrity of Information Furnished to Consumer Reporting Agencies
The Commission encourages voluntary furnishing of information to
consumer reporting agencies. Section 660.3 of this part requires
each furnisher to establish and implement reasonable written
policies and procedures concerning the accuracy and integrity of the
information it furnishes to consumer reporting agencies. Under Sec.
660.3(b), a furnisher must consider the guidelines set forth below
in developing its policies and procedures. In establishing these
policies and procedures, a furnisher may include any of its existing
policies and procedures that are relevant and appropriate. Section
660.3(c) requires each furnisher to review its policies and
procedures periodically and update them as necessary to ensure their
continued effectiveness.
I. Nature, Scope, and Objectives of Policies and Procedures
(a) Nature and Scope. Section 660.3(a) of this part requires
that a furnisher's policies and procedures be appropriate to the
nature, size, complexity, and scope of the furnisher's activities.
In developing its policies and procedures, a furnisher should
consider, for example:
(1) The types of business activities in which the furnisher
engages;
(2) The nature and frequency of the information the furnisher
provides to consumer reporting agencies; and
(3) The technology used by the furnisher to furnish information
to consumer reporting agencies.
(b) Objectives. A furnisher's policies and procedures should be
reasonably designed to promote the following objectives:
(1) To furnish information about accounts or other relationships
with a consumer that is accurate, such that the furnished
information:
(i) Identifies the appropriate consumer;
(ii) Reflects the terms of and liability for those accounts or
other relationships; and
(iii) Reflects the consumer's performance and other conduct with
respect to the account or other relationship;
(2) To furnish information about accounts or other relationships
with a consumer that has integrity, such that the furnished
information:
(i) Is substantiated by the furnisher's records at the time it
is furnished;
(ii) Is furnished in a form and manner that is designed to
minimize the likelihood that the information may be incorrectly
reflected in a consumer report; thus, the furnished information
should:
(A) Include appropriate identifying information about the
consumer to whom it pertains; and
(B) Be furnished in a standardized and clearly understandable
form and manner and with a date specifying the time period to which
the information pertains; and
(iii) Includes the credit limit, if applicable and in the
furnisher's possession;
(3) To conduct reasonable investigations of consumer disputes
and take appropriate actions based on the outcome of such
investigations; and
(4) To update the information it furnishes as necessary to
reflect the current status of the consumer's account or other
relationship, including, for example:
(i) Any transfer of an account (e.g., by sale or assignment for
collection) to a third party; and
(ii) Any cure of the consumer's failure to abide by the terms of
the account or other relationship.
II. Establishing and Implementing Policies and Procedures
In establishing and implementing its policies and procedures, a
furnisher should:
(a) Identify practices or activities of the furnisher that can
compromise the accuracy or integrity of information furnished to
consumer reporting agencies, such as by:
(1) Reviewing its existing practices and activities, including
the technological means and other methods it uses to furnish
information to consumer reporting agencies and the frequency and
timing of its furnishing of information;
(2) Reviewing its historical records relating to accuracy or
integrity or to disputes; reviewing other information relating to
the accuracy or integrity of information provided by the furnisher
to consumer reporting agencies; and considering the types of errors,
omissions, or other problems that may have affected the accuracy or
integrity of information it has furnished about consumers to
consumer reporting agencies;
(3) Considering any feedback received from consumer reporting
agencies, consumers, or other appropriate parties;
(4) Obtaining feedback from the furnisher's staff; and
(5) Considering the potential impact of the furnisher's policies
and procedures on consumers.
(b) Evaluate the effectiveness of existing policies and
procedures of the furnisher regarding the accuracy and integrity of
information furnished to consumer reporting agencies; consider
whether new, additional, or different policies and procedures are
necessary; and consider whether implementation of existing policies
and procedures should be modified to enhance the accuracy and
integrity of information about consumers furnished to consumer
reporting agencies.
(c) Evaluate the effectiveness of specific methods (including
technological means) the furnisher uses to provide information to
consumer reporting agencies; how those methods may affect the
accuracy and integrity of the information it provides to consumer
reporting agencies; and whether new, additional, or different
methods (including technological means) should be used to provide
information to consumer reporting agencies to enhance the accuracy
and integrity of that information.
III. Specific Components of Policies and Procedures
In developing its policies and procedures, a furnisher should
address the following, as appropriate:
(a) Establishing and implementing a system for furnishing
information about consumers to consumer reporting agencies that is
appropriate to the nature, size, complexity, and scope of the
furnisher's business operations.
(b) 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
consumer reporting agencies.
(c) Maintaining 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 is subject to a direct dispute.
(d) Establishing and implementing appropriate internal controls
regarding the accuracy and integrity of information about consumers
furnished to consumer reporting agencies, such as by implementing
standard procedures and verifying random samples of information
provided to consumer reporting agencies.
(e) Training staff that participates in activities related to
the furnishing of information about consumers to consumer reporting
agencies to implement the policies and procedures.
(f) Providing for appropriate and effective oversight of
relevant service providers whose activities may affect the accuracy
or integrity of information about consumers furnished to consumer
reporting agencies to ensure compliance with the policies and
procedures.
(g) Furnishing information about consumers to consumer reporting
agencies following mergers, portfolio acquisitions or sales, or
other acquisitions or transfers of accounts or other obligations in
a manner that prevents re-aging of information, duplicative
reporting, or other problems that may similarly affect the accuracy
or integrity of the information furnished.
(h) Deleting, updating, and correcting information in the
furnisher's records, as appropriate, to avoid furnishing inaccurate
information.
(i) Conducting reasonable investigations of disputes.
(j) Designing technological and other means of communication
with consumer reporting agencies to prevent duplicative reporting of
accounts, erroneous association of information with the wrong
consumer(s), and other occurrences that may compromise the accuracy
or integrity of information provided to consumer reporting agencies.
(k) Providing consumer reporting agencies with sufficient
identifying information in the furnisher's possession about each
consumer about whom information is furnished to enable the consumer
reporting agency properly to identify the consumer.
(l) Conducting a periodic evaluation of its own practices,
consumer reporting agency 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 or integrity of information furnished to
consumer reporting agencies.
(m) Complying with applicable requirements under the Fair Credit
Reporting Act and its implementing regulations.
[[Page 31528]]
Dated: May 15, 2009.
John C. Dugan,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve System
June 4, 2009.
Jennifer J. Johnson,
Secretary of the Board.
By order of the Board of Directors.
Dated at Washington, DC, the 29th day of May 2009.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
Dated: April 2, 2009.
By the Office of Thrift Supervision,
John E. Bowman,
Acting Director.
By the National Credit Union Administration Board on May 21,
2009.
Mary Rupp,
Secretary of the Board.
By Direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. E9-15323 Filed 6-30-09; 8:45 am]
BILLING CODE 4810-33-P, 6210-01-P, 6714-10-P, 6720-01-P, 7535-01-P,
6750-01-P