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The Federal Trade
Commission's Rights and Duties under the Fair Credit Reporting Act
16 CFR Part 601
Notices of Rights and Duties under the Fair Credit Reporting Act
AGENCY: Federal Trade Commission.
ACTION: Publication of guidance for prescribed notice forms.
SUMMARY: The Federal Trade Commission is publishing three notices that it
is required to prescribe under recent amendments to the Fair Credit
Reporting Act (FCRA). These are: A summary of consumer rights under the
FCRA; a notice setting forth the responsibilities under the FCRA of those
who regularly furnish consumer report information to consumer reporting
agencies; and a notice setting forth the duties of any person who uses
information covered by the FCRA. These notices must be distributed by
consumer reporting agencies once the amendments to the FCRA become
effective on September 30, 1997. A consumer reporting agency will be in
compliance with the FCRA if it provides notices substantially similar to
those prescribed by the Commission.
DATES: The amendments become effective September 30, 1997.
ADDRESSES: Federal Trade Commission, Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Federal Trade Commission, Washington, DC
20580
SUPPLEMENTARY INFORMATION:
The Fair Credit Reporting Act (FCRA), originally enacted in 1970,(1) was
extensively amended in 1996. Most of the amendments to the law, including
those discussed in this notice, go into effect on September 30, 1997.
As amended, the FCRA requires each consumer reporting agency ("CRA,"
usually a credit bureau) to distribute three types of notices in order to
better educate consumers, furnishers and users of consumer report
information as to their rights or duties under the law. Section 609(c) of
the amended FCRA mandates that each CRA provide, as part of its file
disclosure to consumers, a written summary of consumer rights ("summary"
or "consumer summary") under the FCRA. Section 607(d) requires each CRA to
provide a notice to persons who buy consumer information from the CRA of
their responsibilities under the FCRA ("user notice"), and a notice to
persons who regularly furnish consumer information to the CRA of their
responsibilities under the FCRA ("furnisher notice"). The Federal Trade
Commission ("Commission") is required to prescribe the content of the
notices, and, in the case of the consumer summary, the form as well. A CRA
complies with the law if it provides the applicable party with a summary
or notice that is substantially similar to the one prescribed by the
Commission.
On February 28, 1997, the Commission published for comment proposed
versions of the three notices (collectively, "the notices"). The
discussion accompanying the proposed notices outlined in detail the
relevant FCRA sections, and set forth a number of questions designed to
facilitate public comment on the proposals. 62 Fed. Reg. 9123 (1997).
The comment period closed on March 31, 1997. The Commission received 28
comments from credit bureaus and other CRAs, creditors (and other parties
that make use of consumer reports and/or furnish information to CRAs),
consumers and their representatives, regulatory authorities, and other
interested parties. Although the Commission stated that it was requesting
comments until March 31, 1997, comments received after that date were
taken into account.
This document highlights the principal areas in which the Commission
revised the proposed versions of the notices or decided not to do so.
I. Consumer Summary
The comments overwhelmingly supported the content and organization of the
proposed summary. Many commenters praised the Commission's effort in
offering a proposal that was thorough, understandable, succinct, and
user-friendly. None suggested any major revision to the overall
presentation. Accordingly, the basic framework of the notice remains
unchanged -- a two-page document that starts with an introductory
paragraph explaining the FCRA very generally, features ten "bullet"
sections to describe significant consumer FCRA rights, and includes the
required list of the federal agencies with FCRA enforcement authority at
the end.
A. Principal Revisions Based on Public Comments
1. Additions and deletions. The amended FCRA provides conflicting guidance
as to whether the consumer summary should be brief or comprehensive. The
law mandates a "summary of all the rights the consumer has under" the FCRA
(Section 609(c)(1)(A)). The law also requires "a brief description of . .
. all rights of consumers" provided by that law (Section 609(c)(2)(A)).
Arguably, no document that is actually a "summary" -- or that constitutes
a "brief description" of FCRA consumer rights -- could literally include
"all" consumer rights.
The Commission specifically asked for suggestions as to areas in which the
proposed form was too long to be effective as a summary, or, conversely,
had omitted something important to consumers. 62 Fed. Reg. 9123, 9124
(1997). The Commission has deleted three items from the proposed form that
were persuasively cited by commenters as unnecessary or not helpful to the
goal of educating consumers about their FCRA rights:
The sentence noting that a CRA is not required to include a "risk score"
or "credit score" in disclosures to consumers of their credit histories.
The Commission included the sentence in the proposed summary to try to
answer a question that consumers would otherwise ask of CRAs. Upon review
of the diverse comments,(2) the Commission now believes that the reference
would be more hindrance than help, and accordingly has deleted it.
A discussion of FCRA litigants' ability to obtain attorney's fees from one
another. The comments made it clear that the topic cannot be covered both
briefly and precisely, because of the complexity of this portion of the
amended FCRA.(3) For that reason, and because the issue is ancillary to
the consumer's right to sue for damages that continues to be emphasized in
this portion of the summary, the Commission decided not to retain the
discussion of attorney's fees.
The reference to a toll-free number in the case of nationwide CRAs.
National CRAs are required to include this number in their file
disclosures; however (as noted by one such CRA), it need not be part of
the summary.(4)
Conversely, other commenters noted that the summary needed more discussion
of the rights of consumers who dispute file data with CRAs. These rights,
which are central to the FCRA and provide important protections for
consumers, are found in Section 611.(5) Accordingly, the Commission has
added a discussion of
(1) the right provided consumers by Section 611(b) to add a brief
statement to their files when they continue to dispute information that
the CRA has investigated and concluded to be accurate, and (2) the right
of consumers under Section 611(d) to have revised reports provided to all
recent recipients of information from their files.(6)
2. Editorial revisions. The Commission's most significant editorial
revisions to the summary are two adjustments in the opening paragraph to
avoid misleading consumers about the range of parties covered by the FCRA,
and to emphasize consumer rights under state law. In the first case, a
major credit bureau asserted that the proposed summary focused on CRAs to
a degree that is unwarranted in view of the fact that the amended FCRA
also imposes substantial duties on users and furnishers of CRA data. The
Commission therefore revised the text to eliminate the unnecessary
reference to FCRA rights "in dealing with CRAs (which must) provide you
with a summary of these rights as listed below"(7) that preceded the body
of the summary. In the second case, state regulatory authorities asserted
that the discussion of state law, which is specifically required by
Section 609(c)(2)(D), should be featured more prominently. Accordingly,
the Commission increased the emphasis by moving the reference to the
opening paragraph. The Commission did not intend the proposed notice to
single out CRAs, or to give short shrift to state law; these two revisions
to the opening paragraph of the prescribed summary should make that clear.
The Commission also adopted some suggestions for stylistic or technical
changes where the Commission believed the change would make the summary
appreciably more precise or useful for consumers. For example, in the
second sentence of the introductory paragraph, the Commission added an
example of consumer report users (landlords) that a state regulator
recommended as useful and deleted a type of CRA information (where
consumers work and live) that industry representatives cited as a poor
example for a summary. Also, the Commission revised a sentence, formerly
in the fourth (now in the third) bullet, to make it clear that national
CRAs are not required to report erroneous information to one another;
rather, furnishers must report to them any disputed data that they find to
be inaccurate or incomplete, a task made easier by an automated system to
be created by national CRAs.
The Commission also made some minor changes to improve the technical legal
accuracy of the summary. The heading to the fourth bullet was expanded
("Inaccurate information must be corrected or deleted") to describe
precisely a CRA's options when its investigation shows that disputed
information is not accurate.(8) Similarly, the statement of consumers'
right to sue violators has been amended to state that furnishers can be
sued only "in some cases" because the amended FCRA limits the situations
in which consumers are authorized to sue directly for damages.(9)
B. Principal Public Comments Not Adopted
Commenters made suggestions for stylistic revisions of the consumer
summary, many of which were adopted because they improved the clarity or
comprehensibility of the summary. However, the Commission could not make
all of these changes without unduly lengthening the document.
Because of the large volume of suggested wording and other changes
contained in more than 170 pages of comments received by the Commission,
it is not feasible to discuss them all in this notice. This section is
intended to identify some of the more significant comments that are not
reflected in the finally-prescribed consumer summary.
1. Form of the summary. The principal credit bureau trade association
expressed the view that the Commission specifications for the form of the
summary were unduly "rigid" in two ways. First, the Commission proposed
that the summary be on paper no smaller that 8 x 11 inches in size. The
commenter noted that continuous feed forms are not always perforated as 8
x 11-inch sheets, and that the requirement that the summary be "on paper"
would inhibit the possibility of electronic disclosures. Second, the
Commission proposed that the notice be in 12-point type (8-point for the
table at the end). The commenter stated that type sizes may vary based on
the font being used.
Section 609(c)(3) of the amended FCRA specifically states that the
"Commission shall prescribe the form and substance of" the summary
(emphasis added). The Commission is required by law to prescribe a format
that ensures that consumers will receive a summary that is readable and
useful, and believes that the format prescribed in the proposal is
appropriate for that purpose. However, the Commission does not intend to
impose an absolutely "rigid" standard, which would be inappropriate under
the statute. Section 609(c)(3) requires only that a summary be
"substantially similar" (i.e., not identical) to the Commission-prescribed
version. Therefore, a format that approximates that published by the
Commission as "Appendix A" (which meets the type size requirements and can
be printed, with comfortable margins, on two 8 x 11-inch pages) will
comply, even if the print is technically not 12-point in size because of a
different font, or it is provided on computer paper that is slightly
smaller in size. Similarly, an electronic submission that normally allows
the recipient to receive it in a format similar to the prescribed version
will also comply.(10) Such summaries will not result in the consumer
receiving a form that is harder to read or use than the exact prescribed
version.(11)
2. Items required by Section 609(c)(2). The Commission received a number
of comments relating to each of three sections the amended FCRA requires
be included in the summary: (1) a reference to rights provided by state
law, (2) a statement that the CRAs are not required to delete accurate
data that is not obsolete under Section 605, and (3) a list of federal
agencies that have authority to enforce the FCRA. The Commission made few
additions or deletions in these areas, because Congress has given precise
instructions. This section describes the nature of those comments and the
basis for the Commission's decision in most cases not to change the
proposed form.
State regulators suggested a substantial expansion of the reference to
state law required by Section 609(c)(2)(D), including multiple references
to state and local authorities, and more detailed instructions on how to
reach them. As noted above (I-A-2), the Commission has decided to feature
the statutorily-required section more prominently in the summary. However,
the Commission does not believe the section should be expanded because it
currently uses the language prescribed by Congress.
Several commenters offered revisions of the sentence, required by Section
609(c)(2)(E), reminding consumers in bold letters that they cannot require
CRAs to remove information that is accurate and not outdated. The
Commission adopted a suggestion by a CRA trade association to add a
parenthetical cross-reference to clarify that "outdated" means the FCRA's
seven year period (ten for bankruptcies), a change that made the bold
statement more precise. It did not adopt suggestions for change that were
not specifically authorized by the statute.(12)
Similarly, the Commission did not adopt suggestions by commenters to
reduce the list of federal agencies with regulatory authority. Section
609(c)(2)(C) requires that the summary include "a list of all federal
agencies responsible for enforcing [the FCRA] and the address and any
appropriate phone number of each such agency, in a form that will assist
the consumer in selecting the appropriate agency." Suggestions for pruning
this section involved using a narrative to replace the required "list,"
reducing the list from "all" agencies by eliminating those deemed to be of
low interest to consumers, and other revisions that would delete or reduce
the jurisdictional summaries designed to "assist the consumer in selecting
the appropriate agency." The comments appeared well-intended, but the
Commission concluded that the summary should reflect the specific
instructions of Congress on this point.
3. Use of "CRA" as an acronym. A number of commenters from different
sectors asserted that "CRA" is an awkward acronym for "consumer reporting
agency; most of them suggested that "credit bureau" would be more easily
understood. Some opined that "CRA" is too easily confused with a common
acronym for the Community Reinvestment Act.
The term "credit bureau" is certainly known to more consumers than "CRA,"
but it has major drawbacks that the Commission believes make its use
inappropriate here. The FCRA unquestionably applies to all consumer
reporting agencies, a universe that includes more than credit bureaus
(e.g., specialized CRAs that report only on mortgage or tenant
applications, or only on consumers' check writing habits). It thus would
be legally inaccurate to use "credit bureau" as a replacement. In
addition, it would make the summary confusing to a consumer who receives
it from a CRA that is not a credit bureau. While some commenters who are
knowledgeable about financial laws may be accustomed to "CRA" as an
acronym for the Community Reinvestment Act, only a small fraction of
consumers who get this summary may make such a connection.(13)
II. Notices to Furnishers and Users
The furnisher and user notices occasioned relatively few comments, and
thus are little changed from the proposed versions. The Commission,
responding to a suggestion by state regulators, added a sentence to each
notice referring to the possible applicability of state law. With the
exception of a few subjects discussed in the following sections on each of
these notices, the only changes were revisions that were very slight
adjustments that the Commission believes, based on the comments, would
make the notice more clearly reflect the FCRA and be of assistance to the
recipients.
The Commission specifically asked whether the public wanted guidance as to
the timing and frequency of notice distribution, in view of the amended
FCRA's silence on the point. 62 Fed. Reg. 9123, 9125 (1997). The
overwhelming majority of the commenters did not address the issue, and
those who commented gave very different views -- a comment from state
regulators advocated requiring frequent notices, two furnishers/users
asked for a ruling limiting or not requiring multiple notices, and a CRA
trade association urged that the marketplace be allowed to work its will
in light of the FCRA's silence. Based on the limited number of (and wide
disagreement among) commenters, formal guidance on these issues at this
early stage seems unwise. If experience after the amendments become
effective indicates a need for such action, the Commission can revisit the
issue.
A. Furnisher Notice
The one significant change in the furnisher notice is the addition of a
reference to the fact that two of the sections apply only to parties that
furnish information to CRAs regularly and in the ordinary course of their
business.(14) The Commission specifically asked for public comment on this
issue. 62 Fed. Reg. 9123, 9125 (1997). There was a consensus among the
commenters that the notice should be revised to include reference to the
different standards that apply to occasional users.
Representatives of different furnishers suggested two additions that the
Commission did not adopt. First, credit card issuers advocated adding a
section spelling out the limitations on consumers' ability to sue
furnishers, a topic that seemed inappropriate for a Commission-prescribed
notice of duties to furnishers. Second, debt collectors and creditors
urged that the notice specify that a furnisher's duty to report an item as
"disputed" lasts only while it is investigating the dispute. This point
involves an issue of statutory interpretation that is more appropriately
resolved in another forum.
Finally, the Commission asked for comments on whether the prescribed form
should include the text of Section 623. 62 Fed. Reg. 9123, 9125 (1997).
The Commission has not included the text, because the commenters generally
stated that it was unnecessary. However, a CRA form that does so will be
"substantially similar" and thus in compliance with Section 609(c).
B. User Notice
The Commission asked for comment as to whether it should prescribe
separate notices for different types of specialized users (62 Fed. Reg.
9125). The overwhelming majority of the commenters stated that a single
notice (as the Commission proposed) was best.
One commenter representing specialized reporting services, while agreeing
that a single notice is appropriate for most CRAs, stated that its
members' business activities are so focused that the information provided
to their clients would never relate to some of the points in the
comprehensive notice. As an example, the commenter asserted that the
portions of the proposed notice concerning employment reports (section II
of the Notice), investigative reports (section III), medical information
(section IV) or prescreened lists (section V) might not be pertinent to
purposes of any clients of a mortgage reporting company. Similarly, it
noted that a different set of sections might not be relevant to the
purposes of any customers of a CRA that provides reports only for
employment or tenant screening uses. The Commission agrees that a CRA may
delete sections of the notice that are irrelevant to the business purposes
for which any user is contractually authorized to purchase consumer
reports from the CRA, in the same fashion that a creditor may omit
inapplicable sections of prescribed forms under other statutes.(15)
The only significant addition to the user notice is in Section I-B of the
notice, concerning the certification of permissible purpose that users
must provide to CRAs that sell consumer reports to them. Several parties
advocated that the Commission expand this Section to account for the
possibility of a general certification, as permitted by Section 604(f).
The Commission has done so, but added the words "as appropriate" to make
it clear that some consumer report users whose activities involve both
permissible and impermissible purposes,(16) or who have given the CRA
reason to believe they have violated a general certification, must be
required to provide individual certifications for each consumer report.
III. Impact on Small Businesses
In publishing the proposed notices, the Commission stated that the notices
would not have a significant economic impact on a substantial number of
small entities. The Commission explained that it is prescribing the
notices at the direction of Congress, so that any economic costs imposed
on small entities by the required dissemination of the notices are in fact
imposed by statute. The Commission noted further that its publication of
forms for the proposed notices could be said to lessen the burden on small
businesses, since the entities can -- but need not -- adopt the
Commission's forms, and thereby avoid the risk and expense of developing
their notices independently. The Commission nevertheless requested
comments in order to ensure that it did not overlook any substantial
economic impact on small businesses.
The Commission received four comments addressing the question of the
notices' economic impact on small businesses. Two commenters agreed that
the Commission's publication of the notices would not have a significant
economic impact on a substantial number of small businesses. One commenter
disagreed, but provided data supporting the conclusion that the statutory
requirement would create a significant economic impact, rather than any
evidence that the Commission's publication of the model forms for the
notices would do so. Finally, one commenter stated that small businesses
would be significantly burdened if the Commission were to require repeated
distribution of the notices. As stated in the second paragraph of Section
II above, the Commission has determined not to impose any requirements
concerning the timing and frequency of dissemination of the notices at
this time. Accordingly, the Commission has determined that public comments
and information before the Commission do not alter the conclusion that its
publication in final form of the models for the prescribed notices will
not have a significant economic impact on a substantial number of small
entities.
IV. Paperwork Reduction Act
In its initial review of the proposed notices, the Commission considered
whether it was "sponsoring or conducting" any "collection[s] of
information" that would trigger the provisions of the Paperwork Reduction
Act, 44 U.S.C. Chapter 35. In this regard, the Commission observed that
the notices contain only statutorily imposed investigation, disclosure,
and recordkeeping requirements; the FTC introduces no additional elements.
Further, two of the notices will become effective on September 30, 1997,
regardless of whether the FTC has provided the language for these forms by
that time. In this situation, the Commission does not "require" or "cause"
the disclosures to occur.
The Commission also observed that the three notices contain all the
information that subject firms will be required to disclose to third
parties. The reporting agencies can simply adopt these notices for
distribution without any change to the language. Therefore, the three
notices fall within an exception to the definition of a "collection of
information" as being "[t]he public disclosure of information originally
supplied by the Federal government to the recipient for the purpose of
disclosure to the public.") 5 C.F.R. 1320.3(c)(2). Accordingly, none of
the three require approval by OMB. Nonetheless, the Commission requested
public comment on this matter. No comments were received.
List of Subjects in 16 CFR Part 601
Credit, Trade practices.
Pursuant to 15 U.S.C. 1681g and 1681s, the FTC hereby adds to Subchapter F
of Chapter I of 16 CFR a new Part 601 to read as follows:
PART 601 -- SUMMARY OF CONSUMER RIGHTS, NOTICE OF USER RESPONSIBILITIES,
AND NOTICE OF FURNISHER RESPONSIBILITIES UNDER THE FAIR CREDIT REPORTING
ACT
Sec.
601.1 Authority and purpose.
601.2 Legal effect.
Appendix A to Part 601 - Prescribed Summary of Consumer Rights
Appendix B to Part 601 - Prescribed Notice of Furnisher Responsibilities
Appendix C to Part 601 - Prescribed Notice of User Responsibilities
Authority: 15 U.S.C. 1681g and 1681s.
601.1 Authority and purpose.
(a) Authority. This part is issued by the Commission pursuant to the
provisions of the Fair Credit Reporting Act (15 U.S.C. 1681 et seq.), as
most recently amended by the Consumer Credit Reporting Reform Act of 1996
(Title II, Subtitle D, Chapter 1, of the Omnibus Consolidated
Appropriations Act for Fiscal Year 1997), Public Law 104-208, 110 Stat.
3009-426 (Sept. 30, 1996).
(b) Purpose. The purpose of this part is to comply with sections 607(c)
and 609(c) of the Fair Credit Reporting Act, as amended. Section 609(c)(3)
directs the FTC to prescribe the form and content of a summary of
consumers' legal rights under the FCRA that the amended law requires each
consumer reporting agency to provide when disclosing the information in
its file to consumers, and section 609(c)(4) provides that the summary
need not be provided until the FTC has in fact prescribed its form and
content. Section 607(d)(2) directs the FTC to prescribe the content of
notices that consumer reporting agencies are required to provide to
parties that supply information to, or purchase consumer reports from, the
agency. These notices will set forth the responsibilities under the FCRA
of all persons who furnish information to consumer reporting agencies or
use information subject to the FCRA.
601.2 Legal effect.
The forms prescribed by the FTC do not constitute a trade regulation rule.
They carry out the directive in the statute that the FTC prescribe the
summary and notices. A consumer reporting agency that provides notices
substantially similar to those prescribed by the FTC will be in compliance
with Section 607(d) or 609(c) of the FCRA, as applicable.
Appendix A to Part 601 - Prescribed Summary of Consumer Rights
Appendix B to Part 601 - Prescribed Notice of Furnisher Responsibilities
Appendix C to Part 601 - Prescribed Notice of User Responsibilities
By direction of the Commission.
Donald S. Clark,
Secretary. |
