FCRA Rights and Duties
The FCRA Rights and Duties are additions to
preexisting credit laws. The Notices of Rights and Duties under the
Fair Credit Reporting Act encourage fair credit reporting by credit
reporting agencies.
The Federal Trade Commission's Rights
and Duties under the Fair Credit Reporting Act (FCRA)
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The Fair Credit Reporting Act (FCRA), originally enacted in 1970,(1)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.
Notices of Rights and Duties under the Fair Credit Reporting Act
help to strengthen the rules and regulations set out in the FCRA,
providing greater protection to consumers.
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