Report to Congress 

Under Section 319 of the 

Fair and Accurate Credit Transactions Act 

of 2003

December 2006

Federal Trade Commission

Deborah Platt Majoras, Chairman

Pamela Jones Harbour, Commissioner

Jon Leibowitz, Commissioner

William E. Kovacic, Commissioner

J. Thomas Rosch, Commissioner
Report to Congress Under Section 319 of the FACT Act

1 Federal Trade Commission, Report to Congress Under Sections 318 and 319 of

the Fair and Accurate Credit Transactions Act of 2003, December 2004.

2

 The design of that study and a summary of related public comments were

provided in two respective Federal Register Notices (FRNs). 69 FR 61675 (October 20, 2004)

and 70 FR 24583 (May 10, 2005). 

3 The contractor’s report on the initial pilot study is included as an Appendix to this

report. The attachment presents the work- product, findings, and opinions of the contractor,

which are not necessarily findings or opinions of the FTC. 

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Summary

The Federal Trade Commission (“FTC” or “Commission”) submits this report pursuant to

Section 319 of the Fair and Accurate Credit Transactions Act of 2003, Pub. L. 108-159, 117 Stat.

1952 (“FACT Act”). The FACT Act, which was enacted on December 4, 2003, amends the Fair

Credit Reporting Act, 15 U.S.C. §§ 1681 et seq. (“FCRA”), and contains a number of provisions

that are designed to enhance the accuracy and completeness of credit reports. Specifically,

Section 319 of the FACT Act requires the Commission to conduct:

an ongoing study of the accuracy and completeness of information contained in 

consumer reports prepared or maintained by consumer reporting agencies and

methods for improving the accuracy and completeness of such information.

The study is to take place over eleven years, with the final report due to Congress in 2014 and

five interim reports to be completed every two years from December 2004 onward (until

December 2012). In its final report (or earlier, if advisable), the Commission will provide

recommendations for legislative and administrative action that it deems appropriate.

Pursuant to this mandate, the Commission submitted the first report to Congress in

December 20041, and this report constitutes the second interim report. In the first report, the

FTC: (i) examined the history and current practices of the credit reporting industry; (ii) identified

the key areas where errors in credit report data can occur; (iii) reviewed and evaluated studies

conducted to date on credit report accuracy and completeness; (iv) examined possible

methodologies for conducting a more reliable and comprehensive study; and (v) described a pilot

study to test a potential methodology for a nationwide survey.2

The FTC engaged a contractor to conduct the pilot study outlined in the first report, and

the results of the study are now available.3 By design of the study, the contractor had consumers

review their credit reports together with an expert to identify potential errors. Consumers then

disputed potential errors that the expert believed could have a non-trivial effect on their credit
Report to Congress Under Section 319 of the FACT Act

4 An FRN has been published regarding the FTC’s plans for a follow-up pilot study. 

71 FR 61776 (October 19, 2006). The notice may be found at the agency’s Web site under

“FACT Act” Actions at http://www.ftc.gov/os/statutes/fcrajump.htm.

5 December 2004 Report (at page iii). As further noted there, the FTC expressed a

possible need for an additional pilot study (depending on the outcome of the initial study).

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standing. The results of the pilot study suggest that this type of consumer survey is generally

feasible. However, the pilot revealed two methodological challenges that would need to be

addressed before undertaking a nationwide survey: (i) developing follow-up procedures to

encourage consumers who say they will file a dispute to follow through with the dispute process;

and (ii) developing alternative methods for recruiting participants that will ensure that

participants represent consumers with a wide range of credit scores. Subject to OMB clearance

under the Paperwork Reduction Act, the Commission plans to undertake a follow-up pilot study

that incorporates the indicated modifications.4

As was true for the initial pilot study, the follow-up pilot study does not rely on a

nationally representative sample of consumers, and statistical conclusions will not be drawn. The

purpose of a further pilot study is to help improve the design for a nationwide survey. As stated 

in the December 2004 report, the Commission anticipates conducting a nationwide survey of

credit reports that focuses on consumers and their experiences in identifying and disputing errors

in credit report information, is based on a nationally representative sample, uses a reliable

method for identifying errors and omissions, and categorizes errors by type and seriousness in

terms of potential consumer harm.5 A nationwide survey will be a substantial undertaking that

presents significant challenges, and the follow-up pilot study will provide information necessary

to ensure that a larger survey can accurately measure the credit reporting process.

The Initial Pilot Study

The FTC’s contractor for the initial pilot study – a research team that included members

from the Center for Business and Industrial Studies (University of Missouri-St. Louis),

Georgetown University Credit Research Center, and the Fair Isaac Corporation – engaged 30

randomly selected consumers in an in-depth review of their credit reports. Participants obtained

copies of their three credit reports and credit scores by using the Web site myfico.com, including

one report and score from each of the three nationwide consumer reporting agencies: Equifax,

Experian, and TransUnion (“CRAs”). The contractor reviewed these credit reports with the

participants to identify alleged inaccuracies and gave advice on the difference between a small

inaccuracy and a potentially significant error that could affect credit scores. After the research

team evaluated alleged errors for materiality, they encouraged the consumers who alleged material

errors to file a formal FCRA dispute, so as to obtain a review of the challenged items by data

furnishers and CRAs. Although the outcome of the dispute process may not always provide a
Report to Congress Under Section 319 of the FACT Act

6 The FCRA dispute procedure renders a specific outcome for each alleged error. 

By direct instruction of the data furnisher, the following outcomes may occur: delete the item,

change or modify the item (specifying the change), or maintain the item as originally reported. 

Also, a CRA may delete a disputed item due to expiration of statutory time frame (the Act limits

the process to 30 days, but the time may be extended to 45 days if the consumer submits relevant

information during the 30-day period). All of these actions track certain categories of response

on a form called “Online Solution for Complete and Accurate Reporting” (e-OSCAR) that is

used by CRAs for resolving FCRA disputes. (See Federal Trade Commission and Board of

Governors of the Federal Reserve System, Report to Congress on the Fair Credit Reporting Act

Dispute Process, August 2006.)

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definitive answer as to whether the consumer's information is accurate, the results of this process

are important in providing a clearer picture of the accuracy of credit reports.6

The first goal of the initial pilot study was to assess the feasibility of engaging consumers

in an in-depth review of their credit reports for the purpose of identifying alleged material errors. 

In assessing this feasibility, the contractor found:

(a) Participants were successfully engaged in conducting a thorough and effective

review of their credit report information by means of the telephone. The members

of the research team and the participants were unanimous in judging the review of

information as thorough and objective. 

(b) Effective mechanisms to protect consumers= private information can be

employed. For example, in the protocols of the pilot study, participants were not

required to reveal their social security numbers (“SSNs”) to University members of

the research team, who conducted all interviews. Only Fair Isaac received SSNs

upon an initial request for credit reports by participants (because this receipt was

necessary to produce the reports). Moreover, all financial account numbers,

including credit and debit card numbers, were truncated to 3 or 4 digits in any

information available to University researchers. These restrictions did not hinder

the quality of information produced by the study. 

(c) The methodology provides sufficient information for a subsequent analysis of

the accuracy of items presented in credit reports. Beyond an assessment of alleged

errors as being material or not, the methodology also provides the necessary

information for analyzing the following array of questions. What is the specific

nature of errors alleged by consumers, and which categories of credit report

information generate more frequent concerns? Do consumers take the initiative to

have alleged errors corrected, i.e., do they file a formal dispute? Are the alleged

errors contained in the credit reports from more than one CRA, and is there
Report to Congress Under Section 319 of the FACT Act

7 By using a set of detailed instructions (Exhibit 5 of contractor’s report, attached),

participants would make use of the Web site myfico.com to establish an account free of charge in

order to receive online reports, as well as printed copies mailed to their home. The contractor

would offer to provide Internet access for those who did not have access if a person otherwise

qualified for the study.

8 The contractor’s report (p. 13) gives the distribution of participant credit scores

obtained from the three CRAs, and further compares these scores to the national distribution. 

The data show that low scores are under-represented in the sample, while high scores are overrepresented.

9 Regarding further considerations, a follow-up pilot study will provide more

information on the expected costs of a broader study, especially the costs related to methods of

recruitment and to additional follow-up procedures for those who express an intention to file a

dispute. (See the next section on Follow-up Pilot Study, design elements (b) and (h).)

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consistency across credit bureau files in representing the creditworthiness of

consumers? For example, the methodology can assess consistency in reporting

employment status, length of credit history, late payments, public derogatories,

utilization of revolving credit, collection activity, as well as additional information.

The contractor also identified two issues that would need to be addressed further: (i) many

who alleged errors did not file a dispute, and thus did not provide FTC staff any way to evaluate

the consumer’s allegation regarding errors, and (ii) the study group may have been biased toward

consumers with relatively higher credit scores. First, regarding the dispute process, intensive

follow-up was required for those who said they would file a dispute. Overall, regarding all those

who alleged errors and said they would file a dispute (7 people), only 2 took action in an effort to

correct their records. Perhaps more importantly, only 1 out of the 3 people who alleged material

errors subsequently filled a dispute. Second, regarding the procedures for creating the study group

(the protocol for inviting people to join the study), potential participants were told during the

screening interview that Internet access would be desirable, but not required.7 Yet, the outcome

suggests that people who did not have Internet access or experience may have been less willing to

participate. Indeed, after telephone screening and further contact with prospective participants, all

those who ultimately became participants in the study had Internet access. A broad spectrum of

credit scores was attained in the study group, but the distribution tended toward those who had

relatively higher credit scores.8 In view of these results and further considerations, the FTC plans

to conduct a follow-up pilot study.9
Report to Congress Under Section 319 of the FACT Act

10 A larger study group will be used as an aid for evaluating the additional design

elements. The initial pilot study had 30 participants; the planned follow-up pilot study has 120.

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Follow-up Pilot Study

The follow-up pilot study, which is subject to OMB clearance, will be similar in many

respects to the initial pilot study because both address a consumer survey approach to assessing

the accuracy of credit reports. In brief, the key modifications from the initial study are: changes in

the recruitment process, measures to improve follow-up, and a larger study group.10 The overall

design elements for the follow-up pilot study are the following:

(a) A study group of 120 consumers will be drawn by a randomized procedure that is screened to

include 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 FTC will send

a letter to potential study participants describing the nature and purpose of the study, and the

contractor will screen consumers through telephone interviews. Consumers who qualify and

agree to participate will sign a prepared consent form giving the contractor permission to review

the consumer’s credit reports.

(b) In selecting the study group, the contractor may use a variety of methods for identifying and

recruiting potential participants. In addition to the random selection procedure employed in the

initial pilot study (which made use of telephone directories), the contractor will also request that

financial institutions and lenders refer consumers to the study. When consumers apply for credit,

e.g., mortgages, automobile loans, or other forms of credit, financial institutions and lenders will

know (and have a permissible purpose for knowing) the consumer's credit score and certain other

characteristics; consumers can then be given information about contacting the FTC's contractor if

they are interesting in participating in the study. The contractor may employ further methods for

securing participation, provided that the methods do not violate the permissible purposes for

obtaining a consumer’s credit report (FCRA §604). The contractor will consult with FTC staff

regarding any recruitment procedure that is employed.

(c) The selected study group will consist of consumers having a diversity of credit scores over

three broad categories: poor, fair, and good. The contractor will monitor the respective processes

of recruitment so as to attain approximately equal representation of credit scores across the

designated categories.

(d) The contractor will help the participants obtain their credit reports from the CRAs. Each

participant will request his or her three credit reports on the same day, although different

participants will generally request their reports on different days. Participants will not pay for

their credit reports or credit scores.
Report to Congress Under Section 319 of the FACT Act

6

(e) The contractor will help the participants review their credit reports by resolving common

misunderstandings that they may have about the information in their reports; this will involve

educating the consumers wherever appropriate (thereby helping them to distinguish between

accurate and inaccurate information). The contractor will further help participants to locate any

material differences or discrepancies among their three reports, and check whether these

differences indicate inaccuracies.

(f) The contractor will facilitate a participant’s contact with the CRAs and data furnishers to help

resolve credit report items that the participant views as inaccurate. To the extent necessary, the

contractor will guide participants through the dispute process established by the FCRA. The

contractor will not directly contact CRAs or data furnishers during the course of the study, as the

outcome of a dispute may still be pending. The contractor will determine any changes in the

participant’s credit score resulting from changes in credit report information.

(g) In making a comparison between the “before” and “after” credit scores for items that have

been corrected, the contractor will not just obtain a new credit report and score from the relevant

CRAs (although such new credit reports will be obtained). The contractor is required to have the

expertise to re-score the original credit report in the context of those changes directly related to

the contractor’s review, and thus will re-score the consumer’s frozen file. (This method addresses

a concern that changes in credit scores retrieved from CRAs could be the result of the addition of

new items rather than corrected items.)

(h) Regarding study participants who have alleged material errors and expressed an intention to

file a dispute and have not done so after 6 weeks, the contractor will prepare a draft dispute letter

on the consumer’s behalf (together with a stamped, pre-addressed envelope to the relevant CRAs). 

The contractor will ascertain from the consumer whether the letter correctly states the consumer’s

allegation, and upon confirmation, the participant will be asked to sign and send the letter.

As was true of the initial study, a follow-up pilot study is not intended to replicate normal

circumstances under which consumers generally review their credit reports; nor is it intended to

evaluate the adequacy or complexity of the dispute process. The scrutiny applied to study

participants’ reports with the help of expert advice would not at all be indicative of a consumer’s

normal experience in reviewing a credit report. Consumers are often not familiar with credit

reporting procedures and may have difficulties in understanding their credit reports (which may

partly be due to a consumer’s own misconceptions). Also, as the contractor discovered in the

initial pilot study, some consumers may need extra guidance and help in completing the process of

filing disputes for items they believe to be in error. In all of the proposed activities, the contractor

will use procedures that avoid identifying study participants to CRAs and data furnishers.

As was also true of the initial study, the follow-up pilot study would not employ any

specific definition of accuracy and completeness, and no decision has been reached on the

definition of these terms for a nationwide survey. Instead, both the initial and follow-up pilot
Report to Congress Under Section 319 of the FACT Act

11 The FTC staff recognizes the different reporting cycles of data furnishers and the

voluntary basis on which information is reported to a CRA. There may be different explanations

for why an anticipated item is not on a particular credit report. The item may be missing because

a data furnisher did not provide the information to a certain CRA, or – due to the specific

reporting cycle of the data furnisher – because it was provided at a time after the credit report

was viewed by the consumer. Alternatively, the item may have been submitted to a CRA but

placed in the wrong consumer’s file. The contractor will seek to determine, to the extent

practicable, which of these explanations may apply. For example, at the end of the study, the

contractor may contact XYZ Mortgage, give a brief explanation of the FTC’s pilot study, and

inquire whether this furnisher normally reports information to Credit Bureau A; if so, then

inquire about the timing of the reporting cycle. When making such inquiries, the contractor will

not disclose the identities of study participants.

12 Federal Trade Commission and Board of Governors of the Federal Reserve

System, Report to Congress on the Fair Credit Reporting Act Dispute Process, August 2006 

(at 19 - 21).

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studies seek to assess a methodology that involves consumer review of credit reports, and both

seek to ascertain the variety of information pertinent to accuracy and completeness that can be

garnered. The expanded pilot study would list an array of possible outcomes for items on

participant credit reports by using the following type of categories (the contractor may supply

additional categories as warranted by circumstances encountered in the study):

“disputed by consumer and deleted due to expiration of statutory [FCRA] time frame”;

“disputed by consumer and data furnisher agrees to delete the item”;

“disputed by consumer and data furnisher agrees to change/modify the item”;

“disputed by consumer and data furnisher maintains the item to be correct as originally

reported”;

“item not disputed by consumer”;

“item not present on the report”.11

It is anticipated that the above categories will be useful in designing a nationwide survey of credit

reports regardless of how accuracy and completeness may be defined for such a survey.

Knowing the results of the dispute process does not establish the "accuracy" of credit

reports in an absolute sense. As the FTC and the Federal Reserve Board reported in August,12

there is disagreement about the effectiveness of the dispute process in investigating alleged errors. 

However, a study using the dispute process appears to be the only feasible way of performing a

nationwide study of credit report accuracy, in view of the enormous difficulty and cost of

attempting to ascertain the ultimate accuracy regarding alleged errors. Measuring both the

number of consumers who allege material errors and the ultimate disposition of their disputes

should provide as complete a picture as possible of the underlying rate of errors in credit reports.
Report to Congress Under Section 319 of the FACT Act

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Conclusion

Under Section 319 of the FACT Act, the Commission has completed an initial pilot study

that uses a consumer survey approach to studying credit report accuracy. As discussed above, this

initial pilot study revealed certain methodological challenges that should be addressed before

proceeding with a nationwide survey. The planned design for a follow-up pilot study is intended

to deal with these challenges and provide further information about whether a nationwide survey

can measure credit report accuracy and completeness in a manner that is not unduly resourceintensive and would not be cost-prohibitive. When the follow-up pilot has been completed, the

Commission will report to Congress the results of that pilot study, as well as the Commission’s

further plans for any nationwide survey of credit reports.
Report to Congress Under Section 319 of the FACT Act

APPENDIX

Contractor’s Report on Initial Pilot Study