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Capital One Financial Corporation

1680 Capital One Drive

McLean, VA 22102

February 11, 2008

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> **Re: Interagency Notice of Proposed Rulemaking: Procedures to
> Enhance**
>
> **the Accuracy and Integrity of Information Furnished to Consumer**
>
> **Reporting Agencies under Section 312 of the Fair and Accurate
> Credit**
>
> **Transactions Act**

Dear Sir or Madam:

Capital One Financial Corporation ("Capital One") is pleased to submit
comments on the federal regulatory agencies' (the "Agencies")
Interagency Notice of Proposed Rulemaking (the "Proposed Rule")[^1] on
the accuracy and integrity of information furnished to consumer
reporting agencies and reinvestigation of consumer disputes under
Section 312 of the Fair and Accurate Credit Transactions Act of 2003
("FACT Act").

Capital One Financial Corporation is a financial holding company whose
principal subsidiaries, Capital One, N.A., Capital One Bank, and Capital
One Auto Finance, Inc., offer a broad spectrum of financial products and
services to consumers, small businesses, and commercial clients. As of
December 31, 2007, Capital One's subsidiaries collectively had \$83
billion in deposits and \$151.4 billion in managed loans outstanding,
and operated more than 740 retail bank branches. Capital One is a major
provider of credit cards, installment loans, mortgage loans and auto
loans. Its subsidiaries regularly and in the ordinary course of business
furnish information to the three major consumer reporting agencies
("CRAs").

Capital One commends the Agencies for the careful work they have devoted
to this important rule. The proposed provisions are generally well
aligned with the needs of the credit reporting function as well as with
the technical capabilities of the industry's current processes.

**1. Accuracy and Integrity**

As a preliminary matter, Capital One notes that there are substantial
practical reasons for most participants in the credit reporting system
to ensure that the information they furnish is correct. First, the
information that financial institutions furnish to the CRAs is the same
information that the institutions themselves use to conduct business and
manage their customers' accounts. Financial institutions must collect,
store, and retrieve data accurately if their businesses are to operate
successfully. Second, incorrect consumer report information commonly
generates customer complaints, which financial institutions must deal
with as a business matter regardless of regulatory requirements. For
these reasons, financial institutions are aligned with CRAs and the
Agencies in their interest in ensuring the accuracy and integrity of
that information. Capital One believes that the Agencies' proposed
concept of "accuracy," and the Agencies' proposed Guidelines Definition
Approach to the concept of "integrity," are sound as matter of concept
and in most details.

*Capital One encourages adoption of the "Guidelines Definition
Approach."*

The Agencies have proposed two alternative approaches to defining the
terms "accuracy" and "integrity," which they have termed the Regulatory
Definition Approach ("Regulatory Approach") and Guidelines Definitions
Approach ("Guidelines Approach"). As the Agencies point out, the
distinction between the approaches is in the definition of "integrity."
In the Regulatory Approach, the Agencies define "integrity" such that
furnishers' data would lack the required integrity if it omitted "any
term ... the absence of which can reasonably be expected to contribute
to an incorrect evaluation by a user of a consumer report of a
consumer's creditworthiness."[^2] In other words, under the Regulatory
Approach, "integrity" is essentially synonymous with "completeness,"

notwithstanding that the Agencies have avoided using that term. In
contrast, under the Guidelines Approach, data has "integrity" so long as
it appropriately identifies the consumer to whom it applies, includes
the date to which it pertains and is otherwise accurate and furnished in
a form designed to minimize the likelihood that it may be erroneously
displayed on a consumer report.[^3]

Capital One urges adoption of the Guidelines Approach. The Guidelines
definition of "integrity" correctly identifies features that information
should have, even if the information is otherwise accurate, in order to
be useful in credit reporting. In contrast, the Regulatory Approach
would be contrary to legislative history, would alter fundamentally the
voluntary nature of reporting under the FCRA, and would create an
unworkable and ambiguous standard.

The Regulatory Approach ignores Congress's deliberate selection of the
word "integrity" and effectively substitutes for it the word
"completeness." FACT Act § 312 requires the Agencies to issue
regulations regarding the *accuracy and integrity* of information
furnished to the credit bureaus, not *accuracy and completeness.* The
formulation "accuracy and completeness" was offered in an alternative
version of Section 312 by Senators Shelby and Sarbanes[^4] but was not
accepted by Congress. Representative Oxley, who had moved the
legislation through the House Financial Services Committee, explained:
"'Accuracy and integrity' was selected \[by Congress\] as the relevant
standard, rather than 'accuracy and completeness' as used in Sections
313 and 319, to focus on the quality of the information furnished rather
than the completeness of the information furnished."[^5] The Regulatory
Approach is inconsistent with the legislative record, which instead
supports the Guidelines Approach.[^6]

The Regulatory Approach makes a sweeping change to the structure of the
FCRA by substantially impairing the voluntary nature of furnishing. A
guiding principle of the FCRA, even as amended by the FACT Act, has been
that furnishing data is voluntary, with the important requirement that
an entity that elects to furnish must furnish accurate information, and
must include a very few specifically required pieces of information
(*e.g*. notice of dispute, voluntary closure, date of first
delinquency[^7]). The Regulatory Approach turns that rule on its head by
creating an all-or-nothing regime for data furnishers -- without clearly
prescribing what that "all" consists of. The result would be a
substantial disincentive to reporting anything. For example, some credit
grantors may have systems that are not well suited to reporting a data
universe that the Agencies would regard as "complete."

Not only does the Regulatory Approach fundamentally change the current
structure of the FCRA without legislative authority, it does so without
introducing a workable standard in its place. To be workable, the
Regulatory Approach would need to state a clear and practical standard
so that furnishers and consumers could understand what data fields must
be furnished. Instead, the Regulatory Approach mandates furnishing any
and all data the absence of which could reasonably contribute to an
incorrect evaluation by a user. Users of consumer reports are of diverse
types, including financial institutions, landlords, employers, and
myriad consumer services businesses, and they may evaluate consumer
reports differently. Some users interpret consumer reports through
complex automated models, while others employ more subjective judgmental
decisioning. Even within the set of users who employ automated models,
there are a number of competing models in use, each claiming to be more
predictive than the others, based on proprietary methodologies that may
weight different variables differently or not at all. The Regulatory
Approach provides no guidance, for example, in situations in which some
models use a variable that others do not -- even assuming that
furnishers know what those variables are. Defining the parameters of the
information that must be furnished by reference to what the various
users of a consumer report might think of different data elements is too
ambiguous to be workable.

*Definition of Accuracy*

Capital One generally supports the proposed definition of accuracy. We
suggest one clarification. Under the proposed definition, all
information furnished must reflect "without error the terms of and
liability for the account or other relationship and the consumer's
performance or other conduct with respect to the account or other
relationship."[^8] We agree that furnishers should be held to such a
standard for information

the accuracy of which is within their control, such as account
performance data. However, furnishers rely on their customers for
certain identifying information that may establish "liability for the
account." Sometimes applicants provide inaccurate information, such as a
misspelled name or interposed numerals in an address, and

furnishers should not be held strictly accountable for such errors. The
Agencies should clarify the definition of accuracy so that it does not
apply to information that was erroneous when provided to the furnisher
by the customer and was furnished in that same state to a CRA.

*Updating Information*

The Agencies specifically ask whether the definition of accuracy should
include an obligation to update information. We submit that the
objective of updating should not be addressed through the definition of
"accuracy." The current requirement under the FCRA is that a furnisher
must correct and update information when the furnisher determines that
the information as furnished was incomplete or inaccurate.[^9] So long
as the information was correct as of the date it was furnished to the
CRA, it is not "inaccurate" even if it does not reflect the current
state of the consumer's account. Capital One firmly believes that
regular and frequent reporting enhances the reliability of the consumer
reporting system, and we support a rule that encourages such practices.
For example, Capital One supports inclusion in the mandatory policies
and procedures of an objective to update information as necessary to
reflect the current status of the customer's account. Regulators could
then examine an institution's performance under that objective for its
sufficiency. However, a failure to update to current status should not
per se be deemed to result in an "inaccuracy."

*The rule should distinguish "furnish" from "report," and respect that
distinction throughout.*

The Proposed Rule should distinguish more systematically between the
terms "furnish" and "report." The FACT Act directs the Agencies to
establish and maintain guidelines regarding accuracy and integrity for
use by entities that "furnish" to consumer reporting agencies and to
prescribe related regulations.[^10] And the Proposed Rule generally
reflects the important distinction between the act of providing
information to a CRA ("furnishing"), an act which over which furnishers
have control; and the display of that information by the CRA
("reporting"), an act over which furnishers have no control. That
distinction is consistent with existing language in the FCRA. However,
the actual language used in the Proposed Rule does not always preserve
that distinction, and its failure to do so changes the substantive
meaning of the rule. For example, in the Regulatory Approach, the
Proposed Rule would require that a furnisher ensure that the information
it furnishes "\[a\]ccurately *reports* the terms of those accounts" and
"\[a\]ccurately *reports* the consumer's performance."[^11] Likewise, in
the Guidelines Approach, the Proposed Rule would require the information
that is furnished to be "\[*r\]eported* with appropriate identifying
information," "\[*r\]eported* in a standardized and clearly
understandable form and manner," and "\[*r\]eported* with a date
specifying the time period for which the information pertains."[^12]
These provisions were undoubtedly intended to address the accuracy and
integrity of the information provided to consumer reporting agencies,
and yet could be misconstrued to impose obligations on furnishers to
ensure that information they furnish is displayed or reported accurately
by the consumer reporting agencies. Thorough adherence to the statutory
language would avoid such a misconstruction.

*Requirement that policies and procedures be written*

Capital One does not believe that the requirement that policies and
procedures be written creates undue burden*.*

*Record Retention*

Capital One agrees that a furnisher's policies and procedures should
provide that the furnisher maintain its own records for a reasonable
period of time in order to substantiate accuracy of information subject
to dispute. Capital One does not recommend that the rule identify a
specific time period; instead, we encourage retaining a flexible
approach under which furnishers develop policies based on their own
particular information technology architecture, their own data retention
standards, and their own assessment of the information required to
support reasonable investigations of consumer accuracy disputes. If the
Agencies do create a specific record retention period, Capital One
cautions against requiring the data to be retained in its original
format, which can be prohibitively expensive; retaining information in
an archived system should be sufficient.

*Establishing and implementing appropriate internal controls regarding
accuracy and integrity.*

Capital One endorses the importance of internal controls, random
sampling, and regular reviews of information provided to consumer
reporting agencies, and agrees that they should be a component of
furnishers' policies and procedures.[^13] Capital One also agrees that
an important component of maintaining data integrity is that data to be
provided to the consumer reporting agencies "in a form and manner
designed to minimize the likelihood that the information, although
accurate, may be erroneously reflected in the

consumer report."[^14] In furtherance of this objective, Capital One
urges the agencies to confirm that furnishers have a permissible purpose
to obtain a consumer report on a customer or former customer for the
limited purpose of ensuring that the furnished information is reporting
correctly. The most effective way to validate the accuracy of a
furnisher's system is to obtain tradelines, sometimes referred to as a
"bullseyes," on a sample of accounts and compare the reported tradelines
with the furnisher's own system of record. Of course, to obtain this
information, a furnisher must certify to the CRA that it has a
permissible purpose. Unfortunately, some consumer advocates and
litigants have argued that a furnisher has no permissible purpose to
obtain a consumer report on a zero-balance closed account under any
circumstance. Since a furnisher's accuracy obligations continue even
with respect to zero-balance closed accounts, such an interpretation is
an obstacle to implementing appropriate internal controls. The Agencies
should take this opportunity to confirm that there is a permissible
purpose to request consumer reports for the limited purpose of verifying
accuracy.

**2. Disputes**

As we described in our comments on the Agencies' Advance Notice of
Proposed Rulemaking, Capital One voluntarily investigates most direct
consumer disputes, and believes that consumers should be able to dispute
the accuracy of credit report information directly with the data
furnisher in nearly every case in which the dispute relates to
information in the report about a relationship with that furnisher.
However, to the extent that the rule limits furnishers from exercising
discretion over the types of disputes they must address, we provide the
following comments.

*Definition of direct disputes*

Capital One urges a clarification to the definition of "direct dispute."
An inquiry should be a "direct dispute" only if it challenges the
accuracy of information furnished by the entity to whom the dispute is
directed. We believe that this was the intention of the Agencies.
However, neither the definition, the general rule, the exceptions, nor
the provision on frivolous or irrelevant disputes makes this point
explicit.[^15] We suggest amending the definition as follows: "*Direct
Dispute* means a dispute submitted directly to a furnisher by a consumer
concerning the accuracy of any information *furnished by the furnisher*
and contained in a consumer report relating the consumer."

*Exceptions*

Capital One agrees with the several instances identified by the Agencies
in which the burdens associated with furnishers' dispute obligations
outweigh likely benefits. Capital One urges the Agencies to add one
additional exception and to clarify another.

In situations where a consumer disputes information that appears to be
in error in one CRA's consumer report, but is reflected accurately at
one or more other CRA, a furnisher should be allowed to direct the
consumer to first dispute the information with the CRA that has reported
the apparent error. Such a fact pattern suggests that the CRA
misinterpreted or miscoded the information, rather than that incorrect
information was furnished by the furnisher.

The Agencies have recognized an important exception under which
furnishers need not respond to disputes submitted by or on a form
prepared by a credit repair organization.[^16] This is an important
exception because financial institutions receive an overwhelming number
of such form letters, often asserting meritless disputes. Unfortunately,
it is rarely possible to determine with certainty that the source of
these letters is a credit repair organization. For that reason, Capital
One urges the Agencies to revise the exception so that it applies when
the furnisher "reasonably believes" that the dispute was prepared by or
submitted on a form prepared by a credit repair organization.

\* \* \*

Capital One appreciates the opportunity to comment on the Agencies'
Notice of Proposed Rulemaking under FACT Act Section 312. If you have
any questions about this matter and our comments, please call me at
(703) 720-2255.

Sincerely,

![](media/image2.wmf){width="2.75in" height="0.3784722222222222in"}

Christopher T. Curtis

Associate General Counsel

Policy Affairs Group

[^1]: 72 Fed. Reg. 70944 (Dec. 13, 2007).

[^2]: Proposed Rule, §\_\_\_. 41(b).

[^3]: Appendix E (Appendix A to FTC's Proposed Rule), Section I .B.
    (Guidelines Approach) 2

[^4]: 149 Cong. Rec. S13912 (Nov. 4, 2003).

[^5]: 149 Cong. Rec. E2512, E2516 (Nov. 21, 2003).

[^6]: The Agencies correctly note that the Congressional Record
    statements of House Financial Services Committee Chairman Oxley and
    Senate Banking Committee Ranking Minority Member Sarbanes offer
    conflicting interpretations of "integrity" -- with Rep. Oxley's
    comments being consistent with the Agencies' Guidelines Appraoch and
    Sen. Sarbanes' comments, supporting the concept of "completeness"
    (though he, like the Agencies, avoided use of that word), being
    consistent with the Regulatory Approach -- and the Agencies suggest
    that those legislator comments are of equal weight and hence support
    the Agencies' proposal of alternative definitions. 72 Fed. Reg. at
    70949-50. But those statements are *not* of equal weight. Rep. Oxley
    had moved the legislation through the committee of which he was the
    chairman *in the form in which it was enacted,* and his remarks
    emphasize the contrast between the language that was enacted and the
    "completeness" language that Congress did *not* adopt. Sen.
    Sarbanes, on the other hand, had been a sponsor of that very
    "completeness" language that Congress had passed over in favor of
    "integrity," as explained by Chairman Oxley. Sen. Sarbanes' attempt,
    in his Congressional Record statement, to read into the term
    "integrity" a meaning indistinguishable from his unsuccessful term
    "completeness" does not have the same weight as Chairman Oxley's
    explanation of the language that Congress actually adopted.

[^7]: FCRA § 623(a)(3), (4) & (5).

[^8]: Proposed Rule, § \_\_.41(a).

[^9]: FCRA § 623(a)(2).

[^10]: FCRA § 623(e)(1)(A) & (B).

[^11]: Appendix E, Section I.B. (Regulatory) 1(b) & (c) (emphasis
    added).

[^12]: Appendix E, Section I.B. (Guidelines) 2(i)(A), (B), & (C)
    (emphasis added).

[^13]: Appendix E, Section IV. D & M.

[^14]: Appendix E, Section I. B. 5. (Regulatory Approach), Section I. B.
    2. (i) (Guidelines Approach).

[^15]: See Proposed Rule §§ \_\_. 41(e), \_\_ 43(a), (b) & (e).

[^16]: Proposed Rule § \_\_\_. 46(b)(2).