Report to Congress on the Fair Credit Reporting Act Dispute Process

Report to Congress

on the

Fair Credit Reporting Act

Dispute Process

August 2006

Federal Trade Commission

Board of Governors

of the Federal Reserve System

Federal Trade Commission

Board of Governors of the Federal Reserve System

Report to Congress

on the

Fair Credit Reporting Act

Dispute Process

Submitted to the Congress pursuant to section 313(b) of the

Fair and Accurate Credit Transactions Act of 2003

August 2006

Table of Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

III. The Reporting Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

IV. The Dispute Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

V. FCRA Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

VI. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Appendix A Table of Names and Acronyms

Appendix B Request for Information for Report

Appendix C Sample Automated Consumer Dispute Verication Form

Appendix D Frequency of Credit Account Disputes in Federal Reserve Board Study of Data

from One Repository as of June 30, 20031

Appendix E Response Rates of Furnishers Responding to One Repository Through E-OSCAR

and Furnishers Responding in Paper Form (July 2004)

Appendix F The FCRA After the FACT Act

Fair Credit Reporting Act Dispute Process

Executive Summary

The Federal Trade Commission (“FTC”) and the Board of Governors of the Federal

Reserve System (“Board”) submit this report pursuant to section 313(b) of the Fair and

Accurate Credit Transactions Act of 2003 (“the FACT Act”). The report discusses the steps that

consumer reporting agencies (“CRAs”) and furnishers of information to CRAs (“furnishers”)

take after receiving a consumer dispute about the accuracy or completeness of information in

the consumer’s le. The report rst provides background information and describes the Fair

Credit Reporting Act’s (“FCRA’s”) dispute provisions. The core portion of the report, titled

“The Dispute Process,” addresses (1) how the consumer submits a dispute to the CRA, (2) how

the CRA forwards the dispute to the furnisher, (3) how the furnisher investigates the dispute

and replies to the CRA, and (4) how the CRA reviews the furnisher’s response and conveys

the results of the reinvestigation to the consumer. The report also discusses the dispute process

when consumers submit disputes directly to furnishers. The Board issued a request for public

comment, and the report summarizes commenters’ overall views on the dispute process.

The report nds that, although the materials that the FTC and the Board reviewed indicated

that most disputes seem to be processed within the statutory time frame, there is disagreement as

to the adequacy of the CRAs’ and furnishers’ investigations.

The FACT Act imposes a number of new requirements to enhance the consumer dispute

process. These provisions are still being implemented. As a result, this report is based solely

on compliance with the pre-FACT Act FCRA dispute process and recommends no additional

administrative or legislative action at this time. The FTC and the Board believe that the FACT

Act requirements should be given time to take effect before legislators and regulators consider

making additional changes to the dispute process. The FTC and the Board will continue to

monitor the performance of the dispute process, explore possible enhancements, and make

recommendations for action, if appropriate.

Report to Congress

Fair Credit Reporting Act Dispute Process

I. Introduction

The Federal Trade Commission (“FTC”) and the Board of Governors of the Federal Reserve

System (“Board”) submit this report pursuant to section 313(b) of the Fair and Accurate Credit

Transactions Act of 2003 (“the FACT Act”).

Section 313(b) of the FACT Act, enacted on

December 4, 2003, mandates that the FTC and Board jointly study

[t]he 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, time lines, and requirements under the Fair Credit Reporting Act

for the prompt investigation of the disputed accuracy of any consumer information,

the completeness of the information provided to consumer reporting agencies, and

the prompt correction or deletion, in accordance with such Act, of any inaccurate or

incomplete information or information that cannot be veried.

Section 313(b) also requires that the FTC and the Board submit a joint report on the results

of the study. In preparing the report, the two agencies must consider information relating to

complaints led with the FTC and referred to the nationwide consumer reporting agencies under

section 611(e) of the Fair Credit Reporting Act (“FCRA”).

Lastly, section 313(b) requires that

the report include any recommendations that the Board and the FTC jointly determine to be

appropriate for legislative or administrative action.

In preparing this report, the FTC and the Board drew upon information provided by various

sources. The Board issued a request for public comment on the topics required by section

313(b).

The two agencies reviewed over 120 comment letters received from consumers,

consumer advocates,

creditors and their trade associations,

consumer reporting agencies

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.

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 les 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 sufcient to show compliance.

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.

Approximately 100 consumers submitted comments in response to the Board’s Federal Register notice.

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.

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

Report to Congress

(“CRAs”) and their trade associations,

and mortgage industry trade associations.

The comment

letters are available on the FTC’s website, at www.ftc.gov/os/statutes/fcrajump.htm. The FTC and

the Board also met with consumer advocates and groups representing CRAs and furnishers. In

addition, the FTC and the Board reviewed consumer complaint information maintained within

their own databases and those of several other federal nancial regulators.

The Board reviewed

information gained through examinations for FCRA compliance by several federal nancial

regulators. Finally, the FTC and the Board reviewed the existing literature, including studies,

reports, and industry manuals, as well as research conducted by the Board’s staff economists.

This report summarizes the information provided by these sources. Part II discusses the

role of CRAs and furnishers in the dispute process, describes consumer reports, and explains

the relevant provisions of the FCRA. Because the process by which information is furnished

to CRA databases is important to understanding the dispute process, Part III of this report

discusses reporting responsibilities and the systems through which furnishers report information

to CRAs. Part IV discusses the various steps that consumers, CRAs, and furnishers take during

the dispute process, the systems used to exchange information between CRAs and furnishers

when consumers dispute information contained in their consumer les, as well as commenters’

overall views on how well the dispute process is working. Part V of the report discusses FCRA

enforcement by the FTC, the Board, and other federal agencies; consumer complaints reviewed

by the Board and several other federal agencies; and the complaint-referral program that the FTC

has entered into with CRAs in compliance with FCRA section 611(e). Finally, Part VI contains

the report’s conclusions.

II. Background

A. The Actors

The FCRA dispute process involves CRAs and those who furnish information to the CRAs.

The largest CRAs are three nationwide “repositories” of consumer credit information: Equifax

Implement the FACT Act (Coalition). The Coalition represents an array of nancial services companies that are furnishers

and/or users of consumer credit information. Comment of Coalition, at 1.

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.

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.

This report uses the term “federal nancial regulators” to refer collectively to the following entities: the Board, Federal

Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), Ofce of the Comptroller of the

Currency (OCC), and Ofce of Thrift Supervision (OTS).

Fair Credit Reporting Act Dispute Process

Information Services, LLC (“Equifax”), Experian Information Solutions, Inc. (“Experian”),

and TransUnion LLC (“TransUnion”).

Each repository has records on as many as 1.5 billion

credit accounts held by approximately 210 million individuals.

According to the Consumer

Data Industry Association (CDIA), the repositories receive approximately 4 billion updates of

information each month from more than 30,000 furnishers,

and normally update their credit

records within one to seven days of receiving new information.

The repositories issue more

than 1 billion consumer reports each year, the vast majority of which go to creditors, employers,

and insurers.

In 2003, the most recent year for which gures are available, the repositories

issued 57.4 million consumer le disclosures, i.e., reports sent to consumers at their request.

The term “consumer reporting agency” in the FCRA covers many entities other than the

three repositories.

For example, the repositories report that approximately twenty companies,

traditionally referred to as “service bureaus” or “afliates,” have contractual relationships

with one of the repositories under which the afliate owns consumer data in certain areas of

the country but stores the data on the repository’s computer.

Other entities that fall within

the denition of “consumer reporting agency” include those that collect and report specialized

information, such as check writing histories, rental records, employment histories, and medical

information.

Another category of CRAs, “resellers,” purchase consumer information from one or more

of the repositories, provide further input to the consumer report, including merging les from

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 Ofcer, Equifax Inc.: Hearing

Before the House Committee on Financial Institutions and Consumer Credit, 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 (Federal Reserve Bank of Philadelphia Working Paper No. 05-13, June

2005).

See Robert B. Avery, Paul S. Calem & Glenn B. Canner, Credit Report Accuracy and Access to Credit, Federal Reserve

Bulletin (Summer 2004) [hereinafter 2004 FRB Study], at 298.

Comment of CDIA, at 10.

2004 FRB Study, supra note 11, at 298.

Id.

Communication from CDIA to the Division of Financial Practices, Federal Trade Commission (Jan. 7, 2005) (on le with the

Division of Privacy & Identity Protection) [hereinafter CDIA Communication 01/07/05].

FCRA section 603(f) denes “consumer reporting agency” as “any person which, for monetary fees, dues, or on a cooperative

nonprot 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.”

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.

The CRAs in this category that operate on a nationwide basis are referred to as “nationwide specialty consumer reporting

agencies.” See FCRA § 603(w).

Report to Congress

multiple repositories or adding information from other data sources, and then resell the report.

While this report briey describes the changes in reseller dispute duties under the FACT Act and

includes comments from their trade representatives, the focus of the report with respect to CRAs

will be on the repositories, which own and maintain the vast majority of the data held by CRAs.

Unlike “consumer reporting agency,” the term “furnisher” is not dened in the FCRA. As

the term is generally understood, however, furnishers are entities that provide information about

their customers to CRAs, including information about customers’ payments on their accounts.

Examples of furnishers include banks, thrifts, credit unions, savings and loan institutions,

mortgage lenders, credit card issuers, collection agencies, retail installment lenders, and auto

nance lenders.

The FCRA does not require furnishers to report to CRAs, but, as discussed

below, if they do report, they must comply with certain provisions of the statute. According

to CDIA, the majority of furnishers report full account payment information, both “positive”

information that the account is current and “negative” information, such as delinquencies and

accounts placed for collection.

Some types of accounts are typically reported only when the

payment history turns negative, such as when the debt is transferred to a debt collector. The most

common examples of these accounts are those related to medical debts, telecommunications, and

power companies.

B. Consumer Reports

Full consumer reports issued by the repositories, commonly referred to as “credit reports,”

generally contain ve types of information:

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

dened 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) denition of “reseller,” because they do not “assemble and merge” the

information, but they still must comply with FCRA section 607(e).

Comment of CDIA, at 4, 10 n.8.

Comment of CDIA, at 4.

See Robert B. Avery, Paul S. Calem, Glenn B. Canner & Raphael W. Bostic, An Overview of Consumer Data and Credit

Reporting, Federal Reserve Bulletin (Feb. 2003) [hereinafter 2003 FRB Study], at 49, 50; Comment of NAMB, at 2;

Comment of Equifax, at 5.

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 (Dec. 2004)

[hereinafter 2004 FTC Report], at 6–11.

Fair Credit Reporting Act Dispute Process

u Identication Information: Information such as the name of the individual, current and

previous residential addresses, and Social Security number.

u Trade Line Information: Detailed information reported by creditors and other furnishers

on each current and past loan, lease, or other debt (such as utility and medical debts).

u Public Record Information: Information derived from nancial-related public records,

such as records of bankruptcies, foreclosures, tax liens, garnishments, and other civil

judgments.

u Collection Account Information: Information reported by collection agencies regarding

credit accounts and other debts.

u Inquiry Information: Identities of individuals or companies that have requested

information from an individual’s credit le; the date of inquiry; and an indication of

whether the inquiry was by the consumer, for the review of an existing account, or to help

the inquirer decide on a potential future account or relationship.

Although Equifax, Experian, and TransUnion are for-prot businesses that compete with

one another on, among other things, the completeness of the information in their databases,

many items in a consumer’s les are common to all three repositories. This is due in large part to

the standard formats that furnishers use to report information to the repositories.

Nonetheless,

some differences remain across repositories. Some furnishers, including some smaller banks

and many debt collection agencies, do not report to all three repositories.

Differences also

can arise from the repositories’ treatment of public record information. Because some public

record information is accessible only by visiting courthouses and other government buildings in

person, the repositories sometimes hire contractors to gather the information.

When repositories

use different contractors, the contractors sometimes report the same public record information

differently, causing additional variations among repository databases.

Yet another reason that

repositories’ databases differ is that the repositories often receive and process information from

furnishers at different times during the same reporting cycle.

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, rst name, address, and current balance—are received in the same

data elds in the databases of any repositories to which the furnisher reports. See infra section III for a discussion of Metro

and Metro 2.

See, e.g., Comment of Coalition, at page 3 of Coalition’s attachment; Comment of NAMB, at 2; Comment of CDIA, at 4.

National Consumer Law Center, Fair Credit Reporting (5

ed. & Supp. 2005) [hereinafter NCLC Treatise], at 55.

2003 FRB Study, supra note 22, at 51 n.11.

Id.; The Accuracy of Credit Report Information and the Fair Credit Reporting Act: Hearing Before the Senate Committee

on Banking, Housing, and Urban Affairs, 108th Cong. (July 10, 2003) (statement of Stuart K. Pratt, CDIA) [hereinafter

Statement of Stuart K. Pratt], at 5.

Report to Congress

C. FCRA Dispute Duties

The FCRA imposes dispute duties on both CRAs and furnishers. If a consumer disputes the

completeness or accuracy of an item contained in his or her le directly with the CRA,

u the CRA must complete a reinvestigation within thirty days after receiving the notice of

dispute from the consumer;

u in conducting the reinvestigation, the CRA must review and consider all relevant

information submitted by the consumer; and

u within ve business days of receiving the dispute, the CRA must notify the furnisher

of the dispute, and include all relevant information that the CRA received from the

consumer.

After receiving a dispute from a CRA, a furnisher must take the following steps:

u conduct an investigation with respect to the disputed information;

u review all relevant information provided by the CRA;

u report the results of the investigation to the CRA;

u if the investigation nds that the information is incomplete or inaccurate, report those

results to all nationwide CRAs to which the furnisher reported the information; and

u complete the investigation before the end of the thirty-day period that the CRA has to

complete its reinvestigation.

If the CRA nds during the reinvestigation that a disputed item is inaccurate, incomplete,

or cannot be veried, the CRA must delete or modify the item.

No later than ve business days

after the completion of a reinvestigation, a CRA must provide written notice to the consumer of

the results of the reinvestigation.

The notice must include

u a statement that the reinvestigation is completed;

u a consumer report based on the consumer’s le (if the le has been revised as a result of

the reinvestigation);

FCRA § 611(a)(1)(A). If a consumer transmits information relevant to the reinvestigation during the thirty-day period,

the CRA has fteen 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).

FCRA § 611(a)(4).

FCRA § 611(a)(2).

FCRA § 623(b). The FCRA also imposes other duties on furnishers, a number of which are described in appendix F of this

report.

FCRA § 611(a)(5)(A). FCRA section 611(a) as originally enacted in 1970 required CRAs to delete information found to be

inaccurate or unveriable, but a 1996 amendment gave CRAs the choice of either deleting the information or modifying it.

FCRA § 611(a)(6).

Fair Credit Reporting Act Dispute Process

u a notice that the CRA will provide a description of the procedure used to determine

the accuracy and completeness of the disputed item to the consumer at the consumer’s

request;

u a notice that the consumer has the right to add a statement to his or her le disputing the

accuracy or completeness of the information; and

u a notice that the consumer has the right to request that the CRA furnish notication that

the item had been deleted, or the consumer’s statement of dispute, to certain persons

designated by the consumer who had previously received a consumer report that

contained the deleted or disputed information.

The FACT Act amended the FCRA in a number of ways that affect the consumer dispute

resolution process.

One of the changes requires the FTC, the Board, and other federal

agencies to promulgate guidelines and regulations requiring creditors to establish reasonable

procedures regarding the accuracy of the data they report to CRAs.

A second change also

requires joint regulations identifying the circumstances under which furnishers, for the rst

time, must investigate certain disputes received directly from consumers.

A third FACT Act

change requires that, in disputes received from a CRA, if information disputed by a consumer

is found to be inaccurate or incomplete or cannot be veried after the furnisher completes the

investigation, the furnisher must promptly delete, modify, or permanently block the reporting

of that information, as appropriate based on the results of the investigation.

The FACT Act

amendments also require nancial institutions that furnish information to nationwide CRAs

to notify consumers in writing if they furnish, or may furnish, negative information about the

consumers to a CRA.

Because these and other provisions of the FACT Act have not become

effective or have only recently become effective, this report focuses on the dispute process as it

existed under the FCRA prior to the FACT Act amendments.

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.

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).

See FCRA § 623(a)(8), added by FACT Act § 312.

FCRA § 623(b)(1)(E), added by FACT Act § 314.

FCRA § 623(a)(7), added by FACT Act § 217. The Board issued two model notices that nancial 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.

Report to Congress

III. The Reporting Process

This section provides an overview of the process through which furnishers report

information to the CRAs. According to CDIA, more than 30,000 furnishers provide

approximately 4 billion updates of information to the repositories each month.

In general,

nancial services providers such as banks, credit unions, and consumer nance companies

provide the majority of positive and negative account information in CRA les.

A. Reporting Requirements

The FCRA does not require furnishers to report to CRAs. Some entities that choose to

furnish, however, are required by the FCRA to report certain information. For example, a

furnisher must notify a CRA if the consumer voluntarily closes a credit account that the furnisher

has been reporting to that CRA.

The FCRA also requires a furnisher that provides information

to a CRA regarding a delinquent account being placed for collection, charged off, or subjected to

similar action, to notify the CRA of the month and year that the delinquency began.

Some entities are required to furnish certain information due to contractual or other

requirements. For example, the Mortgage Bankers Association (MBA) stated that “[m]ost

mortgage companies … are required by investors and government entities, such as Fannie Mae,

Freddie Mac, and [the U.S. Department of Housing and Urban Development], to report ‘full le’

credit information,” including both positive and negative information and the exact status of each

mortgage serviced as of the last business day of each month, to each of the repositories.

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.

Comment of TransUnion, at 3. See also Comment of Wells Fargo, at 1.

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.

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 rst 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 prot 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.

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

Fair Credit Reporting Act Dispute Process

Nevertheless, because the FCRA generally does not require reporting, some furnishers

choose not to report at all, to report only negative information, or to omit a key element of data

such as a credit limit.

Others report data on some of their credit products and not others.

Commenters proffered a variety of reasons why some furnishers choose not to report or to report

only certain kinds of information. CDIA reported that “[s]ome lenders omit the reporting of

very elite customers out of concern that other lenders will attempt to compete for this market of

consumers.”

Other lenders choose not to report their subprime portfolios for the same reason.

Some regulated entities, such as telephone companies, are limited by regulations as to the types

of information they may report to CRAs.

Some of these companies, for example, are permitted

to report only information about accounts that are in past due or charged-off status.

Some

entities choose not to report to all the repositories in light of the potential liability imposed on

furnishers by the FCRA dispute provisions as well as the costs involved in furnishing.

These

costs may include those associated with reporting, handling investigation requests, establishing

policies and procedures to ensure compliance with the FCRA, and performing audits of reporting

systems and information reported.

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.

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.

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.

Comment of CDIA, at 4. Many creditors obtain lists of consumers from CRAs for the purpose of making “rm 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.

Comment of CDIA, at 4; Comment of NAMB, at 2.

See, e.g., Cal. Pub. Util. Code § 2891(a) (2004).

Comment of Equifax, at 5.

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.

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.

Report to Congress

B. Reporting Formats

Most furnishers use one of two standard formats to report credit information to the

repositories. In the mid-1970’s, the credit reporting industry developed the Metro format, which

was designed to ensure greater precision in the data reported to the CRAs.

In 1997, CDIA

introduced the Metro 2 format.

Metro and Metro 2 each provide a standard format, including

standard codes, that can be used for virtually any consumer credit transaction. According to

CDIA, Metro 2 is “an updated and more robust version of Metro, and provides for complete and

accurate reporting.”

For example, unlike the Metro format, Metro 2 allows a furnisher to report

complete identication information for each consumer, including co-debtors and co-signers,

which makes it more likely that CRAs will match the reported item to the correct consumer’s

le.

The repositories currently receive over 99% of all data from furnishers in either the Metro

or Metro 2 format.

Approximately 31% of these furnishers—representing approximately 50%

of all data furnished to the repositories—now report through Metro 2.

The repositories hope to

convert the rest of the furnishers to Metro 2.

Repositories also obtain information from courts, city halls, tax ofces, and motor vehicles

departments.

For those public record sources that are not yet available electronically, the

repositories often hire contractors to manually collect the information. This information is then

added to the repositories’ databases for inclusion in future consumer reports.

IV. The Dispute Process

In the consumer dispute process, a consumer rst reviews his or her credit report and

identies information in the report that he or she believes is incomplete or inaccurate. The

consumer then communicates a dispute to the CRA, which conveys the dispute to the furnisher

of the information. The furnisher investigates the dispute and reports back to the CRA the results

of its investigation. Finally, the CRA communicates the outcome of the reinvestigation to the

Comment of CDIA, at 10.

Id. Both Metro and Metro 2 are maintained by an industry committee of employees from each of the three repositories. Id.

Communication from CDIA to the Division of Financial Practices, Federal Trade Commission (Jan. 12, 2005) (on le with

the Division of Privacy & Identity Protection) [hereinafter CDIA Communication 01/12/05], at 1.

CDIA, Credit Reporting Resource Guide (2003) [hereinafter CDIA Resource Guide], at 2-1.

General Accounting Ofce, Report No. GAO-03-1036T, Consumer Credit: Limited Information Exists on the Extent of Credit

Report Errors and Their Implications for Consumers (July 2003), at 12.

CDIA Communication 01/12/05, supra note 55, at 2.

Comment of CDIA, at 4.

NCLC Treatise, supra note 26, at 55.

Id. at 55–56.

Fair Credit Reporting Act Dispute Process

consumer. In some cases, consumers communicate a dispute directly to the furnisher.

This

section will discuss each step of the dispute process, as well as the commenters’ overall views on

how well the current process is working.

A. Consumer Reviews Consumer Report and Conveys Dispute to

CRA

In a 2004 Government Accountability Ofce (GAO) survey of 1578 consumers, 58% of

consumers had seen their credit report at some point, and 45% of this subgroup had viewed

their report within the previous year.63 Of the 58% who had viewed their report at some point,

53% said they had ordered their report themselves, and 47% said someone else (e.g., a mortgage

company, nancial institution, or car dealership) had ordered their report and given it to them.

CDIA reported that the repositories issued 57.4 million le disclosures (i.e., reports sent to

consumers at their request) in 2003.

If a consumer requests a credit report from one of the

nationwide CRAs, the CRA must provide the consumer with a toll-free telephone number at

which personnel are accessible to consumers during normal business hours.

The 58% of consumers in the GAO study who had seen their credit report at some time gave

the following as the reasons their credit report had been ordered:

48% Making a large purchase or renancing

30% Checking for completeness and accuracy

8% Due to an adverse action, such as denial of credit, based on a credit report

4% Suspected fraud and/or identity theft

1% Looking for a job

9% Other reasons

Until new FACT Act rules under FCRA § 623(a)(8) take effect, the FCRA does not specically 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).

Government Accountability Ofce, Report No. GAO-05-223, Credit Reporting Literacy: Consumers Understand the Basics

but Could Benet From Targeted Educational Efforts (March 2005) [hereinafter 2005 GAO Report], at 3, 20.

Id. at 20–21, 64.

CDIA Communication 01/07/05, supra note 15. In many cases, a single consumer may have received disclosures from

multiple CRAs. Therefore it is difcult to compare CDIA’s estimate of le disclosures to the GAO’s estimate of the number

of reports ordered by consumers.

FCRA § 609(c)(2)(B).

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).

Report to Congress

A consumer who believes that an item reported in a credit report is inaccurate or incomplete

may contact the CRA by mail, online, by telephone, or in person to dispute the item.

According

to CDIA, of the 57.4 million le disclosures issued to consumers by the repositories in 2003,

21.8% (12.5 million) led to a reinvestigation by one of the repositories.

Approximately 18% of

the consumers interviewed in the GAO survey said that they disputed information in their credit

le at some point.

The consumers surveyed by GAO reported the following reasons for their

disputes:

17% Someone else’s information

14% Incorrect payment history

14% Incorrect late payments

13% Incorrect bill information

13% Incorrect credit card information

10% Incorrect personal information

7% Incorrect balance information

4% Incorrect bankruptcy information

3% Incorrect information from a former spouse

2% Identity theft

4% Another reason

To understand how often credit accounts are disputed, the Federal Reserve Board reviewed

data provided by one of the three repositories as of June 30, 2003.

The data are broken out by

percentage of accounts in dispute. The Board found that 0.18% of credit accounts had a pending

dispute.

Most of the disputes related to open accounts (85.4% of the pending disputes related

CDIA Communication 01/12/05, supra note 55, at 2.

CDIA Communication 01/07/05, supra note 15.

The consumers who said they disputed information in their credit les 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.

2005 GAO Report, supra note 63, at 30–31.

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.

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).

Fair Credit Reporting Act Dispute Process

to open accounts and 14.6% related to closed accounts).

Of those credit accounts in dispute,

89.9% were credit card accounts.

B. CRA Processes Dispute

As discussed above, when a consumer submits a dispute to a CRA, the CRA generally

must reinvestigate within thirty days.

As part of the reinvestigation, the CRA must review and

consider all relevant information submitted by the consumer.

Although the FCRA before the

FACT Act did not specically state that a CRA’s reinvestigation had to be “reasonable,” courts

generally imposed a reasonableness standard. Under the FACT Act, the FCRA now expressly

requires that a CRA’s reinvestigation be reasonable.

Whether a particular CRA’s actions

constitute a “reasonable” reinvestigation varies depending on the circumstances surrounding the

dispute.

The joint comment letter submitted by the National Consumer Law Center, Consumer

Federation of America, Consumers Union, Electronic Privacy Clearinghouse, and U.S. Public

Interest Research Group (“the consumer groups”) asserted that CRAs fail to conduct meaningful

reinvestigations and merely “parrot” information received from furnishers as “veried,” without

See appendix D, table 3.

See appendix D, table 2.

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 fteen days. FCRA § 611(a)(1)(B). In addition, the

FACT Act provides that CRAs have forty-ve days to complete a reinvestigation if the consumer disputes information after

receiving an annual free le disclosure pursuant to the FACT Act. FCRA § 612(a)(3), amended by FACT Act § 211.

FCRA § 611(a)(4).

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”).

Compare Cushman v. TransUnion Corp., 115 F.3d 220, 225 (3d Cir. 1997) (where a consumer alerted CRA to possible

fraud, it was not sufcient 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 notied

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 deciency 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 specic information regarding nature of inaccuracies in her credit report, court ruled that CRA may rely on

information in public records absent more specic evidence that the information is inaccurate).

Report to Congress

independently investigating the accuracy and completeness of such information.

CDIA, on the

other hand, maintained that the repositories meet their obligations to perform reinvestigations.

According to CDIA, in some cases the CRA makes the correction without even submitting the

dispute to the furnisher. CDIA asserted that the repositories “examine the information provided

by a consumer, and where that information demonstrates that the account should be changed

or deleted, the account is changed or deleted.”

Similarly, TransUnion claimed that, “if the

documentation [provided by a consumer] can be reasonably veried as being authentic, the

account is automatically updated based on the documentation, in lieu of sending” a dispute to the

furnisher.

C. CRA Forwards Dispute to Furnisher

Assuming the CRA does not resolve the dispute itself, the CRA must provide notice of the

dispute to the entity that furnished the disputed information, along with “all relevant information

regarding the dispute that the CRA has received from the consumer,” within ve business days

after receiving the consumer’s dispute.

1. How CRA Conveys Dispute to Furnisher

When a consumer contacts a CRA to dispute information on the consumer’s credit report,

the consumer generally is asked to provide the name of the furnisher that reported the disputed

item, the account number relating to the disputed information, the reason for the dispute, and

certain identifying information (e.g., date of birth, Social Security number, and current address).

A CRA employee typically lls out a consumer dispute verication (“CDV”) form based on the

information the consumer provides. The CRA either sends the CDV to the furnisher via mail or

fax, or electronically in the form of an Automated Consumer Dispute Verication (“ACDV”).

(An example of an ACDV form is attached as appendix C.) After investigating the disputed

information, the furnisher lls in relevant portions of the CDV or ACDV and returns it to the

CRA.

CRAs and furnishers also communicate through Universal Data Forms (“UDFs”). Like

CDVs and ACDVs, UDFs are used by furnishers to notify CRAs that information the furnisher

Comment of consumer groups, at 6.

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 falsied documents, including forged letters from credit grantors which advise a consumer

reporting agency to delete accurate information.” Id.

Comment of TransUnion, at 5.

FCRA § 611(a)(2).

See, e.g., www.transunion.com, “Dispute”; www.equifax.com, “Online Dispute”; www.experian.com, “Submit a Dispute

Online.”

Fair Credit Reporting Act Dispute Process

has reported should be deleted or modied in some way. Unlike CDVs and ACDVs, however,

UDFs are initiated by furnishers, rather than by CRAs. For example, if a consumer contacts a

furnisher directly to dispute the accuracy of an item that the furnisher has reported to a CRA,

and the furnisher determines that the information is inaccurate, the furnisher generally would

use a UDF to notify the CRA of the inaccuracy.

UDFs sent electronically are referred to as

Automated Universal Data forms (“AUDs”).

The credit reporting industry’s current electronic dispute processing system is known as

e-OSCAR

(“Online Solution for Complete and Accurate Reporting”). The system is web-based

and permits furnishers to receive and send ACDVs, and send AUDs, over the Internet.

On the

ACDVs they send through e-OSCAR, CRAs provide the furnisher with identifying information

about the consumer in the CRA’s le; one or two codes summarizing the consumer’s dispute;

and, if the CRA deems it necessary, a free-form narrative eld that supplements the dispute

codes.

CRAs select the dispute codes from among twenty-six offered by the e-OSCAR system,

such as “Not his/hers” and “Claims account closed.” CDIA provided the full list of codes to the

FTC and the Board but declined to release the list for use in this report, citing concerns that the

codes are condential and that credit repair organizations would misuse their knowledge of the

dispute codes to have accurate information removed from consumers’ les.

According to CDIA, as of December 2004, e-OSCAR had nearly 15,400 registered users

and more than 83% of all disputes were being processed on the e-OSCAR system.

The

remaining disputes currently are processed through paper CDVs. When a consumer contacts a

repository to dispute an item reported by a furnisher that does not participate in e-OSCAR, the

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.

See CDIA, “What Is e-OSCAR?” at www.e-oscar.org.

Id. Because e-OSCAR is web-based, furnishers are able to avoid the cost of purchasing and updating software. CDIA,

“Benets,” www.e-oscar.org/benets.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.

Comment of CDIA, at 5; Comment of TransUnion, at 4; CDIA Communication 01/12/05, supra note 55, at 2.

“Credit repair organizations” generally offer to remove, or assist consumers in removing, derogatory information from

consumers’ credit les. See 15 U.S.C. § 1679b(3) (dening “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.

CDIA Communication 01/12/05, supra note 55, at 2.

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.

Report to Congress

repository submits a paper CDV by mail or fax to the furnisher that reported the disputed data.

The furnisher investigates the disputed data and returns the paper CDV to the repository, which

then uses the information to update the consumer’s le as necessary.

Some CRAs convey

disputes to furnishers through telephone calls. While repositories generally do not use this

method,

resellers often do, conducting three-way calls with the consumer and the furnisher that

reported the disputed item.

According to the National Credit Reporting Association (NCRA), a

trade association that represents many resellers, resellers generally are willing to provide disputes

to furnishers by whatever means the furnisher demands.

Each of the three repositories, however, has announced plans to stop accepting paper-based

disputes and require all furnishers to participate in e-OSCAR.

MBA commented that it is

unclear whether all mortgage servicers or other creditors have access to e-OSCAR.

Several

furnishers have responded to the repositories’ plans to stop accepting paper-based disputes by

stating that they will refuse to pay the fee to use e-OSCAR.

As a result, these furnishers argue,

any disputed information that they report will be deleted because the furnisher has no other way

to respond to the dispute.

To avoid this, MBA recommended in its comment letter that there be

a free alternative to e-OSCAR for CRAs to accept corrections from furnishers.

100

2. “All Relevant Information”

As noted above, when CRAs send disputes to furnishers, the FCRA requires them to

include “all relevant information regarding the dispute that the agency has received from the

consumer.”

101

Comments reected differing views on whether the current system sufciently

provides “all relevant information” for all disputes. The consumer groups commented that

consumers often supply CRAs with information and documentation sufcient to support their

disputes (including account applications, billing statements, and letters), but CRAs neither

CDIA Communication 01/12/05, supra note 55, at 3.

Id. at 2.

Resellers are discussed in more detail in section II.A of this report.

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.

Comment of CDIA, at 2; Comment of TransUnion, at 4; Comment of Equifax, at 4; Comment of MBA, at 10.

Comment of MBA, at 3.

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.

Comment of Ford County Bank, at 1. See FCRA § 611(a)(5)(A).

100

Comment of MBA, at 11.

101

FCRA § 611(a)(2)(A).

Fair Credit Reporting Act Dispute Process

review the documentation nor forward it to furnishers.

102

The consumer groups asserted that the

twenty-six dispute codes CRAs use in ACDVs and CDVs to describe consumer disputes convey

only “generic descriptions” of the disputes.

103

A number of furnishers commented that the dispute codes are “vague and broad,” and

that the CRAs do not always provide sufcient information.

104

The Coalition to Implement the

FACT Act reported that a signicant volume of current disputes—according to some Coalition

members, 30%–40% of all disputes—are assigned generic, or “catch-all,” dispute codes, such as

“other” or “consumer complains data inaccurate; no specic dispute.” According to the Coalition,

the use of these catch-all codes makes investigations time-consuming and costly.

105

At the same

time, most furnishers reported that the information provided to them through e-OSCAR usually

is sufcient to investigate the dispute.

106

According to CDIA, the free-form eld is used in 30%

of all disputes processed through e-OSCAR.

107

MBA also noted that, while the information its

members receive from CRAs is often cursory, it generally is not problematic, adding that the

bank can contact the borrower directly for information.

108

According to CDIA, the e-OSCAR system as it currently exists already conveys all relevant

information.

109

The two repositories that submitted comments, TransUnion and Equifax,

102

Comment of consumer groups, at 2, 5–6.

103

Comment of consumer groups, at 7.

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.

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 sufcient to

conduct an investigation reported that the information is almost always sufcient. Id. at 4.

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.

107

CDIA Communication 01/12/05, supra note 55, at 2 n.2.

108

Comment of MBA, at 9.

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 specic and detailed information, a rational factnder may nd 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

Report to Congress

agreed.

110

CDIA reported that 22% of consumer disputes submitted to the repositories are

submitted by telephone,

111

and that many other disputes are submitted on the standardized

form that CRAs provide when they give consumers copies of their consumer reports. Thus,

CDIA commented, most disputes are not accompanied by additional relevant information.

112

TransUnion also reported that most consumer disputes it receives do not reference or contain any

specic information or documentation.

113

CDIA added that, “due to credit repair activity or even

individual choices, not all information or documentation that a consumer submits is truthful or

authentic, nor are all requests for reinvestigations valid.”

114

TransUnion stated that it typically does not supply copies of consumer-supplied

documentation to furnishers but added that, “if the documentation can be reasonably veried

as being authentic, the account is automatically updated based on the documentation, in lieu

of sending an ACDV or CDV.”

115

Equifax noted that it currently provides two methods of

supplementing the e-OSCAR dispute codes and free-form eld: (1) a copy of the documentation

can be faxed to the furnisher as appropriate and (2) furnishers can contact CRAs with questions

they have about a particular dispute.

116

In April 2006, CDIA stated that its members “have continued to research both the

technological and legal questions that might arise from providing consumer-submitted

information directly to data furnishers.” It concluded that “the viability of the concept of making

consumer-submitted information available through the e-OSCAR system to data furnishers is

now questionable.”

117

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.

110

Comment of TransUnion, at 6; Comment of Equifax, at 7.

111

CDIA Communication 01/12/05, supra note 55, at 3 n.4.

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.

113

Comment of TransUnion, at 6.

114

Comment of CDIA, at 7.

115

Comment of TransUnion, at 5.

116

Comment of Equifax, at 7.

117

Communication from CDIA to the Division of Privacy & Identity Protection, Federal Trade Commission (Apr. 14, 2006)

(on le 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 difcult. 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.

Fair Credit Reporting Act Dispute Process

D. Furnisher Investigates and Sends Response to CRA

1. Furnisher’s Investigation

A furnisher that receives notice of a dispute from a CRA is required to

(A) conduct an investigation with respect to the disputed information;

(B) review all relevant information provided by the consumer reporting agency . . .;

(D) if the investigation nds that the information is incomplete or inaccurate, report

those results to all other [nationwide] consumer reporting agencies to which the

person furnished the information.

118

Whether a furnisher’s actions constitute a sufcient investigation depends on a number

of factors, including the information the furnisher received about the dispute and the steps the

furnisher takes to investigate the dispute.

119

According to the consumer groups, “regardless of where the dispute is made (directly

with the furnisher or through a CRA), furnishers are simply not conducting meaningful

reinvestigations; they do not train their employees on effective reinvestigation procedures; and

they repeatedly default simply to verifying the existence of an account.”

120

The consumer groups

118

FCRA § 623(b)(1). The FACT Act imposes additional duties on furnishers, described in appendix F of this report.

119

Examples of courts ruling that a furnisher’s investigation was sufcient 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 veried 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 insufcient. See, e.g.,

Johnson v. MBNA, 357 F.3d 426, 431-32 (4th Cir. 2004) (upholding jury verdict nding that credit card issuer’s investigation

was not reasonable where company was notied 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).

120

Comment of consumer groups, at 4 (emphasis in original). NAMB reported that in some cases, instead of conrming

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 modications

reported back to the CRA are not accurate—e.g., discharge dates are reported inaccurately or balances are not indicated

accurately as zero. Id.

Report to Congress

assert that furnishers rarely research the underlying dispute, review documents, or analyze the

furnishers’ own data for inconsistencies and errors.

121

Other commenters provided varying information on the level of investigation that

furnishers conduct in response to disputes. Several furnishers commented that they compared

the information provided on the dispute notice with the information contained in the furnishers’

records.

122

Wells Fargo and Company (Wells Fargo) indicated that such information could

include the

u consumer’s name, address, and Social Security number;

u consumer’s account number;

u account payment history;

u account servicing notes and collection notes;

u loan documents; and

u deferral, modication, and extension history.

123

Similarly, Zions Bancorporation (Zions) indicated that its consumer loan servicing

department researches the account history to match the consumer’s identifying information and

to determine the timing of the payment compared to the payment due dates.

124

If the department’s

staff members determine that they reported incomplete or inaccurate information, they send a

correction to CRAs through the e-OSCAR system.

125

Some commenters stated that furnishers generally correct their internal records to ensure

that the incorrect information is not re-reported to CRAs.

126

In some cases, the furnisher will also

send a letter to the consumer indicating that the information was incomplete or inaccurate and

that a correction will be made.

127

NAMB asserts, however, that some furnishers do not correct

their internal records, and, as a result, the incorrect information is reinserted into the consumer’s

le at the CRA the next time the furnisher sends an electronic update to the CRA.

128

As amended

by the FACT Act, however, the FCRA now requires furnishers to delete, modify, or permanently

block the reporting of disputed information that is found to be inaccurate or incomplete or

121

Comment of consumer groups, at 4.

122

Comment of Wells Fargo, at 4; Comment of MBA, at 6–7, 9; Comment of Juniper, at 4; Comment of Zions, at 4.

123

Comment of Wells Fargo, at 5.

124

Comment of Zions, at 4.

125

Id. at 3.

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.

127

Comment of MBA, at 10.

128

Comment of NAMB, at 3, 6.

Fair Credit Reporting Act Dispute Process

cannot be veried.

129

This change is likely to reduce the instances of incorrect information being

reinserted.

2. Furnisher Communicates Results to CRA

If a furnisher determines that the information in dispute is neither incomplete nor inaccurate,

the furnisher generally selects “Veried as Reported” on the ACDV or CDV and returns it to

the CRA.

130

If, instead, the furnisher determines that the information the consumer disputed is

incomplete or inaccurate, the furnisher generally makes the correction on the ACDV or CDV and

returns it to the CRA.

131

If the furnisher is using e-OSCAR, the system forwards the information

automatically to any other nationwide CRA to which the furnisher reported the disputed

item.

132

According to CDIA, e-OSCAR also edits for illogical furnisher responses and provides

furnishers with an error message if the data they enter in responding to a dispute are inconsistent

with the dispute code.

133

MBA commented that disputes returned to CRAs through e-OSCAR are

more quickly reected in consumers’ credit reports than are disputes conveyed to CRAs through

paper.

134

In contrast to the experience of the repositories, the National Credit Reporting Association

commented that where the dispute has been reported to a reseller and then forwarded to the

furnisher, furnisher practice varies. Some furnishers provide the correct information to the

reseller and then forward the correction to the proper repository. Other furnishers do not respond

at all, causing the reseller to delete the disputed information, whether it is accurate or not.

135

The

FACT Act amended the FCRA to no longer require resellers to forward disputes to the furnisher

that reported the disputed item. Instead, resellers generally are permitted to forward the consumer

dispute to the CRAs from which they obtained the disputed item (“source CRA”).

136

The source

CRA then must reinvestigate the dispute as if it had come directly from the consumer. This new

process is likely to alleviate the problems that the NCRA described.

129

FCRA § 623(b)(1)(E), added by FACT Act § 314.

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.

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.

132

CDIA Resource Guide, supra note 56, at 14-3; CDIA, “e-OSCAR Benets,” at www.e-oscar.org/benets.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).

133

CDIA Resource Guide, supra note 56, at 14-3.

134

Comment of MBA, at 10.

135

Comment of NCRA, at 2.

136

FCRA § 611(f), added by FACT Act § 316.

Report to Congress

If a consumer continues to dispute information after the formal dispute process has been

concluded, some furnishers offer the consumer the option of submitting additional evidentiary

information that the furnishers then review.

137

Under the FCRA, the consumer has a right to

include a statement of dispute in the consumer report if the reinvestigation does not resolve the

dispute.

138

Several furnishers commented that they advise consumers of this option, although

some commenters questioned its value.

139

TransUnion reported that approximately 4% of

all consumer le disclosures result in a statement of dispute being added to the le after the

repository completed its reinvestigation.

140

Of the 18% of consumers in the GAO survey who

disputed information in their le and either (1) the information was not deleted from their les

or (2) they did not know whether the information was deleted, 30% submitted such a dispute

statement to the CRA.

141

3. Furnishers’ Response Times and Rates

Based on the information that the FTC and the Board reviewed, it appears that most disputes

are processed in the statutory time frame, regardless of whether they are processed by e-OSCAR

or by fax and mail. According to CDIA, e-OSCAR allows furnishers to prioritize all disputes

to ensure that the most urgent ones are processed rst and that all disputes can be processed

within the time frames established by the FCRA.

142

As the time limit for responding to a dispute

approaches, e-OSCAR noties the furnisher of the impending deadline.

143

CDIA noted that, of

the disputes that all three repositories sent through e-OSCAR in April 2004, furnishers responded

within the following time periods:

u 54% within 0–7 days;

u 18% within 8–14 days;

u 22% within 15–30 days; and

137

Comment of MBA, at 11; Comment of BECU, at 4; Comment of Juniper, at 5.

138

FCRA § 611(b).

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 le with the Division of Privacy

& Identity Protection).

140

Comment of TransUnion, at 7. As noted in section IV.A, CDIA reported that 21.8% of the le disclosures issued by the

repositories to consumers in 2003 led to a reinvestigation by one of the repositories.

141

2005 GAO Report, supra note 63, at 67–68.

142

Comment of CDIA, at 6.

143

Comment of Equifax, at 7; Comment of CDIA, at 6; Comment of Wells Fargo, at 5.

Fair Credit Reporting Act Dispute Process

u 6% did not respond within 30 days.

144

CDIA also supplied statistics (see appendix E) showing the July 2004 response rates of

furnishers that responded to one of the three repositories using e-OSCAR and furnishers that

responded to the repository in paper form.

145

According to CDIA, as of day 10, 50.98% of the

e-OSCAR furnishers had responded to this CRA regarding the disputes forwarded to them

by the repository. At the same time, 24.33% of paper-based furnishers had responded. By day

20, 79.47% of e-OSCAR furnishers and 71.50% of paper-based furnishers had responded. By

the end of the month, e-OSCAR furnishers had responded to 94% of the disputes from the

repository, and paper-based furnishers had responded to 82%.

A number of furnishers reported that disputes received from CRAs by paper or by e-OSCAR

are normally resolved within twenty days, and often within the rst ve days after receipt.

146

The

Coalition to Implement the FACT Act (Coalition) reported that its members meet the FCRA’s

thirty-day response requirement 100% of the time when using e-OSCAR.

147

The consumer groups commented that the length of time CRAs and furnishers take to

complete reinvestigations generally is not a problem, and that reinvestigations usually are

nished very quickly through the e-OSCAR system.

148

E. CRA Communicates Reinvestigation Results to Consumer

If a furnisher does not respond to the CRA within the 30-day period established by the

FCRA, the CRA is required to treat the disputed information as unveriable and delete the

information.

149

TransUnion stated that if a response is not received within twenty-eight days, the

information in dispute is automatically deleted from the consumer’s credit le.

150

Of the 18% of consumers in the GAO study who had disputed information in their les, 69%

reported that the disputed information had been removed from their credit les. Another 23%

reported that their disputed information had not been removed, and 7% said they did not know

144

Comment of CDIA, at 3.

145

Communication from CDIA to the Division of Financial Practices, Federal Trade Commission (Feb. 2, 2005) (on le with the

Division of Privacy & Identity Protection).

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).

147

Comment of Coalition, at 5; Comment of MBNA, at 5.

148

Comment of consumer groups, at 5.

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.

150

Comment of TransUnion, at 5.

Report to Congress

whether it had been removed.

151

Of those consumers in the survey who reported that information

they disputed had been removed, approximately 72% said the information was not reinserted

later, 13% reported that the information had been reinserted, and 15% did not know.

152

CDIA provided the following data for the rst ve months of 2004, showing the resolution

of disputes processed through the e-OSCAR system.

153

Result of Dispute % of Disputes

Data modied per data furnisher’s instructions 53.64

Information veried as reported 22.37

Data deleted per data furnisher’s direction 17.74

Data deleted due to furnisher not responding within the thirty-day period 6.27

We note that the percentage of consumers in the GAO survey who reported that disputed

information had been removed from their le—69%—is similar to the percentage of

consumers whose disputed information was either modied or deleted based on the furnisher’s

instructions—71.38%. According to CDIA, however, with respect to the “Data modied per

data furnisher’s instructions” category, the data may have been modied due to an update of

information, rather than the data being found to be inaccurate as of the date reported.

154

With

respect to the fourth category—data deleted due to the furnisher not responding within the thirty-

day period—CDIA stated that it cannot be determined whether these data were accurate.

155

TransUnion noted that it identied approximately 5% of disputes as “repeats,” meaning

that the repository recently processed the same dispute and the consumer has provided no new

information.

156

In such cases, TransUnion may treat the dispute as frivolous and notify the

consumer accordingly, without sending a dispute notice to the furnisher.

157

151

2005 GAO Report, supra note 63, at 32.

152

Id. at 32, 67. If an item is deleted from a consumer’s le because a reinvestigation nds that the item is inaccurate,

incomplete, or could not be veried, the CRA may not reinsert the item in the consumer’s le unless the entity that furnished

the item certies that the item is complete and accurate and the CRA noties 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 le and in consumer reports issued about the consumer. FCRA § 611(a)(5)(C).

153

Communication from CDIA to the Division of Financial Practices, Federal Trade Commission (Oct. 26, 2004) (on le with

the Division of Privacy & Identity Protection).

154

Statement of Stuart K. Pratt, supra note 28, at 14.

155

Id.

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.

157

Comment of TransUnion, at 7.

Fair Credit Reporting Act Dispute Process

F. Consumer Disputes Information Directly to Furnisher

In addition to disputes received from CRAs, furnishers also receive disputes directly from

consumers about information reported to CRAs. As noted earlier, of the consumers in the GAO

survey who said they disputed information in their credit les, 32% reported that they disputed

with a CRA only, 29% reported that they disputed with the creditor only, and 30% reported that

they disputed with both a CRA and the creditor.

158

Furnishers that submitted comments generally

reported that they receive most of their disputes from CRAs.

159

As discussed above, until the new

consumer-direct-dispute provision of the FACT Act takes effect, the FCRA does not specically

require that furnishers investigate disputes conveyed directly to them by consumers.

160

However,

the FCRA does (1) prohibit furnishers that report regularly from reporting information they have

determined is inaccurate and (2) require them to report corrected information.

161

Some furnishers that commented reported that they provide or plan to provide a specic

address or other information sufcient for consumers to initiate a dispute directly with them.

162

For example, Juniper Bank reported that it provides a specic address for direct disputes on all

of its monthly billing statements.

163

Similarly, Wells Fargo commented that while some of its

divisions and afliates already do so, virtually all of them plan to begin providing addresses

soon to consumers who want to dispute information directly.

164

Some furnishers do not provide

a specic address dedicated to receiving disputes on information reported to CRAs, but instead

provide general contact information that consumers can use to raise complaints and inquiries

generally, including disputes on information provided to CRAs.

165

Furnishers that did not

provide a specic address for reporting disputes directly provided various reasons for not doing

158

2005 GAO Report, supra note 63, at 67.

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.

160

See FCRA § 623(a)(8), added by FACT Act § 312(c).

161

FCRA § 623(a)(2).

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 specic 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 nancial regulators will promulgate rules that will require consumers who

wish to submit disputes directly to furnishers to do so at “the address specied by the [furnisher] for such notices.” See FCRA

§ 623(a)(8)(D), added by FACT Act § 312.

163

Comment of Juniper, at 2.

164

Comment of Wells Fargo, at 2.

165

Comment of ABA, at 2; Comment of MBA, at 2.

Report to Congress

so, including that (1) such disputes represent too small a percentage of the total inquiries and

disputes received to justify establishing a specic address for such disputes; (2) a specic address

would not be provided at a useful time; while the address would appear on initial disclosures

or periodic statements, consumers generally learn of potential inaccuracies from receiving and

reviewing consumer reports—not from the disclosures; and (3) the more appropriate address to

publicly disclose is that of the three repositories.

166

Whether or not a furnisher provides a specic address for receiving disputes directly from

a consumer, most furnishers reported that they use a similar procedure for investigating direct

disputes as they use for disputes received through a CRA,

167

including making any necessary

corrections by sending the results of their investigations through e-OSCAR or in paper form.

168

Some furnishers commented that, upon receiving disputes directly from consumers, they

compare information and documentation submitted by the consumers to information contained

in their les.

169

In some cases, furnishers send letters to consumers notifying them that the

information will be corrected.

170

Furnishers also report updating their own records to ensure that

the erroneous information does not “re-pollute” the CRA’s les when the furnisher sends its next

monthly update.

171

If the information is found to be accurate, a letter may be sent to the consumer

and reporting continues as before.

172

In general, the furnisher commenters stated that they

investigate and attempt to resolve disputes directly from consumers as soon as possible, usually

within one to twenty—and no more than thirty—days.

173

Several furnishers reported that while most consumers provide sufcient information

for the furnisher to investigate the consumer’s dispute,

174

disputes received directly from

consumers sometimes lack clarity as to the precise information disputed or fail to provide

information sufcient to justify the dispute. According to the Coalition, for example, one of its

members reported that 30% of all direct consumer disputes it receives fall into this category;

166

Comment of ABA, at 2; Comment of BB&T, at 2; Comment of Ford County Bank, at 1.

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.

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.

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.

170

Comment of MBA, at 7; Comment of Zions, at 2.

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.

172

Comment of BECU, at 2–3; Comment of MBA, at 6–7; Comment of Zions, at 2.

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.

174

Comment of MBA, at 7; Comment of Juniper, at 2; Comment of Zions, at 3.

Fair Credit Reporting Act Dispute Process

another member that is a major credit grantor reported that 40% of its direct disputes contained

insufcient information to conduct an investigation.

175

The type of information that is usually

missing from consumers in direct disputes includes the consumer’s full account number, Social

Security number, date of birth, and address.

176

MBA noted that, on occasion, a consumer will

refuse to send in a copy of his or her credit report. If the mortgage furnisher is given the authority

by the CRA to view its tradeline as it appears in the CRA’s database without impacting the

consumer’s credit score (i.e., as an inquiry), the mortgage furnisher will do so if this is relevant

to the dispute.

177

Several furnishers commented that when relevant information is missing,

the furnisher generally contacts the consumer by telephone or mail to request the necessary

additional information.

178

G. Commenters’ Overall Views on the Dispute Process

The consumer groups and the credit reporting industry hold differing views on how well

the current dispute process is working. The consumer groups maintain that the reinvestigation

system in its current form is awed because of what they regard as failures by both the CRAs

and furnishers to conduct meaningful investigations of disputes.

179

As noted above, the consumer

groups assert that CRAs typically do not provide furnishers with the documentation of the error

that the consumer sent to the CRAs, that the CRAs generally do not review that documentation,

and that the codes used by the CRAs to convey the nature of the dispute are too general and

vague. The consumer groups also state that furnishers’ investigations of disputed information are

inadequate because they typically consist merely of verifying that their own records show that

a debt exists.

180

They believe that CRAs and furnishers have little incentive to conduct thorough

reinvestigations because such investigations are expensive and the relatively small number of

lawsuits that CRAs and furnishers face for failing to conduct adequate investigations impose

almost no economic cost.

181

According to the consumer groups, furnishers actually have an

incentive to keep derogatory information in a consumer’s credit le, “even if it is inaccurate …

175

Comment of Coalition, at 3–4. Wells Fargo commented that up to 25% of disputes it receives directly from consumers do not

contain sufcient relevant information to conduct a proper investigation. Comment of Wells Fargo, at 3.

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 specic accounts. Comment of NAMB, at 8; Comment of Zions, at 3.

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.

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.

179

Comment of consumer groups, at 2.

180

Id.

181

Id. at 9.

Report to Congress

because the negative information limits the consumer’s options to obtain other, less expensive

debt, and is often the impetus to force a consumer to pay the furnisher even on an unjust

claim.”

182

The consumer groups recommend that the current system be reformed to shift or counter

these economic incentives. They suggest a role for lay advocates or independent third-party

review in the reinvestigation system. They also recommend making statutory damages more

readily available, so that CRAs and furnishers would take their duties more seriously.

183

The consumer groups also suggest increasing the duties on furnishers as another option for

improving the current system. These groups state that consumers currently have the impossible

burden of proving that the disputed information is not correct to both furnishers and CRAs.

They believe that the burden of proof should be shifted so that furnishers are required to rebut

a consumer’s specic disputes by providing documentation to the CRA that shows that the

information furnished is correct. In particular, the consumer groups believe that furnishers should

not be allowed simply to tell the CRA that the consumer is wrong and the original information

was correct, and CRAs should not be allowed to accept such a report. Instead, the furnisher

should be required to give the CRA the underlying information—copies of documents with

original signatures to rebut a forgery claim, for example, or copies of the payment record to

demonstrate that the claimed balance is correct. Then, the CRA should be required to evaluate

the data and reach its own conclusions.

184

The consumer groups believe that the dispute process should require, at a minimum, the

following:

u CRAs to convey to furnishers the actual documents that support the consumer’s dispute,

with failure to do so being per se unreasonable;

u furnishers to reinvestigate, rather than merely verify, that the information appears in

their records, including reviewing the actual documents provided by the consumer and,

in appropriate circumstances, reviewing documents in the furnisher’s possession or the

possession of others;

u furnishers to respond specically and in detail to the consumer’s dispute and include

enough material so that the CRA can evaluate the response and reach an independent

conclusion;

u CRAs to review and evaluate furnishers’ responses; and

182

Id.

183

Id.

184

Id. at 8–10.

Fair Credit Reporting Act Dispute Process

u CRAs to establish an appeals process that involves a telephone conference between

the consumer and a CRA employee who has the consumer’s dispute and all the

documentation provided by the furnisher and the consumer.

185

Approximately 100 consumers provided comments for this report, generally expressing

a variety of problems they encountered in resolving their disputes.

186

For the most part, these

individual accounts parallel the concerns raised by the consumer groups.

The California Association of Realtors recommended that sufcient nancial penalties be

imposed for violations of the FCRA to allow the FTC to protect the integrity of credit reports

and to create the proper incentives for creditors and CRAs to comply.

187

The Mortgage Bankers

Association recommended that the e-OSCAR system be changed to permit furnishers to submit

comments to CRAs when they return ACDVs.

188

Most industry commenters—furnishers and their trade groups and the repositories and

their trade group—asserted that while there is still room for improvement, the current dispute

process generally is working well, and that legislative and regulatory changes would not be

appropriate at this time.

189

Visa U.S.A. Inc. (Visa), a membership organization composed of

nancial institutions, gave several reasons it believes that the current system is effective in

removing inaccuracies.

190

First, Visa argued, nancial institutions have strong incentives to

investigate disputed information adequately in order to maintain good relationships with their

customers. Visa also pointed out that, in providing information to CRAs, nancial institutions

typically report information as it appears that month in the institution’s own records. According

to Visa, nancial institutions have strong incentives to ensure that their own records are accurate,

because the records are essential for the institution’s own collection activities and other important

business purposes, for making reports to their federal and state bank regulatory agencies, and,

where applicable, for making securities lings.

185

Id. at 10.

186

Certain furnishers also maintained that obtaining correction of erroneous information was difcult. Comment of Coalition, at

page 11 of Coalition’s attachment; Comment of MBA, at 3.

187

Comment of California Association of Realtors, at 3.

188

Comment of MBA, at 12. According to CDIA, the “Remarks” eld 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 le with the Division of Privacy & Identity

Protection), at 1.

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.

190

Comment of Visa, at 4–5.

Report to Congress

Visa warned that any additional requirements and liability on furnishers would have a

negative impact on the nationwide credit reporting and credit granting systems.

191

According

to Visa, the more requirements imposed on, and the more liability risks incurred by, furnishers,

the less likely it is they will continue to furnish information to CRAs. Visa noted that, should

this occur, the entire nationwide credit system would suffer. A reduction in the supply of credit

information, Visa argued, would increase the risks associated with extending credit because

creditors would be required to make credit decisions on less complete information. The increased

risk would be reected in an increase in the costs consumers must pay for credit. Visa contended

that this increased risk also would have an anticompetitive impact on nancial institutions, where

smaller lenders are less able to absorb the cost of this increased risk than larger lenders. Thus,

smaller lenders could nd it difcult to price their products to compete with larger lenders. Visa

also warned that a shortage of consumer report information would decrease competition by

making it difcult for creditors to serve consumers across the country through national credit

programs. In addition, the types and amounts of credit available to consumers could be restricted.

Visa and Juniper also warned that potential changes in the dispute process (such as shorter

time frames to investigate disputes) could impact industry’s fraud prevention efforts.

192

Several

commenters indicated that the nancial industry continues to be plagued by “debt elimination”

schemes and abuses by some borrowers and credit repair organizations that initiate disputes

designed to overwhelm the dispute system, forcing removal of accurate, but unfavorable,

information.

193

Visa warned that any changes to shorten the time periods to investigate and

correct consumer report information would benet credit repair organizations by forcing the

deletion of correct, but unfavorable, information that cannot be veried in a shorter period.

194

According to Visa, this would lead to less accurate consumer report les and greater risk for

191

Id. at 4.

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

nished quickly through the e-OSCAR system. Comment of consumer groups, at 5.

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 led 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

denition of “credit repair organization” in the Credit Repair Organizations Act (CROA), 15 U.S.C. sections 1679-1679j, to

include not-for-prot 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 denition 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.

194

Comment of Visa, at 3.

Fair Credit Reporting Act Dispute Process

creditors who rely on consumer reports to underwrite credit requests. Juniper argued that any

new proposals need to be examined to ensure that they are not providing another avenue for

individuals to avoid legitimate debt.

195

Other commenters indicated that, given the FACT Act provisions, further legislative and

regulatory actions are not needed at this time. The Coalition and MBNA report that to the

extent problems have occurred, they almost entirely relate to cases of identity theft.

196

These

commenters point out that the FACT Act contains a number of key provisions to deal with

problems of identity theft and should be fully implemented before it is possible to determine

whether there are any remaining reinvestigation issues. According to TransUnion, the

improvements made through the 1996 FCRA amendments, combined with the as-yet unknown

impact of the FACT Act’s amendments concerning accuracy, reinvestigations, and the processing

of consumer disputes by furnishers and resellers, make further statutory or regulatory changes

inadvisable at this time.

197

V. FCRA Enforcement

The FTC and the federal nancial regulators are responsible for enforcing the FCRA.

198

The FTC’s jurisdiction extends to all CRAs and other persons not specically committed to

another agency’s jurisdiction.

199

The FTC does not formally examine its regulated entities for

compliance with the FCRA, but rather conducts selected law enforcement investigations and

brings legal actions against violators. The FTC has brought a number of actions against CRAs

200

and furnishers

201

for violations of the FCRA’s dispute and accuracy provisions.

195

Comment of Juniper, at 5.

196

Comment of Coalition, at 4; Comment of MBNA, at 5.

197

Comment of TransUnion, at 7.

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.

199

FCRA § 621(a).

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).

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

Report to Congress

Financial institutions regulated by the federal nancial regulators generally are subject

to the FCRA dispute provisions primarily due to their role as furnishers of information to

CRAs. The federal nancial regulators examine these institutions for compliance with the

FCRA, including the FCRA dispute provisions. The federal nancial regulators have FCRA

examination procedures that each decides how to implement. For example, the Federal Reserve

System implements these procedures as part of routine consumer compliance examinations. A

Federal Reserve Bank examiner considers the bank’s processes for complying with the FCRA

accuracy and dispute provisions when performing a preliminary risk assessment of the bank and

setting the scope of the consumer compliance examination, and applies the FCRA examination

procedures, as appropriate.

While state-chartered banks make up only a portion of the furnishers, for this study, bank

examiners for the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) looked

at violations by state-chartered banks of the dispute provisions governing furnishers and found

an insignicant number of violations.

202

These two federal nancial regulators, along with the

OCC, also surveyed their complaint databases for this study to determine the number and types

of consumer complaints regarding disputed consumer le information.

203

Both the Board and

the OCC provided data from 2000 to 2004; the FDIC provided data from 2002 to 2004. While

some consumers complained that inaccurate or incomplete information remained in their les, or

that a furnisher failed to conduct or complete an investigation to the consumers’ satisfaction, in

general, the data did not indicate a large number of complaints regarding failures by furnishers to

properly reinvestigate information disputed by consumers.

Under section 611(e), the FTC is required to transmit to the repositories complaints from

consumers who appear to have disputed the completeness or accuracy of their les with one

or more repositories or otherwise utilized their dispute rights under FCRA section 611(a).

Section 611(e) also requires that the repositories review the complaints, report to the FTC on

the results of their review, and maintain sufcient records to show compliance. To implement

section 611(e), the FTC entered into a complaint-referral program with the three repositories

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.

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.

203

The OCC regulates national banks.

Fair Credit Reporting Act Dispute Process

and a number of afliate CRAs that store their data in the repositories’ databases.

204

Under the

program, the FTC refers to the repositories and the afliates’ complaints that it receives from

consumers who report that their disputes about accuracy or completeness have not been resolved

to their satisfaction. The FTC makes no determination about the merits of the complaints. The

CRAs review the complaints to ensure that they have complied with the applicable provisions

of the FCRA and periodically provide reports to the FTC on the disposition of a sample of the

complaints. The program does not limit the FTC’s ability to pursue law violations under the

FCRA.

Because the data that the FTC has obtained through the complaint-referral program to date

are insufcient to provide probative evidence of the functioning of the dispute resolution process,

this report contains no ndings on that issue.

VI. Conclusion

In compliance with FACT Act section 313(b), the FTC and the Board have studied the

FCRA dispute process by reviewing information from a number of sources. There is general

consensus that CRAs and furnishers usually are conducting their investigations within the thirty-

day period set forth in FCRA section 611(a)(1). However, many commenters held differing views

on the subject of FCRA compliance by CRAs and furnishers. Consumer groups that commented,

for example, assert that CRAs do not convey “all relevant information” to furnishers, and that

both CRAs and furnishers typically fail to conduct meaningful investigations. These groups

recommend that the current system be reformed to induce CRAs and furnishers to take their

duties to investigate disputes seriously. Most industry commenters, however, maintain that,

while there is room for improvement, the current dispute process generally is working well

and additional legislative and regulatory changes are not advisable at this time. Courts also

have reached different conclusions on the subject of CRA and furnisher compliance, generally

applying a reasonableness standard to CRA and furnisher investigations and then determining

whether the investigation at issue was reasonable based on the facts of each case.

205

With respect to the FCRA’s requirement that CRAs forward to the furnisher “all relevant

information,” it appears that CRAs generally do not convey to furnishers documents that

some consumers give CRAs in connection with their disputes. By itself, however, this does

not mean that CRAs fail to convey “all relevant information” to furnishers. It is unclear how

204

The FTC announced the program on April 23, 2004. See www.ftc.gov/opa/2004/04/cra.htm. The afliates are discussed in

more depth in section II.A.

205

See supra notes 79 and 117 and accompanying text.

Report to Congress

often consumers submit documents along with their disputes, or how often these documents

contain relevant information. When consumers do submit documents, the CRAs summarize the

information in a numeric code supplemented, in some instances, by a narrative in a free-form

eld. Although this process may be sufcient in most cases to resolve the dispute properly, in

certain situations, the failure to convey the actual documents may lead to incorrect outcomes.

The information that the FTC and the Board have obtained on this subject is inconclusive as to

the prevalence of this result.

Likewise, the question of whether CRAs and furnishers generally are conducting

investigations that comply with the FCRA cannot be resolved denitively. Although some

consumers ultimately le a dispute statement regarding information that has not been corrected

or deleted after reinvestigation, it is not clear whether these disputes reect a failure to comply

with the FCRA reinvestigation procedures or simply consumer dissatisfaction with the results

of the reinvestigations, despite CRA and furnisher compliance. Similarly, evidence regarding

compliance by the consumer reporting industry is inconclusive. The FTC and the Board agree

with courts holding that (1) CRA and furnisher investigations must be reasonable and (2)

whether an investigation is reasonable depends on the facts in each case.

FACT Act section 313(b)(4) requires that the FTC and the Board include in this report any

legislative or administrative recommendations for improvements to the dispute process that

the agencies jointly determine to be appropriate. The agencies recommend that no legislative

action be taken at this time, in large part because the agencies believe such action would be

premature. The FACT Act imposes a number of new requirements on CRAs and furnishers that

should enhance the consumer dispute process and improve accuracy, including measures to

reduce identity theft and new requirements on furnishers.

206

Many of these requirements are still

being implemented, and their effects on the dispute process have yet to be seen. The FTC and

the Board believe that the FACT Act requirements should be given time to take effect before

legislators and regulators consider making additional changes to the dispute process. This is

particularly important given the voluntary nature of the reporting system and the uncertainty of

how additional requirements and burdens would affect that system. As additional information

becomes available, the agencies will reassess the need for administrative actions.

With respect to the “all relevant information” issue, there may be a number of ways to

address the concerns that have been expressed about the process, ranging from different or

more specic codes, to greater use of the narrative eld, to better training of personnel who

do the coding, to the scanning or other conveyance of documents to furnishers. The costs and

206

See supra notes 35-39 and accompanying text. See also appendix F.

Fair Credit Reporting Act Dispute Process

benets of each of these steps cannot be determined on the basis of the current record. The

FTC and the Board intend to explore further these issues and possible solutions with the CRAs,

furnishers, consumer advocates, and other interested parties, and, if appropriate, will make

recommendations for action.

Report to Congress

Appendix A

Table of Names and Acronyms

ABA American Bankers Association

ACB Associated Credit Bureaus

ACDV Automated Consumer Dispute Verication

AUD Automated Universal Data

BB&T Branch Banking and Trust Company

BECU Boeing Employees’ Credit Union

Board Board of Governors of the Federal Reserve System

CDIA Consumer Data Industry Association

CDV Consumer Dispute Verication

Coalition The Coalition to Implement the FACT Act

Consumer Groups National Consumer Law Center, Consumer Federation of

America, Consumers Union, Electronic Privacy Clearinghouse,

and U.S. Public Interest Research Group

CRA Consumer Reporting Agency

e-OSCAR Online Solution for Complete and Accurate Reporting

FACT Act Fair and Accurate Credit Transactions Act of 2003

FCRA Fair Credit Reporting Act

FDIC Federal Deposit Insurance Corporation

Federal Financial Regulators The Board, Federal Deposit Insurance Corporation, National

Credit Union Administration, Ofce of the Comptroller of the

Currency, and Ofce of Thrift Supervision.

FTC Federal Trade Commission

GAO Government Accountability Ofce

Juniper Juniper Bank

MBA Mortgage Bankers Association

MBNA MBNA America Bank

Metro/Metro 2 Standard layouts for furnishers to report information to

consumer reporting agencies

NAMB National Association of Mortgage Brokers

Fair Credit Reporting Act Dispute Process

NCRA National Credit Reporting Association

OCC Ofce of the Comptroller of the Currency

UDF Universal Data Form

Visa Visa U.S.A. Inc.

Wells Fargo Wells Fargo & Company

Zions Zions Bancorporation

1996 FCRA The FCRA as amended in 1996 and 1999 but before the FACT

Act amendments in December 2003

Report to Congress

Appendix B

Request for Information for Report

Fair Credit Reporting Act Dispute Process

Report to Congress

Fair Credit Reporting Act Dispute Process

Report to Congress

Appendix C

Sample Automated Consumer Dispute Verification Form

Source: Consumer Data Industry Association.

Fair Credit Reporting Act Dispute Process

Appendix D

Frequency of Credit Account Disputes in Federal Reserve

Board Study of Data from One Repository as of June 30,

2003

Table 1

Frequency of pending disputes, by number of accounts affected

Credit card Mortgage Auto Other All types

No dispute

Pending dispute

99.63%

0.37%

99.98%

0.02%

100%

99.96%

0.04%

99.82%

0.18%

Number of accounts of this type 666,152 88,014 7,176 719,140 1,480,482

Table 2

Share of pending disputes, by type of credit

Credit card Mortgage Auto Other

Pending dispute 89.86% 0.73% 0.00% 9.41%

Table 3

Distribution of pending disputes based on status of account

Credit card Mortgage Auto Other All types

Pending disputes on open accounts 87.41% 89.47% N/A 66.15% 85.39%

Pending disputes on closed accounts 12.59% 10.53% N/A 33.85% 14.61%

Source: Federal Reserve Board.

Report to Congress

Appendix E

Response Rates of Furnishers Responding to One Repository

Through E-OSCAR and Furnishers Responding in Paper Form

(July 2004)

Response Time

(# Days)

E-Oscar: Monthly

accumulated % of

responses to all

disputes

Paper: Monthly

accumulated % of

responses to all

disputes

2 4.96% 3.08%

3 12.46% 6.39%

4 19.12% 8.27%

5 26.71% 9.74%

6 32.29% 12.19%

7 38.89% 16.60%

8 44.90% 19.20%

9 48.40% 21.93%

10 50.98% 24.33%

11 54.13% 27.95%

12 57.15% 31.32%

13 59.69% 36.78%

14 62.43% 44.18%

15 65.33% 51.14%

16 68.15% 57.02%

17 71.05% 61.25%

18 74.64% 64.43%

19 78.06% 68.08%

20 79.47% 71.50%

21 80.82% 74.80%

22 82.56% 77.12%

23 84.35% 78.29%

24 85.95% 79.32%

25 88.09% 80.13%

26 89.98% 80.85%

27 92.24% 81.60%

28 94.00% 82.00%

Source: Consumer Data Industry Association.

Fair Credit Reporting Act Dispute Process

Appendix F

The FCRA After the FACT Act

In the FACT Act amendments, Congress made three changes to the core dispute duties of

CRAs. The provision stating that CRAs “shall reinvestigate” information that consumers dispute

was amended to require CRAs to “conduct a reasonable reinvestigation to determine whether

the disputed information is inaccurate.”

In addition, a CRA that learns during a reinvestigation

that information disputed by a consumer is inaccurate, incomplete, or cannot be veried, now

must notify the furnisher that the information has been modied or deleted from the CRA’s le

on the consumer.

Finally, the FACT Act amendments give CRAs forty-ve days to reinvestigate

a dispute from a consumer that is made following the consumer’s receipt of a free annual le

disclosure under the Act’s new free le disclosure provisions.

The FACT Act substantially changed the dispute duties for resellers.

Because resellers

are CRAs, the FCRA, prior to the FACT Act, required them to carry out all of the CRA dispute

duties described in section II.C of the attached report. A new provision added by the FACT Act,

however, changed those duties. If a consumer disputes directly to a reseller the completeness

or accuracy of an item in a consumer report issued by the reseller, the reseller must, within ve

business days of receiving notice of the dispute, and free of charge, do the following:

u determine whether the item is incomplete or inaccurate because of an act or omission of

the reseller; and

u if the reseller determines that the item is incomplete or inaccurate because of an act of

the reseller, not less than 20 days after receiving the notice, correct the information in the

consumer report or delete it; or

u if the reseller determines that the item is not incomplete or inaccurate because of an

act or omission of the reseller, convey the notice of dispute, together with all relevant

information provided by the consumer, to each CRA that provided the disputed item to

the reseller (“source CRA”).

FCRA § 611(a)(1)(A), as amended by FACT Act § 317.

FCRA § 611(a)(5)(A), as amended by FACT Act § 314.

FCRA § 612(a)(3), as amended by FACT Act § 211.

FCRA § 611(f), as amended by FACT Act § 316. FCRA section 603(u) denes a “reseller” as a CRA that “assembles and

merges” information contained in the database of a repository.

FCRA § 611(f)(2), as amended by FACT Act § 316.

Report to Congress

Another FACT Act provision requires a source CRA to reinvestigate a dispute conveyed by

a reseller.

Upon completion of its reinvestigation, the source CRA must provide to the reseller a

written notice stating the results of the reinvestigation.

The reseller must immediately reconvey

the notice to the consumer.

The FACT Act also amended the FCRA with respect to furnishers’ dispute duties in several

ways. Under one of the amendments, the FTC and the federal nancial regulators are required

to issue joint regulations that will identify the circumstances under which a furnisher must

investigate a dispute made directly by a consumer to the furnisher. In prescribing the regulations,

the agencies must weigh several factors, including the benets to consumers versus the costs

to furnishers and the credit reporting system. In those circumstances identied in the rules, the

rules must provide that, when a consumer submits a proper notice of dispute to a furnisher,

the furnisher must conduct an investigation of the disputed information; review all relevant

information provided by the consumer with the notice; complete the investigation within thirty

days (or forty-ve days, if the consumer provides additional relevant information during the

thirty-day period); and, if the investigation nds that the disputed item was reported inaccurately,

promptly provide corrections to each CRA to which the information was furnished.

These

provisions do not apply if the dispute is frivolous or irrelevant or comes from a credit repair

organization.

The FACT Act also provides that, in disputes received through a CRA, if an item of

information disputed by a consumer is found to be inaccurate or incomplete or cannot be veried

after the furnisher completes the investigation, the furnisher must promptly delete, modify, or

permanently block the reporting of that information as appropriate based on the results of the

investigation.

In addition, the FACT Act provides that furnishers must establish reasonable

procedures to avoid re-furnishing to CRAs information after (1) a CRA noties the furnisher

that the CRA has blocked the information because it might be the result of identity theft or (2)

FCRA § 611(a)(1)(A), as amended by FACT Act § 317.

FCRA § 611(f)(3)(A), as amended by FACT Act § 316.

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).

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.

FCRA § 623(b)(1)(E), as amended by FACT Act § 314.

Fair Credit Reporting Act Dispute Process

the consumer submits an identity theft report stating that the information resulted from identity

theft.

Prior to the FACT Act, furnishers could not furnish information about a consumer to a CRA

if the furnisher knew or consciously avoided knowing that the information was inaccurate.

Under the FACT Act, the standard is now “knows or has reasonable cause to believe that

the information is inaccurate.”

The term “reasonable cause to believe that the information

is inaccurate” is dened as “having specic knowledge, other than solely allegations by the

consumer, that would cause a reasonable person to have substantial doubts about the accuracy of

the information.”

The FACT Act amendments require a nancial institution that furnishes negative

information about a consumer to a nationwide CRA to notify the consumer in writing.

addition, the amendments require federal nancial regulators and the FTC to promulgate

guidelines and regulations dealing with the accuracy and integrity of information that furnishers

provide to CRAs.

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).

FCRA § 623(a)(1)(A) of 1996 FCRA.

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).

FCRA § 623(a)(1)(D), as amended by FACT Act § 312(b)(2).

FCRA § 623(a)(7), as amended by FACT Act § 217. The nancial institution may choose to convey this notice before

furnishing the information to the CRA. 12 C.F.R. pt. 222 app. B.

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.