CUNA Regulatory Comment Call


April 15, 2004

Proposed Model Form on Furnishing Negative Information to Credit Bureaus
(Not a Major Rule)

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.coop and to Assistant General Counsel Jeff Bloch at jbloch@cuna.coop; or mail them to Mary and Jeff in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6732, if you would like a copy of the proposed rule and model form, or you may access it on the Internet at the following address: http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040407/attachment.pdf.

BACKGROUND

President Bush this past December signed into law the FACT Act that permanently extends the federal preemptions for credit reporting under the FCRA. The new law also creates a number of important new consumer protections designed to help prevent identity theft and assist consumers who become victims of this rapidly growing crime. It also contains new restrictions on information sharing and creates a new federal commission that will coordinate financial education efforts at the national, state, and local levels.

The FACT Act will be implemented through a number of new rules that will be issued this year. Access below for a special issue of RegWatch that describes the significant provisions of the FACT Act: http://www.cuna.org/reg_advocacy/member/regwatch/regwatch.html.

DESCRIPTION OF THE PROPOSED MODEL FORM AND LANGUAGE

The FACT Act requires that financial institutions provide "clear and conspicuous" written notice when negative information is provided to nationwide credit bureaus. As part of this requirement, the Fed has issued a proposed model form and language that financial institutions may use to comply with this requirement. The final version of the form will be issued by June 4, 2004, although use of this form and language will not be required.

Financial institutions must provide this notice prior to, or no later than 30 days after, furnishing the negative information to the credit bureau. "Negative information" means information concerning the consumer’s delinquencies, late payments, insolvency, or any form of default.

After providing the notice, the institution may submit additional negative information to the credit bureau with regard to the same transaction, credit extension, account, or consumer without providing additional notice. Providing the notice prior to furnishing the negative information does not require the financial institution to submit the information to the credit bureau.

The notice may be provided on or with a notice of default, billing statement, or any other information provided to the consumer, as long as it is "clear and conspicuous." However, the notice may not be provided with the initial disclosures that are required under the Truth in Lending Act. Financial institutions will not be liable for failure to comply with these notice requirements if, at the time of failure, the institution maintained reasonable policies and procedures to comply with the requirements, or the institution reasonably believed it was prohibited by law from contacting the consumer.

Here is the model language of the notice that financial institutions may use:

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.

QUESTIONS TO CONSIDER REGARDING THE FED’S MODEL FORM ON PROVIDING NEGATIVE INFORMATION TO CREDIT BUREAUS

Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com