[Federal Register Volume 69, Number 202 (Wednesday, October 20, 2004)]
[Notices]
[Pages 61675-61677]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-23453]


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FEDERAL TRADE COMMISSION


Notice of a Pilot Study to Aid Federal Trade Commission Staff in 
Conducting a Study of the Accuracy and Completeness of Consumer 
Reports, Pursuant to Section 319 of the Fair and Accurate Credit 
Transactions Act of 2003

AGENCY: Federal Trade Commission.

ACTION: Notice of pilot study and request for comment.

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SUMMARY: Pursuant to section 319 of the Fair and Accurate Credit 
Transactions Act of 2003 (``the Act'' or ``FACT Act''), the Federal 
Trade Commission (the ``Commission'' or ``FTC'') is evaluating ways to 
study the accuracy and completeness of consumer reports. The purpose of 
the current pilot study is to evaluate the feasibility of a methodology 
that involves direct review by consumers of the information reported in 
their consumer reports. Due to the small size of the study group, 
statistical conclusions will not be drawn from this pilot study. 
Comments will be considered before the FTC submits a request for Office 
of Management and Budget (``OMB'') review under the Paperwork Reduction 
Act.

DATES: Public comments must be received on or before December 20, 2004.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to the ``Accuracy Pilot Study: Paperwork 
Comment'' 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 to the following 
address: Federal Trade Commission/Office of the Secretary, Room H-159 
(Annex Y), 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments 
containing confidential material must be filed in paper (rather than 
electronic) 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, because U.S. postal mail in the Washington area and at the 
Commission is subject to delay due to heightened security precautions. 
Comments filed in electronic form (except comments containing any 
confidential material) should be sent to the following e-mail box: 
<a href="/cdn-cgi/l/email-protection#96d7f5f5e3e4f7f5efc6fffaf9e2c5e2e3f2efd6f0e2f5b8f1f9e0"><span class="__cf_email__" data-cfemail="36775555434457554f665f5a5942654243524f7650425518515940">[email protected]</span></a>.
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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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    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 individuals 
from public comments it receives before placing those comments on the 
FTC Web site. More information, including routine uses permitted by the

[[Page 61676]]

Privacy Act, may be found in the FTC's privacy policy, at http://
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www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Peter Vander Nat, Economist, (202) 
326-3518, Federal Trade Commission, Bureau of Economics, 601 New Jersey 
Avenue, NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: The Fair and Accurate Credit Transactions 
Act of 2003, Pub. L. 108-159 (2003), among other purposes, amends the 
Fair Credit Reporting Act (``FCRA'') to enhance the accuracy of 
consumer reports. The FACT Act requires the FTC to conduct a number of 
studies on consumer reporting and related issues.
    Section 319 of the FACT Act 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. The Act requires the Commission to issue a series of 
biennial reports to Congress over a period of eleven years. The first 
report is due in December 2004.
    As the first step in conducting the accuracy and completeness 
study, the FTC is conducting a pilot study which will evaluate the 
feasibility of a methodology that directly involves consumer review of 
the information contained in their credit reports. The pilot study does 
not rely on the selection of a nationally representative sample of 
consumers, and statistical conclusions will not be drawn from the pilot 
study. The FTC has designated a contractor with high-level expertise in 
credit reporting and related issues, subject to OMB clearance for the 
study under the Paperwork Reduction Act. The pilot study will involve a 
small group of consumers who give the contractor permission to review 
their credit reports. The contractor will help the consumers to 
understand their reports and to discern inaccuracies or incompleteness 
in them.
    The FTC invites comments on: (1) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, which includes the duties provided by the FACT Act, and 
whether the information will have practical utility; (2) the accuracy 
of the agency's estimate of the burden of the proposed collection of 
information, including the validity of the methodology and assumptions 
used; (3) ways to enhance the quality, utility, and clarity of the 
information to be collected; and (4) ways to minimize the burden of the 
collection of information on those who are to respond, including 
through the use of appropriate automated, electronic, mechanical, or 
other technological collection techniques or other forms of information 
technology, e.g., permitting electronic submission of responses. The 
FTC will submit the proposed information collection requirements to OMB 
for review, as required by the Paperwork Reduction Act, 44 U.S.C. 3501-
3520.

Description of the Collection of Information and Proposed Use:

    The design elements of the study are the following:
    1. The study will consist of approximately 35 consumers having a 
diversity of credit scores covering at least three broad categories: 
poor, fair, and good.\2\ The study group will 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 study group will be constructed by using list-assisted 
random digit telephone numbers with associated addresses. The FTC will 
send an official letter from the FTC regarding the nature and purpose 
of the pilot study to potential study participants. The study 
contractor then will screen consumers through telephone interviews. As 
various consumers give consent to participate (and thereby give the 
contractor permission to know their credit scores), if the respective 
categories of credit scores have an unequal distribution of consumers, 
then an array will be chosen to favor consumers with the relatively 
lower credit scores.
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    \2\ A credit score is a numerical summary of the information in 
a credit report and is designed to be predictive of the risk of 
default. Credit scores are created by proprietary formulas that 
render the following general result: the higher the credit score, 
the lower the risk of default. The designated contractor for the 
pilot study plans to use the ``FICO'' credit score, which is a 
commonly used score in credit reporting that is developed by the 
Fair Isaac Corporation.
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    2. The contractor will help the participants obtain their credit 
reports from the three national repositories (``credit bureaus''): 
Equifax, Experian, and Trans Union.\3\ Each study participant will 
request his or her three credit reports on the same day; although 
different participants will generally request their reports on 
different days.
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    \3\ Participants will use the Web site http://www.myfico.com to 
request credit reports. For participants who do not have Internet 
access, the contractor will provide it.
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    3. The contractor will help the participants review their credit 
reports by (a) resolving common misunderstandings that they may have 
about the information in their reports (this will involve educating the 
participant wherever appropriate), (b) helping to identify errors or 
potential errors, and (c) helping to locate any material differences or 
discrepancies among their three reports, and checking whether these 
differences indicate inaccuracies.
    4. The contractor will facilitate a participant's contact with the 
credit bureaus and with the furnishers of information to help resolve 
items on the credit report the participant views as inaccurate. After 
the completion of the review, the contractor will determine whether the 
credit report information has changed, and whether any such change on 
the credit report led to a change in the participant's credit score.
    5. To the extent necessary, the contractor will guide participants 
through the FCRA dispute process (by law, this process is limited to 30 
days, but may be extended to 45 days if the consumer submits relevant 
information during the 30-day period). Specifically, participants who 
have issues that could not be resolved informally will use the dispute 
process provided by the FCRA. At the conclusion of this process, the 
contractor will ascertain whether the credit report information has 
changed, and whether any such change led to a change in the credit 
score.
    The most important information to be obtained from the study is an 
assessment of the degree of difficulty with which each of the above 
tasks was performed by the participants, including the average amount 
of time needed for the respective tasks. The contractor also will 
provide an opinion on the feasibility of a national survey of credit 
reports using a methodology similar to that of the pilot study.

Estimated Hours of Burden

    Consumer participation involves the initial screening and any 
subsequent time spent to understand, to review, and if deemed 
necessary, to dispute information in credit reports. The FTC staff 
estimates that up to 225 consumers may need to be screened through 
telephone interviews and that each screening interview may last up to 
10 minutes, resulting in approximately 38 hours (225 contacts 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

[[Page 61677]]

disputed formally, the participant must submit a dispute form, identify 
the nature of the problem, present verification from the participant's 
own records to the extent possible, and, upon furnisher response, 
perhaps submit follow-up information. All participants will have expert 
assistance available to them, and staff estimates that, on average, 
approximately 5 hours would be spent per participant, resulting in a 
total of 175 hours (5 hours x 35 participants).\4\ Total burden hours 
are thus in a neighborhood of 200 hours (up to 38 hours for screening 
plus approximately 175 hours for study participants, then rounded to 
the nearest 50 hours).
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    \4\ From testimony before Congress by the Consumer Date Industry 
Association (see Statement of Stuart K. Pratt, CDIA, Before the 
Committee on Banking, Housing and Urban Affairs of the United States 
Senate, July 9, 2003), there were approximately 16 million consumer-
requested credit reports across the three major credit bureaus for 
year 2003. Roughly 50% of these reports did not lead to any further 
response from the consumer (such as a call to, or dispute with, the 
credit bureaus). Regarding the remaining reports, about half of 
these (i.e., about 4 million reports) involved questions or 
clarifications; the other half (roughly another 4 million reports) 
involved some type of dispute. These data, although approximate, can 
be used to help create an estimate of the average time spent by 
participants in reviewing their credit reports.
    The following estimates are for the purpose of calculating 
burden under the Paperwork Reduction Act. The estimates are 
conservative and likely overestimate the amount of time that will be 
spent by study participants. For reports that do not require the 
participants to pose any questions to a credit bureau about their 
report (estimated to be 50% of reports), staff estimates the 
participants's time spent to be an hour or less. For reports that 
involve questions to a credit bureau but not a formal dispute 
(estimated to be 25% of reports), staff estimates the participant's 
time spent to be 2 to 3 hours. For reports that involve a formal 
dispute (estimated here to be 25% of consumer-requested reports), 
there may be significant differences for time spent by the 
participants, and this variation is itself one element to be 
discerned by the pilot study. Staff believes that, as a preliminary 
estimate, a formal dispute would not involve more than 15 hours of 
the participant's time, particularly in light of the fact that the 
participants will have expert assistance available to them, 
including guidance through the FCRA dispute process. Overall, the 
staff has calculated the average time per participant by using the 
weighted average over the three categories of reports: (.50 x 1 
hour) + (.25 x 3 hours) + (.25 x 15 hours) = 5 hours.
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Estimated Cost Burden

    Participation by the consumer is voluntary. All participants will 
benefit by receiving assistance from the contractor in reviewing their 
credit reports, and identifying and resolving any errors. No monetary 
costs are involved for the consumer; specifically, participants will 
not pay for their credit reports.

John D. Graubert,
Acting General Counsel.
[FR Doc. 04-23453 Filed 10-19-04; 8:45 am]
BILLING CODE 4750-01-P


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