FACTA 312 Supptg Stmt FIN

Supporting Statement for Information Collection
Proposed Furnisher Rules under the
Fair and Accurate Credit Transactions Act of 2003
(OMB Control # 3084-NEW)
1. & 2.

Necessity for and Use of the Information Collected
The instant joint proposed rulemaking implements section 312 of the Fair and Accurate

Credit Transactions Act of 2003 (“FACT Act”), Pub. L. No. 108-159 (2003). As described,
below, portions of the FACT Act amend the Fair Credit Reporting Act of 1970 (“FCRA”), 15
U.S.C. 1681 et seq., to require the Federal Trade Commission (“FTC” or “Commission”), Office
of the Comptroller of the Currency (Treasury), Board of Governors of the Federal Reserve
System, Federal Deposit Insurance Corporation, Office of Thrift Supervision (Treasury), and
National Credit Union Administration (collectively, “Agencies”) to prescribe regulations
concerning the accuracy and integrity of information furnished to consumer reporting agencies
(“CRAs”), and to jointly prescribe regulations that identify circumstances under which a
furnisher must investigate a dispute concerning the accuracy of information contained in a
consumer report, in response to a direct request from the consumer to whom the report relates.
FACT Act Section 312(a)
Section 312(a) of the FACT Act adds a new section 623(e) to the FCRA, 15 U.S.C.
1681s-2(e), to require the Agencies to, in consultation and coordination:
·

·

Establish and maintain guidelines for use by furnishers of information to CRAs
regarding the accuracy and integrity of the information relating to consumers that such
entities furnish to CRAs and update such guidelines as often as necessary. In
developing the guidelines, the Agencies should: (1) identify patterns, practices, and
specific forms of activity that can compromise the accuracy and integrity of furnished
information; (2) review the methods (including technological means) used to furnish
information to CRAs; (3) determine whether furnishers maintain and enforce policies
to assure the accuracy and integrity of information furnished to CRAs; and (4)
examine the policies and procedures that furnishers employ to conduct investigations
and correct inaccurate information that has been furnished to CRAs.
Prescribe regulations requiring furnishers to establish reasonable policies and
procedures for implementing the guidelines.

FACT Act Section 312(c)
Section 312(c) of the FACT Act adds a new section 623(a)(8) to the FCRA, 15 U.S.C.
1681s-2(a)(8), to require the Agencies to jointly prescribe regulations that identify the
circumstances under which a furnisher must investigate a dispute concerning the accuracy of
information contained in a consumer report, in response to a direct request from the consumer to
whom the report relates. In prescribing these regulations, the Agencies must weigh: (1) the

benefits to consumers and the costs to furnishers and the credit reporting system; (2) the impact
of any requirements imposed by the rule on the overall accuracy and integrity of consumer
reports; (3) whether permitting consumers to contact furnishers directly to dispute the accuracy of
consumer report information will likely result in the most expeditious resolution of such
disputes; and (4) the potential impact on the credit reporting process if “credit repair
organizations,” as defined in the Credit Repair Organization Act, are able to submit notices of
dispute directly to furnishers on behalf of consumers.
The information collections in the proposed regulations implementing section 312(c)
would require each furnisher to amend their procedures to ensure that disputes received directly
from consumers are handled the same way as disputes received from CRAs. The proposed
regulations would also require each furnisher to notify consumers by mail or other means (if
authorized by the consumer) within five business days after making a determination that a
dispute is frivolous or irrelevant.
3.

Consideration of Using Improved Information Technology to Reduce Burden

Consistent with the aims of the Government Paperwork Elimination Act, Pub. L. 105-277,
Title XVII, 112 Stat. 2681-749, 44 U.S.C. § 3504 note, the proposed Furnisher Regulations permit
furnishers latitude in using new technologies to reduce compliance costs. Indeed, the Agencies
attempted to draft the proposed regulations in a flexible, technology-neutral manner. For example,
the proposed regulations do not prevent furnishers from continuing to use automated, electronic,
mechanical, or other technological means to provide information about consumers to CRAs. In
addition, as noted in #2 above, furnishers would be permitted to use means other than postal mail
(if authorized by the consumer) to notify consumers after making a determination that a dispute is
frivolous or irrelevant.
4.

Efforts to Identify Duplication/Availability of Similar Information

FTC staff has not identified any other federal or state statutes, rules, or policies that would
duplicate, overlap, or conflict with the proposed regulations. Section 625(b)(1)(F) of the FCRA
preempts states from enacting any law concerning furnisher obligations included in section 623 of
the FCRA, including the requirements contained in the proposed regulations.
5.

Efforts to Minimize Burdens on Small Businesses

The collection applies to any entity, other than an individual consumer, that furnishes
information relating to consumers to one or more CRAs, regardless of size. The standards in the
proposed regulations are flexible and designed to take into account a covered entity’s size and
sophistication to minimize burdens on small businesses.

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6.

Consequences of Conducting Collection Less Frequently

The burden associated with this proposed rulemaking is in part attributable to the written
policies and procedures that a respondent must establish to implement the guidelines. Once they
are developed, these policies and procedures will only need to be adjusted if they become
ineffective. The burden associated with this proposed rulemaking is also in part attributable to the
requirement that a furnisher must investigate disputes received directly from consumers and notify
consumers after making a determination that a dispute is frivolous or irrelevant. Furnishers would
only need to amend their procedures once to ensure that disputes received directly from consumers
are handled the same way as complaints from CRAs, and would need to notify consumers after
making a determination that a dispute is frivolous or irrelevant only when such a determination is
made.
7.

Circumstances Requiring Disclosures Inconsistent with Guidelines

The collection of information in the proposed regulations is consistent with all applicable
guidelines contained in 5 C.F.R. § 1320.5(d)(2).
8.

Consultation Outside the Agency

The Agencies collaborated to draft these proposed regulations. In conjunction with this
current request, the Agencies are seeking public comment on the proposed regulations as a whole
and with particular respect to the proposed regulations’ recordkeeping and disclosure requirements.
9.

Payments/Gifts to Respondents
Not applicable.

10. & 11.

Assurances of Confidentiality/Matters of a Sensitive Nature

No assurance of confidentiality is necessary because the proposed Rule does not require
furnishers to register or file any documents with the Agencies. To the extent that information
covered by a recordkeeping requirement is collected by the Commission for law enforcement
purposes, the confidentiality provisions of Sections 6(f) and 21 of the FTC Act, 15 U.S.C. §§ 46(f),
57b-2, will apply.
12.

Estimated Hours Burden:1 68,000 total burden hours, rounded to the nearest thousand
(51,000 hours for Section 312(a) + 17,000 hours for Section 312(c))

1

Due to the varied nature of the entities subject to the jurisdiction of the FTC, item #12 reflects only the view
of the FTC . The other federal agencies participating in this rulem aking p roceeding have jointly prepared a separate
PRA analysis.

3

Section 312(a):
Affected Public: Businesses that furnish information to a CRA and are subject to
administrative enforcement by the FTC pursuant to section 621(a)(1) of the FCRA (15 U.S.C.
1681s(a)(1))
Estimated Hours Burden: 51,000 hours (rounded to the nearest thousand)
As discussed above, the proposed regulations would require furnishers to establish and
implement reasonable written policies and procedures regarding the accuracy and integrity of the
information relating to consumers that they furnish to a CRA. The proposed regulations would
define “furnisher” to mean an entity other than an individual consumer that furnishes information
relating to consumers to one or more CRAs, except when it provides information to a CRA solely
to obtain a consumer report for a permissible purpose under the FCRA.2 Given the broad range of
entities that are furnishers, it is difficult to determine precisely the number that are subject to the
FTC’s jurisdiction. Nonetheless, FTC staff estimates that the proposed regulations pursuant to
section 312(a) will affect approximately 6,133 furnishers under the FTC’s jurisdiction.3
The proposed regulations are drafted in a flexible manner that allows entities to establish
and implement different types of written policies and procedures based upon the nature, size,
complexity, and scope of their activities. A furnisher may include any of its existing policies and
procedures in place to ensure the accuracy of information. The Commission believes that many
entities have already implemented a significant portion of the policies and procedures required by
the proposed rule. Entities have had an ongoing requirement under Section 623 of the FCRA to
provide accurate information when they choose to furnish data to CRAs. The written policies and
procedures proposed in the rule would formalize the processes and controls necessary for accurate
reporting. Accordingly, FTC staff estimates that entities will require 21 hours to establish and
2

15 U.S.C. 16 81b(a).

3

The Comm ission invited co mment and information about the categories and numb er of furnishers sub ject to
its jurisdiction. The FTC staff estimate is derived from the number of furnishers reporting to the three nationwide
CRA s (approximately 18,000), minus the number of entities subject to jurisdiction by the federal financial agencies and
the NCU A (14,16 7 combined), and ad ding the numb er of furnishers to med ical inform ation b ureaus (app roxim ately
500) and the number of insurance companies furnishing information to other types of CRAs (approximately 1,800)
[18,000 - 14,167 + 500 + 1,800 = 6 ,133]. As of June, 2007, there were 18,000 estimated furnishers reporting to the
three nationwide CRAs. Statement of Stuart K. Pratt, Consumer Data Industry Association, Before the Committee on
Financial Services, H ouse of Represe ntatives, Cred it Reports: C onsum ers’ Ability to D ispute and Chang e Ina ccurate
Information, at 12-1 3 (June 19 , 200 7), available at
http://www.house.gov/apps/list/hearing/financialsvcs_dem/ospratt061907.pdf [hereinafter Pratt testimony]. There are
app roxim ately 50 0 furnishers to m edica l information b ureaus. See http://www.mib.com/html/about_mib_group.html.
According to information received from the National Association of Insurance Commissioners, in 2006, there were an
estimated 920 home owne rs insurance comp anies and an estimated 1,0 23 auto insurance companies. FT C staff
estimates that 90% of home owners insurance companies and 95% auto insurance companies furnish information to a
CRA. See http://www.choicepoint.com/business/pc_ins/us_2.html;
http://www.choicepoint.com/business/pc_ins/us_1.html. [(920 x.90) + (1,023 x .95) • 1,800]

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implement written policies and procedures, including the incremental time to train staff to
implement these policies and procedures, with an annual recurring burden of 2 hours.
FTC staff estimates that the proposed regulations implementing section 312(a) affect 6,133
furnishers subject to the FTC’s jurisdiction at an average annual burden of 8.33 hours per entity
[average annual burden over 3-year clearance period for establishment and implementation of
written policies and procedures ((21 + 2 + 2 hours)/3)], for a cumulative average annual total of
51,000 hours (rounded to the nearest thousand) [(6,133 furnishers x 8.33 hours)].
Estimated Labor Cost Burden: $1,985,000 (rounded to the nearest thousand)
The FTC staff derived labor costs by applying appropriate estimated hourly cost figures to
the burden hours described above. It is difficult to calculate with precision the labor costs
associated with the proposed regulations, as they entail varying compensation levels of
management and/or technical staff among companies of different sizes. In calculating the cost
figures, staff assumes that managerial and/or professional technical personnel will draft the written
policies and procedures and train staff, at an hourly rate of $38.93.4
Based on the above estimates and assumptions, the total annual labor costs for all
categories of covered entities under the proposed regulations in section 660.3 are $1,985,000
(rounded to the nearest thousand) [(51,000 hours x $ 38.93)].
Section 312(c):
Affected Public: Businesses that furnish information to a CRA, and are subject to
administrative enforcement by the FTC pursuant to section 621(a)(1) of the FCRA (15 U.S.C.
1681s(a)(1)).
Estimated Hours Burden: 17,000 hours (rounded to the nearest thousand)
The proposed regulations would require entities that furnish information about consumers
to CRAs to respond to direct disputes from consumers. FTC staff estimates that the proposed
regulations pursuant to section 312(c) will also affect approximately 6,133 furnishers subject to the
FTC’s jurisdiction.
FTC staff estimates that it will take furnishers four hours to amend their procedures to
ensure that disputes received directly from consumers are handled the same way as complaints
from CRAs. FTC staff believes that furnishers of information to CRAs will have automated the
process of responding to direct disputes in the first year of the clearance. Thus, there will be no
annual recurring burden. FTC staff estimates that it will take furnishers four hours in the first year
4

This cost is derived from the median hourly wage from the 2006 National Occupational Employment and
W age E stimates b y the Bureau of Lab or Statistics for ma nagement occupations. See
http://www.bls.gov/oes/current/oes_nat.htm#b11-0000.

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to implement the requirement to notify a consumer by mail or other means after making a
determination that a dispute is frivolous or irrelevant. FTC staff believes that furnishers will also
automate this process in the first year of clearance, so there will be no annual recurring burden.
FTC staff further estimates that to prepare and distribute a notice to a consumer after a
furnisher determines that a dispute is frivolous or irrelevant will require approximately five
minutes per notice. FTC staff projects that furnishers under its jurisdiction would receive 5,430
frivolous or irrelevant disputes requiring a notice each year. This number is derived from an
estimate of disputes per year that relate to information provided by an entity under the FTC’s
jurisdiction and the Agencies’ estimated 10% increase of the number of written notices that
furnishers will provide to consumers in response to direct disputes that are frivolous or irrelevant.5
Accordingly, FTC staff estimates that it will take furnishers 452 hours for each of the three years
for which OMB clearance is sought (5,430 dispute notices x 5 minutes each). The estimated
annual labor cost associated with this notification requirement is $6,102.

5

In particular, FTC staff estimates that 10,000,000 disputes are submitted to CRAs each year, based on
information available from the Co nsumer Data Ind ustry Associatio n. See Pratt testimony, at 8-9; Federal Trade
Commission and B oard of Governors of the Federal Reserve System, Report to Congress on the Fair Credit Reporting
Act D ispute Pro cess, at 12 (August 2006), available at
http://www.ftc.gov/os/comments/fcradispute/P044808fcradisputeprocessreporttocongress.pdf. The Agencies used data
on consumer com plaints to a CRA as the basis for calculating each agency’s share of direct disputes (that is, the
percent of disputes that relate to information supplied by furnishers under the jurisdiction of each agency). The
Agencies estimated their market share of disputes b y market sector. For e xample, the Agencies estimated their
respective market share of disputes associated with bankcards based on the market share of the top 50 card issuers, and
the market share for m ortgages based on the market share of the top 40 mortgage se rvicers. Acco rdingly, FTC staff
estimated that 1.086% percent of the 10,000,000 disputes submitted to CRAs each year are related to information
provided by a furnisher und er the FT C’s jurisdiction, for a total of 108,600 disputes.
Of these 10 8,60 0 disp utes, the A gencies have estimated that 50% will be sent directly to furnishers under this
rule, and that the number of written notices that furnishers will have to provide to consumers in response to direct
disputes that are frivolou s or irrelevant will increase by an amou nt equal to 10 % o f the num ber o f disputes. W ith
respect to estimating the potential burden associated with providing the notices to consumers, the Agencies received
one comm ent on the ANPR from a financial institution stating that it is estimated that 50% o f disputes received are
frivolous or irre levant. In contra st, one trade association co mmented that in only 25% of disputes is the info rmatio n in
the consumer report being challenged verified as correct; thus, even assuming that every time the information in the
consumer report is verified the underlying dispute was frivolous or irrelevant, a maximum of 25% of disputes could be
frivolous or irrelevant. The Agencies are also aware that a significant number of furnishers are already providing
consumers with a written notice in response to direct disputes. Further, commenters from both industry and consumer
groups observed that disputes filed with CRAs from credit repair organizations have been particularly likely to be
rejected, though they disagreed on the reaso ns. Co nsidering all of these co mments and information, and taking into
account that direct disputes from credit repair organizations are prohibited by section 623(a)(8)(G) of the FCRA, the
Agencies b elieve it is rea sonable to estimate that the numbe r of written notices that furnishers provide to co nsumers in
response to direct disputes would increase by an amount equal to 10%.
Thus, FTC staff estimates that furnishers under its jurisdiction would receive 5,430 frivolous or irrelevant
disputes requiring a notice each year under the proposed regulations. [(108,600 x 50 % x 10 %)].

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Based on the above estimates and assumptions, the total average annual hours burden for
all categories of covered entities under the proposed regulations pursuant to section 312(c) is
17,000 hours [((4 + 4 hours)/3 x 6,133 entities) + (5,430 dispute notices x 5 minutes each)].
Estimated Labor Cost Burden: $641,000 (rounded to the nearest thousand)
The FTC staff derived labor costs by applying appropriate estimated hourly cost figures to
the burden hours described above. It is difficult to calculate with precision the labor costs
associated with the proposed regulations, as they entail varying compensation levels of different
types of support staff among companies of different sizes. Nonetheless, in calculating labor cost,
staff assumes managerial and/or professional technical personnel at an hourly rate of $38.936 will
amend procedures to ensure that disputes received directly from consumers are handled the same
way as complaints from CRAs. Staff also assumes such personnel will implement the
aforementioned notification requirement regarding frivolous or irrelevant disputes. Staff assumes
that administrative support personnel will provide the required notices to consumers, at an hourly
rate of $13.50.7
Based on the above estimates and assumptions, the total average annual labor costs for all
categories of covered entities under the proposed regulations pursuant to section 312(c) are
$641,000 (rounded to the nearest thousand) [((4 + 4 hours)/3 x 6,133 x $38.93) + (452 hours x
$13.50)].
13.

Estimated Capital and Other Non-Labor Costs

The FTC staff estimates that the proposed regulations impose negligible capital or other
non-labor costs, as the affected entities are already likely to have the necessary supplies and/or
equipment (e.g., offices and computers) for the information collections described herein.
14.

Estimated Cost to the Federal Government

FTC staff estimates that a representative year’s cost to the FTC of administering the
proposed regulations requirements during the 3-year clearance period sought will be approximately
$15,750. This represents one tenth of an attorney work year, and includes employee benefits.
15.

Program Changes or Adjustments
FTC staff estimates that the average annual burden for the proposed regulations will

6

This cost is derived from the median hourly wage from the 2006 National Occupational Employment and
W age E stimates b y the Bureau of Lab or Statistics for ma nagement occupations. See
http://www.bls.gov/oes/current/oes_nat.htm#b11-0000.
7

This cost is derived from the median hourly wage from the 2006 National Occupational Employment and
W age E stimates b y the Bureau of Lab or Statistics for office and administrative sup port occupations. See
http://www.bls.gov/oes/current/oes_nat.htm#b11-0000.

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approximate 68,000 hours. This is a program change due to the Commission’s proposal of new
regulations.
16.

Publishing Results of the Collection of Information
There are no plans to publish any information for statistical use.

17.

Display of Expiration Date for OMB Approval
Not applicable.

18.

Exceptions to the Certifications for PRA Submissions
Not applicable.

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