Fair and Accurate Credit Transactions Act Section 312

7/22/2010

By Fran Sponsler, CRCM, CCBCO

The final rule for procedures to enhance the accuracy and integrity of information furnished to consumer reporting agencies was published July 1, 2009, and went into effect July 1, 2010. This rule requires furnishers of consumer information to establish reasonable written policies and procedures, utilizing the guidelines within the rule regarding the accuracy and integrity of the information provided. The rule also addresses requirements for handling disputes submitted directly to the furnisher.

Establishing Written Policies and Procedures

Furnishers must establish written policies and procedures regarding accuracy and integrity that take into account the nature, size, complexity, and scope of the furnisher’s activities. This will allow each furnisher to have policies and procedures which are appropriate to their institution. Regulatory agencies will evaluate the adequateness of the policies and procedures based on these criteria. In addition to the implementation of the policies and procedures, financial institutions are required to ensure that adequate and comprehensive training is provided to staff members.

The rule defines accuracy as information that correctly:

• Reflects the terms of and liability for the account or other relationship
• Reflects the consumer’s performance and other conduct with respect to the other account or relationship
• Identifies the appropriate consumer 

Integrity is defined as information that:

• Is substantiated by the furnisher’s records at the time it is furnished
• Is furnished in a form and manner that is designed to minimize the likelihood that the information may be incorrectly reflected in a consumer report
• Includes the information in the furnisher’s possession about the account or other relationship that the relevant agency has determined the absence of which would likely be materially misleading in evaluating a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living
• Includes the credit limit, if applicable, and in the furnisher’s possession

The agencies generated guidelines for the furnishers in establishing the policies and procedures. Included in these are identifying the practices or activities that can compromise the accuracy and integrity of information about consumers furnished to consumer reporting agencies and evaluating the effectiveness of existing policies and procedures regarding the accuracy and integrity of information provided. These policies and procedures will also evaluate the effectiveness of specific methods, including technological means, the furnishers use to provide information. The agencies cited several components which should be included within the policies and procedures. A list of these components may be found beginning on page thirteen of the final rule by clicking here.

Investigating a Direct Dispute

This section of the Fact Act also addresses the requirement for furnishers to reinvestigate a dispute concerning the accuracy of information contained in a consumer report based on a direct request from the consumer. As a best practice, furnishers should voluntarily conduct an investigation. 

• The furnisher is required to conduct a reasonable investigation if the dispute relates to:
• The consumer’s liability for a credit account or other debt with the furnisher
• The terms of a credit account or other debt with the furnisher
• The consumer’s performance or other conduct concerning a credit account or other debt with the furnisher
• Any other information contained in a consumer report regarding an account or other relationship with the furnisher that bears on the consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living attributed to the furnisher on the consumer report

There are exceptions to the investigation requirement. Furnishers are only required to investigate disputes of information regarding an account or other relationship between the consumer and the furnisher. Any dispute that would be more appropriate for the consumer reporting agency, such as information which is obtained from a public source, is not considered the responsibility of the furnisher to investigate.