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Letters to Regulators
Fair Credit Reporting Act, Notice on Furnishing Negative Information
May 6, 2004
Jennifer J. Johnson, Secretary
Re: Fair Credit Reporting Act, Notice on Furnishing Negative Information
Dear Ms. Johnson:
The Independent Community Bankers of America (ICBA)1 appreciates the opportunity to comment on the Federal Reserve's proposed model notice that banks may use when furnishing negative information to credit bureaus. Congress required the Federal Reserve to develop the model notice in section 217 of the Fair and Accurate Credit Transactions Act of 2003 (FACTA).
The statute provides that any financial institution that extends credit in the ordinary course of business and regularly furnishes information to a nationwide credit reporting agency, and furnishes negative information about credit provided to a consumer, must provide a clear and conspicuous notice to the customer about furnishing such negative information. The information must be provided within 30 days of the time the bank forwards the information to the credit reporting agency, either before or after the time the information is forwarded. However, providing the notice does not require the bank to forward the information.
The notice may be included with any notice of default, billing statement or other materials provided to the customer as long as the notice is clear and conspicuous. The notice may not be included with the initial disclosures. As required by the statute, the Federal Reserve has proposed a model notice form that banks may use to comply with these requirements: "We [may provide/have provided] information to credit bureaus about an insolvency, delinquency, late payment, or default on your account to include in your credit report."
The ICBA does not object to the proposed model language, as it satisfies the mandates issued by Congress in FACTA. However, we have three recommendations for revisions to the regulatory language proposed by the Federal Reserve to implement this provision of the statute.
Safe Harbor. Section 217 of FACTA establishes two safe harbor provisions for a bank that either uses the model language or establishes reasonable policies and procedures that are designed to ensure compliance with the notice requirement. The ICBA recommends that the Federal Reserve incorporate the safe harbor language of the statutory provisions in the regulation, since many examiners and banks use the regulation as a point of reference.
Timing of Notice. Second, as noted by the Federal Reserve in the preamble of the proposal, section 217 of FACTA clearly requires that the notice must be sent within 30 days of the time that a delinquency or default is reported to a national credit reporting agency, although the bank is required to provide the notice only once with respect to a particular transaction, account or extension of credit. The proposed regulation itself, however, does not include this language. The ICBA believes that this restriction should be incorporated into the final regulatory language as well to better inform banks of their obligation.
Additional Guidance. As the Federal Reserve garners experience under the new regulatory requirements, the ICBA also encourages the Board to consider developing a staff commentary for Regulation V (the Fair Credit Reporting Act). The Federal Reserve has used this model for many other regulations, such as Regulation B (Equal Credit Opportunity Act) and Regulation Z (Truth in Lending Act), and the ICBA believes that a similar model would prove useful guidance to bankers and examiners here as well as compliance questions arise.
Thank you for the opportunity to comment. If you have any questions or need additional information, please contact the undersigned at 202-659-8111 or by e-mail at firstname.lastname@example.org.
Robert G. Rowe, III
1 ICBA is the nation's leading voice for community banks and the only national trade association dedicated exclusively to protecting the interests of the community banking industry. ICBA has nearly 4,600 members with branches in more than 17,000 locations nationwide. Our members hold more than $526 billion in insured deposits, $728 billion in assets and more than $405 billion in loans for consumers, small businesses, and farms. They employ more than 231,000 people in the communities they serve.