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Federal Trade Commission Report to Congress on the
Notes1. Pub. L. 108-159, 117 Stat. 1952. Although the FACT Act makes many improvements to the dispute process, the Act's provisions are still in the initial stages of implementation. Consequently, this report is based solely on compliance with the pre-FACT Act FCRA. Return to text 2. FCRA section 611(e), also enacted as part of the FACT Act, requires that the FTC transmit to the three nationwide consumer reporting agencies ("repositories")--Equifax Information Services, LLC (Equifax), Experian Information Solutions, Inc. (Experian), and TransUnion LLC (TransUnion)--complaints from consumers who appear to have disputed the completeness or accuracy of their files with one or more repositories or otherwise exercised their dispute rights under FCRA section 611(a). FCRA section 611(e) also requires that the repositories review the complaints, report to the FTC on the results of their review, and maintain records sufficient to show compliance. Return to text 3. Request for Information for Study on Investigations of Disputed Consumer Information Reported to Consumer Reporting Agencies, 69 Fed. Reg. 48,494 (Aug. 10, 2004). See appendix B. Return to text 4. Approximately 100 consumers submitted comments in response to the Board's Federal Register notice. Return to text 5. The National Consumer Law Center, Consumer Federation of America, Consumers Union, Electronic Privacy Clearinghouse, and U.S. Public Interest Research Group ("consumer groups") submitted a joint comment. Return to text 6. Commenters that provided information for this report on behalf of furnishers include the Ford County State Bank (Ford County Bank), Juniper Bank (Juniper), Zions Bancorporation (Zions), Wells Fargo & Company (Wells Fargo), Boeing Employees Credit Union (BECU), Branch Banking and Trust Company (BB&T), MBNA America Bank (MBNA), Visa U.S.A. Inc. (Visa), American Bankers Association (ABA), Mortgage Bankers Association (MBA), and Coalition to Implement the FACT Act (Coalition). The Coalition represents an array of financial services companies that are furnishers and/or users of consumer credit information. Comment of Coalition, at 1. Return to text 7. For this report, both Equifax and TransUnion submitted comment letters, as did the National Credit Reporting Association (NCRA), a trade association that represents resellers of consumer reports, and the Consumer Data Industry Association (CDIA). Formerly known as Associated Credit Bureaus, Inc., CDIA represents many of the nation's largest CRAs, including Equifax, Experian, and TransUnion. Comment of CDIA, at 1 n.1. Return to text 8. The following trade associations also submitted comments: the National Association of Realtors, California Association of Realtors, National Association of Mortgage Brokers (NAMB), and Florida Association of Mortgage Brokers. Return to text 9. This report uses the term "federal financial regulators" to refer collectively to the following entities: the Board, Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), and Office of Thrift Supervision (OTS). Return to text 10. When the FCRA was enacted in 1970, the credit reporting industry consisted of more than 2,500 independent local and regional credit bureaus across the country. Written Statement of John A. Ford, Chief Privacy Officer, Equifax Inc.: Hearing Before the House Committee on Financial Institutions and Consumer Credit (152 KB PDF), 108th Cong. (June 4, 2003) [hereinafter Statement of John A. Ford], at 5. Over time, however, most of these credit bureaus were consolidated into the three existing repositories. For a detailed discussion of the history and development of the consumer reporting system, see Robert M. Hunt, A Century of Consumer Credit Reporting in America (611 KB PDF) (Federal Reserve Bank of Philadelphia Working Paper No. 05-13, June 2005). Return to text 11. See Robert B. Avery, Paul S. Calem & Glenn B. Canner, Credit Report Accuracy and Access to Credit (148 KB PDF), Federal Reserve Bulletin (Summer 2004) [hereinafter 2004 FRB Study], at 298. Return to text 12. Comment of CDIA, at 10. Return to text 13. 2004 FRB Study, supra note 11, at 298. Return to text 14. Id. Return to text 15. Communication from CDIA to the Division of Financial Practices, Federal Trade Commission (Jan. 7, 2005) (on file with the Division of Privacy & Identity Protection) [hereinafter CDIA Communication 01/07/05]. Return to text 16. FCRA section 603(f) defines "consumer reporting agency" as "any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports." Return to text 17. In the FTC's Free Annual File Disclosure Rule, these agencies are termed "associated consumer reporting agencies." 16 C.F.R. � 610.1(b)(2). Although each of these arrangements is unique, the repository with which such an agency is associated typically has the right to sell the agency's data to the repository's customers. Return to text 18. The CRAs in this category that operate on a nationwide basis are referred to as "nationwide specialty consumer reporting agencies." See FCRA � 603(w). Return to text 19. All entities that procure consumer reports for purposes of reselling them must comply with FCRA section 607(e), which requires that these entities take certain steps before reselling the reports. The FACT Act, however, added special provisions with respect to the dispute duties of certain of these entities. The special provisions apply only to "resellers." A reseller is defined as a consumer reporting agency that (1) assembles and merges information contained in the database of another consumer reporting agency or multiple consumer reporting agencies concerning any consumer for purposes of furnishing such information to any third party, to the extent of such activities; and (2) does not maintain a database of the assembled or merged information from which new consumer reports are produced. FCRA � 603(u). Some CRAs that resell repository information merely forward, or "pass through," the information. These entities fall outside the FCRA section 603(u) definition of "reseller," because they do not "assemble and merge" the information, but they still must comply with FCRA section 607(e). Return to text 20. Comment of CDIA, at 4, 10 n.8. Return to text 21. Comment of CDIA, at 4. Return to text 22. See Robert B. Avery, Paul S. Calem, Glenn B. Canner & Raphael W. Bostic, An Overview of Consumer Data and Credit Reporting (151 KB PDF), Federal Reserve Bulletin (Feb. 2003) [hereinafter 2003 FRB Study], at 49, 50; Comment of NAMB, at 2; Comment of Equifax, at 5. Return to text 23. See 2003 FRB Study, supra note 22, at 48; Statement of John A. Ford, supra note 10, at 8-9. In addition to "credit reports," repositories also produce "credit scores," consumer reports that summarize a consumer's credit history in a number, or "score." For a fuller discussion of consumer reports and their uses in consumer transactions, see Federal Trade Commission, Report to Congress Under Sections 318 and 319 of the Fair and Accurate Credit Transactions Act of 2003 (1.05 MB PDF) (Dec. 2004) [hereinafter 2004 FTC Report], at 6-11. Return to text 24. For furnishers that report to more than one repository, the standardized formats, known as Metro and Metro 2, ensure that the bits of information from these furnishers--e.g., last name, first name, address, and current balance--are received in the same data fields in the databases of any repositories to which the furnisher reports. See infra section III for a discussion of Metro and Metro 2. Return to text 25. See, e.g., Comment of Coalition, at page 3 of Coalition's attachment; Comment of NAMB, at 2; Comment of CDIA, at 4. Return to text 26. National Consumer Law Center, Fair Credit Reporting (5th ed. & Supp. 2005) [hereinafter NCLC Treatise], at 55. Return to text 27. 2003 FRB Study, supra note 22, at 51 n.11. Return to text 28. Id.; The Accuracy of Credit Report Information and the Fair Credit Reporting Act: Hearing Before the Senate Committee on Banking, Housing, and Urban Affairs (283 KB PDF), 108th Cong. (July 10, 2003) (statement of Stuart K. Pratt, CDIA) [hereinafter Statement of Stuart K. Pratt], at 5. Return to text 29. FCRA � 611(a)(1)(A). If a consumer transmits information relevant to the reinvestigation during the thirty-day period, the CRA has fifteen additional days to complete the reinvestigation. FCRA � 611(a)(1)(B). The FCRA uses the term "reinvestigation" when referring to reviews of disputed items conducted by CRAs and the term "investigation" when referring to reviews conducted by furnishers. Compare FCRA � 611(a) with FCRA � 623(b). Return to text 30. FCRA � 611(a)(4). Return to text 31. FCRA � 611(a)(2). Return to text 32. FCRA � 623(b). The FCRA also imposes other duties on furnishers, a number of which are described in appendix F of this report. Return to text 33. FCRA � 611(a)(5)(A). FCRA section 611(a) as originally enacted in 1970 required CRAs to delete information found to be inaccurate or unverifiable, but a 1996 amendment gave CRAs the choice of either deleting the information or modifying it. Return to text 34. FCRA � 611(a)(6). Return to text 35. Appendix F contains a more detailed discussion of the FACT Act changes to the FCRA. Other laws, such as the Fair Credit Billing Act, Electronic Fund Transfer Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, and Servicemembers Civil Relief Act, also contain requirements with respect to disputes or the furnishing of information. This report addresses only those requirements in the FCRA. Return to text 36. See FCRA � 623(e), added by FACT Act � 312. In March 2006 the agencies published an Advance Notice of Proposed Rulemaking. 71 Fed. Reg. 14,419 (March 22, 2006). Return to text 37. See FCRA � 623(a)(8), added by FACT Act � 312. Return to text 38. FCRA � 623(b)(1)(E), added by FACT Act � 314. Return to text 39. FCRA � 623(a)(7), added by FACT Act � 217. The Board issued two model notices that financial institutions may use to comply with this requirement. One may be used if the institution provides the notice prior to furnishing negative information to a nationwide CRA. The other may be used if the institution provides the notice after furnishing the negative information. 12 C.F.R. pt. 222 app. B. Return to text 40. Comment of CDIA, at 10. Some furnishers report to CRAs by contracting with other companies to report on their behalf. Comment of Coalition, at page 1 of Coalition's attachment. Return to text 41. Comment of TransUnion, at 3. See also Comment of Wells Fargo, at 1. Return to text 42. FCRA � 623(a)(4). The furnisher must include this notice with the information it regularly furnishes to the CRA for the period in which the account is closed. Id. Furnishers that commented on this issue indicated that they report the closure in their next regularly scheduled report to the CRA, as required by law. Comment of BECU, at 3; Comment of Wells Fargo, at 4; Comment of Juniper, at 3; Comment of MBA, at 9; Comment of ABA, at 3; Comment of Zions, at 4; Comment of BB&T, at 5. However, the National Association of Mortgage Brokers stated that instead of reporting that an account is closed, some creditors simply stop sending updates on the account to CRAs. Comment of NAMB, at 7. Return to text 43. FCRA � 623(a)(5). Some commenters stated that with respect to accounts that have been placed for collection or charged off, they report the date of the first delinquency with their regular monthly update to the CRAs. Comment of MBA, at 8; Comment of Ford County Bank, at 1; Comment of BECU, at 3; Comment of Wells Fargo, at 4; Comment of Zions, at 3-4; Comment of Juniper, at 3. NAMB was concerned that, in some cases, as a collection or charged-off account is sold and resold, a new date is attached to the account by each new furnisher, so it appears that the delinquency is more recent than it really is. Comment of NAMB, at 6. The practice described by NAMB likely would violate the FCRA. As noted above, the FCRA requires a furnisher that reports information to a CRA regarding a delinquent account being placed for collection, charged to profit or loss, or subjected to any similar action to notify the CRA of the month and year of the commencement of the delinquency that immediately preceded the action (often referred to as the "date of delinquency"), not later than ninety days after furnishing the information to the CRA. FCRA � 623(a)(5). No matter how many times a delinquent account is sold and resold, its date of delinquency should remain the same. Return to text 44. Comment of MBA, at 2. In addition, MBA commented that mortgage furnishers are not allowed to report certain negative information. For example, Freddie Mac and Fannie Mae require forbearances on mortgages to be reported as military indulgences if the borrower is a service member on active duty and eligible for relief under the Servicemembers Civil Relief Act. Comment of MBA, at 5. Return to text 45. Comment of CDIA, at 4. The ABA reported that only a small percentage of the very smallest institutions report only negative information. Comment of ABA, at 2. Return to text 46. Comment of BB&T, at 1. Many banks in the Coalition's survey of twenty community banks stated that they do not report information on commercial loans and a variety of other loans such as agricultural loans, real estate loans, and overdraft-protection closed-end loans. Comment of Coalition, at page 2 of Coalition's attachment. A state member bank explained that in the course of a bank examination, it reports on all its mortgage and consumer loan products, but not on its commercial loans, as the commercial loan relationships are supported with cash generated from operating income and real estate investments. Return to text 47. Comment of CDIA, at 4. Many creditors obtain lists of consumers from CRAs for the purpose of making "firm offers of credit" (often referred to as "prescreened offers"). The FCRA permits creditors to obtain these consumer lists under FCRA section 604(c) unless a consumer opts out of receiving such offers. By refraining from reporting positive data on their best customers, banks and other creditors can keep competitors from "cherry picking" those customers through prescreened offers. Return to text 48. Comment of CDIA, at 4; Comment of NAMB, at 2. Return to text 49. See, e.g., Cal. Pub. Util. Code � 2891(a) (2004). Return to text 50. Comment of Equifax, at 5. Return to text 51. Comment of CDIA, at 4; Comment of TransUnion, at 4; Comment of Equifax, at 5; Comment of BECU, at 1; Comment of Coalition, at page 3 of Coalition's attachment. Return to text 52. Commenters reported on the policies and procedures implemented to ensure compliance with the FCRA and the periodic auditing performed to ensure that information reported is accurate. See Comment of MBA, at 7-8; Comment of Coalition, at 4; Comment of MBNA, at 5; Comment of ABA, at 3; Comment of Wells Fargo, at 3; Comment of Juniper, at 2; Comment of BB&T, at 4; Comment of BECU, at 2. In addition, BECU reviews annual audits from each CRA to ensure that the CRAs are accurately recording information reported by BECU. Comment of BECU, at 2. Similarly, the Coalition reported that one of its members that performed such a review found that the CRA accurately recorded the reported information more than 99.7% of the time. See Comment of Coalition, at 4. Return to text 53. Comment of CDIA, at 10. Return to text 54. Id. Both Metro and Metro 2 are maintained by an industry committee of employees from each of the three repositories. Id. Return to text 55. Communication from CDIA to the Division of Financial Practices, Federal Trade Commission (Jan. 12, 2005) (on file with the Division of Privacy & Identity Protection) [hereinafter CDIA Communication 01/12/05], at 1. Return to text 56. CDIA, Credit Reporting Resource Guide (2003) [hereinafter CDIA Resource Guide], at 2-1. Return to text 57. General Accounting Office, Report No. GAO-03-1036T, Consumer Credit: Limited Information Exists on the Extent of Credit Report Errors and Their Implications for Consumers (206 KB PDF) | HTML (July 2003), at 12. Return to text 58. CDIA Communication 01/12/05, supra note 55, at 2. Return to text 59. Comment of CDIA, at 4. Return to text 60. NCLC Treatise, supra note 26, at 55. Return to text 61. Id. at 55-56. Return to text 62. Until new FACT Act rules under FCRA � 623(a)(8) take effect, the FCRA does not specifically require that furnishers investigate disputes conveyed directly to them by consumers. Even before the rules take effect, however, the FCRA prohibits furnishers that report regularly from reporting information they have determined is inaccurate, and requires them to report corrected information. FCRA � 623(a)(2). Return to text 63. Government Accountability Office, Report No. GAO-05-223, Credit Reporting Literacy: Consumers Understand the Basics but Could Benefit From Targeted Educational Efforts (1.79 MB PDF) | HTML (March 2005) [hereinafter 2005 GAO Report], at 3, 20. Return to text 64. Id. at 20-21, 64. Return to text 65. CDIA Communication 01/07/05, supra note 15. In many cases, a single consumer may have received disclosures from multiple CRAs. Therefore it is difficult to compare CDIA's estimate of file disclosures to the GAO's estimate of the number of reports ordered by consumers. Return to text 66. FCRA � 609(c)(2)(B). Return to text 67. 2005 GAO Report, supra note 63, at 21, 64-65. Consumers in many circumstances can obtain a free credit report. See FCRA �� 609, 612. If consumers are not entitled to a free report, they may purchase one for a statutorily capped fee. FCRA � 612(f). The current maximum fee is $10.00. See 70 Fed. Reg. 74,816 (Dec. 16, 2005). Return to text 68. CDIA Communication 01/12/05, supra note 55, at 2. Return to text 69. CDIA Communication 01/07/05, supra note 15. Return to text 70. The consumers who said they disputed information in their credit files reported that they had disputed to the following entities: 32% to a CRA only; 29% to the creditor only; 30% to both a CRA and the creditor; 6% to an agency other than a CRA or the creditor; and 3% did not know. 2005 GAO Report, supra note 63, at 67. Return to text 71. 2005 GAO Report, supra note 63, at 30-31. Return to text 72. The Board examined the credit records of a large, nationally representative sample of individuals as of June 30, 2003. This sample was previously examined in detail by the Board as part of a series of articles about the credit reporting system. See 2003 FRB Study, supra note 22, at 47-73; 2004 FRB Study, supra note 11, at 297-322. Return to text 73. See appendix D, table 1. With respect to different types of credit accounts, the following percentages of accounts were in dispute: 0.37% of credit card accounts; 0.02% of mortgage loans; 0.0% of auto loans; and 0.04% of other types of credit accounts (such as charge accounts, lines of credit, secured credit, and student loans). Return to text 74. See appendix D, table 3. Return to text 75. See appendix D, table 2. Return to text 76. FCRA � 611(a)(1)(A). If the consumer submits additional information relevant to the reinvestigation during the thirty-day period, the reinvestigation period can be extended for an additional fifteen days. FCRA � 611(a)(1)(B). In addition, the FACT Act provides that CRAs have forty-five days to complete a reinvestigation if the consumer disputes information after receiving an annual free file disclosure pursuant to the FACT Act. FCRA � 612(a)(3), amended by FACT Act � 211. Return to text 77. FCRA � 611(a)(4). Return to text 78. Compare section 611(a)(1)(A) of 1996 FCRA ("the agency shall reinvestigate free of charge") with section 611(a)(1)(A) of the FACT Act FCRA ("the agency shall, free of charge, conduct a reasonable reinvestigation"). Return to text 79. Compare Cushman v. TransUnion Corp., 115 F.3d 220, 225 (3d Cir. 1997) (where a consumer alerted CRA to possible fraud, it was not sufficient for CRA to rely merely on the creditor's information; court applied a two-factor test: (1) whether the consumer has alerted CRA to possibility that source may be unreliable or CRA itself knows or should know that source is unreliable, and (2) cost of verifying accuracy of source compared with possible harm inaccurately reported information may cause consumer); Pinner v. Schmidt, 805 F.2d 1258, 1262 (5th Cir. 1986) (unreasonable for CRA only to contact the creditor's agent to re-verify a delinquent account balance reported on the consumer's credit report where plaintiff notified CRA of his personal dispute with the agent); Soghomonian v. U.S., 278 F. Supp. 2d 1151, 1156 (E.D. Cal. 2003) (CRA does not act reasonably by deferring entirely to another source of information, especially in cases where source on which CRA relies does not consider information supplied by consumers in course of verifying information); with Bagby v. Experian Information Systems, 162 Fed. Appx. 600, 606-07 (7th Cir. 2006) (CRA had no duty to perform independent investigation where the consumer provided no evidence that source providing information to CRA was unreliable and cost of investigation far outweighed harm to the consumer); Cahlin v. General Motors Acceptance Corp., 936 F.2d 1151, 1160 (11th Cir. 1991) (CRA's reinvestigation was not unreasonable where CRA exercised independent professional judgment, based on full information, as to how particular account should be reported on credit report and where there was no factual deficiency in credit report); Stewart v. Credit Bureau, Inc., 734 F.2d 47, 55 (D.C. Cir. 1984) (CRA's failure, following reinvestigation of disputed items in credit report, to note that a lien was against the consumer as a business entity, rather than as an individual, and that the consumer contested the lien, did not render report fundamentally incomplete, so as to serve as basis for the consumer's claim that reinvestigation procedures were inadequate to reasonably ensure accurate correction of disputed items); Kettler v. CSC Credit Serv., Inc., 2003 U.S. Dist. LEXIS 14424, *7-8 (D. Minn. Aug. 12, 2003) (where the consumer did not provide specific information regarding nature of inaccuracies in her credit report, court ruled that CRA may rely on information in public records absent more specific evidence that the information is inaccurate). Return to text 80. Comment of consumer groups, at 6. Return to text 81. CDIA Communication 01/12/05, supra note 55, at 3. CDIA added that CRAs "also keep in mind that credit repair [organizations] can and do submit falsified documents, including forged letters from credit grantors which advise a consumer reporting agency to delete accurate information." Id. Return to text 82. Comment of TransUnion, at 5. Return to text 83. FCRA � 611(a)(2). Return to text 84. See, e.g., www.transunion.com, "Dispute"; www.equifax.com, "Online Dispute"; www.experian.com, "Submit a Dispute Online." Return to text 85. FCRA section 623(a)(2) requires that if a furnisher determines that information the furnisher has reported to a CRA is incomplete or inaccurate, the furnisher (1) must promptly notify the CRA of that determination and provide any information necessary for the CRA to make the information complete and accurate and (2) may not furnish the incomplete or inaccurate information to the CRA in the future. Return to text 86. See CDIA, "What Is e-OSCAR?" at www.e-oscar.org. Return to text 87. Id. Because e-OSCAR is web-based, furnishers are able to avoid the cost of purchasing and updating software. CDIA, "Benefits," www.e-oscar.org/benefits.htm. FCRA section 611(a)(5)(D) requires the nationwide CRAs to implement an automated system through which furnishers may report the results of their investigations to all nationwide CRAs to which the furnishers reported the disputed information. The e-OSCAR system permits such reporting by furnishers. Return to text 88. Comment of CDIA, at 5; Comment of TransUnion, at 4; CDIA Communication 01/12/05, supra note 55, at 2. Return to text 89. "Credit repair organizations" generally offer to remove, or assist consumers in removing, derogatory information from consumers' credit files. See 15 U.S.C. � 1679b(3) (defining "credit repair organization"). Because of deceptive practices used by many credit repair organizations, Congress enacted the Credit Repair Organizations Act, 15 U.S.C. �� 1679-1679j, in 1996. TransUnion estimates that between 12% and 20% of all requests for reinvestigations are generated by credit repair organizations. Comment of TransUnion, at 8. Two furnishers, on the other hand, asserted that few, if any, disputes they received came from credit repair organizations. Comment of Coalition, at page 4 of Coalition's attachment; Comment of Zions, at 1. Return to text 90. CDIA Communication 01/12/05, supra note 55, at 2. Return to text 91. Id. TransUnion estimates that approximately 86% of its dispute notices are sent to e-OSCAR participants; the remaining 14% are sent to paper-based furnishers. Comment of TransUnion, at 6. Return to text 92. CDIA Communication 01/12/05, supra note 55, at 3. Return to text 93. Id. at 2. Return to text 94. Resellers are discussed in more detail in section II.A of this report. Return to text 95. Comment of NCRA, at 2. As discussed more fully in section IV.D.2, NCRA commented that furnishers vary in the degree to which they cooperate when resellers convey consumer disputes to them. Return to text 96. Comment of CDIA, at 2; Comment of TransUnion, at 4; Comment of Equifax, at 4; Comment of MBA, at 10. Return to text 97. Comment of MBA, at 3. Return to text 98. Comment of Ford County Bank, at 1. Similarly, in the course of a Federal Reserve bank examination, a state member bank stated that because it received so few disputes, it decided not to pay the fee to correct information with the CRA. Furnishers that participate in e-OSCAR are charged $0.25 each time they receive an ACDV or send an AUD. They pay a minimum charge of $21 each quarter, regardless of the number of e-OSCAR transactions they conduct during that period. CDIA, "e-OSCAR Costs," at www.e-oscar.org/costs.htm. Return to text 99. Comment of Ford County Bank, at 1. See FCRA � 611(a)(5)(A). Return to text 100. Comment of MBA, at 11. Return to text 101. FCRA � 611(a)(2)(A). Return to text 102. Comment of consumer groups, at 2, 5-6. Return to text 103. Comment of consumer groups, at 7. Return to text 104. Comment of BB&T, at 6; Comment of MBA, at 9; Comment of Wells Fargo, at 5; Comment of ABA, at 4; Comment of Zions, at 4; Comment of Coalition, at 2-3; Comment of MBNA, at 3-4. Return to text 105. Comment of Coalition, at 2. The Coalition recommended that several of these catch-all dispute codes be made more precise. Id. The Coalition noted, however, that those members that addressed whether the information from the CRAs is sufficient to conduct an investigation reported that the information is almost always sufficient. Id. at 4. Return to text 106. Comment of Coalition, at 1; Comment of MBNA, at 2; Comment of Ford County Bank, at 1; Comment of ABA, at 4; Comment of Wells Fargo, at 5; Comment of Juniper, at 4. Return to text 107. CDIA Communication 01/12/05, supra note 55, at 2 n.2. Return to text 108. Comment of MBA, at 9. Return to text 109. Comment of CDIA, at 7. The courts that have addressed the issue of whether the ACDV system and its use of codes to convey the relevant consumer information complies with the FCRA have concluded that, at least in concept, it does. See Davis v. Equifax Information Services LLC, 346 F. Supp. 2d 1164, 1176 (N.D. Ala. 2004) (where consumer did not know what information CRA asked furnisher to investigate and consumer's only evidence that CRA failed to convey "all relevant information" to furnisher was fact that CRA conveyed the information electronically, court granted summary judgment for CRA); Perry v. Experian Info. Solutions, No. 05C1578, 2005 U.S. Dist. LEXIS 26040, *22-23 (N.D. Ill. Oct. 28, 2005) (based on scant information in consumer's dispute letters, CRA's reinvestigation using ACDVs was reasonable); and Lee v. Experian Info. Solutions, No. 02C8424, 2003 U.S. Dist. LEXIS 17420, at 19-20 (N.D. Ill. Oct. 2, 2003) ("[T]he CDV procedure alone is accepted by courts as an adequate method both for assuring accuracy and for reinvestigation" (citing Dickens v. TransUnion Corp., 18 Fed. Appx. 315, 319 (6th Cir. 2001))). Several courts, however, have found that under particular circumstances, the CRA should take additional steps to override or correct the standard procedures when it knows or should know those procedures are not functioning properly in that case. See Apodaca v. Discover Financial Services, 2006 U.S. Dist. LEXIS 12505, *32 (D.N.M. Mar. 2, 2006) (where potential harm to the consumer is great and the consumer provides specific and detailed information, a rational factfinder may find this "weigh[s] strongly in favor of investing the resources necessary to complete a more thorough investigation that goes beyond the minimal CDV procedure," which the CRA knew would be inadequate to correct the problems created by its reporting procedures); and Soghomonian v. U.S., 278 F. Supp. 2d 1151, 1157 n.3 (E.D. Cal. 2003) (CRA acted unreasonably in failing to provide furnisher with copy of IRS document supplied by the plaintiffs that proved the plaintiffs' tax lien had been extinguished). Thus, the issue of whether the CRA has conveyed "all relevant information" is a fact-dependent one. Return to text 110. Comment of TransUnion, at 6; Comment of Equifax, at 7. Return to text 111. CDIA Communication 01/12/05, supra note 55, at 3 n.4. Return to text 112. Comment of CDIA, at 6. CDIA's members report that they do not have a tracking mechanism that allows them to report on how many written disputes are submitted using only a standardized form and how many contain additional documentation. CDIA Communication 01/12/05, supra note 55, at 3. Return to text 113. Comment of TransUnion, at 6. Return to text 114. Comment of CDIA, at 7. Return to text 115. Comment of TransUnion, at 5. Return to text 116. Comment of Equifax, at 7. Return to text 117. Communication from CDIA to the Division of Privacy & Identity Protection, Federal Trade Commission (Apr. 14, 2006) (on file with the Division of Privacy & Identity Protection). Among other things, CDIA noted that some consumers submit disputes with information about different accounts and furnishers commingled, and that it was unclear whether individual furnishers should be permitted to see information other than that which relates to their account. According to CDIA, masking or editing consumer documents to maintain privacy would be technologically difficult. In its original comment letter, CDIA had stated that under the e-OSCAR system, "it has become feasible to consider some additional enhancements to an already successful technology. Discussions have begun on a means of delivering or making available consumer documentation, submitted to a consumer reporting agency along with a dispute, to data furnishers to ensure that a furnisher can more fully consider a consumer's dispute." Comment of CDIA, at 5. Return to text 118. FCRA � 623(b)(1). The FACT Act imposes additional duties on furnishers, described in appendix F of this report. Return to text 119. Examples of courts ruling that a furnisher's investigation was sufficient include Westra v. Credit Control of Pinellas, 409 F.3d 825, 827 (7th Cir. 2005) (investigation was reasonable where CRA did not inform furnisher that plaintiff was victim of identity theft and furnisher verified name, address, and date of birth of account and reported to CRA that account belonged to plaintiff); Malm v. Household Bank, N.A., 2004 U.S. Dist. LEXIS 12981, *14-15 (D. Minn. July 7, 2004) (where CRA's CDV stated only "Not his/hers. Provide complete ID" and did not specify that plaintiff believed account belonged to ex-wife only, or that she forged his signature to open it, furnisher conducted reasonable investigation by verifying that plaintiff's personal information matched its records and updating account balance; furnisher did not have to review the actual credit card application). Other courts, however, have ruled that a furnisher's investigation was or might have been insufficient. See, e.g., Johnson v. MBNA, 357 F.3d 426, 431-32 (4th Cir. 2004) (upholding jury verdict finding that credit card issuer's investigation was not reasonable where company was notified that consumer disputed that she was co-obligor on the account and company reviewed only information in its computerized customer information system and did not consult underlying documents, such as account applications); Schaffhausen v. Bank of America, 393 F. Supp. 2d 853, 858 (D. Minn. 2005) ("Bank of America's convoluted and inconsistent responses to the CRAs' inquiries … create at least a jury question as to the reasonableness of BOA's procedures."); Bruce v. First U.S.A. Bank, 103 F. Supp. 2d 1135, 1143 (E.D. Mo. 2000) (court held that standard for reasonable investigation for furnishers is analogous to that of CRAs, and found issues of material fact where furnisher reviewed only its internal records, which revealed that signature on credit application did not match plaintiff's signature, and furnisher did not contact either the plaintiff or his ex-wife regarding allegations of fraud). Return to text 120. Comment of consumer groups, at 4 (emphasis in original). NAMB reported that in some cases, instead of confirming that the furnisher cannot validate the information, the furnisher will do nothing, or actually report back to the CRA that the information is accurate as reported. Comment of NAMB, at 4. NAMB also commented that there are times when the furnisher is, in fact, given conclusive information about the disputed information, but the corrections or modifications reported back to the CRA are not accurate--e.g., discharge dates are reported inaccurately or balances are not indicated accurately as zero. Id. Return to text 121. Comment of consumer groups, at 4. Return to text 122. Comment of Wells Fargo, at 4; Comment of MBA, at 6-7, 9; Comment of Juniper, at 4; Comment of Zions, at 4. Return to text 123. Comment of Wells Fargo, at 5. Return to text 124. Comment of Zions, at 4. Return to text 125. Id. at 3. Return to text 126. Comment of MBA, at 10; Comment of Wells Fargo, at 6; Comment of Zions, at 5; Comment of Juniper, at 4-5; Comment of BB&T, at 7; Comment of CDIA, at 7. Return to text 127. Comment of MBA, at 10. Return to text 128. Comment of NAMB, at 3, 6. Return to text 129. FCRA � 623(b)(1)(E), added by FACT Act � 314. Return to text 130. Comment of Juniper, at 5; Comment of BB&T, at 7; Comment of Wells Fargo, at 6; Comment of CDIA, at 7; Comment of Equifax, at 7; Comment of TransUnion, at 7. Return to text 131. Comment of MBA, at 10; Comment of Wells Fargo, at 6; Comment of Zions, at 5; Comment of Juniper, at 4-5; Comment of BB&T, at 7; Comment of BECU, at 3; Comment of CDIA, at 7; Comment of TransUnion, at 7. Return to text 132. CDIA Resource Guide, supra note 56, at 14-3; CDIA, "e-OSCAR Benefits," at www.e-oscar.org/benefits.htm; Comment of Equifax, at 3. As noted above, the FCRA was amended in 1996 to require nationwide CRAs to implement an automated system through which furnishers may report the results of their investigations to all nationwide CRAs to which the furnisher reported the disputed information. FCRA � 611(a)(5)(D). Return to text 133. CDIA Resource Guide, supra note 56, at 14-3. Return to text 134. Comment of MBA, at 10. Return to text 135. Comment of NCRA, at 2. Return to text 136. FCRA � 611(f), added by FACT Act � 316. Return to text 137. Comment of MBA, at 11; Comment of BECU, at 4; Comment of Juniper, at 5. Return to text 138. FCRA � 611(b). Return to text 139. Comment of ABA at 4; Comment of Zions, at 5. However, Juniper stated that these post-investigation dispute statements are not very helpful to consumers, because credit scoring models do not take the statements into account. Comment of Juniper, at 3. A leading producer of credit scoring models, Fair Isaac Corp., reported that, although its scoring models do not take post-investigation dispute statements into consideration when calculating "FICO scores," the models do consider disputes that are still being investigated. The Fair Isaac representative added that some lenders may choose to consider post-investigation statements in their credit decisions. E-mail from Karlene E. Bowen, Director-Client Relationships, Fair Isaac Corp., to the Division of Financial Practices, Federal Trade Commission (Jan. 12, 2005, 23:32 EST) (on file with the Division of Privacy & Identity Protection). Return to text 140. Comment of TransUnion, at 7. As noted in section IV.A, CDIA reported that 21.8% of the file disclosures issued by the repositories to consumers in 2003 led to a reinvestigation by one of the repositories. Return to text 141. 2005 GAO Report, supra note 63, at 67-68. Return to text 142. Comment of CDIA, at 6. Return to text 143. Comment of Equifax, at 7; Comment of CDIA, at 6; Comment of Wells Fargo, at 5. Return to text 144. Comment of CDIA, at 3. Return to text 145. Communication from CDIA to the Division of Financial Practices, Federal Trade Commission (Feb. 2, 2005) (on file with the Division of Privacy & Identity Protection). Return to text 146. Comment of Wells Fargo, at 5; Comment of BECU, at 4; Comment of Zions, at 4. See also Comment of Coalition, at 5 and pages 8-9 of Coalition's attachment; Comment of MBNA, at 5; Comment of MBA, at 6, 9 (which mentions disputes communicated by paper). Return to text 147. Comment of Coalition, at 5; Comment of MBNA, at 5. Return to text 148. Comment of consumer groups, at 5. Return to text 149. The FCRA mandates that CRAs modify or delete disputed information if the furnisher does not verify it within the thirty-day reinvestigation period. FCRA � 611(a)(5)(A). See also Comment of BECU, at 3; Comment of Juniper, at 4; Comment of CDIA, at 6. Return to text 150. Comment of TransUnion, at 5. Return to text 151. 2005 GAO Report, supra note 63, at 32. Return to text 152. Id. at 32, 67. If an item is deleted from a consumer's file because a reinvestigation finds that the item is inaccurate, incomplete, or could not be verified, the CRA may not reinsert the item in the consumer's file unless the entity that furnished the item certifies that the item is complete and accurate and the CRA notifies the consumer of the reinsertion. FCRA � 611(a)(5)(B). CRAs also must maintain reasonable procedures designed to prevent the reappearance of previously deleted items in a consumer's file and in consumer reports issued about the consumer. FCRA � 611(a)(5)(C). Return to text 153. Communication from CDIA to the Division of Financial Practices, Federal Trade Commission (Oct. 26, 2004) (on file with the Division of Privacy & Identity Protection). Return to text 154. Statement of Stuart K. Pratt, supra note 28, at 14. Return to text 155. Id. Return to text 156. TransUnion reported that it does not treat as "repeats" disputes containing additional information, or those made after a reasonable length of time has passed since the last dispute. Comment of TransUnion, at 7. Return to text 157. Comment of TransUnion, at 7. Return to text 158. 2005 GAO Report, supra note 63, at 67. Return to text 159. Comment of Coalition, at 3 and page 5 of attachment; Comment of MBNA, at 4; Comment of Wells Fargo, at 2; Comment of BB&T, at 4; Comment of ABA, at 2; Comment of MBA, at 6; Comment of Juniper, at 1; Comment of Zions, at 2 (regarding its mortgages). Zions, for example, reported that its Consumer Loan Servicing Department receives 60% of its disputes through CRAs, 20% directly from consumers, and 20% from internal requests. Comment of Zions, at 1. On the other hand, some furnishers suggested that a higher percentage of their disputes came from consumers. BECU reported that it received only half of its disputes through CRAs and the other half directly from consumers. Comment of BECU, at 1. One community bank in the Coalition's survey reported that 100% of the disputes it receives come directly from consumers. Comment of Coalition, at page 5 of attachment. Return to text 160. See FCRA � 623(a)(8), added by FACT Act � 312(c). Return to text 161. FCRA � 623(a)(2). Return to text 162. Comment of Coalition, at 3; Comment of MBNA, at 4; Comment of Wells Fargo, at 2; Comment of Juniper, at 2. The FCRA currently does not require furnishers to provide consumers with a specific address for submitting disputes, but furnishers that provide such an address are exempt from certain kinds of liability under the FCRA. See FCRA � 623(a)(1). In addition, as required by the FACT Act, the FTC and the federal financial regulators will promulgate rules that will require consumers who wish to submit disputes directly to furnishers to do so at "the address specified by the [furnisher] for such notices." See FCRA � 623(a)(8)(D), added by FACT Act � 312. Return to text 163. Comment of Juniper, at 2. Return to text 164. Comment of Wells Fargo, at 2. Return to text 165. Comment of ABA, at 2; Comment of MBA, at 2. Return to text 166. Comment of ABA, at 2; Comment of BB&T, at 2; Comment of Ford County Bank, at 1. Return to text 167. Comment of MBA, at 6-8; Comment of BECU, at 1-2; Comment of ABA, at 2-3; Comment of Wells Fargo, at 2-5; Comment of Juniper, at 3; Comment of BB&T, at 4; Comment of Zions, at 2. Return to text 168. Comment of MBA, at 6-7; Comment of ABA, at 3; Comment of Wells Fargo, at 2; Comment of Zions, at 2; Comment of Juniper, at 2; Comment of BECU, at 2-3; Comment of BB&T, at 4. Return to text 169. Comment of MBA, at 6-7; Comment of Wells Fargo, at 2. As described above, the consumer groups maintain that furnishers typically are not consulting underlying documents when investigating disputes. See supra section IV.D.1. Return to text 170. Comment of MBA, at 7; Comment of Zions, at 2. Return to text 171. Comment of MBA, at 6-7; Comment of Juniper, at 2; Comment of Zions, at 3; Comment of BB&T, at 4. As described above, NAMB reports that some furnishers are not correcting the information in their own records. See supra note 126 and accompanying text. Return to text 172. Comment of BECU, at 2-3; Comment of MBA, at 6-7; Comment of Zions, at 2. Return to text 173. Comment of ABA, at 2-3; Comment of Wells Fargo, at 2; Comment of Juniper, at 2; Comment of BB&T, at 4; Comment of Zions, at 2; Comment of MBA, at 6; Comment of BECU, at 2. Return to text 174. Comment of MBA, at 7; Comment of Juniper, at 2; Comment of Zions, at 3. Return to text 175. Comment of Coalition, at 3-4. Wells Fargo commented that up to 25% of disputes it receives directly from consumers do not contain sufficient relevant information to conduct a proper investigation. Comment of Wells Fargo, at 3. Return to text 176. Comment of Coalition, at 3-4; Comment of MBNA, at 4-5; Comment of ABA, at 3; Comment of BECU, at 2; Comment of Zions, at 3. Some commenters suggested that one reason consumers may not provide full information is that credit reports typically do not show the full account number on specific accounts. Comment of NAMB, at 8; Comment of Zions, at 3. Return to text 177. Comment of MBA, at 7. Zions explained that it uses a service available through Experian, called "Bullseye," to obtain information on individual accounts. Comment of Zions, at 3. Return to text 178. Comment of Juniper, at 2; Comment of ABA, at 3; Comment of Coalition, at 3-4; Comment of MBNA, at 4-5; Comment of MBA, at 7. Return to text 179. Comment of consumer groups, at 2. Return to text 180. Id. Return to text 181. Id. at 9. Return to text 182. Id. Return to text 183. Id. Return to text 184. Id. at 8-10. Return to text 185. Id. at 10. Return to text 186. Certain furnishers also maintained that obtaining correction of erroneous information was difficult. Comment of Coalition, at page 11 of Coalition's attachment; Comment of MBA, at 3. Return to text 187. Comment of California Association of Realtors, at 3. Return to text 188. Comment of MBA, at 12. According to CDIA, the "Remarks" field on the ACDV form does allow furnishers to convey certain additional information (e.g., that the account is being paid under a partial payment agreement or has been closed due to transfer) through codes describing the status of the accounts at issue. Communication from CDIA to the Division of Privacy & Identity Protection, Federal Trade Commission (July 21, 2006) (on file with the Division of Privacy & Identity Protection), at 1. Return to text 189. Comment of Coalition, at 1, 4; Comment of MBNA, at 2, 5; Comment of ABA, at 1-2, 4-5; Comment of Wells Fargo, at 6; Comment of Juniper, at 5; Comment of Visa, at 3-5; Comment of CDIA, at 7; Comment of TransUnion, at 7-9. Return to text 190. Comment of Visa, at 4-5. Return to text 191. Id. at 4. Return to text 192. Id. at 3; Comment of Juniper, at 5. The National Association of Realtors, a trade group representing realtors, suggested shortening the reinvestigation period from thirty days in light of the increased use of technology and the consolidation of CRAs. This trade group suggested that shortening the reinvestigation period would force the CRAs to complete their reinvestigations faster, which would minimize the adverse impacts on consumers caused by incorrect information in their credit histories. Comment of National Association of Realtors, at 2-3. The consumer groups commented, however, that the length of time CRAs and furnishers take to complete reinvestigations usually is not a problem, because they ordinarily are finished quickly through the e-OSCAR system. Comment of consumer groups, at 5. Return to text 193. Comment of Juniper, at 5; Comment of MBA, at 4; Comment of TransUnion, at 8. MBA and TransUnion suggested that changes should be made to curb these types of abuses. MBA suggested that limits should be placed on the number of disputes allowed to be filed by a consumer or credit repair organization within the investigation time period on the same issue on the same trade-line. Comment of MBA, at 11. See also Comment of BECU, at 4. TransUnion suggested expanding the definition of "credit repair organization" in the Credit Repair Organizations Act (CROA), 15 U.S.C. sections 1679-1679j, to include not-for-profit agencies and professional associations that advertise their credit repair or counseling services. CROA is intended to protect consumers from deceptive and abusive practices by companies engaged in credit repair. According to TransUnion, amending the definition of "credit repair organization" in this way would give consumers, CRAs, and furnishers a private right of action to enforce their rights under CROA against these entities. Comment of TransUnion, at 8. Return to text 194. Comment of Visa, at 3. Return to text 195. Comment of Juniper, at 5. Return to text 196. Comment of Coalition, at 4; Comment of MBNA, at 5. Return to text 197. Comment of TransUnion, at 7. Return to text 198. FCRA � 621. Other entities, such as the individual states, the U.S. Department of Transportation, and the U.S. Department of Agriculture, also have FCRA enforcement authority under certain circumstances. Return to text 199. FCRA � 621(a). Return to text 200. See, e.g., United States v. Far West Credit, Inc., Civ. No. 2:06CV00041-TC (D. Utah 2006) (consent decree settling charges that reseller failed to follow reasonable procedures to ensure the accuracy of its reports); First American Real Estate Solutions, LLC, 127 F.T.C. 85 (1999) (consent order with reseller concerning the reinvestigation obligations of CRAs). The FTC also settled cases with the three repositories, charging that they failed to establish a toll-free number with "personnel accessible" during normal business hours to answer consumers' questions about their consumer reports, as mandated by FCRA section 609(c)(1). The complaints in these cases alleged that the repositories failed to maintain adequate personnel, resulting in busy signals, excessive hold times, and the blocking of consumer calls from particular locations. The orders require the repositories to maintain adequate personnel, establish auditing requirements to ensure future compliance, and pay a total of $2.5 million in civil penalties. See FTC v. Equifax Credit Info. Services, Inc., No. 1:00-CV-0087 (N.D. Ga. 2000); FTC v. Experian Mktg. Info. Solutions, Inc., No. 3-00CV0056-L (N.D. Tex. 2000); FTC v. TransUnion LLC, 00C 0235 (N.D. Ill. 2000); see also United States v. Equifax Credit Info. Servs., Inc., Civ. No. 1:0-CV-0087-MHS (N.D. Ga. 2003) ($250,000 disgorgement remedy for alleged violation of consent decree). Return to text 201. See FTC v. NCO Group, Inc., 2004 WL 1103323 (E.D. Pa. 2004) (providing inaccurate delinquency dates; $1.5 million civil penalty); United States v. Fairbanks Capital Corp., Civ. Action No. 03-12219 DPW (D. Mass 2003) (furnishing information to a CRA knowing, or consciously avoiding knowing, that the information is inaccurate); FTC v. DC Credit Servs., Inc., No. 02-5115 (C.D. Cal. 2002) (furnishing information to a CRA knowing, or consciously avoiding knowing, that the information is inaccurate, failing to notify and provide corrections to CRAs when previously reported information was found to be inaccurate, failing to provide accurate delinquency dates, failing to report accounts as "disputed"; $300,000 civil penalty); FTC v. Performance Capital Mgmt., Inc., 2:01cv1047 (C.D. Cal. 2000) (providing inaccurate delinquency dates, failing to properly investigate disputes, failing to report accounts as "disputed"; $2 million civil penalty). All these cases were settlements resulting in consent decrees. Return to text 202. The Federal Reserve System regulates, among others, state-chartered banks that are members of the System. The FDIC regulates, among others, insured state-chartered banks that are not members of the Federal Reserve System. Return to text 203. The OCC regulates national banks. Return to text 204. The FTC announced the program on April 23, 2004. See www.ftc.gov/opa/2004/04/cra.htm. The affiliates are discussed in more depth in section II.A. Return to text 205. See supra notes 79 and 117 and accompanying text. Return to text 206. See supra notes 35-39 and accompanying text. See also appendix F. Return to text Note for Appendix C1. Source: Consumer Data Industry Association. Return to text Note for Appendix D1. Source: Federal Reserve Board. Return to text Note for Appendix E1. Source: Consumer Data Industry Association. Return to text Notes for Appendix F1. FCRA � 611(a)(1)(A), as amended by FACT Act � 317. Return to text 2. FCRA � 611(a)(5)(A), as amended by FACT Act � 314. Return to text 3. FCRA � 612(a)(3), as amended by FACT Act � 211. Return to text 4. FCRA � 611(f), as amended by FACT Act � 316. FCRA section 603(u) defines a "reseller" as a CRA that "assembles and merges" information contained in the database of a repository. Return to text 5. FCRA � 611(f)(2), as amended by FACT Act � 316. Return to text 6. FCRA � 611(a)(1)(A), as amended by FACT Act � 317. Return to text 7. FCRA � 611(f)(3)(A), as amended by FACT Act � 316. Return to text 8. FCRA � 611(f)(3)(B), as amended by FACT Act � 316. Resellers still are free to conduct their own reinvestigations of consumer disputes, but they are no longer required to do so. See FCRA � 611(f)(4), as amended by FACT Act � 316(b). Return to text 9. FCRA � 623(a)(8), as amended by FACT Act � 312(c). When completed, the regulations will be available at www.ftc.gov/credit and www.federalreserve.gov. Return to text 10. FCRA � 623(b)(1)(E), as amended by FACT Act � 314. Return to text 11. FCRA � 623(a)(6), as amended by FACT Act � 154(a) A furnisher may re-report the information if the furnisher subsequently knows or is informed by the consumer that the information is correct. FCRA � 623(a)(6)(B), as amended by FACT Act � 154(a). Return to text 12. FCRA � 623(a)(1)(A) of 1996 FCRA. Return to text 13. FCRA � 623(a)(1)(A), as amended by FACT Act � 312(b)(1). If a furnisher clearly and conspicuously supplies an address to which disputes should be sent, however, this duty does not apply to the furnisher. FCRA � 623(a)(1)(C). Return to text 14. FCRA � 623(a)(1)(D), as amended by FACT Act � 312(b)(2). Return to text 15. FCRA � 623(a)(7), as amended by FACT Act � 217. The financial institution may choose to convey this notice before furnishing the information to the CRA. 12 C.F.R. pt. 222 app. B. Return to text 16. FCRA � 623(e), as amended by FACT Act � 312(a). The FACT Act amendments also added several other furnisher provisions that are not discussed here. Return to text |
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