[Federal Register Volume 71, Number 202 (Thursday, October 19, 2006)]
[Notices]
[Pages 61776-61780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-17507]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Reinstatement of 
Existing Collection; Comment Request

AGENCY: Federal Trade Commission.

ACTION: Notice and request for comment.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') 
intends to conduct a pilot study in connection with Section 319 of the 
Fair and Accurate Credit Transactions Act of 2003, Pub. L. 108-159 
(2003). This study is a follow-up to the Commission's previous pilot 
study conducted from October 2005 through June 2006. Before gathering 
this information, the FTC is seeking public

[[Page 61777]]

comment on its proposed consumer pilot study. Comments will be 
considered before the FTC submits a request for Office of Management 
and Budget (``OMB'') review under the Paperwork Reduction Act, 44 
U.S.C. 3501-3520.

DATES: Public comments must be received on or before December 18, 2006.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Accuracy Pilot Study: Paperwork Comment (FTC 
file no. P044804)'' to facilitate the organization of the comments. A 
comment filed in paper form should include this reference both in the 
text and on the envelope and should be mailed or delivered, with two 
complete copies, to the following address: Federal Trade Commission/
Office of the Secretary, Room H-135 (Annex J), 600 Pennsylvania Avenue, 
NW., Washington, DC 20580. Because paper mail in the Washington area 
and at the Commission is subject to delay, please consider submitting 
your comments in electronic form, as prescribed below. However, if the 
comment contains any material for which confidential treatment is 
requested, it must be filed in paper form, and the first page of the 
document must be clearly labeled ``Confidential.'' \1\ The FTC is 
requesting that any comment filed in paper form be sent by courier or 
overnight service, if possible.
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    Comments filed in electronic form should be submitted by using the 
following Web link: https://secure.commentworks.com/ftc-accuracy 
(further following the instructions on the Web-based form). To ensure 
that the Commission considers an electronic comment, you must file it 
on the Web-based form at the Web link; https://secure.commentworks.com/ftc-accuracy. If this notice appears at http://www.regulations.gov, you 
may also file an electronic comment through that Web site. The 
Commission will consider all comments that regulations.gov forwards to 
it.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from public comments it receives before placing those comments on the 
FTC Web site. More information, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Peter Vander Nat, Economist, (202) 
326-3518, Federal Trade Commission, Bureau of Economics, 600 
Pennsylvania Ave., NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Section 319 of the Fair and Accurate Credit 
Transactions Act of 2003 (``FACT Act'' or the ``Act''), Pub. L. 108-159 
(2003), requires the FTC to study the accuracy and completeness of 
information in consumers' credit reports and to consider methods for 
improving the accuracy and completeness of such information. Section 
319 of the Act also requires the Commission to issue a series of 
biennial reports to Congress over a period of eleven years. The first 
report was submitted to Congress in December 2004 (``December 2004 
Report'').\2\
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    \2\ Report to Congress Under Sections 318 and 319 of the Fair 
and Accurate Credit Transactions Act of 2003, Federal Trade 
Commission, December 2004. The December 2004 Report is available at 
http://www.ftc.gov/reports/index.htm#2004.
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    In July 2005, OMB approved the FTC's request to conduct a pilot 
study to evaluate the feasibility of a methodology that involves direct 
review by consumers of the information contained in their credit 
reports (OMB Control Number 3084-0133).\3\ After receiving OMB 
approval, the FTC conducted the pilot study from October 2005 through 
June 2006. As discussed below, FTC staff believes it is necessary to 
conduct a follow-up pilot study to evaluate additional design elements 
prior to carrying out a nationwide survey on the accuracy and 
completeness of consumer credit reports. The additional design elements 
would permit the FTC to further assess whether the collection of 
certain data pertinent to credit report accuracy can be obtained in a 
way that is not unduly resource-intensive or otherwise cost-prohibitive 
if extended to a nationwide survey. As with the initial study, the 
FTC's proposed follow-up study will not rely on the selection of a 
nationally representative sample of consumers and statistical 
conclusions will not be drawn.
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    \3\ See 70 FR 24583 (May 10, 2005) (discussion of the initial 
pilot study and related public comments).
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    Under the Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501-3520, 
Federal agencies must obtain approval from OMB for each collection of 
information they conduct or sponsor. ``Collection of information'' 
means agency requests or requirements that members of the public submit 
reports, keep records, or provide information to a third party. 44 
U.S.C. 3502(3), 5 CFR 1320.3(c). As required by the PRA, 44 U.S.C. 
3506(c)(2)(A), the FTC is providing this opportunity for public comment 
before requesting that OMB reinstate the clearance for the pilot study, 
which expired in September 2006.\4\
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    \4\ The clearance was originally set to expire in December 2006. 
However, rather than seek a straight extension of the existing 
clearance in order to conduct the proposed follow-up pilot study, 
FTC staff asked OMB to discontinue the clearance in September 2006. 
This procedural approach ensures that the FTC's December 2006 Report 
to Congress (which will include a detailed review of the results of 
the initial pilot study) will be available to the public before the 
expiration of the comments period for this notice. The December 2006 
Report is expected to be publicly available on the FTC's Web site by 
December 2, 2006.
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    The FTC invites comment on: (1) Whether the proposed collections of 
information are necessary for the proper performance of the functions 
of the FTC, including whether the information will have practical 
utility; (2) the accuracy of the FTC's estimate of the burden of the 
proposed collections of information; (3) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (4) ways 
to minimize the burden of collecting the information on those who are 
to respond, including through the use of collection techniques or other 
form of information technology, e.g., permitting electronic submissions 
of responses. All comments should be filed as prescribed in the 
ADDRESSES section above, and must be received on or before December 18, 
2006.

1. Description of the Collection of Information and Proposed Use

A. Initial Pilot Study

    The goal of the initial pilot study was to assess the feasibility 
of directly engaging consumers in an in-depth review of their credit 
reports for the purpose of identifying alleged material errors and 
attempting to resolve such errors through the Fair Credit Report Act 
(``FCRA'') dispute resolution process. The FTC's contractor for the 
initial pilot study--a research team comprised of members from the 
Center for Business and Industrial Studies (University of Missouri-St 
Louis),

[[Page 61778]]

Georgetown University Credit Research Center, and the Fair Isaac 
Corporation--engaged 30 randomly selected participants in an in-depth 
review of their credit reports. By using the Web site ``myfico.com,'' 
study participants obtained their credit reports and credit scores \5\ 
from each of the three nationwide consumer reporting agencies (Equifax, 
Experian, TransUnion--hereinafter, the ``CRAs''). The contractor 
reviewed these credit reports with the participants to identify alleged 
inaccuracies and further gave advice on the difference between a small 
inaccuracy and a potentially significant error that could affect credit 
scores. After an evaluation of alleged errors for materiality by the 
research team, consumers were asked to channel disputed information 
through the FCRA dispute resolution process.\6\
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    \5\ A credit score is a numerical summary of the information in 
a credit report and is designed to be predictive of the risk of 
default. Credit scores are created by proprietary formulas that 
render the following result: the higher the credit score, the lower 
the risk of default. The contractor in the initial pilot study 
employed a score that is commonly used in credit reporting, namely 
the FICO score. (The same score is anticipated for the proposed 
follow-up pilot study.)
    \6\ The FCRA dispute resolution process involves the review of 
disputed items by data furnishers and CRAs. The formal dispute 
process renders a specific outcome for each alleged error. By direct 
instruction of the data furnisher, the following outcomes may occur: 
delete the item, change or modify the item (specifying the change), 
or maintain the item as originally reported. Also, a CRA may delete 
a disputed item due to expiration of statutory time frame (the FCRA 
limits the process to 30 days, but the time may be extended to 45 
days if the consumer submits relevant information during the 30-day 
period). These possible actions are tracked by a form called 
``Online Solution for Complete and Accurate Reporting'' (e-OSCAR) 
that is used by CRAs for resolving FCRA disputes. (See, Federal 
Trade Commission and Board of Governors of the Federal Reserve 
System, Report to Congress on the Fair Credit Reporting Act Dispute 
Process, August 2006. The report is available at http://www.ftc.gov/reports/index.htm#2006.)
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    Some of the contractor's key findings concerning the methodology of 
the initial pilot study include: \7\
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    \7\ As previously noted, the FTC's upcoming December 2006 Report 
to Congress will contain a more detailed review of the study 
results. The December 2006 Report is expected to be publicly 
available on the FTC's Web site by December 2, 2006.
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    (i) Participants were successfully engaged in conducting a thorough 
and effective review of their credit report information over the 
telephone. The members of the research team and the participants were 
unanimous in judging the review of the information as thorough and 
objective.
    (ii) Effective mechanisms to protect consumers' personal 
information can be employed. For example, in the protocols of the pilot 
study, participants were not required to reveal their social security 
numbers (``SSNs'') to University members of the research team, who 
conducted all interviews. Only Fair Isaac received SSNs upon an initial 
request for credit reports by participants. Moreover, all financial 
account numbers (including credit and debit card numbers) were 
truncated to 3 or 4 digits in any information available to University 
researchers. These restrictions did not hinder the quality of 
information produced by the study.
    (iii) Sufficient information was provided for a subsequent analysis 
of the accuracy of items placed in CRA files and presented in credit 
reports. For example, in addition to assessing whether the alleged 
errors are material, the methodology permitted the contractor to 
address the following types of questions:
    (a) What is the specific nature of the errors alleged by consumers?
    (b) Which categories of credit report information generate frequent 
concerns?
    (c) Do consumers take initiative to have the alleged errors 
corrected (i.e., do they file a formal FCRA dispute)?
    (d) Are the alleged errors present in the credit reports from more 
than one CRA?
    (e) Is there consistency over CRA files in representing the 
creditworthiness of consumers? (Specifically, sufficient information 
was provided to assess consistency in reporting a wide variety of 
pertinent information, including: employment status; length of credit 
history; late payments; public derogatories; utilization of revolving 
credit; and collection activity.)
    The contractor also identified matters that would need to be 
addressed further, chief among these being: additional procedures to 
help consumers follow through with the entirety of the study process 
and additional ways of identifying and recruiting consumers to become 
participants in the study. For example, the majority of participants 
who alleged errors on their credit reports and indicated that they 
would file a formal dispute did not follow through with their intention 
to file. Considering that this was also true with respect to those who 
alleged material errors in the expert opinion of the research term, the 
need to further explore how to best follow-up with consumers who 
indicate they will file a dispute is clear. Moreover, those who 
ultimately became study participants tended to be persons who had 
relatively higher credit scores and were possibly more affluent and 
better educated. (Ranging from low to high, a broad spectrum of credit 
scores was attained in the study group; yet, the overall distribution 
favored the relatively higher credit scores.) FTC staff believes there 
is a need to further explore whether Internet access may have played a 
role in the apparent imbalance. For example, although the contractor 
would have offered to provide Internet access to otherwise qualified 
study participants, all of the consumers who ultimately became 
participants in the study already had Internet access. Accordingly, 
there is a need to further explore how to best invite and recruit 
persons to participate in the study. In consideration of these and 
other matters, the FTC is proposing to conduct a follow-up pilot study.

B. Follow-up Pilot Study

    In many respects, the design of the follow-up study will be similar 
to the initial pilot study. The elements of the proposed follow-up 
study are as follows:
    (i) A study group of 120 consumers will be drawn by a randomized 
procedure that is screened to consist of adult members of households to 
whom credit has been extended in the form of credit cards, automobile 
loans, home mortgages, or other forms of installment credit. The FTC 
will send a letter to potential study participants describing the 
nature and purpose of the pilot study. The contractor will screen 
consumers by conducting telephone interviews. Consumers who qualify and 
agree to participate will sign a prepared consent form giving the 
contractor permission to review the consumer's credit reports.
    (ii) In selecting the study group the contractor will use, and may 
also experiment with, a variety of methods for recruiting participants. 
For example, in addition to therandomized selection procedure used in 
the initial pilot study (which made use oftelephone directories), the 
contractor will engage consumers through referrals from financial 
institutions as they apply for credit, e.g., mortgages, automobile 
loans, or other forms of credit. (Lenders will know--and have a 
permissible purpose for knowing--the consumer's credit score and 
certain other characteristics; consumers can then be informed of the 
FTC study and invited to participate.)
     The contractor may experiment with additional methods for securing 
participation, provided that the methods employed do not violate the 
FCRA, and specifically do not violate the permissible purposes for 
obtaining a consumer's credit report (FCRA Sec.  604).
    (iii) The selected study group will consist of consumers having a 
diversity of credit scores over three broad categories: poor, fair, and 
good. The contractor will monitor the respective

[[Page 61779]]

processes of recruitment so as to attain approximately equal 
representations of credit scores across the designated categories.
    (iv) The contractor will help participants obtain their credit 
reports from the CRAs. Each participant will request his or her three 
credit reports on the same day, although different participants will 
generally request their reports on different days.
    (v) The contractor will help the participants review their credit 
reports by resolving common misunderstandings that they may have about 
the information in their reports; this will involve educating the 
consumers wherever appropriate (thereby helping them to distinguish 
between accurate and inaccurate information).
    (vi) The contractor will help participants locate any material 
differences or discrepancies among their three reports and check 
whether these differences indicate inaccuracies.
    (vii) The contractor will facilitate a participant's contact with 
the CRAs and data furnishers as necessary to help resolve credit report 
items that the participant views as inaccurate. To the extent 
necessary, the contractor will guide participants through the dispute 
process established by the FCRA. The contractor will not directly 
contact CRAs or data furnishers during the course of the study, as the 
outcome of a dispute may still be pending. The contractor will 
determine if any changes in the participant's credit score result from 
changes in credit report information.\8\
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    \8\ In making this comparison, the contractor will not just 
obtain a new credit report and score from the relevant CRAs after 
items have been corrected (although such reports will be obtained). 
The contractor is required to have the expertise to re-score the 
original credit report in the context of those changes directly 
related to the contractor's review, thus resulting in a re-scoring 
of the consumer's ``frozen file.'' This method addresses the concern 
that changes in credit scores retrieved from CRAs could be the 
result of the addition of new items rather than corrected items.
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    (viii) For study participants who have alleged material errors and 
expressed an intention to file a dispute but do not file within 6 
weeks, the contractor will prepare draft dispute letters on their 
behalf (together with stamped envelopes, pre-addressed to the relevant 
CRAs). The contractor will ascertain from the consumer whether the 
letter correctly describes the consumer's allegation and, upon 
confirmation, the participant will be asked to sign and send the 
letter.
    As was true of the initial study, the proposed follow-up pilot 
study is not intended to replicate normal circumstances under which 
consumers generally review their credit reports; nor is it intended to 
evaluate the adequacy or complexity of the dispute process. The 
scrutiny applied to the reports of study participants, via the help of 
expert advice, would not at all be indicative of a consumer's normal 
experience in reviewing a credit report. The FTC recognizes that 
consumers often are not familiar with credit reporting procedures and 
may have difficulties in understanding a credit report (which may be 
partly due to a consumer's own misconceptions). Also, as noted above, 
some consumers may need extra guidance and help in completing the 
process of filing disputes for alleged inaccuracies. In all of the 
proposed activities, the contractor will use procedures that avoid 
identification of study participants to CRAs and data furnishers.
    Furthermore, as was true of the initial study, the proposed follow-
up pilot study will not employ a specific definition of accuracy and 
completeness and no decision has been made on the definition of these 
terms for a nationwide survey.\9\ Instead, both the initial and follow-
up pilot studies seek to assess a methodology that involves consumer 
review of credit reports and both seek to ascertain the variety of 
information pertinent to accuracy and completeness that can be 
garnered.
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    \9\ See also December 2004 Report at 5 n.10, which discusses 
different definitions of completeness, and at 16-18, which discusses 
FCRA accuracy and completeness requirements.
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    Finally, the follow-up pilot study will list an array of possible 
outcomes for items reviewed on the participants' credit reports. FTC 
staff anticipates this list will include the following categories (the 
contractor may supply additional categories as warranted by matters 
encountered in the study):
    ``disputed by consumer and deleted due to expiration of statutory 
[FCRA] time frame'';
    ``disputed by consumer and data furnisher agrees to delete the 
item'';
    ``disputed by consumer and data furnisher agrees to change or 
modify the item'';
    ``disputed by consumer and data furnisher disagrees, maintaining 
the item to be correct'';
    ``item not disputed by consumer''; or
    ``item not present on the report''.\10\
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    \10\ The FTC staff recognizes the different reporting cycles of 
data furnishers and the voluntary basis on which information is 
reported to a CRA. There may be different explanations why an 
anticipated item is not on a particular credit report. The item may 
be missing because a data furnisher did not provide the information 
to a certain CRA, or--due to the specific reporting cycle of the 
data furnisher--because it was provided at a time after the credit 
report was viewed by the consumer. Alternatively, the item may have 
been submitted to a CRA but placed in the wrong consumer's file. The 
contractor will seek to determine, to the extent practicable, which 
of these explanations may apply. For example, at the end of the 
study the contractor may contact XYZ Mortgage, give a brief 
explanation of the FTC's pilot study, and inquire whether this 
furnisher normally reports information to Credit Bureau A; if so, 
then inquire about the timing of the reporting cycle. When making 
such inquiries, the contractor will not disclose the identities of 
study participants.
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    FTC staff anticipates that these categories will be useful in 
designing a nationwide survey regardless of how accuracy and 
completeness may be defined for such a survey.

2. Estimated Hours Burden

    Consumer participation in the follow-up pilot study would involve 
an initial screening interview and any subsequent time spent by 
participants to understand, review, and if deemed necessary, dispute 
information in their credit reports. The FTC staff estimates that up to 
800 consumers may need to be screened through telephone interviews to 
obtain 120 participants, and that each screening interview may last up 
to 10 minutes, yielding a total of approximately 133 hours (800 
screening interviews x \1/6\ hour per contact).
    With respect to the hours spent by study participants, in some 
cases the relative simplicity of a credit report may render little need 
for review and the consumer's participation may only be an hour. For 
reports that involve difficulties, it may require a number of hours for 
the participant to be educated about the report and to resolve any 
disputed items. For items that are disputed formally, the participant 
must submit a dispute form, identify the nature of the problem, present 
verification from the participant's own records to the extent possible, 
and, upon furnisher response, perhaps submit follow-up information. As 
was true of the initial study, FTC staff again estimates the 
participants' time for reviewing their credit reports at an average of 
5 hours per participant, resulting in a total of 600 hours (5 hours x 
120 participants).\11\ Total consumer burden hours are thus 
approximately 750 hours (derived as 133 screening hours plus 600 
participant hours,

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further rounding upwards to the nearest 50 hours).
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    \11\ This general estimate is given for the purpose of 
calculating burden under the PRA. Information contained in the 
contractor's report to the FTC regarding the initial study may 
indicate a somewhat lower estimate of the average time spent by the 
30 participants, but it would not render a noticeably different 
result for the overall consumer burden. In an effort not to 
underestimate the time spent by additional study participants, FTC 
staff has retained the estimate used for the initial study.
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3. Estimated Cost Burden

    The cost per participant should be negligible. Participation is 
voluntary, and will not require any start-up, capital, or labor 
expenditures by study participants. As with the initial study, 
participants will not pay for their credit reports or credit scores.

William Blumenthal,
General Counsel.
 [FR Doc. E6-17507 Filed 10-18-06; 8:45 am]
BILLING CODE 6750-01-P