On July 1st, the Federal Trade Commission and banking agencies ("Agencies") approved final rules ("Final Rules") to enhance the accuracy and integrity of consumer information furnished to consumer reporting agencies.
The Final Rules, developed to implement certain Fair and Accurate Credit Transactions Act ("FACTA") amendments to the Fair Credit Reporting Act ("FCRA"), require companies ("Furnishers") that provide information to consumer reporting agencies ("CRAs") to establish written policies regarding the accuracy and integrity of information they furnish. In a major departure from prior law, the Final Rules will also permit consumers to take their disputes as to the accuracy of information in their consumer reports directly to the Furnishers who reported it.
Accuracy and Integrity Regulations. The Final Rules will require Furnishers to establish, implement, and regularly update written policies and procedures regarding the accuracy and integrity of information furnished to CRAs, in accordance with the guidelines published by the Agencies. The procedures must be appropriate to the nature, size, complexity, and scope of the Furnisher's activities, reflecting their business activities, the nature and frequency of information provided to CRAs, and the technology used to do so.
"Accuracy" is defined in the Rules to mean that information a Furnisher provides to a CRA about a consumer account must correctly reflect the terms of and liability for the account, the consumer's performance with respect to the account, and the consumer's identity. The information must be regularly updated so that it remains current.
"Integrity" is defined to mean that information provided to a CRA about an account is substantiated by the Furnisher's records, is provided in a form and manner designed to minimize the likelihood that it may be incorrectly reflected in a consumer's report, and, includes information that if missing would be materially misleading in evaluating creditworthiness.
Direct Dispute Rule. For the first time, Furnishers will be required to investigate disputes received directly from consumers relating to liability on their accounts, account terms, balances, potential identify theft, and any other information in a consumer report regarding the consumer's relationship with the Furnisher that bears on the consumer's creditworthiness, credit standing, and character.
The duty to investigate direct disputes will arise only if the consumer submits a written dispute notice to the Furnisher at the address provided by the Furnisher to the consumer or the CRAs. The Furnisher will then be required to investigate and report the results of the investigation to the consumer within 30 days of receiving the dispute notice.
The requirement that Furnishers investigate direct consumer disputes significantly changes existing law under the FCRA, which previously required Furnishers to respond to consumer disputes only when they received notice of such disputes via the CRAs. Elimination of the CRA as a "middleman" for consumer disputes will increase the number of disputes received by Furnishers, along with the burden of investigating and reporting the results of the investigations to the consumers as the Final Rules require.
The Final Rules, which will become effective July 1, 2010, can be found here.