In June of 2009, the FACT Act Furnisher Rules were passed by federal banking agencies and the Federal Trade Commission. The rules regulate the accuracy and integrity of consumer information which furnishers of such information provide to consumer reporting agencies (the credit bureaus).
Companies that “furnish” information to the credit bureaus such as a bank, credit card issuer, lender, debt collector or loan servicer must investigate disputes by consumers under the Direct Dispute Rule.
Direct Dispute Rule
The Direct Dispute Rule gives consumers the power to dispute directly with the furnishers of the information in their credit reports rather than disputing only with the credit bureaus. Formerly, the furnisher of information to the credit bureaus were only required to respond directly to the credit bureaus after the consumer submitted a credit dispute.
Under the Direct Dispute Rule, furnishers of information must respond to disputes submitted to them by consumers. An investigation must be completed within 30 days. The dispute must be verified as accurate, corrected or deleted from the credit reports. The rule also forces the furnisher of information to review all documentation and proof the consumer submits along with their dispute.
Disputes should be submitted directly to the address the furnisher has provided in the consumer’s credit file. If the furnisher has not provided an address, the consumer can submit the dispute to any address of the furnisher.
The furnisher will have 30 days to conduct an investigation, just as the credit bureaus. The credit bureaus and the furnisher will not be able to solely rely upon the E-Oscar method of handling disputes. The E-Oscar method is where most credit disputes are reduced to a numerical code through an automated electronic dispute system. With the E-Oscar automated system a consumer may submit supporting documentation as proof but that proof is never reviewed or considered.
Accuracy and Integrity Rule
The accuracy of the information the furnisher provides to the credit bureau must reflect the terms of liability of the account, the consumer’s performance regarding the account and whether or not information identifies the appropriate consumer. The rule encourages creditors to supply correct and accurate information of a consumer’s borrowing history to the credit bureaus. Essentially that means correct amounts, dates and payment history.
The integrity of the information provided by the furnisher must be substantiated by the furnisher’s records and furnished in a way which minimizes the likelihood the information could be incorrectly reflected in a consumer’s credit report.
What this law really means to the consumer
Previously consumers could dispute information directly with the creditors, however the creditor or furnisher of information was under no requirement to respond. Under the Direct Dispute Rule original creditors must respond within 30 days just like the credit bureaus. If the furnisher has not verified or corrected the information within 30 days, the item must be deleted. Direct Disputes should always be sent to the original credit via certified mail, return receipt. This is your proof they are in receipt of the direct dispute.
There may be a chance an original creditor has not maintained your records after 18 months of a charge-off, inactivity or account closure. This can work to your advantage as the original creditor may not be able to back up their negative reporting. Some original creditors may not have any records at all as accounts age. During recent years there have been numerous bank mergers and consolidations, often consumer records do not get transferred in their entirety.
Here is what the furnishers of information are required to do:
- Conduct a reasonable investigation
- Review all relevant information provided by the consumer
- Report results to the consumer, generally within 30 days
- Notify each CRA to which you provided inaccurate information if the investigation finds the information was inaccurate. Furnisher Rule 660.4(e)