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Perkins on Real Estate

FACT Act gives consumers accurate credit information

By Broderick Perkins

The same 3-year-old federal consumer credit law that gave you free credit reports and greater fraud and identity theft protection is poised to generate more accurate credit information.

Since the Fair and Accurate Credit Transactions Act was enacted on Dec. 4, 2003, to amend and strengthen the Fair Credit Reporting Act, the feds have been rolling out a host of regulations to better safeguard your credit and financial information, as well as to give you greater access and control over that information.

Among the regulations are free access to credit and finance reports stockpiled by both major credit agencies and smaller personal data collection firms; fraud and identity theft protection provisions; and more thorough procedures for disposing and monitoring the disposal of sensitive consumer credit and finance data.

Thus far, after public hearings, each of the proposed provisions has become a federal regulation without a hitch.

The latest proposed rule, from the Federal Trade Commission, the Federal Reserve System and four other federal monetary system regulators, addresses FACT Act's Section 312 and is open for public comment until the end of May.

According to federal documents filed with the Federal Register, Section 312 will mandate regulated credit and financial information data warehouses, including Equifax, Experian and TransUnion, as well as smaller specialized consumer reporting agencies, and fine tune the information provided by "furnishers"--banks, credit unions, finance companies, employers, insurance companies, doctors and hospitals, debt collectors and landlords.

Under current law, furnishers' information is used, in part, to determine your eligibility for credit, employment, insurance, rental housing and other products and services, as well as the terms and costs of credit, insurance and other products and services.

The problem is, furnishers aren't uniform in the way they supply credit and data agencies with information.

Not all furnishers regularly provide information. Some furnishers provide only negative information. Some may provide information to one or two of the big three credit reporting agencies. Others may report only to one of the smaller specialized consumer reporting agencies. Still others don't report at all.

Unfortunately, that inconsistency can lead to both errors of omission and factual errors that can damage your creditworthiness. Damaged credit can reduce your eligibility for credit and financial services as well as raise the cost of those services.

That can be especially devastating to someone buying a home and discovering a patchwork of errors are preventing him or her from landing an affordable mortgage--or any mortgage at all.

Equifax, Experian and TransUnion recently replaced a mix of credit scoring systems with a single system to be used by all three in an effort to bring some uniformity to the way credit data is analyzed.

Under proposed provisions, the feds say credit reporting agencies must:

* identify patterns, practices and specific forms of activity that can compromise the accuracy and integrity of information furnished to consumer reporting agencies;

* review the methods (including technological means) used to furnish consumer information to consumer reporting agencies;

* determine whether furnishers maintain and enforce policies to assure the accuracy and integrity of information furnished to consumer reporting agencies;

* examine the policies and processes employed by furnishers to conduct investigations and to correct inaccurate consumer information that has been furnished to consumer reporting agencies.

Another provision examines how furnishers address consumer complaints about information when consumers appeal directly to the furnisher, rather than to the credit or finance reporting agency. It will also address what role, if any, credit repair agencies should play in information disputes.

Right now, official consumer complaints are initially filed through the credit reporting agency offering data the consumer disputes. When the agency notifies a furnisher of a consumer dispute, the furnisher must investigate the complaint, report findings back to the agency, provide any corrected information to all consumer reporting agencies that received the original information and prevent a repeat of furnishing that same incorrect or unverifiable information.

Under new rules, agencies must identify when a furnisher is required to investigate a dispute arising from a complaint filed directly from a consumer.

To get a handle on when that should happen, the feds have instructed agencies to:

* weigh such a regulation's benefits to consumers against the costs on furnishers and the credit reporting system;

* determine the impact of such a regulation on the overall accuracy and integrity of consumer reports;

* determine if direct contact by the consumer with the furnisher would likely result in the most expeditious resolution of any dispute;

For more information about FCRA and the FACT Act, visit the Federal Trade Commission online at http://www.ftc.gov/ os/statutes/fcrajump.htm.

Real estate writer Broderick Perkins, executive editor of San Jose-based DeadlineNews.Com, writes regularly for this newspaper.