Wednesday, Jun. 27, 2007, 08:00 PM UPDATED 11:59 AMBy Nick Zulovich
HANOVER, Md. — Anne Fortney, a partner with the Hudson Cook law firm recently testified before the House Committee on Financial Services about furnishers' ability to maintain and report accurate information to credit reporting agencies. Basically, furnishers are any companies that report consumer information to credit bureaus, including auto lenders.
She recommended that Congress wait before the FACT Act is fully implemented to enact any new credit reporting legislation. Fortney based her opinion on her more than 30 years of service in the financial services field. She is currently a partner in the Washington, D.C., office of Hudson Cook law firm.
She also served as associate director for credit practices at the FTC, as in-house counsel at a consumer credit card issuer and as a practitioner that counsels clients on compliance with the Fair Credit Reporting Act.
In her opening statement before Congress, Fortney told the committee, "I commend you for holding this hearing on the accuracy of credit report data and the effectiveness of the consumer dispute process under FCRA.
"Through the leadership of this committee, the FCRA was amended by the Fair and Accurate Credit Transactions Act of 2003. The FACT Act changed the FCRA to improve, in pertinent part, the accuracy and integrity of the data furnished to consumer reporting agencies and the resolution of consumer disputes regarding this data."
Fortney pointed out that Section 312 of the FACT Act requires that federal agencies prescribe guidelines and regulations for furnishers to follow to increase the accuracy and integrity of data reported to consumer reporting agencies. According to Fortney, agencies should keep the following tips in mind when creating these guidelines:
—Identify patterns, practices and specific forms of activity that can compromise the accuracy and integrity of information.
—Review the methods used to furnish information.
—Determine if furnishers maintain and enforce policies to furnish accurate information.
—Examine policies and procedures used by furnishers to conduct investigations and correct inaccurate information.
She pointed out that billions of items of tradeline information are furnished to consumer reporting agencies each month, meaning files on more than 200 million consumers need to be created or maintained, with 1.5 billion consumer reports issued each year.
"Creditors benefit because readily available credit information enables them to offer more credit, incur less default risk and obtain greater lending capital through the bundling and selling of consumer credit obligations in the secondary market," she explained.
"Consumers benefit because they have easy access to credit and pay less for credit extended. Our consumer reporting system is unequaled in the world in terms of scope and benefits," Fortney highlighted.
This being said, she stressed to the committee that, "Congress has never imposed, and should not impose, a perfect information obligation upon furnishers of credit report information or upon the consumer reporting agencies. Given the speed and volume of consumer reporting transactions, mistakes will occur. The challenge is to minimize avoidable errors, quickly resolve inevitable mistakes and still encourage maximum participation in a voluntary system."
She went on to explain that based on her experience, furnishers invest quite a bit into ensuring the accuracy of the data they report to agencies. They also work hard to resolve consumer disputes about the accuracy of information.
"Furnishers have financial and reputation interests at stake when they report information about their customers and when they investigate consumer disputes," Fortney told the committee. "If furnishers fail to comply with their legal obligations, they will have dissatisfied customers, lose future business opportunities in a competitive marketplace, maintain inaccurate internal records and may face litigation and regulatory enforcement actions.
Moreover, she pointed out," Customer disputes may also alert furnishers to actual or potential identify theft or other fraud, and the resolution of those disputes may prevent additional losses or facilitate loss recovery."
Even though the new FACT Act has not been fully implemented, Fortney offered a list of some of the procedures furnishers already have in place to protect consumer information.
—Written policies governing reporting requirements and procedures.
—Written policies regarding investigation of disputes, in some cases with step-by-step instruction.
—Special policies and procedures when identity theft is alleged.
—Escalated reviews in more difficult cases.
"Through the years, furnishers have gained experience and information so that they can best assess the nature and complexity of the dispute and properly respond to disputes in the most efficient and effective manner," she explained.
"Although some have advocated more stringent sanctions for failures to meet furnishers' obligations, additional penalties would not incentivize furnishers to enhance compliance efforts," she said.
"Instead, the more likely result of imposing penalties would be that furnishers would delete accurate tradeline information or settle frivolous litigation. Neither result would enhance the overall system for consumers or creditors; in fact, doing so would undermine the accuracy and integrity of the information upon which creditors rely," Fortney pointed out.
Carlaw Gains New State Editor
In other recent news, Hudson Cook announced that Kenneth Seidberg, with Seidberg Law Offices has been appointed Arizona state editor for the CounselorLibrary.com publication, Carlaw.
In this role, he will monitor court decisions and pending legislation at the state level and provide the information to CounselorLibrary.com.
"Kenneth's firm is noted for its collection practice, and we think that our Carlaw subscribers will be well served to have their lawyers involved in keeping tabs on Arizona legal development," explained Tom Hudson, chairman of Hudson Cook.
According to Hudson Cook, Carlaw provides a "multi-faceted legal report for the auto compliance industry."