In 2003, Congress enacted amendments to the Fair Credit Reporting Act (“FCRA”) known as the Fair and Accurate Credit Transactions Act (“FACTA”). In accordance with FACTA, a host of federal agencies have enacted sweeping new regulations that will affect virtually every bank, credit union and other entity that provide information to consumer reporting agencies (“furnishers”). The Accuracy and Integrity Regulations, which were promulgated by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration and the Federal Trade Commission prescribe the following:
- Guidelines for use by furnishers regarding the accuracy and integrity of the information furnished to consumer reporting agencies;
- Regulations requiring furnishers to establish reasonable policies and procedures for implementing the guidelines described above; and
- Regulations identifying the circumstances under which a furnisher must investigate disputes based on a direct request from a consumer.
The Accuracy and Integrity Regulations take effect on July 1, 2010.
Who is subject to and must comply with the Accuracy and Integrity Regulations?
The regulations apply to all entities (including, without limitation, financial institutions, finance companies, retail companies, collection agencies, and debt buyers) that provide information to a consumer reporting agency.
What are the penalties for failure to comply with the Accuracy and Integrity Regulations?
Financial institutions covered by the Accuracy and Integrity Regulations are subject to oversight by the appropriate federal banking regulators, which may impose penalties consistent with their regulatory authority. For all other furnishers, the Federal Trade Commission provides oversight. In the event of a knowing violation, which constitutes a pattern or practice of violations, the FTC may commence a civil action seeking to enjoin the violation and to recover a civil penalty. In addition, appropriate State law enforcement and regulatory agencies may commence a civil action seeking to enjoin the violation and to recover damages.
What are some of the things that entities subject to the Accuracy and Integrity Regulations must to do comply?
Establish and Maintain Written Policies and Procedures Concerning the Accuracy and Integrity of the Furnished Information
In developing its policies and procedures, the furnisher must consider the Guidelines published by the Agencies and incorporate those Guidelines as appropriate. The Guidelines have three sections.
- Nature, Scope and Objectives of Policies and Procedures.
- In developing its policies and procedures, the furnisher should consider its type of business activities, the nature and frequency of the information it provides and the technology it uses to furnish the information.
- The policies and procedures should be designed to promote the following objectives:
- Furnishing of information that is accurate, such that the information (i) identifies the appropriate consumer, (ii) reflects the terms of and liability for the account and (iii) reflects the consumer’s performance with respect to the account;
- Furnishing of information that has integrity, such that the information (i) is substantiated by the furnisher’s contemporaneous records, (ii) is furnished in manner to minimize the likelihood that it is attributed to the wrong consumer, (iii) includes clear information regarding the time period to which the information pertains and (iv) includes credit limit data (if applicable);
- Conducting reasonable investigations of disputes and take appropriate actions based upon the outcome of such investigations; andUpdating information as necessary to reflect the current status of the account, including (i) the sale, transfer or assignment to a third party and (ii) the consumer’s cure of a failure to abide by the terms of the account.
- Contemporaneous with the release of these Regulations, the Agencies are requesting comments on whether items of information in addition to credit limit should be required to be included because the absence of such data would likely be materially misleading in evaluating a consumer’s creditworthiness, credit standing or credit capacity. Comments are due on August 31, 2009.
- Establishing and Implementing Policies and Procedures. In establishing policies and procedures, the furnisher should:
- Identify practices or activities that can compromise the accuracy or integrity of the information furnished by (i) reviewing existing policies and procedures (including the technological means by which it provides data to the consumer reporting agency and the frequency and timing of its furnishing), (ii) reviewing its historical records relating to disputes and considering the types of errors or omissions that have previously affected the accuracy or integrity of the data it furnished, (iii) considering feedback received from furnisher’s staff and third parties including consumer reporting agencies and consumers and (iv) considering the impact of the policies and procedures on consumers;
- Evaluate the effectiveness of existing policies and procedures and consider whether new, additional, or modified policies and procedures would enhance the accuracy or integrity of the information furnished; and
- Evaluate the effectiveness of specific methods (including technological means) the furnisher uses to provide the information and consider whether new, additional, or modified methods would enhance the accuracy or integrity of the information furnished.
- Specific Components of the Policies and Procedures. In developing the policies and procedures, the furnisher should address numerous issues including the following, as appropriate:
- Using standard data formats and standard procedures for compiling and furnishing data, and designing means of communication with consumer reporting agencies to prevent duplicative reporting, association of account with the wrong consumer and other errors;
- Records retention, and establishing and implementing internal controls, staff training and oversight of third-party service providers;
- Furnishing of information following a merger or acquisition/sale of the account in a manner that prevents re-aging, duplicate reporting or other problems;
- Deleting, updating and correcting of furnisher’s records and conducting reasonable investigations of disputes; and Conducting periodic evaluations to identify areas for improvement.
Respond to Disputes Received Directly from Consumers
With the enactment of these Regulations, furnishers are now obligated to conduct a reasonable investigation of a dispute received directly from the consumer as summarized below.
- A furnisher must investigate a direct dispute if it relates to (i) the consumer’s liability for the account, (ii) the terms of the account, (iii) the consumer’s performance on the account or (iv) any other information about the account contained on a consumer report.
- A furnisher does not have to investigate a direct dispute if it relates to (i) the consumer’s identifying information (other than a dispute relating to the consumer’s liability), (ii) the identity of employers, (iii) inquiries, (iv) information derived from public records (unless provided by the furnisher), (v) fraud or active duty alerts or (vi) information not provided by the furnisher.
- A furnisher does not have to investigate a direct dispute if the furnisher believes the dispute was submitted by a credit repair organization or if it determines that the dispute is frivolous or irrelevant, though it must provide the consumer notice of that determination.
- If a furnisher provides consumers with an address for submitting direct disputes, it only has to investigate disputes received at that address; otherwise, direct disputes can be sent to any business address of the furnisher and they must be investigated.
- Upon receipt of a direct dispute, the furnisher must (i) conduct a reasonable investigation, (ii) review all relevant information provided by the consumer, (iii) generally complete the investigation within 30 days of receipt, (iv) provide the consumer with the results of the investigation and (v) if necessary, promptly notify the consumer reporting agency to update any information found to be inaccurate.