[Federal Register: December 13, 2007 (Volume 72, Number 239)] [Proposed Rules] [Page 70943-70986] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr13de07-22] [[Page 70943]] ----------------------------------------------------------------------- Part II Department of the Treasury Office of the Comptroller of the Currency 12 CFR Part 41 ----------------------------------------------------------------------- Federal Reserve System 12 CFR Part 222 ----------------------------------------------------------------------- Federal Deposit Insurance Corporation 12 CFR Part 334 ----------------------------------------------------------------------- Department of the Treasury Office of Thrift Supervision 12 CFR Part 571 ----------------------------------------------------------------------- National Credit Union Administration 12 CFR Part 717 ----------------------------------------------------------------------- Federal Trade Commission 16 CFR Part 660 ----------------------------------------------------------------------- Section 312 of the Fair and Accurate Credit Transactions Act; Proposed Rule [[Page 70944]] ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Part 41 [Docket ID OCC-2007-0019] RIN 1557-AC89 FEDERAL RESERVE SYSTEM 12 CFR Part 222 [Docket No. R-1300] FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 334 RIN 3064-AC99 DEPARTMENT OF THE TREASURY Office of Thrift Supervision 12 CFR Part 571 [Docket No. OTS-2007-0022] RIN 1550-AC01 NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 717 FEDERAL TRADE COMMISSION 16 CFR Part 660 RIN 3084-AA94 Interagency Notice of Proposed Rulemaking: Procedures To Enhance the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies Under Section 312 of the Fair and Accurate Credit Transactions Act AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (Board); Federal Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, Treasury (OTS); National Credit Union Administration (NCUA); and Federal Trade Commission (FTC). ACTION: Notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: The OCC, Board, FDIC, OTS, NCUA, and FTC (Agencies) are publishing for comment proposed regulations and guidelines to implement the accuracy and integrity provisions in section 312 of the Fair and Accurate Credit Transactions Act of 2003 (FACT Act).\1\ The proposed regulations and guidelines would implement the requirement that the Agencies issue guidelines for use by furnishers regarding the accuracy and integrity of the information about consumers that they furnish to consumer reporting agencies and prescribe regulations requiring furnishers to establish reasonable policies and procedures for implementing the guidelines. The Agencies also are publishing for comment proposed regulations to implement the direct dispute provisions in section 312. The proposed regulations would implement the requirement that the Agencies issue regulations identifying the circumstances under which a furnisher must reinvestigate disputes about the accuracy of information contained in a consumer report based on a direct request from a consumer. --------------------------------------------------------------------------- \1\ Pub. L. 108-159, 117 Stat. 1952 (Dec. 4, 2003). --------------------------------------------------------------------------- DATES: Comments must be submitted by February 11, 2008. ADDRESSES: Because paper mail in the Washington, DC area and at the Agencies is subject to delay, commenters are encouraged to submit comments by e-mail, if possible. Commenters are also encouraged to use the title ``Procedures to Enhance the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies'' to facilitate the organization and distribution of the comments. Comments submitted to one or more of the Agencies will be made available to all of the Agencies. Interested parties are invited to submit comments to: OCC: You may submit comments by any of the following methods: Federal eRulemaking Portal--``Regulations.gov'': Go to http://www.regulations.gov, select ``Comptroller of the Currency'' from the agency drop-down menu, then click ``Submit.'' In the ``Docket ID'' column, select ``OCC-2007-0019'' to submit or view public comments and to view supporting and related materials for this notice of proposed rulemaking. The ``User Tips'' link at the top of the Regulations.gov home page provides information on using Regulations.gov, including instructions for submitting or viewing public comments, viewing other supporting and related materials, and viewing the docket after the close of the comment period. Mail: Office of the Comptroller of the Currency, 250 E Street, SW., Mail Stop 1-5, Washington, DC 20219. E-mail: regs.comments@occ.treas.gov. Fax: (202) 874-4448. Hand Delivery/Courier: 250 E Street, SW., Attn: Public Information Room, Mail Stop 1-5, Washington, DC 20219. Instructions: You must include ``OCC'' as the agency name and ``Docket Number OCC-2007-0019'' in your comment. In general, OCC will enter all comments received into the docket and publish them on Regulations.gov without change, including any business or personal information that you provide such as name and address information, e- mail addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not enclose any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. You may review comments and other related materials by any of the following methods: Viewing Comments Electronically: Go to http://www.regulations.gov , select the ``Search for All Documents (Open and Closed for Comment)'' option, select ``Comptroller of the Currency'' from the agency drop-down menu, then click ``Submit.'' In the ``Docket ID'' column, select ``OCC-2007-0019'' to view public comments for this notice of proposed rulemaking. Viewing Comments Personally: You may personally inspect and photocopy comments at the OCC's Public Information Room, 250 E Street, SW., Washington, DC. You can make an appointment to inspect comments by calling (202) 874-5043. Docket: You may also view or request available background documents and project summaries using the methods described above. Board: You may submit comments, identified by Docket No. R-1300, by any of the following methods: Agency Web site: http://www.federalreserve.gov Follow the instructions for submitting comments at http://www.federalreserve.gov/. . Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. E-mail: regs.comments@federalreserve.gov. Include docket number in the subject line of the message. FAX: (202) 452-3819 or (202) 452-3102. Mail: Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, NW., Washington, DC 20551. All public comments are available from the Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, [[Page 70945]] unless modified for technical reasons. Accordingly, your comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper in Room MP-500 of the Board's Martin Building (20th and C Streets, NW.) between 9 a.m. and 5 p.m. on weekdays. FDIC: You may submit comments, identified by the RIN for this rulemaking, by any of the following methods: Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html. Follow instructions for submitting comments on the Agency Web site. Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. E-Mail: Comments@FDIC.gov. Include the RIN number in the subject line of the message. Mail: Robert E. Feldman, Executive Secretary, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429. Hand Delivery/Courier: Guard station at the rear of the 550 17th Street Building (located on F Street) on business days between 7 a.m. and 5 p.m. Public Inspection: All comments received will be posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html, including any personal information provided. Comments may be inspected and photocopied at the FDIC Public Information Center, Room E-1002, 3501 North Fairfax Drive, Arlington, VA 22226, between 9 a.m. and 5 p.m. (EST) on business days. Paper copies of public comments may be ordered from the Public Information Center by telephone at (877) 275- 3342 or (703) 562-2200. OTS: You may submit comments, identified by OTS-2007-0022, by any of the following methods: Federal eRulemaking Portal: Go to http://www.regulations.gov , select ``Office of Thrift Supervision'' from the agency drop-down menu, then click submit. Select Docket ID ``OTS-2007- 0022'' to submit or view public comments and to view supporting and related materials for this notice of proposed rulemaking. The ``User Tips'' link at the top of the page provides information on using Regulations.gov, including instructions for submitting or viewing public comments, viewing other supporting and related materials, and viewing the docket after the close of the comment period. Mail: Regulation Comments, Chief Counsel's Office, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, Attention: OTS-2007-0022. Fax: (202) 906-6518. Hand Delivery/Courier: Guard's Desk, East Lobby Entrance, 1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention: Regulation Comments, Chief Counsel's Office, Attention: OTS-2007-0022. Instructions: All submissions received must include the agency name and docket number for this rulemaking. All comments received will be entered into the docket and posted on Regulations.gov without change, including any personal information provided. Comments, including attachments and other supporting materials received are part of the public record and subject to public disclosure. Do not enclose any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. Viewing Comments Electronically: Go to http://www.regulations.gov , select ``Office of Thrift Supervision'' from the agency drop-down menu, then click ``Submit.'' Select Docket ID ``OTS- 2007-0022'' to view public comments for this notice of proposed rulemaking. Viewing Comments On-Site: You may inspect comments at the Public Reading Room, 1700 G Street, NW., by appointment. To make an appointment for access, call (202) 906-5922, send an e-mail to public.info@ots.treas.gov, or send a facsimile transmission to (202) 906-6518. (Prior notice identifying the materials you will be requesting will assist us in serving you.) We schedule appointments on business days between 10 a.m. and 4 p.m. In most cases, appointments will be available the next business day following the date we receive a request. NCUA: You may submit comments by any of the following methods (please send comments by one method only): Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. NCUA Web Site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the instructions for submitting comments. E-mail: Address to regcomments@ncua.gov. Include ``[Your name] Comments on Notice of Proposed Rulemaking Part 717, Procedures to Enhance the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies under Section 312 of the Fair and Accurate Credit Transactions Act'' in the e-mail subject line. Fax: (703) 518-6319. Use the subject line described above for e-mail. Mail: Address to Mary Rupp, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314-3428. Hand Delivery/Courier: Address to Mary Rupp, Secretary of the Board, National Credit Union Administration. Deliver to guard station in the lobby of 1775 Duke Street, Alexandria, VA 22314-3428, on business days between 8 a.m. and 5 p.m. All public comments are available on the agency's Web site at http://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical reasons. Public comments will not be edited to remove any identifying or contact information. Paper copies of comments may be inspected in NCUA's law library, at 1775 Duke Street, Alexandria, VA 22314, by appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, call (703) 518-6546 or send an e- mail to OGCMail@ncua.gov. FTC: Comments should refer to ``Procedures to Enhance the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies under Section 312 of the Fair and Accurate Credit Transactions Act, Project No. R611017,'' and may be submitted by any of the following methods. Comments containing confidential material must be filed in paper form, must be clearly labeled ``Confidential,'' and must comply with Commission Rule 4.9(c).\2\ --------------------------------------------------------------------------- \2\ The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission's General Counsel, consistent with applicable law and the public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c). --------------------------------------------------------------------------- E-mail: https://secure.commentworks.com/ftc-FACTAfurnishers. To ensure that the Commission considers an electronic comment, you must file it on the Web-based form found at this Web link and follow the instructions on that form. Federal eRulemaking Portal: http://www.regulations.gov. You may visit this Web site to read this request for public comment and to file an electronic comment. The Commission will consider all comments that regulations.gov forwards to it. Mail or Hand Delivery: A comment filed in paper form should refer, both in the text and on the envelope, to the name and project number identified above, and should be mailed or delivered to the following address: [[Page 70946]] Federal Trade Commission/Office of the Secretary, Room 159-H (Annex C), 600 Pennsylvania Avenue, NW., Washington, DC 20580. The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments, whether filed in paper or electronic form, will be considered by the Commission, and will be available to the public on the FTC Web site, to the extent practicable, at http://www.ftc.gov/os/publiccomments.htm. As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm. FOR FURTHER INFORMATION CONTACT: OCC: Stephen Van Meter, Assistant Director, Community and Consumer Law Division, (202) 874-5750; Patrick T. Tierney, Senior Attorney, Legislative and Regulatory Activities Division, (202) 874-5090; or Paul Utterback, National Bank Examiner, Compliance Policy, (202) 874-4428, Office of the Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219. Board: David A. Stein, Counsel, Amy E. Burke, Attorney, or Jelena McWilliams, Attorney, Division of Consumer and Community Affairs, (202) 452-3667 or (202) 452-2412; or Anne B. Zorc, Senior Attorney, (202) 452-3876, or Kara L. Handzlik, Attorney, (202) 452-3852, Legal Division, Board of Governors of the Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551. FDIC: David P. Lafleur, Policy Analyst, (202) 898-6569, or John Jackwood, Senior Policy Analyst, (202) 898-3991, Division of Supervision and Consumer Protection; Richard M. Schwartz, Counsel, (202) 898-7424, or Richard B. Foley, Counsel, (202) 898-3784, Legal Division; 550 17th St., NW., Washington, DC 20429. OTS: Suzanne McQueen, Consumer Regulations Analyst, Compliance and Consumer Protection Division, (202) 906-6459; or Richard Bennett, Senior Compliance Counsel, Regulations and Legislation Division, (202) 906-7409, at 1700 G Street, NW., Washington, DC 20552. NCUA: Linda Dent or Regina Metz, Attorneys, Office of General Counsel, phone (703) 518-6540 or fax (703) 518-6569, National Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314. FTC: Clarke W. Brinckerhoff and Pavneet Singh, Attorneys, (202) 326-2252, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue, NW., Washington, DC 20580. SUPPLEMENTARY INFORMATION: I. Introduction The Fair Credit Reporting Act (FCRA), which was enacted in 1970, sets standards for the collection, communication, and use of information bearing on a consumer's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.\3\ In 1996, the Consumer Credit Reporting Reform Act extensively amended the FCRA.\4\ The FACT Act further amended the FCRA for various purposes, including to increase the accuracy of consumer reports. --------------------------------------------------------------------------- \3\ 15 U.S.C. 1681-1681x. \4\ Pub. L. 104-208, 110 Stat. 3009 (Sept. 20, 1996). --------------------------------------------------------------------------- Section 623 of the FCRA describes the responsibilities of persons that furnish information about consumers (furnishers) to consumer reporting agencies (CRAs).\5\ Section 312 of the FACT Act amended section 623 by requiring the Agencies to issue guidelines for use by furnishers regarding the accuracy and integrity of the information about consumers that they furnish to consumer reporting agencies and to prescribe regulations requiring furnishers to establish reasonable policies and procedures for implementing the guidelines (referred to in this proposal as the accuracy and integrity regulations and guidelines). Section 312 also requires the Agencies to issue regulations identifying the circumstances under which a furnisher must reinvestigate disputes concerning the accuracy of information provided by a furnisher to a CRA and contained in a consumer report based on a direct request from a consumer (referred to in this proposal as the direct dispute regulations). The Agencies are proposing to adopt accuracy and integrity regulations and guidelines and direct dispute regulations to satisfy the requirements of section 312.\6\ --------------------------------------------------------------------------- \5\ Section 623 is codified at 15 U.S.C. 1681s-2. \6\ The FACT Act also directs the FTC to ``conduct an ongoing study of the accuracy and completeness of information contained in consumer reports prepared or maintained by consumer reporting agencies and methods for improving the accuracy and completeness of such information.'' See section 319 of the FACT Act. The FTC submitted its first interim report to Congress on this study on December 9, 2004, http://www.ftc.gov/reports/facta/041209factarpt.pdf (last visited Oct. 4, 2007). The FTC submitted its second interim report to Congress in December 2006, http://www.ftc.gov/reports/FACTACT/FACT_Act_Report_2006.pdf (last visited Oct. 4, 2007). --------------------------------------------------------------------------- II. Statutory Requirements Accuracy and Integrity Regulations and Guidelines As added by section 312 of the FACT Act, section 623(e)(1)(A) of the FCRA requires the Agencies to establish and maintain guidelines for use by each furnisher ``regarding the accuracy and integrity of the information relating to consumers'' that the furnisher provides to CRAs. In developing the guidelines, section 623(e)(3) directs the Agencies to: Identify patterns, practices, and specific forms of activity that can compromise the accuracy and integrity of information furnished to CRAs; Review the methods (including technological means) used to furnish information relating to consumers to CRAs; Determine whether furnishers maintain and enforce policies to assure the accuracy and integrity of information furnished to CRAs; and Examine the policies and processes employed by furnishers to conduct reinvestigations and correct inaccurate information relating to consumers that has been furnished to CRAs. The Agencies also are required to update the guidelines as often as necessary. Section 623(e)(1)(B) of the FCRA requires the Agencies to prescribe regulations requiring furnishers to ``establish reasonable policies and procedures for implementing the guidelines'' established pursuant to section 623(e)(1)(A). Section 623(e)(2) of the FCRA provides that the Agencies must consult and coordinate with one another so that, to the extent possible, the regulations prescribed by each Agency are consistent and comparable with the regulations prescribed by each of the other Agencies. Direct Disputes As amended by section 312 of the FACT Act, section 623(a)(8) of the FCRA directs the Agencies jointly to prescribe regulations that identify the circumstances under which a furnisher is required to reinvestigate a dispute concerning the accuracy of information contained in a consumer report on the consumer, based on a direct request by the consumer. In prescribing the direct dispute regulations, section 623(a)(8) directs the Agencies to weigh the following specific factors: The benefits to consumers and the costs to furnishers and the credit reporting system; [[Page 70947]] The impact on the overall accuracy and integrity of consumer reports of any direct dispute requirements; Whether direct contact by the consumer with the furnisher would likely result in the most expeditious resolution of any dispute; and The potential impact on the credit reporting process if credit repair organizations are able to circumvent the provisions in subparagraph G of section 623(a)(8), which generally states that the direct dispute rules shall not apply when credit repair organizations provide notices of dispute on behalf of consumers. III. The Agencies' Consideration of the Statutory Accuracy and Integrity Criteria and Direct Dispute Factors The Agencies' Advance Notice of Proposed Rulemaking In order to obtain information pertaining to the criteria that Congress directed the Agencies to consider in developing the accuracy and integrity guidelines and the factors that Congress directed the Agencies to weigh in prescribing the direct dispute regulations, the Agencies issued an advance notice of proposed rulemaking (ANPR) in March 2006.\7\ The ANPR contained detailed requests for comment on ten issues related to the statutory criteria governing the development of the accuracy and integrity guidelines, and on eight issues related to the statutory factors that the Agencies must weigh when promulgating the direct dispute regulations. The Agencies also specifically requested comment on how the issues presented by the ANPR might differ depending on the type of furnisher, the types of information furnished, the frequency with which a furnisher reports information about consumers to CRAs, or the type of CRA that receives the furnished information. --------------------------------------------------------------------------- \7\ 71 FR 14,419 (March 22, 2006). --------------------------------------------------------------------------- The Agencies received a total of 197 comments. Commenters included depository institutions, other financial services companies, trade associations, a CRA, a credit score service provider, a mortgage company, consumer groups, and individual consumers. Key issues identified and comments received on the accuracy and integrity criteria and on the direct dispute factors are summarized separately in the next two sections. Comments Pertaining to Accuracy and Integrity Regulations and Guidelines Burden of accuracy and integrity regulations and guidelines. A consistent theme among industry commenters on the ANPR was that the proposed guidelines and regulations should be sensitive to the voluntary nature of the reporting of information about consumers by furnishers to CRAs and not create undue burdens on furnishers that would discourage reporting. These commenters asserted that imposing burden on furnishers may result in furnishers reporting less information than they do presently or ceasing to report at all, thereby decreasing the effectiveness of the current credit reporting system for both consumers and industry. Types of errors, omissions, or other problems that may impair the accuracy and integrity of furnished information. Many commenters detailed the types of errors that may impair the accuracy of information furnished to CRAs. Industry commenters, consumer groups, and individuals stated that some furnishers do not report consumers' positive payment histories, a practice that can lead to lower credit scores than consumers may merit. Similarly, commenters also noted that some furnishers do not report credit limits, which may likewise lead to lower credit scores. Consumer groups reported that sales of consumer accounts to collection agencies also result in accounts being ``re- aged,'' meaning that a debt receives a new origination date when the collection account is opened, resulting in the debt being included on a consumer's credit file longer than legally permissible. In addition, a number of industry commenters mentioned that data entry errors by furnishers and different data processing procedures by the CRAs can result in ``mixed files''--files that include information from two or more consumers. Commenters noted that furnishing inaccurate information can adversely affect consumer credit scores and result in higher costs of credit for some consumers and increased credit risk for lenders. Patterns, practices, and specific forms of activity that can compromise the accuracy and integrity of furnished information. Industry commenters and consumer groups stated that a number of furnishers do not use the industry standard format for reporting information about consumers to CRAs, which results in the reporting of inaccurate information. In addition, industry and consumer groups mentioned that sales of debt to collection agencies or to other creditors results in inaccurate information reported to the CRAs (e.g., duplicative reporting of accounts and re-aged accounts). Consumer groups and a trade association noted problems with inaccurate bankruptcy information being reported--some furnishers continue to report a debt as not included in bankruptcy, fail to record a debt as discharged, or continue to show a balance owed after bankruptcy discharge. Several industry commenters stated that some furnishers do not provide data to CRAs in a timely manner, which may result in delinquent debtors appearing as current on their loans. Business, economic, or other reasons for the patterns, practices, and specific forms of activity that can compromise the accuracy and integrity of furnished information. A few consumer groups and trade associations indicated that some creditors omit good payment history or credit limit information in order to protect their proprietary underwriting systems and prevent competitors from soliciting business from their customers. Some commenters also asserted that collection agencies have little economic incentive to report updated or accurate information because they typically do not use consumer report information to determine credit risk. Recommendations and descriptions of policies and procedures that a furnisher should implement and maintain to identify, prevent, or mitigate patterns, practices, and specific forms of activity that can compromise the accuracy and integrity of information furnished to a CRA. Some individual and industry commenters recommended that furnishers report all consumer account information to CRAs and not omit information. Consumer groups and some industry commenters recommended that furnishers should report using the Metro 2 format--a standard reporting format created by the credit reporting industry--or a similar standardized format. Some depository institutions and trade associations suggested that the accuracy and integrity guidelines should be flexible and take into consideration the diversity of furnishers with regard to size and business complexity. Methods (including technological means) used to furnish information about consumers to CRAs. Industry commenters stated that most furnishers are reporting to the three nationwide CRAs electronically using the Metro 2 format, although some furnishers transmit information via magnetic tape, disks, or paper. Some trade associations commented that errors can be introduced into a consumer's credit file when a CRA translates the furnisher's raw data into the CRA's database. [[Page 70948]] Maintenance and enforcement of policies and procedures to ensure the accuracy and integrity of information furnished to CRAs. Industry commenters stated that, in general, furnishers have policies and procedures in place to ensure the accuracy of information and perform internal audits to verify accuracy. Industry commenters also stated that furnishers have a business incentive to maintain and report accurate information in order to maintain good customer relations. Methods (including any technological means) that a furnisher should use to ensure the accuracy and integrity of information about consumers furnished to CRAs. Industry commenters suggested that furnishers should use internal reports to verify the accuracy of information transmitted to the CRAs. Consumer groups recommended that furnishers take appropriate steps to ensure that they report bankruptcy discharge information accurately. Descriptions of policies, procedures, and processes used by furnishers to conduct reinvestigations and to correct inaccurately furnished information and recommendations that furnishers should adopt. Industry commenters indicated that most furnishers use an electronic automated system (e-OSCAR) for receiving and transmitting consumer dispute information from and to the three nationwide CRAs. Although each furnisher has its own procedures for investigating disputes, furnishers generally review the information provided by the CRA and compare it to the information in the consumer's file at the furnisher. A few industry commenters stated that using the e-OSCAR system to conduct reinvestigations is adequate. One trade association stated that furnishers should establish better reinvestigation procedures and provide staff training for processing credit disputes. Consumer groups commented that furnishers' reinvestigation procedures are inadequate in that they only verify that the reported information is consistent with the furnishers' records, not the underlying accuracy of such information. Consumer groups recommended that furnishers should perform in-depth investigations beyond verifying that information reported to CRAs matches furnishers' records, including contacting consumers to obtain additional information, if necessary. Consumer groups also noted that CRAs do not provide furnishers with documentation provided by consumers to support their claims. Description of the policies and procedures of CRAs for ensuring the accuracy and integrity of furnished information and whether and to what extent those policies, procedures, or other requirements address particular problems that may affect information accuracy and integrity. A few industry commenters noted that CRAs have implemented policies to ensure the accuracy of information that they receive from furnishers. One industry commenter asserted that once CRAs incorporate data into their databases, furnishers do not know how CRAs actually apply the data to consumer credit files or whether the data is applied to the correct consumers. Comments Pertaining to Direct Dispute Regulations Circumstances under which a furnisher should be required to investigate a dispute. Industry commenters indicated that furnishers generally are voluntarily investigating disputes that are directly submitted to them using a process that is similar to the one furnishers use to investigate disputes that CRAs forward to the furnishers. Industry commenters, however, also stated that investigations of direct disputes should be required only in instances of fraud or identity theft that can be documented by the consumer, or where the consumer has provided a written detailed dispute to the furnisher. Other industry commenters believe that investigations of direct disputes should only be required if the consumer has already disputed the item with the CRA and received a response. Consumer groups favored a broad application of the direct dispute rule, noting that many furnishers already have an obligation to investigate other types of disputes for major product categories under other laws, such as the Truth in Lending Act, Real Estate Settlement Procedures Act, and Electronic Fund Transfer Act. Some individuals commented that furnishers should always be required to reinvestigate a consumer's account upon the consumer's request. Benefits or costs to consumers that may result from a direct dispute right. Consumer groups commented that consumers would benefit from direct disputes because the dispute requirement would eliminate the problem of CRAs not forwarding disputes and supporting documentation to furnishers and would provide furnishers with necessary documentation to investigate errors or fraud. One individual noted that consumers would benefit by being able to deal with one entity, the furnisher, rather than the three nationwide CRAs. Some industry commenters noted that consumers would benefit from direct disputes in complex cases or where the consumer needs to provide the furnisher with supporting documentation. Benefits to furnishers, consumer reporting agencies, or the credit reporting system that may result if furnishers are required to investigate direct disputes. Consumer groups stated that direct disputes will result in a more accurate credit reporting system and would afford industry the opportunity to standardize the dispute resolution process. A few industry commenters stated that direct disputes would yield faster dispute resolution for consumers. Some industry commenters mentioned that direct disputes may be beneficial for providing to furnishers additional documentation for complex disputes, noting that such information may not be forwarded by CRAs. Costs to furnishers, consumer reporting agencies, or the credit reporting system of implementing a direct dispute requirement. Industry commenters believed that a direct dispute requirement would impose significant costs on furnishers resulting from an expected increase in the number of direct disputes. One depository institution reported that the costs of resolving a direct dispute are related to whether the disputed information contains derogatory information and the nature of the consumer's dispute. Some industry commenters noted that reviewing consumers' lengthy payment histories can be costly. One industry commenter noted that a direct dispute requirement would shift costs from CRAs to furnishers. One consumer group commented that start-up costs should not be burdensome as many furnishers already have direct dispute responsibilities for their major products (such as credit cards). This commenter asserted that the cost for processing a direct dispute ranges from $25 to $200, and that this cost is exceeded by the harms to consumers who are adversely affected due to reporting errors. Impact on the overall accuracy and integrity of consumer reports if furnishers are required to investigate direct disputes. Some industry commenters stated that they expect an adverse impact on overall accuracy and integrity of consumer reports as a result of an increase in duplicate disputes and costs, decreased efficiency in processing disputes, and the likelihood that some furnishers would stop reporting or report less information than they currently do. Whether direct contact by the consumer with the furnisher would likely result in the most expeditious [[Page 70949]] resolution of a dispute. Industry commenters generally believed that direct contact by the consumer is most appropriate in instances of fraud, identity theft, or where detailed information is needed in order to resolve the consumer dispute. Some industry commenters also stated that direct contact by the consumer would not be appropriate where the error lies with the CRA or an aggregator rather than with the furnisher. Potential impact on the credit reporting process if credit repair organizations are able to circumvent the FCRA's prohibition of their submission of direct disputes. Consumer groups and an individual commented that attorneys should be permitted to assist consumers with disputes and not be considered credit repair organizations. Industry commenters predicted an increase in costs resulting from a significant increase in the number of direct disputes that would be filed by credit repair organizations, which, these commenters contended, are often deliberately vague or overbroad. Additional, specific comments are mentioned, as appropriate, in the section-by-section analysis. The Agencies have carefully considered the comments received in response to the ANPR in developing the proposed accuracy and integrity regulations and guidelines and the proposed direct dispute regulations. The Agencies also reviewed a number of studies that have identified potential issues that may affect the accuracy of consumer report information. These studies indicate that consumer report accuracy may be affected by the presence of stale account information, the practice of furnishing only negative information about an account, inaccurate or incomplete public record data, inaccurate or incomplete collection account data, and unreported credit limits.\8\ --------------------------------------------------------------------------- \8\ See Robert B. Avery, Raphael W. Bostic, Paul S. Calem & Glenn B. Canner, An Overview of Consumer Data and Credit Reporting, Federal Reserve Bulletin, vol. 89, at 47-73 (Feb. 2003); Robert B. Avery, Paul S. Calem, Glenn B. Canner & Shannon C. Mok, Credit Report Accuracy and Access to Credit, Federal Reserve Bulletin, vol. 90, at 297-322 (Summer 2004); Consumer Federation of America & National Credit Reporting Association, Credit Score Accuracy and Implications for Consumers (Dec. 17, 2002), http://www.consumerfed.org/pdfs/121702CFA_NCRA_Credit_Score_Report_Final.pdf (last visited Oct. 4, 2007); Federal Trade Commission and Board of Governors of the Federal Reserve System, Report to Congress on the Fair Credit Reporting Act Dispute Process (Aug. 2006). --------------------------------------------------------------------------- IV. Section-by-Section Analysis \9\ --------------------------------------------------------------------------- \9\ The OCC, Board, FDIC, OTS and NCUA would place the proposed regulations and guidelines implementing section 312 in the part of their regulations that implement the FCRA--12 CFR parts 41, 222, 334, 571, and 717, respectively. For ease of reference, the discussion in the Supplementary Information section uses the shared numerical suffix of each of these agency's regulations. The FTC also would place the proposed regulations and guidelines in the part of its regulations implementing the FCRA, specifically 16 CFR part 660. However, the FTC uses different numerical suffixes that equate to the numerical suffixes discussed in the Supplementary Information section as follows: Suffix .40 = FTC suffix .1, suffix .41 = FTC suffix .2, suffix .42 = FTC suffix .3, and suffix .43 = FTC suffix .4. In addition, Appendix E referenced in the Supplementary Information section is the FTC's Appendix A. --------------------------------------------------------------------------- The following describes the three components of this rulemaking: the proposed accuracy and integrity regulations, the proposed accuracy and integrity guidelines, and the proposed direct dispute regulations. Proposed Accuracy and Integrity Regulations Section --.40 Scope Section --.40 sets forth the scope of each Agency's proposed regulations requiring furnishers to establish reasonable policies and procedures for implementing the accuracy and integrity guidelines. Each of the Agencies has tailored this section to describe those entities to which this subpart applies. The FDIC requests comment on whether it would be useful to include a cross-reference in its proposed regulation to the definition of ``subsidiary'' in the Federal Deposit Insurance Act.\10\ --------------------------------------------------------------------------- \10\ See 12 U.S.C. 1813(w)(4). --------------------------------------------------------------------------- Section --.41 Definitions. Two approaches to defining the terms ``accuracy'' and ``integrity.'' Section 623(e) of the FCRA requires the Agencies to establish and maintain guidelines for use by furnishers regarding the accuracy and integrity of the information about consumers that they furnish to CRAs. The statute does not define the terms ``accuracy'' or ``integrity.'' Consumer group and industry commenters on the ANPR provided suggestions for defining the terms ``accuracy'' and ``integrity.'' Consumer groups proposed that the Agencies define the term ``accuracy'' to mean ``conformity to fact,'' rather than conformity to data records. They said that an accuracy standard should rely not only upon a furnisher's data records, but also upon original documents such as credit agreements. Some consumer groups also said that information should not be considered ``accurate'' if it is overly general, incomplete, out-of-date, or misleading. Consumer groups also proposed that the Agencies make clear that information lacks ``integrity'' if it is technically accurate, but misleads users of consumer reports because it does not include critical information. Industry commenters, citing the legislative history of the FACT Act, suggested that the term ``integrity'' does not mean completeness, but rather, that the information a furnisher provides to a CRA is factually correct. In the Agencies' view, neither the text nor the legislative history of the FACT Act resolves how the terms ``accuracy'' and ``integrity'' should be defined. Although the terms used in section 623(e) differ from terms used in other provisions of the FCRA,\11\ the text of section 623(e) provides no direction to the Agencies about the meaning or significance of that difference.\12\ The Agencies have reviewed the legislative history, and note that the Congressional Record includes post-enrollment statements regarding section 623(e) made by the Chairman of the House Financial Services Committee and by the Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs.\13\ Those statements, [[Page 70950]] however, provide different views on the meaning of the terms. --------------------------------------------------------------------------- \11\ See FCRA section 623(b)(1), 15 U.S.C. 1681s-2(b)(1) (requiring entities that furnish information to CRAs to conduct investigations in response to complaints regarding the ``completeness or accuracy'' of furnished information); sections FCRA 623(a)(2)(A)-(B), 15 U.S.C. 1681s-2(a)(2)(A)-(B) (requiring furnishers to correct and update information that the furnisher determines is ``not complete or accurate'' and to refrain from refurnishing information that remains ``not complete or accurate''). \12\ Earlier versions of the legislation that became the FACT Act required the agencies to prescribe regulations and guidelines regarding the ``accuracy and completeness'' of information relating to consumers. This language also was contained in the bill passed by the Senate and referred to the Conference Committee. However, the bill reported by the Conference Committee used the phrase ``accuracy and integrity.'' Compare 149 Cong. Rec. S13990 (Nov. 5, 2003) (bill as passed by the Senate) with 149 Cong. Rec. H12198 (Nov. 21, 2003) (bill as reported by the Conference Committee). \13\ See 149 Cong. Rec. E2512, E2516 (Nov. 4, 2003) (extension of remarks of Chairman Michael Oxley, entered into the Congressional Record on Dec. 9, 2003) (`` `[a]ccuracy and integrity' was selected [by the Congress] as the relevant standard rather than `accuracy and completeness' as used in Sections 313 and 319 [of the FACT Act], to focus on the quality of the information furnished rather than the completeness of the information furnished.''); 149 Cong. Rec. S15806-02 (Nov. 24, 2003) (statement of Ranking Member Paul Sarbanes) (`` `[A]ccuracy' relates to whether the information that is provided by data furnishers to credit reporting agencies is factually correct. The term `integrity' relates to whether all relevant information that is used to assess credit risk and to grant credit is accurately provided. Integrity of information is not achieved when furnishers do not fully provide data that, by its absence, could have a positive or negative effect on a consumer's credit score, or on his or her ability to obtain credit under the most favorable terms for which he or she qualifies.''). --------------------------------------------------------------------------- In light of these considerations, the Agencies are proposing for comment two alternative approaches to defining the terms ``accuracy'' and ``integrity'' in the text of the regulations and guidelines. Although the definition of ``accuracy'' is the same under both alternatives, the two approaches differ in terms of both the substance of the definition of ``integrity'' and the placement of the definitions. Accordingly, the Agencies request comment on which definition of ``integrity'' should be adopted in the final rule, and on whether the definitions of ``accuracy'' and ``integrity'' should be placed in the regulations or in the guidelines. A. Regulatory Definition Approach Under the first approach, the Agencies would provide specific definitions for the terms ``accuracy'' and ``integrity'' in the regulations. This approach, labeled ``Regulatory Definition Approach,'' appears at Sec. Sec. --.41(a) and --.41(b) in the text of the proposed regulations. Under proposed Sec. --.41(a), the term ``accuracy'' means that any information that a furnisher provides to a CRA about an account or other relationship with the consumer reflects without error the terms of and liability for the account or other relationship and the consumer's performance or other conduct with respect to the account or other relationship. This proposed definition of ``accuracy'' is intended to require that furnishers have reasonable procedures in place to ensure that the information they provide to CRAs is factually correct. The Agencies solicit comment on whether the definition of accuracy should specifically provide that accuracy includes updating information as necessary to ensure that information furnished is current. Under proposed Sec. --.41(b), the term ``integrity'' means that any information that a furnisher provides to a CRA about an account or other relationship with the consumer does not omit any term, such as a credit limit or opening date, of that account or other relationship, the absence of which can reasonably be expected to contribute to an incorrect evaluation by a user of a consumer report of a consumer's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. Thus, the Regulatory Definition Approach provides that information furnished to a CRA may be technically ``accurate'' yet lack ``integrity'' because it presents a misleading picture of the consumer's creditworthiness by omitting critical information, such as a credit limit on a revolving credit account.\14\ --------------------------------------------------------------------------- \14\ ``A key factor that credit evaluators consider when they assess the creditworthiness of an individual is credit utilization. If a creditor fails to report a credit limit for an account, credit evaluators must either ignore utilization or use a substitute measure such as the highest-balance level--that is, the largest amount ever owed on the account. Substituting the highest balance level for the credit limit generally results in a higher estimate of credit utilization because the highest-balance amount is typically lower than the credit limit: the higher estimate leads, in turn, to a higher perceived level of credit risk for affected consumers.'' Robert B. Avery, Paul S. Calem, Glenn B. Canner, Credit Report Accuracy and Access to Credit; Federal Reserve Bulletin, Summer 2004, p. 306. --------------------------------------------------------------------------- Under the Regulatory Definition Approach--and as described in further detail in the section-by-section analysis of the guidelines-- the Agencies would include in the guidelines six objectives that a furnisher's policies and procedures should be designed to achieve. The six objectives seek to ensure that: Information is furnished accurately; information is furnished with integrity; the furnisher conducts reasonable investigations of consumer disputes about the accuracy or integrity of information in consumer reports and takes appropriate actions based on the outcome of such investigations; information is reported in a form and manner designed to minimize the likelihood that it will be erroneously reflected in the consumer's report; information furnished is substantiated by the furnisher's records; and the furnisher updates information it furnishes as necessary to reflect the current status of the consumer's account or other relationship. The first two of these objectives would reflect the regulatory definitions of ``accuracy'' and ``integrity.'' Thus, under the Regulatory Definition Approach, the guidelines would provide that a furnisher should have written policies and procedures reasonably designed to ensure that the information it furnishes about accounts or other relationships with a consumer: Accurately identifies the appropriate consumer; Accurately reports the terms of those accounts or other relationships; and Accurately reports the consumer's performance and other conduct with respect to the account or other relationship. Further, the guidelines would provide that a furnisher should have policies and procedures reasonably designed to ensure that the information it furnishes about accounts or other relationships with a consumer avoids misleading users of consumer reports about the consumer's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. Consistent with the FCRA, under which the furnishing of information about consumers is voluntary, the proposed definitions would apply only to information that the furnisher elects to report to CRAs. The Agencies are aware that some furnishers may be subject to separate obligations to report all available information about an account or other relationship.\15\ These proposed definitions, however, are not intended to require furnishers to do so. --------------------------------------------------------------------------- \15\ Furnishers that report information about consumers to CRAs related to mortgage loans may be required by Freddie Mac, Fannie Mae, and the Federal Housing Administration to report full-file information. See Fannie Mae Servicing Guide, Part I, Section 304.09 and Part VII, Section 107; Freddie Mac Service Guide, Section 55.4: Reports to credit repositories; and the Federal Housing Administration Servicing Handbook, Section 4330.1(c) (Rev-5) (incorporating by reference the Fannie Mae Servicing Guide). Further, the Department of Housing and Urban Development has defined ``Mortgages contrary to good lending practices'' to include a mortgage or a group or category of mortgages entered into by a lender and purchased by Fannie Mae or Freddie Mac where it can be shown that a lender engaged in a practice of failing to report monthly on borrowers' repayment history to credit repositories on the status of each loan purchased by Fannie Mae or Freddie Mac that a lender is servicing. 24 CFR 81.2(b). --------------------------------------------------------------------------- B. Guidelines Definition Approach The second approach contained in the proposal, labeled the ``Guidelines Definition Approach,'' would define the terms ``accuracy'' and ``integrity'' in the guidelines--rather than in the regulations-- with reference to the objectives that a furnisher's policies and procedures should be designed to accomplish. Under the Guidelines Definition Approach, the Agencies have identified four objectives that pertain to the accuracy and integrity of information furnished and related matters. Definitions for the terms ``accuracy'' and ``integrity'' would be incorporated into the first two of these objectives. Thus, the guidelines would provide that a furnisher should have written policies and procedures reasonably designed to ensure that the information it furnishes about accounts or other relationships with a consumer is accurate. The guidelines would define ``accuracy'' to mean that any information that a furnisher provides to a CRA about an account or other relationship with the consumer reflects without error the terms of and liability for the account or other relationship and the consumer's performance or other conduct with [[Page 70951]] respect to the account or other relationship. This is the same definition of ``accuracy'' used in the Regulatory Definition Approach. Additionally, the guidelines would provide that a furnisher's policies and procedures should ensure that the information it furnishes about accounts or other relationships with a consumer is furnished with integrity. The guidelines would define ``integrity'' to mean that any information that a furnisher provides to a CRA about an account or other relationship with the consumer: (1) Is reported in a form and manner that is designed to minimize the likelihood that the information, although accurate, may be erroneously reflected in a consumer report; and (2) should be substantiated by the furnisher's own records. In addition to being placed in a different location, this definition is substantively different from that used in the Regulatory Definition Approach. Under the Guidelines Definition Approach, the definition of ``integrity'' does not address the omission of any term the absence of which could contribute to an incorrect evaluation by a user of a consumer's creditworthiness. Instead, the proposed definition of ``integrity'' addresses two potential issues with furnished information. First, accurate information may be attributed to the wrong consumer or the wrong account, or may be associated with an erroneous date. Second, if the accuracy of the furnished information is disputed, the furnisher should be able to substantiate, or verify, the information through its own records. The Regulatory Definition Approach also includes these two concepts in the guidelines as objectives that a furnisher's policies and procedures should be designed to achieve. The Guidelines Definition Approach, like the Regulatory Definition Approach, also includes as objectives: Ensuring that the furnisher conducts reasonable investigations of consumer disputes about the accuracy or integrity of information in consumer reports and takes appropriate actions based on the outcome of such investigations; and ensuring that the furnisher updates information it furnishes as necessary to reflect the current status of the consumer's account or other relationship. As noted above, the Agencies invite comment on these alternative definitions of ``integrity,'' and on whether the definitions of ``accuracy'' and ``integrity'' should be placed in the regulatory text or in the guidelines. Furnisher Proposed Sec. --.41(c) would define the term ``furnisher'' to mean an entity other than an individual consumer that furnishes information relating to consumers to one or more CRAs. An entity is not a furnisher under the proposed definition when it provides information to a CRA solely to obtain a consumer report under sections 604(a) and (f) of the FCRA, which enumerate the circumstances under which a CRA may provide a consumer report and prohibit persons from obtaining or using consumer reports for impermissible purposes. Users of consumer reports may provide information about consumers to CRAs in order to obtain such reports, but they do not do so for the purpose of having such information included in consumer reports. Although the user's request for the report may be reflected in the consumer report as an inquiry, the Agencies do not believe it would be appropriate to subject such furnishing of information to the regulations and guidelines proposed here. In addition, by defining the term ``furnisher'' in terms of an entity other than an individual consumer, the proposal makes clear that consumers are not furnishers, even if they self-report information about themselves to a CRA. Identity Theft Proposed Sec. --.41(d) provides that the term ``identity theft'' has the same meaning as in the FTC's regulations at 16 CFR 603.2(a). Section 603.2(a), which was adopted pursuant to section 111 of the FACT Act,\16\ defines the term ``identity theft'' to mean ``a fraud committed or attempted using the identifying information of another person without authority.'' This definition also is used in the interagency regulations implementing section 114 of the FACT Act (Red Flags). --------------------------------------------------------------------------- \16\ Section 111 provides for a definition of the term ``identity theft,'' and authorizes the FTC to refine that definition. See section 603(q)(3) of the FCRA, 15 U.S.C. 1681a(q)(3). --------------------------------------------------------------------------- Direct Dispute Proposed Sec. --.41(e) defines ``direct dispute'' to mean a dispute submitted directly to a furnisher by a consumer concerning the accuracy of any information contained in a consumer report relating to the consumer. Although the definition of ``direct dispute'' uses the term accuracy, the proposed Regulatory Definition Approach provides a definition of accuracy for purposes of the definition of ``direct dispute,'' but the Guidelines Definition Approach does not. The Agencies solicit comment on whether the definition of ``accuracy'' should be made applicable to direct disputes, if the Guidelines Definition Approach is adopted. The Agencies also solicit comment on whether the proposed definition of ``accuracy'' is appropriate for the direct dispute provision.\17\ --------------------------------------------------------------------------- \17\ The Agencies note that section 623(a)(8) only requires a furnisher to handle direct disputes about ``accuracy.'' In contrast, section 611(a) requires a CRA to handle disputes about ``completeness or accuracy'' and section 623(b) requires furnishers to reinvestigate disputes about ``completeness or accuracy'' if the disputes come through a CRA. The Agencies particularly request comment on whether the definition of ``accuracy'' needs to be clarified in order to more clearly delineate those disputes that, while subject to the CRA dispute process, would not be subject to the direct disputes rule. --------------------------------------------------------------------------- Section --.42 Reasonable Policies and Procedures Concerning the Accuracy and Integrity of Furnished Information Paragraph (a) of proposed Sec. --.42 would require each furnisher to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information about consumers that it furnishes to a CRA. The policies and procedures must be appropriate to the nature, size, complexity, and scope of the furnisher's activities. The requirement that furnishers' policies and procedures be written facilitates effective implementation and enables the Agencies to assess furnishers' compliance with the rules. The Agencies do not believe that the requirement for written policies and procedures will be unduly burdensome, particularly since, under the guidelines, a furnisher may include any of its existing policies and procedures that are relevant and appropriate. As noted previously, industry commenters responding to the ANPR noted that, in general, furnishers have policies and procedures in place to ensure the accuracy of information furnished to CRAs. The Agencies invite comment on any burden and effects on furnishers, particularly small furnishers, regarding the requirement that the policies and procedures be written. The Agencies recognize that there is substantial diversity among furnishers with respect to their structure, operations, and the types of business they conduct, such that a ``one-size-fit-all'' approach to the implementation of the guidelines is inappropriate. The requirement that the furnisher's policies and procedures must be appropriate to the nature, size, complexity, and scope of the furnisher's activities permits furnishers to tailor their policies and procedures to their business activities. [[Page 70952]] The Agencies expect, for example, that the policies and procedures for a small retail entity would differ from those of a multi-billion dollar financial services company. Proposed Sec. --.42(b) requires each furnisher to consider the accuracy and integrity guidelines in developing its policies and procedures and to incorporate those guidelines that are appropriate. Furnishers should consider the guidelines in the context of the nature, size, complexity, and scope of their activities and incorporate the guidelines that are appropriate to ensure the accuracy and integrity of the information about consumers that they provide to CRAs. Some of the commenters on the ANPR speci