On July 1, and effective July 1, 2010, July 1, 2009 Inter-agency FACTA Rule 974 Fed. Reg. 31484 (2009) was issued defining the obligations imposed on furnishers of credit reporting information. The history behind the July 1, 2009 Inter-Agency Rule is as follows.
FACTA and Implementing Regulations
On December 4, 2003, Congress passed the Fair and Accurate Transactions Act, which amended the Fair Credit Reporting Act. Applicable to furnishers and the process of resolving consumer disputes of information, FACTA made three changes: (1) it required federal agencies to promulgate guidelines and regulations requiring creditors to establish reasonable procedures regarding the “accuracy and integrity” of the data they report to CRAs (FCRA § 623(e)); (2) it required federal agencies to promulgate guidelines and regulations identifying circumstances under which furnishers, for the first time, must investigate certain disputes received directly from consumers (as opposed indirectly through the CRAs) (FCRA § 623(a)(8)); and (3) if a furnisher receives a dispute from a consumer through the CRA and the furnisher finds inaccuracy, incompleteness or can not verify the information, the furnisher delete, modify, or permanently block the information. (FCRA § 623(b)(1)(E)).
The first significant activity in furtherance of these enabling statutes was the issuance of a Joint Report by the Federal Trade Commission and the Board of Governors of the Federal Reserve Board issuance in August 2006 on the Fair Credit Reporting Act Dispute Process. The Joint Report not only road-mapped the METRO-2, ACDV, and e-OSCAR processes, but it also concluded that “the FACT Act requirements should be given time to take effect before legislators and regulators consider making additional changes to the dispute process”. (Joint Report, p. 34).
The 2007 Proposed Rule
On December 13, 2007, regulators issued a December 13, 2007 Inter-Agency Rule, as required by the FACTA enabling statutes, and invited comment. Regulators found that “neither the text nor the legislative history of the FACT Act resolves how the terms “accuracy” and “integrity” should be defined” with regard to policies and procedures for furnishing consumer data. Accordingly, regulators proposed two separate schemes, the “Regulatory Scheme” under which these terms would be defined in the regulations and the “Guideline Scheme” where the terms would merely be defined as mere guidelines.
The July 1, 2009 Inter-Agency Rule
The regulators decided to put the definitions of “accuracy” and “integrity” in the text of the regulations. But, to defray concerns that placement of the terms in the definitions of the regulation would increase litigation initiated by plaintiffs asserting that furnished information failed to meet the accuracy and integrity standards, the regulators limited the applicability of defined terms to each Agency’s regulations, and confirmed that “the definitions do not impose stand-alone obligations on furnishers but guide and inform the duties otherwise imposed on furnishers under the regulations”. The regulators summarized the Final Rule:
The final rules include the accuracy and integrity regulations, which contain definitions of key terms such as “accuracy”, “integrity”, “direct dispute”, and “furnisher” and require furnishers to establish and implement written policies and procedures regarding the accuracy and integrity of consumer information provided to a CRA. The final rules also include guidelines concerning the accuracy and integrity of information furnished to CRAs that furnishers must consider in developing their policies and procedures.
The Final Rule adopted a definition of “accuracy” which means
that information that a furnisher provides to a consumer reporting agency about an account or other relationship with the consumer correctly: (1) reflects the terms of and liability for the account or other relationship; (2) reflects the consumer’s performance and other conduct with respect to the account or other relationship; and (3) identifies the appropriate consumer.
The Final Rule defined “integrity” as
that information that a furnisher provides to a CRA about an account or other relationship with the consumer: (1) is substantiated by the furnisher’s records at the time it is furnished; (2) is furnished in a form that is designed to minimize the likelihood that the information may be incorrectly reflected in a consumer report; and (3) includes the information in the furnisher’s possession about the account or other relationship that the relevant Agency has determined that the absence of which would likely be materially misleading evaluating a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.
The Final Rule’s definition of “integrity” reflects a compromise between the proposed Regulatory Definition Approach and the proposed Guidelines Definition Approach. In other words, “in order to satisfy the definition of “integrity”, furnished information must include items in a furnisher’s possession about the account or other relationship only if the relevant Agency has determined that its absence would be materially misleading in evaluating a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, and has listed that item of information in the Agency’s guidelines.”
The Final Rule also requires furnishers to maintain written policies and procedures, and to periodically review and update them as necessary to ensure their continued effectiveness.