[Federal Register Volume 69, Number 153 (Tuesday, August 10, 2004)]
[Notices]
[Pages 48494-48497]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 04-18290]


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FEDERAL RESERVE SYSTEM

[Docket No. OP-1209]


Request for Information for Study on Investigations of Disputed 
Consumer Information Reported to Consumer Reporting Agencies

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice of study and request for information.

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SUMMARY: Pursuant to section 313(b) of the Fair and Accurate Credit 
Transactions Act of 2003 (FACT Act), the Board of Governors of the 
Federal Reserve System is conducting a study on investigations by 
furnishers of consumer information to consumer reporting agencies when 
that information is disputed. The FACT Act generally amends the Fair 
Credit Reporting Act. In preparing this study, the Board requests 
public comment on a number of issues relating to the prompt 
investigation, completeness, and correction or deletion of information 
reported to credit reporting agencies.

DATES: Comments must be received by September 17, 2004.

ADDRESSES: You may submit comments, identified by Docket No. OP-1209, 
by any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments on the http://
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include docket 
number in the subject line of the message.
     FAX: 202/452-3819 or 202/452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, 
except as necessary 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.

FOR FURTHER INFORMATION CONTACT: Minh-Duc T. Le or Ky Tran-Trong, 
Senior Attorneys, Division of Consumer and Community Affairs, Board of 
Governors of the Federal Reserve System, at (202) 452-3667 or 452-2412; 
for users of Telecommunications Device for the Deaf (``TDD'') only, 
contact (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Background

    The Fair and Accurate Credit Transactions Act of 2003 (FACT Act) 
was signed into law on December 4, 2003. Pub. L. 108-159, 117 Stat. 
1952. In general, the FACT Act amends the Fair Credit Reporting Act 
(FCRA) to enhance the ability of consumers to combat identity theft, to 
increase the accuracy of consumer reports, and to allow consumers to 
exercise greater control regarding the type and amount of marketing 
solicitations they receive. The FACT Act also restricts the use and 
disclosure of sensitive medical information. To bolster efforts to 
improve financial literacy among consumers, title V of the Act 
(entitled the ``Financial Literacy and Education Improvement Act'') 
creates a new Financial Literacy and Education Commission empowered to 
take

[[Page 48495]]

appropriate actions to improve the financial literacy and education 
programs, grants, and materials of the Federal government. Lastly, to 
promote increasingly efficient national credit markets, the FACT Act 
establishes uniform national standards in key areas of regulation 
regarding consumer report information.
    As part of the effort to increase the accuracy of consumer reports, 
section 313(b) of the FACT Act requires the Board to conduct a joint 
study with the Federal Trade Commission (FTC) regarding the extent to 
which, and the manner in which, consumer reporting agencies and 
furnishers of consumer information to consumer reporting agencies are 
complying with the procedures, timelines, and requirements under the 
FCRA for (1) the prompt investigation of disputed information, (2) the 
completeness of information provided to consumer reporting agencies, 
and (3) the prompt correction or deletion of any inaccurate or 
incomplete information or information that cannot be verified. 
Furnishers of information to consumer reporting agencies may include 
banks, retailers, mortgage companies, medical establishments, and 
others.
    The FTC and the Board must jointly submit a progress report to 
Congress on the results of this study no later than December 4, 2004, 
which is 12 months after the date of enactment of the FACT Act. The 
report also must contain recommendations for legislative or 
administrative actions as the Board and FTC jointly determine to be 
appropriate.
    In this notice, the Board requests specific information about the 
current duties and practices of furnishers regarding the prompt 
investigation of information, the completeness of information, and the 
prompt correction or deletion of information. The Board also seeks 
comment on possible legislative and regulatory action to improve the 
dispute process.

II. The Fair Credit Reporting Act

    The FCRA was amended in 1996 to impose duties on furnishers of 
consumer information. Consumer Credit Reporting Reform Act of 1996 
(Pub. L. 105-347), 15 U.S.C. 1681 et seq. With the passage of the FACT 
Act, certain duties were amended and additional duties were imposed. 
The first section below will discuss the furnishers' duties imposed by 
the FCRA in effect prior to the FACT Act amendments, since the 
amendments have not, or have only recently become effective. The second 
section will discuss the new obligations arising from the FACT Act 
amendments.

The FCRA--Pre FACT Act

    The 1996 amendments to the FCRA established duties for furnishers 
of consumer information. These duties, found in FCRA section 623, 
include the duties to report accurate information; to provide notice of 
a dispute; to provide notice of closed accounts; to provide notice 
involving delinquent accounts; and to investigate after receiving 
notice of a dispute from a consumer reporting agency.
    Section 623(a)(1) of the FCRA prohibits a furnisher from reporting 
any information to a consumer reporting agency that it knows or 
consciously avoids knowing is inaccurate. This general prohibition, 
however, does not apply if a furnisher provides an address for 
consumers to use to notify the furnisher that specific information is 
inaccurate. If the furnisher provides such an address, the furnisher 
may not report information relating to a consumer to any consumer 
reporting agency if the consumer has notified the furnisher at the 
specified address that the information is inaccurate, and the 
information is in fact inaccurate.
    Section 623(a)(2) of the FCRA provides that when a furnisher who 
regularly and in the ordinary course of business reports information to 
one or more consumer reporting agencies determines that the information 
provided is not complete or accurate, the furnisher must promptly 
notify the consumer reporting agency. The furnisher must also provide 
the consumer reporting agency any corrections to that information, or 
any additional information necessary to make the information provided 
by the furnisher to the consumer reporting agency complete and 
accurate. Thereafter, the furnisher must not report to the consumer 
reporting agency any of the information that remains incomplete or 
inaccurate.
    Section 623(a)(3) of the FCRA requires that if the completeness or 
accuracy of any information reported by the furnisher to a consumer 
reporting agency is disputed by a consumer directly to the furnisher, 
the furnisher may not report that information to any consumer reporting 
agency without notice that the information is disputed by the consumer.
    Furnishers have a duty to provide notice of closed accounts and 
delinquent accounts. Under section 623(a)(4), a furnisher--who 
regularly and in the ordinary course of business reports information to 
a consumer reporting agency about a consumer who has a credit account 
with the furnisher--must notify the consumer reporting agency of the 
voluntary closure of the account by the consumer. This notice must be 
included with information regularly furnished for the period in which 
the account is closed. Under section 623(a)(5), a furnisher that 
reports to a consumer reporting agency that a delinquent account is 
being placed for collection, charged off, or subjected to any similar 
action must notify the consumer reporting agency of the month and year 
of the commencement of the delinquency that immediately preceded the 
collection, charge off, or similar action. The month and year must be 
reported within 90 days of the furnisher reporting the collection, 
charge off, or similar action.
    A furnisher also has duties when a consumer disputes information 
with a consumer reporting agency. Section 611 of the FCRA requires that 
the consumer reporting agency notify the furnisher of the dispute 
received from the consumer and provide the furnisher with all the 
information relevant to the dispute. When the furnisher receives this 
notification, section 623(b) of the FCRA requires the furnisher to 
conduct an investigation with respect to the disputed information, 
review all the relevant information provided, and report the results to 
the consumer reporting agency generally within 30 days of the consumer 
reporting agency having received notice of the dispute from the 
consumer. If the furnisher's investigation establishes that the 
information was incomplete or inaccurate, the furnisher must report 
that result to all other nationwide consumer reporting agencies to whom 
the furnisher provided that information. The time period for 
investigation, review, and report may be extended for 15 days if the 
consumer reporting agency receives additional relevant information from 
the consumer.

The FCRA--Post FACT Act Amendments

    The FACT Act amends the FCRA with respect to furnishers' duties in 
several ways. For example, section 312(b) of the FACT Act amends the 
FCRA's prohibition on knowingly reporting inaccurate information to 
prohibit reporting of information if the furnisher ``knows or has 
reasonable cause to believe that the information is inaccurate.'' 
``Reasonable cause to believe that the information is inaccurate'' 
means ``having specific knowledge, other than solely allegations by the 
consumer, that would cause a reasonable person to have substantial 
doubts about the accuracy of the information.''

[[Page 48496]]

    Other provisions of the FACT Act add to a furnisher's duties. For 
example, section 312(c) of the FACT Act requires the Board, FTC, and 
other federal banking regulators to jointly prescribe regulations that 
would identify when a furnisher would be required to reinvestigate a 
dispute concerning the accuracy of information contained in a consumer 
report on the consumer, based on a direct request from a consumer. The 
furnisher, upon receiving this notice would generally have 30 days to 
investigate the disputed information, review all relevant information 
provided by the consumer, and report the results to the consumer. If 
the furnisher finds that the information reported was inaccurate, the 
furnisher also must promptly notify each consumer reporting agency to 
which the furnisher had reported the inaccurate information and provide 
any correction to that information that is necessary to make the 
information accurate. Section 314(b) of the FACT Act would further 
require furnishers that find an item disputed by a consumer to a 
consumer reporting agency to be inaccurate, incomplete, or unverifiable 
after any reinvestigation to promptly modify, delete, or permanently 
block the reporting of that item of information.
    Since these provisions of the FACT Act generally have not become 
effective, the Board understands that information about a furnisher's 
practices with respect to reporting and dispute investigations will be 
mostly about practices as they exist under the FCRA prior to the FACT 
Act amendments.

III. Request for Specific Information

    As described above, section 313(b) of the FACT Act requires the 
Board and the FTC to jointly study the extent to which, and the manner 
in which, consumer reporting agencies and furnishers of consumer 
information to consumer reporting agencies are complying with the 
procedures, timelines, and requirements under the FCRA for the prompt 
investigation of the disputed accuracy of any consumer information. The 
agencies also must study the completeness of the information provided 
to consumer reporting agencies and the prompt correction or deletion of 
any inaccurate or incomplete information or information that cannot be 
verified. In conducting the study, the Board is requesting public 
comment from furnishers, consumers, and other persons on the following 
issues:

General Information

     What type of entity reports negative and/or positive 
information to a consumer reporting agency and what type of entity does 
not report negative and/or positive information to a consumer reporting 
agency? If an entity does not report information to a consumer 
reporting agency, why not?
     Of all disputes received by the furnisher, what percentage 
of the disputes or complaints comes through a consumer reporting 
agency? What percentage comes directly from consumers? What percentage 
comes from other sources (e.g., credit repair entities)?
     Do the answers to the questions below vary based on 
industry, size of entity, type of credit, or other characteristics? Are 
there any generalizations that can be made based on industry, size of 
entity, type of credit, or other characteristics?

Disputes Communicated by Consumers Directly to Furnishers

     Does the furnisher provide an address for consumers to use 
if they want to dispute information directly with the furnisher? If 
not, why? If an address is provided, how is the consumer informed about 
this address?
     Regardless of whether an address is provided, what is the 
furnisher's process and timeline in handling disputes and complaints 
that come directly from consumers? Under what circumstances do 
furnishers currently investigate disputes regarding information in a 
consumer file, based on a direct request of the consumer?
     Is sufficient relevant information provided to the 
furnisher by the consumer? If not, what relevant information is often 
missing, and why? If relevant information is lacking, how does the 
furnisher resolve the dispute?
     What are consumers' experiences in resolving a dispute 
where the furnisher provided an address? What are their experiences 
locating and using this address to resolve their dispute?
     What are consumers' experiences in resolving disputes 
where the furnisher does not provide an address? How were the disputes 
resolved and what entity or person (e.g., furnisher, consumer reporting 
agency, credit repair entity, legal representative, etc.) was 
instrumental in resolving the dispute?

Other Furnisher Duties

     How does the furnisher ensure that it complies with the 
applicable statutory requirements regarding the accuracy and 
completeness of information it reports to the consumer reporting 
agency?
     What are the furnisher's procedures and timelines if it 
finds the information is not complete or accurate?
     What are the furnisher's procedures and timelines for 
reporting information that has been directly disputed by a consumer?
     What are the furnisher's procedures and timelines for 
reporting when a delinquency began on an account that has been placed 
for collection, charged off, or subjected to similar action?
     What are the furnisher's procedures and timelines for 
notifying a consumer reporting agency that a consumer has voluntarily 
closed a credit account with the furnisher?
     What are consumers' experience with communicating with 
furnishers, with the timing of the notice of dispute appearing on the 
credit report, or any other matter related to having the notice of 
dispute placed on the credit report when disputed information continues 
to be reported but with a notice of the dispute?
     What are consumers' experiences with furnishers reporting 
that credit accounts with the furnishers have been voluntarily closed? 
What is the time span between the consumer closing the account and 
information about the closure appearing on the credit report?

Disputes Communicated by Consumers to Consumer Reporting Agencies

     When a consumer reporting agency receives notice of 
consumer disputes and forwards the information to the furnisher, how 
does the consumer reporting agency provide the furnisher with the 
notices and relevant information? What information does the consumer 
reporting agency transmit to the furnisher? Describe any guidelines or 
procedures, voluntary or otherwise, that apply to this process.
     How does a consumer reporting agency ensure that 
furnishers comply with the requirements and timelines established under 
the FCRA for disputes communicated to a consumer reporting agency?
     What are the furnisher's procedures and timelines for 
investigating the disputes and reviewing the information provided?
     Is sufficient relevant information provided to the 
furnisher by the consumer through the consumer reporting agency? Is all 
relevant information from a consumer provided to the furnisher through 
the consumer reporting agency? If not, what relevant information is 
often missing, and why? If relevant information is lacking, how does 
the furnisher resolve the dispute?
     If the furnisher finds that the information it reported to 
the consumer reporting agency was incomplete or inaccurate, what steps 
does the furnisher take?

[[Page 48497]]

     If the furnisher does not find the information reported to 
the consumer reporting agency to be incomplete or inaccurate, what 
steps does the furnisher take?
     Describe any guidelines or procedures that may apply to 
the treatment of information that continues to be disputed by the 
consumer after the formal dispute process has been concluded. How often 
do the furnisher and consumer fail to reach an agreement after the 
conclusion of the formal dispute process, for example, where the 
consumer maintains that the disputed information is inaccurate and the 
furnisher maintains that it is accurate?

Recommendations

     What, if any, legislative or regulatory changes do you 
recommend besides changes made by the FACT Act and its implementing 
rules? How would these recommendations improve the system? What 
benefits or burdens should be considered?

    By order of the Board of Governors of the Federal Reserve 
System, August 5, 2004.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 04-18290 Filed 8-9-04; 8:45 am]
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