To: All Affiliated Credit Union CEOs
From: Matt Beard - Regulatory Specialist
Date: April 17, 2006
RE: FACT Act Guidelines and Rules on the Accuracy of Credit Information
Note: This new Comment Call format is designed to highlight the key issues associated with the proposed changes, with the option of going to the full description from CUNA. If the topic discussed is of interest, you may click on the link that will take you to the full explanation and questions associated with the changes. If you receive this information via fax or mail, and you do not have Internet access, please contact Angie Hall at 800-262-6285 to receive CUNA’s full proposal.
The Fair and Accurate Credit Transactions Act (FACT) contains provisions that are designed to enhance the accuracy of credit reports. These provisions require the National Credit Union Administration (NCUA), the other Federal financial institution regulators, and the Federal Trade Commission (FTC) to establish and maintain guidelines for use by those that furnish information to credit bureaus that address the accuracy and integrity of the information. These regulators are also required to issue rules requiring these furnishers to establish policies and procedures for implementing the guidelines and to issue rules identifying the circumstances in which a furnisher, based on a direct request from a consumer, must reinvestigate disputes about the accuracy of information in a credit report. The regulators have now issued an advance notice of proposed rulemaking (ANPR) in order to solicit comments as they proceed with developing these guidelines and rules that are required under the FACT Act.
Accuracy and Integrity Guidelines. The FACT Act sets forth the criteria that the regulators must use in developing the accuracy and integrity guidelines, which requires them to:
- Identify patterns, practices, and activities that compromise the accuracy and integrity of the information furnished to the credit bureaus.
- Review the methods used to furnish consumer information to credit bureaus.
- Determine whether furnishers maintain and enforce policies to assure the accuracy and integrity of the information furnished to the credit bureaus.
- Examine the policies and processes employed by furnishers to conduct reinvestigations and correct inaccurate consumer information that has been furnished to the credit bureaus.
Reinvestigating Disputes. The FACT Act also requires the regulators to assess the following when developing the rules for identifying the circumstances in which a furnisher, based on a direct request from a consumer, must reinvestigate disputes about the accuracy of information in a credit report:
- Assess the benefits to consumers as compared to the costs to the furnishers and the credit reporting system.
- Assess the impact on the overall accuracy and integrity of consumer reports.
- Determine whether direct contact with the furnisher would likely result in the most expeditious resolution of any dispute.
- Determine the impact on the credit reporting process of the exception in the FACT Act that allows credit repair organizations to circumvent the requirements of these rules when submitting disputes on behalf of the consumer.
Regulators will review the comments received from the ANPR and then issue specific proposed rules. Comments in response to the ANRP are due by May 22, 2006. Please submit your comments to MCUL by May 11, 2006. You may also access a copy of the ANPR at:
- What are the types of errors, omissions, or other problems that may impair the accuracy and integrity of information furnished to credit bureaus and their significance to consumers (particularly groups of consumers, the users of consumer reports, and the credit reporting system)? ( These include problems that result in information that is incorrect, out of date, associated with the wrong consumer, omitted (such as credit limits or positive account information), duplicative, or misleading.)
- What are the patterns, practices and forms or specific activities that can compromise the accuracy and integrity of information furnished to credit bureaus, along with any business, economic, or other reasons for them? ( This may include sales of debt to collection agencies; conversion of the information into a standard form; and the frequency, timing, categories, and content of the information furnished to credit bureaus. This may relate to any aspect of the reporting process, such as how the information is collected, verified, edited, standardized, or transferred.)
- What are the policies and procedures that a furnisher should implement to identify, prevent, or mitigate these patterns, practices, or specific activities?
- What are the methods used to furnish consumer information to credit bureaus? How can they can either enhance or compromise the accuracy and integrity of consumer information that is furnished to credit bureaus?
- Should furnishers maintain and enforce policies and procedures to ensure the accuracy and integrity of information furnished to credit bureaus, including a description of these policies and procedures, such as those relating to data controls, points of failure, account termination, the re-reporting of deleted consumer information, and the reporting of the deferral and suspension of payment obligations in unusual circumstances, as well as the frequency, timing, categories, and content of the information? If so, to what extent? ( This should also address the effectiveness of these polices and procedures, how they can be improved, and how they are monitored or evaluated to ensure their effectiveness.)
- What are the methods that a furnisher should use to ensure the accuracy and integrity of consumer information furnished to a credit bureau?
- What are the policies and procedures used by furnishers to conduct reinvestigations and to correct inaccurate consumer information that has been furnished to credit bureaus? ( This includes the policies and procedures that furnishers use to comply with the requirement in the FCRA that they review all relevant information provided by the credit bureau.)
- What are the policies and procedures that furnishers should use to conduct reinvestigations and to correct inaccurate consumer information that has been furnished to credit bureaus?
- What are the circumstances under which a furnisher should or should not be required to investigate a dispute concerning the accuracy of information furnished to a credit bureau, based upon a request from the consumer?
- What are the benefits and costs to consumers from having the right to dispute information directly with the furnisher, rather than through a credit bureau?
- What are the benefits to furnishers, credit bureaus, and the credit reporting system that may result if furnishers were required to investigate disputes based on direct requests from consumers?
- What are the costs, including start-up costs, to furnishers and the credit reporting system of requiring furnishers to investigate disputes based on direct requests from consumers? ( This includes the circumstances in which these direct disputes with furnishers would cost more, less, or the same to process, as compared to disputes that are directed to credit bureaus and then routed to furnishers for investigation. This should also include information as to the percentage of disputes that: A) involve an error by the credit bureau; B) are determined to be frivolous or irrelevant (including the cost of providing the notice of this to the consumer within five days, as required under the FCRA); or C) result in changes to consumer credit files.)
- Is it your current practice to investigate disputes about the accuracy of information furnished to credit bureaus based on direct requests by consumers? If so, provide more information regarding:
- The circumstances in which the furnisher will or will not investigate the dispute.
- The experience with receiving disputes from credit repair organizations.
- The current procedures for resolving the direct disputes, including the time frames and communications with the consumer and the cost to conform to the new requirements under the FACT Act.
- Whether the number of direct disputes varies by type of account (such as mortgages, auto lending, or unsecured accounts) and whether the cost to resolve the disputes varies by the type of account.
- The percentage of disputes received directly from the consumer and from the credit bureaus, the percentage of duplicate disputes that are both received from consumers and the credit bureaus, and the practices designed to detect and process these duplicate requests.
- What would be the impact on the accuracy and integrity of consumer reports if the furnisher were required, under some or all circumstances, to investigate disputes about the accuracy of information furnished to credit bureaus based on direct requests by consumers?
- What are the circumstances in which direct contact by the consumer with the furnisher would or would not likely result in the most expeditious resolution of a dispute concerning the accuracy of information furnished to a credit bureau?
- What is the impact on small institutions of procedures that would enhance the accuracy and integrity of information furnished to credit bureaus, specifically the impact on the institution’s resources and the availability of personnel with the required expertise? What is an alternative approach available for these institutions that would also achieve the goals of these new FACT Act guidelines and rules?
Potential Impact to Credit Unions. ( Note: Below are issues the MCUL identified as potentially impacting credit union policies, procedures, or operations. Keep in mind that as each credit union is unique, this list may not be exhaustive.)
- Potential areas of impact are unknown since nothing has been proposed at this point. This ANPR seeks to gather information as to what burdens furnishers of information currently face, or would potentially face, in having to comply with additional requirements to enhance the accuracy and integrity of information furnished to credit bureaus.
If you have any further questions, or to submit a response, please contact:
Michigan Credit Union League
112 East Allegan St., Suite 800
Lansing, MI 48933
Fax: (517) 482-3762