Agencies Propose Rule on Consumer Information Accuracy

By Richard Roth, J.D., Editor, the CCH Federal Banking Law Reporter.

Rules intended to ensure the accuracy of information reported to consumer reporting agencies have been proposed by the federal financial institution regulatory agencies. The proposed rules also cover the circumstances under which a consumer may raise a dispute directly with the furnisher of such information and require the information furnisher to perform a reinvestigation. The proposal, required by the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), was offered jointly by the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., Office of Thrift Supervision, Federal Trade Commission and National Credit Union Administration.

According to the agencies, the FACT Act requires that they establish guidelines that persons who furnish information to consumer reporting agencies must follow to ensure the “accuracy and integrity” of that information. Also, the agencies are to adopt regulations that require information furnishers to establish procedures to implement those guidelines. The proposed regulations on direct disputes also are required by the Act.

Accuracy and Integrity Guidelines

Under the proposal, each person that furnishes information to consumer reporting agencies would be required to have written policies and procedures designed to ensure that the information:

• accurately identifies the correct consumer;

• accurately reports the terms of the consumer's accounts or relationships;

• accurately reports the consumer's performance and other relevant conduct; and

• does not mislead a consumer report user about the consumer's credit-related situation.

“Accuracy” would be defined to mean that the information “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.” Two alternative definitions of “integrity” are proposed. The first would define “integrity” to require that information be reported in a manner designed to minimize the chance that the information could be erroneously included in a consumer report and that it was substantiated by the information furnisher's own records. The other would state that the information furnished would be required to include any term of an account or other relationship that, if omitted, could reasonably be expected to contribute to an incorrect evaluation of the consumer's credit-related situation--creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living.

Disputing Information

The proposal would require information furnishers to reinvestigate consumer disputes under four broad circumstances. Reinvestigation would be needed if a consumer notified an information furnisher of a dispute about:

• liability for a debt, including claims of identity theft or unauthorized use of a credit account;

• the terms of an account or other debt;

• the consumer's performance, including current payment status, payment dates or amounts or the date the account was opened or closed; or

• any other information relating to the consumer's credit-related situation.

According to the agencies, the proposed rule is intended to “permit direct disputes in virtually all circumstances involving disputes with respect to the types of information typically furnished” to a consumer reporting agency other than information derived from public records and information on requests for reports. Disputes over these types of information would be more appropriately directed to the reporting agency, the regulators observed.

Comments must be submitted by Feb. 11, 2008. The proposal appeared at 72 Federal Register 70944 on Dec. 13, 2007.