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Feds Propose New Rules for Credit Bureaus

Consumers could dispute bad data directly with lenders

by Martin H. Bosworth
ConsumerAffairs.com

December 3, 2007

The proposed rules would let consumers dispute data in their reports directly with lenders rather than with the three major credit bureaus -- Equifax, Experian and Trans Union.

The 191-page document was crafted by a multiagency task force that included the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Federal Trade Commission (FTC), the National Credit Union Administration (NCUA), and the Office of Thrift Supervision.

The definition of "accuracy and integrity" takes up a considerable part of the report, with the agencies submitting two types of definitions apiece for the "regulation" and "guidelines" sections.

The "regulation" definition 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."

The "guidelines" approach "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," the report said, emphasizing that the data "furnisher" should investigate and verify that information it provides is accurate and up-to-date.

Among the specific policies and procedures the agency report recommends for data accuracy are:

• Using standard data reporting formats and standard procedures for compiling and furnishing data, such as the electronic transmission of information about consumers to CRAs.

• Ensuring that the furnisher maintains its own records for a reasonable period of time, not less than any applicable record-keeping requirement, in order to substantiate the accuracy of any information about consumers it furnishes that may be subject to a direct dispute.

• Training staff that participates in activities related to the furnishing of information about consumers to CRAs to implement the policies and procedures.

• Ensuring that technological and other means of communication with CRAs are designed to prevent duplicative reporting of accounts, erroneous association of information with the wrong consumer(s), and other occurrences that may compromise the accuracy and integrity

• of information contained in consumer reports.

Data In Dispute

The report recommended that data furnishers directly investigate a dispute of data if the dispute related to a consumer's liability for the debt in case of identity theft, the validity of the debt, the debt's payment status or balance, or any other information that "bears on the consumer's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living attributed to the furnisher on the consumer report."

Exemptions from the direct dispute regulation would be any information reported by the lender that comes from public records, such as bankruptcy filings, property purchases, tax liens, and criminal judgments, as well as inquiries related to past or present employment.

The agencies advised that data furnishers provide an address "clearly and conspicuously specified" for submitting data disputes both in writing and electronically, though the data furnishers would not be held liable if a credit reporting agency got the address wrong when providing a report to consumers.

The report also mandates that in order for a dispute to be investigated and not dismissed as "frivolous," consumers must provide specific information detailing the dispute and contact information including a name, address, and telephone number.

The report is available as a free PDF download. The report will soon be published in the Federal Register, and the agencies have included information for submitting comments on the proposal for up to 60 days after publication.

The proposed new rules were mandated by the Fair and Accurate Credit Transactions Act (FACTA) of 2003, an update to the Fair Credit Reporting Act (FCRA) which governs credit and consumer reporting agencies.

As per section 312 of FACTA, "the Agencies are proposing guidelines for use by entities that furnish information about consumers to a consumer reporting agency regarding the accuracy and integrity of the information that they furnish," according to a joint statement.

"The Agencies are also proposing regulations that would require each entity that furnishes information to a consumer reporting agency to establish reasonable policies and procedures for implementing the guidelines," the report said.

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