[Federal Register Volume 72, Number 24 (Tuesday, February 6, 2007)]
[Notices]
[Pages 5435-5440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-1837]


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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. 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 comment on its proposed consumer pilot study. The 
information collection requirements described below will be submitted 
to the Office of Management and Budget (``OMB'') for review, as 
required by the Paperwork Reduction Act.

DATES: Public comments must be received on or before March 8, 2007.

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-expand 
(and 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-expand. If this notice appears at 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.
    Comments should also be submitted to: Office of Management and 
Budget, Attention: Desk Officer for the Federal Trade Commission. 
Comments should be submitted via facsimile to (202) 395-6974 because 
U.S. Postal Mail is subject to lengthy delays due to heightened 
security precautions.
    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

[[Page 5436]]

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''), 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 FACT 
Act requires the Commission to issue a series of biennial reports to 
Congress over a period of eleven years, and the FTC has submitted two 
reports thus far: one in December 2004 (``December 2004 Report'') and 
another in December 2006 (``December 2006 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, and Report to Congress Under Section 319 
of the Fair and Accurate Credit Transactions Act of 2003, Federal 
Trade Commission, December 2006. The respective reports are 
available on the FTC's Web site at http://www.ftc.gov/reports/index.htm#2004 and http://www.ftc.gov/reports/index.htm#2006.
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    In July 2005, OMB approved the FTC's plan to conduct a consumer 
pilot study to evaluate the feasibility of directly involving consumers 
in a review of the information in their credit reports (OMB Control No. 
3084-0133).\3\ 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 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 was true of the initial study, the follow-up 
pilot 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) (design of 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. On October 19, 2006, the FTC 
sought comment on the information collection requirements associated 
with the proposed follow-up pilot study.\4\ As discussed below, three 
comments were received. Pursuant to the OMB regulations that implement 
the PRA (5 CFR Part 1320), the FTC is providing this second opportunity 
for public comment while seeking OMB approval to reinstate the 
clearance for the pilot study, which expired in September 2006.\5\ All 
comments should be filed as prescribed in the ADDRESSES section above, 
and must be received on or before March 8, 2007.
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    \4\ 71 FR 61776.
    \5\ 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 ensured that the FTC's December 2006 Report 
to Congress, which includes the contractor's report on initial pilot 
study, would be publicly available before the expiration of the 
comment period regarding the October 19, 2006 Notice. See 71 FR 
61776.
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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 disputed items through the Fair Credit 
Report Act (``FCRA'') dispute resolution process (see below). The FTC's 
contractor for the initial pilot study 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 from each of the three nationwide consumer 
reporting agencies (Equifax, Experian, and TransUnion--hereinafter, the 
``CRAs''). After the research team evaluated consumer alleged errors 
for materiality, consumers were asked to channel disputed items through 
the FCRA dispute resolution process.\6\
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    \6\ Section 611 of the FCRA (15 U.S.C. Sec.  1681i) sets forth 
the process by which a consumer may dispute data in his or her 
credit files with a CRA, and the CRA's duty to investigate the 
dispute. Section 623(b) (15 U.S.C. Sec.  1681s-2(b)) spells out the 
duties of persons that have furnished disputed items of information 
to a CRA, after receiving notice of a dispute from the CRA. The FCRA 
dispute resolution process thus involves the review of disputed 
items by data furnishers and CRAs, and the 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). The 
CRAs track these possible actions by using a form called ``Online 
Solution for Complete and Accurate Reporting'' (e-OSCAR). 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: (i) Participants were successfully 
engaged in conducting a thorough and effective review of their credit 
report information over the telephone; (ii) effective mechanisms to 
protect consumers, personal information can be employed,\7\ and (iii) 
sufficient information was provided for a subsequent analysis of the 
accuracy of items placed in CRA files and presented in credit 
reports.\8\
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    \7\ 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. Using normal Web site procedures, only Fair Isaac 
received SSNs upon an initial request for credit reports at 
``myfico.com.'' All financial account numbers were truncated to 3 or 
4 digits in any information available to University researchers. 
More generally, the contractor used procedures that avoided 
identification of study participants to CRAs and data furnishers.
    \8\ See December 2006 Report and its appendix, which includes 
the contractor's report on the initial pilot study (available at 
http://www.ftc.gov/reports/index.htm#2006).
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    The contractor identified two matters that would need to be 
addressed further: additional procedures to help consumers follow 
through with the entirety of the study, and additional ways of 
identifying and recruiting consumers to become participants in the 
study. 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 for those who alleged material errors in the expert opinion 
of the research team, the need to explore how to best follow-up with 
consumers who indicate they will file a dispute is clear. Further, the 
outcome of the study suggests that people who did not have Internet 
access or experience may have been less willing to participate. 
Although the contractor would have offered to provide Internet access 
to otherwise qualified participants, all the consumers who ultimately 
became participants in the study had Internet access.\9\ In 
consideration of these and

[[Page 5437]]

other matters, the FTC plans to conduct a follow-up pilot study.
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    \9\ A broad spectrum of credit scores was attained in the study 
group, but the distribution tended toward relatively higher credit 
scores. The contractor compared participants' credit scores to the 
national distribution, and the study data revealed that low scores 
were underrepresented in the sample, while high scores were over-
represented.
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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. 
In addition to the randomized selection procedure used in the initial 
pilot study (which made use of telephone directories), the contractor 
may 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 employ additional methods for securing 
participation, provided that no method would 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 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 
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 whether any changes in the participant's credit score result 
from changes in credit report information.\10\
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    \10\ 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, thereby re-scoring 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 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, with 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 errors. In all of the proposed 
activities, the contractor will again use procedures that avoid 
identification of study participants to CRAs and data furnishers.
    As was further 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.\11\ 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. 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):
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    \11\ 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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    ``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.'' \12\
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    \12\ 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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    As discussed in the December 2006 Report (at 7), which recognizes 
that the results of the dispute process do not establish the 
``accuracy'' of credit reports in an absolute sense, it is still

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anticipated that these categories will be useful in designing a 
nationwide survey regardless of how ``accuracy'' and ``completeness'' 
may be delineated for such a survey.

C. Summary of Public Comments

    The FTC received three comments on the proposed follow-up pilot 
study; one from ACA International (``ACA''), another from the Consumer 
Data Industry Association (``CDIA''), and a third from TransUnion, LLC 
(``TransUnion'').\13\ The comments from each of these organizations are 
addressed below.
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    \13\ The comments are available on the FTC's Web site at http://www.ftc.gov/os/comments/FACTA-accuracystudy-2/index.htm.
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1. ACA Comment \14 \
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    \14\ ACA (at 1) describes itself as an international trade 
organization of credit and collection companies that provide a 
variety of accounts receivable management services.
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    ACA supports the goal of both the initial and proposed follow-up 
pilot study (ACA at 5), while it also expresses concerns. ACA (at 5-7) 
views it as a shortcoming that the pilot study design does not include 
definitions of the terms ``accuracy,'' ``completeness,'' or 
``dispute,'' and does not categorize the types of data furnishers who 
may be addressed by a dispute.
    The terms ``accuracy'' and ``completeness'' do not require specific 
definition at this time for the following reason: the pilot studies are 
not used to draw any conclusions, statistical or otherwise, about 
accuracy or completeness but are formulated solely as vehicles for 
assessing the feasibility of a certain study methodology (i.e., an 
assessment of a consumer survey approach that directly involves 
consumers in a review of information in their credit reports for the 
purpose of identifying alleged materials errors and attempting to 
resolve disputed items through the FCRA dispute resolution process). As 
discussed above, it is anticipated that the related categories outlined 
in this notice will be useful in designing a nationwide survey 
regardless of how the terms accuracy and completeness may be delineated 
for such a survey.
    Regarding ACA's question about the term ``dispute'' and a 
classification for ``data furnisher,'' staff uses these terms--
expressly for the purpose of the pilot studies--in the following way: 
in regard to items on a credit report, a ``disputed item'' is a 
consumer alleged error that is communicated by the consumer, either in 
writing or electronically, to a CRA or to a data furnisher; a ``data 
furnisher'' is simply a party who provides to a CRA any of the items 
that appear on a credit report.\15\ In giving this description, staff 
sees no need to classify, at this stage, the types of data furnishers 
who may be involved with consumer disputed items.\16\
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    \15\ In offering this description, staff is not proposing any 
legal determination of duties or actions that may be required of a 
CRA or a data furnisher under the FCRA.
    \16\ In preparation for the Commission's stated goal of 
classifying credit report errors by type and seriousness in terms of 
potential consumer harm (see, December 2006 Report at 2), it is 
expected that the studies will rank categories of credit report 
information according to the frequency of consumer disputes and 
determined errors. This type of ranking may be expected to render, 
concurrently, some categorization of corresponding data furnishers.
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2. CDIA Comment
    The CDIA expresses support for FTC's plan to continue testing a 
methodology for a prospective nationwide study (CDIA at 1), and it also 
gives comment on a number of related matters. For purposes of staff's 
response, we summarize CDIA's concerns as follows: (1) specific 
concerns and advice pertaining to the design of a nationwide survey, 
(2) concerns with the contractor's report on the completed pilot study 
in relation to the proposed follow-up pilot study, and (3) concerns 
that some of the activities of the study may fall outside the scope of 
the mandate given to the FTC by Section 319 of the FACT Act. FTC staff 
addresses each of these areas in turn.
    Regarding the design of a nationwide survey, CDIA (at 2-4) raises 
many matters, including the selection of sample participants and 
institutions that may be involved in helping to identify potential 
participants, appropriate sample size for a national survey, potential 
sample bias, and the need to ensure that the sample of credit reports 
utilized in a national survey have a distribution of credit scores 
representative of the national distribution. In connection with all of 
these matters, CDIA's overriding request appears to be (CDIA at 2) that 
the FTC present a national survey design for public comment. FTC staff 
has no disagreement with CDIA regarding these stated concerns but 
believes that a staff response would presently be premature. The design 
for a nationwide study depends in part on what the proposed follow-up 
pilot study reveals. More generally, staff affirms that a proposed 
design for a nationwide survey will be made publicly available.\17 \
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    \17\ Staff anticipates that upon completion of the follow-up 
pilot study, a subsequent design for a nationwide survey will be 
submitted for OMB clearance. As is also true of the present matter, 
the clearance process involves two Federal Register Notices which 
set forth the design elements of the study. Each notice provides 
opportunity for public scrutiny and comment.
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    Regarding the work-product contained in the contractor's report, 
CDIA objects to some of the ways in which data were presented, and it 
disagrees with certain views and recommendations of the contractor 
(CDIA at 4-6). Before responding to these matters, staff notes that in 
order to have a transparent study process in connection with Section 
319 of the FACT Act, the FTC made public the entirety of the 
contractor's report on the initial pilot study (appendix to the FTC's 
December 2006 Report to Congress). In the same report to Congress (at 
2-4), the FTC brought forward those salient features in the 
contractor's report that were used in proposing a follow-up pilot 
study. Overall, staff believes that CDIA raises two or three matters 
that relate to both the work-product of the contractor and the FTC's 
formulation of a follow-up pilot study; these are discussed below.\18\
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    \18\ The December 2006 Report (at 1) noted that the work-product 
and opinions of the contractor are not necessarily findings or 
opinions of the FTC. Staff sees no fruitful purpose to respond to 
matters in the contractor's report that were not used to formulate 
the follow-up study.
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    As described in section B(vi) above, when conducting the proposed 
follow-up pilot study, the FTC anticipates that the contractor will 
help participants to locate any material differences or discrepancies 
among their three credit reports and to check whether these differences 
indicate inaccuracies. In regard to this proposed study design element, 
CDIA (at 6-7) strongly objects to using a ``cross-file analysis * * * 
publishing score range differences * * *'' for the initial study or for 
the proposed follow-up pilot study. Staff agrees with CDIA that 
differences in credit scores across a consumer's credit reports 
(including very substantial differences) need not indicate errors. 
Given the voluntary basis on which information is reported to a CRA, 
(see note 12 above), there may be various explanations for differences 
in credit report information. Nonetheless, a score difference is 
relevant to the study if this score difference should be based on 
informational differences or discrepancies arising from some error in a 
consumer's credit files. (Staff anticipates that certain credit score 
ranges will be used to categorize the impact of determined errors; see 
discussion below.)
    A second matter raised by CDIA that pertains to both the work-
product of the contractor and the formulation of a

[[Page 5439]]

follow-up pilot study involves the meaning of the term material and 
score ranges used for assessing materiality. CDIA (at 5) notes that 
certain credit score ranges were used by the contractor in assessing 
potential materiality.\19\ For the follow-up pilot study, FTC staff 
anticipates that disputed information will likely be categorized 
incrementally in terms of 10 point movements in score changes derived 
from a re-scoring of frozen files.\20\
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    \19\ Based upon staff discussion with the contractor, the 
contractor viewed an alleged error as material if a re-scoring of 
the frozen file in regard to the challenged item yielded a change of 
approximately 30 points (deeming the later score range to be a 
commonly accepted estimate of normal variation in credit scores 
across a consumer's three credit reports). However, any consumer who 
wanted to dispute an item, regardless of anticipated impact, could 
do so and would be instructed on how to file. The contractor would 
summarize the results for all disputed items, as categorized by a 
re-scoring of frozen files to obtain the materiality of alleged 
errors. But the paucity of filed disputes that occurred in the 
initial pilot study rendered the procedures for assessing and 
reporting the materiality of disputed items as largely moot.
    \20\ We distinguish between disputed items and determined 
errors. The categorization of disputed items would start with items 
having an expected impact of 10 points or more, then 20 points, 30 
points, and so forth. The various outcomes of the dispute process 
would also be summarized in terms of these same categories, 
including any actual changes in credit scores that arise from 
determined errors (those alleged inaccuracies that the dispute 
process confirms as being errors). As noted above in connection with 
design element B(vii), actual changes in scores retrieved from CRAs 
could be the result of the addition of new items rather than 
corrected items, so that these actual score changes need not 
correctly convey the impact of an error in a credit report. Hence, 
we categorize outcomes by using credit score ranges that refer to a 
re-scoring of frozen files.
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    CDIA (at 5) also inquires how the study will address items that 
remain unresolved after the dispute process is complete; i.e., items 
for which a data furnisher maintains the information to be accurate but 
the consumer maintains it is not. Staff does not intend that the study 
would resolve such items and anticipates that the study will identify 
certain items (in terms of the categories of credit report information 
and their frequency) that remain unresolved. As noted in the FTC's 
December 2006 Report (at 7), knowing the results of the dispute process 
does not establish the accuracy of credit reports in an absolute sense. 
Yet, a study using the dispute process appears to be the only feasible 
way of performing a study of credit report accuracy, in view of the 
enormous difficulty and cost of attempting to ascertain the ultimate 
accuracy regarding alleged errors.
    CDIA also comments on the mandate given by Section 319 of the FACT 
Act and maintains that such matters as comparing scores across credit 
bureaus (as discussed above), attempting to ascertain why consumers do 
not dispute alleged inaccuracies, and engaging non-English speaking 
consumers in a review of their credit reports, all fall outside the 
scope of the Act (CDIA at 7). FTC staff disagrees. Staff believes that 
all of the design elements set forth regarding the follow-up pilot 
study (section B above) fall within the two-prong scope of the mandate: 
to study the accuracy and completeness of credit report information and 
to study methods for improving the accuracy and completeness of such 
information.
3. TransUnion Comment
    Beyond the support expressed for CDIA's comments, TransUnion's 
comment letter conveys critical concern and advice in four main areas: 
(1) Disappointment that the FTC has not defined the terms accuracy and 
completeness in the context of the present studies, (2) concern that 
the FTC's scope in executing the mandate of Section 319 of the FACT Act 
appears to be limited to the three nationwide credit bureaus (Equifax, 
Experian, and TransUnion), (3) advice that, since Fair Isaac has 
recently developed a subsidiary that acts as a consumer reporting 
agency, Fair Isaac should not play a part in any follow-up study, and 
(4) a request that any person who has disputed credit report 
information in the past be excluded from the follow-up study.
    In the above discussion of ACA's concerns, staff has explained why 
the terms ``accuracy'' and ``completeness'' do not require definitions 
in the context of these pilot studies; the same response serves as a 
reply to TransUnion's comment on this matter.
    Regarding TransUnion's question (at 2) about the scope of the study 
on the variety of consumer reporting agencies encompassed under section 
319 of the FACT Act, staff notes that the proposed pilot study does 
indeed involve credit reports and scores from Equifax, Experian, and 
TransUnion. We recognize there are many consumer reporting agencies, 
but credit reports from the three nationwide CRAs are the most widely 
used in making credit, insurance, and employment decisions. Staff has 
not foreclosed the possibility of recommending that additional consumer 
reporting agencies may be included in a broader survey. As noted above, 
any design for a nationwide study will, in due course, be made 
available for public comment.
    TransUnion also requests (at 2) that Fair Isaac not be part of the 
contracting team for any follow-up study. The background for 
TransUnion's request appears to be that Fair Isaac has recently 
developed a new credit score (an ``Expansion Score'') in regard to 
which a subsidiary of Fair Isaac acts as a consumer reporting agency. 
As described by the company,\21\ this score has been developed for 
credit grantors in connection with consumers who have insufficient 
credit histories to render the traditional FICO-based scores that are 
used by the nationwide CRAs.
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    \21\ Description obtained from Fair Isaac's Web site at 
www.fairisaac.com.
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    Staff has considered this matter and does not think TransUnion's 
stated concern would justify excluding Fair Isaac from the bidding 
process for a follow-up pilot study.\22\ In the initial study, all 
participants had credit histories that were evaluated by traditional 
FICO-based scores, and Fair Isaac's role was limited to using its 
expert knowledge of these scores in connection with a re-scoring of 
participants' frozen files for consumer alleged errors.\23\ In 
evaluating the proposals for the extended pilot from various 
contractors, staff will consider how susceptible a proposal may be to 
possible bias in the data collection process.
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    \22\ Presently, no determination has been made about a contract 
award. FTC staff anticipates that a contract will be let out for 
competitive bidding during the spring of 2007.
    \23\ See, 70 FR 24583 (May 10, 2005) on the design of the 
initial pilot study on this mater. The follow-up pilot study has the 
same design element (i.e., element B(vii), note 10.) Staff further 
notes that prospective participants are 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 (design element B(i)). Typically, such consumers 
have credit histories capable of evaluation by traditional credit 
bureau scores.
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    Finally, TransUnion (at 2) requests that anyone who has disputed 
credit report information in the past be excluded from the follow-up 
study, further adding that individuals who have already alleged an 
error at an earlier time should not be allowed to use the study as a 
means to recast their issues or complaints. Staff has several 
observations here. If it should be that some items may be ``re-
disputed'' (as TransUnion suggests), the outcome for such disputes 
would follow from whatever normal procedures may be employed. For 
example, if a CRA has a reasonable basis for deeming a dispute 
frivolous, it can advise the consumer so and decline to act further. 
Or, if a CRA can identify the dispute as being a ``re-dispute'' of an 
already considered matter, it can again advise the consumer 
accordingly. Such responses would be part of the outcome of the study. 
On the other hand, should a CRA not have a

[[Page 5440]]

readily available way of identifying ``re-disputed'' items, then 
neither would the contractor.
    More generally, staff sees no basis for restricting the study to 
the reports of consumers who have never disputed any item prior to the 
study. It is possible that the accuracy of credit reports may differ 
based on items that have, or have not been, disputed. In light of this, 
staff plans to include a question in the study about whether consumers 
have disputed any item in one of their credit reports at an earlier 
time, and if so, to briefly indicate when and what. But a currently 
alleged error need not be related to a prior dispute, and we do not see 
any justification for excluding all consumers who have disputed some 
item(s) in the past. Staff adds that an important element of both the 
initial and proposed pilot study is that any contractor must have the 
expertise to evaluate alleged errors and to assess whether a dispute 
would be material to creditworthiness. In this context, it is very 
unlikely that frivolous or immaterial disputes would go forward.

2. Estimated Hours Burden

    Consumer participation in the follow-up pilot study would involve 
an initial screening and any subsequent time spent by participants to 
understand, review, and if deemed necessary, to 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 a 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, the participant must 
submit a dispute form, identify the nature of the problem, present 
verification from the consumer's own records to the extent possible, 
and perhaps submit further 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).\24\ 
Total consumer burden hours are thus approximately 750 hours (derived 
as 133 screening hours plus 600 participant hours, further rounding 
upwards to the nearest 50 hours).
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    \24\ This estimate is given for the purpose of calculating 
burden under the PRA. Information contained in the contractor's 
report 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. E7-1837 Filed 2-5-07; 8:45 am]
BILLING CODE 6750-01-P