FACTA Accuracy Pilot Study II SS_2007

Supporting Statement
FTC Follow-up Pilot Study Pursuant to Section 319 of the
Fair and Accurate Credit Transactions Act of 2003
(Reinstatement of OMB Control No. 3084-0133)

Section 319 of the Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”),
Pub. L.108-159 (2003), requires the Federal Trade Commission (“FTC” or “Commission”) 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. Accurate credit
reporting is important to consumers and to the industry. For consumers, credit reports !and the
associated credit scores! may be the key to getting approval for such items as a mortgage, an
automobile loan, a major credit card, a job, the rental of an apartment, phone service, insurance
coverage, and other financial products or services. For the industry, credit reports provide lenders
the information about a borrowers’ credit history with which they can estimate default risk and
may thus tailor interest rates and other credit terms to the risk that is presented by the borrower.
The FTC intends to conduct a pilot study in connection with Section 319 of the FACT
Act. The proposed pilot study is a follow-up to the Commission’s previous pilot study conducted
from October 2005 through June 2006. After the initial pilot study was conducted, the FTC
requested that the Office of Management and Budget (“OMB”) discontinue the clearance (OMB
Control No. 3084-0133).1 The FTC is now requesting that the OMB reinstate that clearance so
that it can conduct a follow-up pilot study.
The FTC believes it is necessary to conduct a follow-up pilot study to evaluate additional
design elements prior to carrying out a nationwide survey on the accuracy and completeness of
consumer credit reports. The additional design elements would permit the FTC to further assess
whether certain data pertinent to credit report accuracy can be obtained in a way that is not
unduly resource-intensive or otherwise cost-prohibitive if extended to a nationwide survey. As
was true of the initial study, the follow-up pilot study will not rely on the selection of a nationally
representative sample of consumers, and statistical conclusions will not be drawn.
A.

JUSTIFICATION
1. Necessity for Information Collection

Among other purposes, the FACT Act amends the Fair Credit Reporting Act (“FCRA”),
15 U.S.C. §§ 1681, to enhance the accuracy of consumer reports. The FACT Act requires the
1

The clearance for the initial study was originally set to expire in December 2006.
However, rather than seek an extension of the existing clearance to conduct the proposed followup pilot study, FTC staff asked OMB to discontinue the clearance in September 2006. This
procedural approach ensured that the FTC’s December 2006 Report to Congress, which includes
the contractor’s report on initial pilot study, would be publicly available before the end of the
comment period for the proposed follow-up pilot study. See 71 FR 61776 (October 19, 2006).
Dated: February 2007

2
Commission to conduct a number of studies on consumer reporting and related issues.
Specifically, Section 319 of the Act requires the Commission 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 FTC to issue a series of
biennial reports to Congress over a period of eleven years, and the FTC has submitted two
reports thus far: one in December 2004 (“December 2004 Report”) and another in December
2006 (“December 2006 Report”).2
Through a variety of means, such as a consideration of prior studies, published reports of
other governmental agencies, a roundtable on credit report accuracy, and contact with numerous
relevant parties, the Commission found that although prior approaches to the study of credit
report accuracy provide some useful information, none provides a reliable and comprehensive
assessment. Indeed, none of the existing sources of information relied on the participation of all
three of the key stakeholders in the credit reporting process: consumers, data furnishers, and the
CRAs. The proposed follow-up pilot study is a second step in preparing for a nationwide survey
of credit reports. (See also discussion in Section 4 below).
2. How Data Will Be Collected and Used
Scope of Work to be Performed
The design of the proposed follow-up pilot study is similar in many respects to the initial
pilot study because both involve a consumer survey approach to assessing the accuracy of credit
reports. In brief, the key modifications from the initial study will include: changes in the
recruitment process, improved follow-up measures with certain study participants, and a larger
respondent pool.3
The design elements for the proposed 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
consist of adult members of households to whom credit has been extended in the form of credit

2

Report to Congress Under Sections 318 and 319 of the Fair and Accurate Credit
Transactions Act of 2003, Federal Trade Commission, December 2004, and Report to Congress
Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003, Federal Trade
Commission, December 2006. The December 2006 Report includes a full copy of the
contractor’s report on the initial pilot study. The respective reports are available at
http://www.ftc.gov/reports/index.htm#2004 and http://www.ftc.gov/reports/index.htm#2006.
3

A larger study group will be used as an aid for evaluating the additional elements.
The initial pilot study had 30 participants; the proposed follow-up pilot study will have 120.
Dated: February 2007

3
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 pilot study.
The contractor will screen consumers by conducting 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 will use, and may also experiment with, a variety
of methods for recruiting participants. In addition to the randomized selection procedure used in
the initial pilot study (which made use of telephone directories), the contractor may engage
consumers through referrals from financial institutions as they apply for credit, e.g., mortgages,
automobile loans, or other forms of credit. (Lenders will know – and have a permissible purpose
for knowing – the consumer’s credit score and certain other characteristics; consumers can then
be informed of the FTC study and invited to participate.) The contractor may employ additional
methods for securing participation, provided that no method would violate the permissible
purposes for obtaining a consumer’s credit report (FCRA sec. 604).
(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 representations of credit scores across the
designated categories.
(d) The contractor will help 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.
(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).
(f) The contractor will help participants locate any material differences or discrepancies among
their three reports and check whether these differences indicate inaccuracies.
(g) The contractor will facilitate a participant’s contact with CRAs and data furnishers as
necessary 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.4 The contractor will not directly contact CRAs or data furnishers during the course of

4

Section 611 of the FCRA (15 U.S.C. §1681i) sets forth the process by which a
consumer may dispute data in his or her credit files with a CRA, and the CRA's duty to
investigate the dispute. Section 623(b) (15 U.S.C. §1681s-2(b)) spells out the duties of persons
(continued...)
Dated: February 2007

4
the study, as the outcome of a dispute may still be pending. The contractor will determine
whether any changes in the participant’s credit score result from changes in credit report
information.5
(h) For study participants who have alleged material errors and expressed an intention to file a
dispute but do not file within 6 weeks, the contractor will prepare draft dispute letters on their
behalf (together with stamped envelopes, pre-addressed to relevant CRAs). The contractor will
ascertain from the consumer whether the letter correctly describes 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, the proposed 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 the reports of study participants, with the help of expert advice, would not at all be indicative
of a consumer’s normal experience in reviewing a credit report. The FTC recognizes that
consumers often are not familiar with credit reporting procedures and may have difficulties in
understanding a credit report (which may be partly due to a consumer’s own misconceptions).
Also, as noted above, some consumers may need extra guidance and help in completing the
process of filing disputes for alleged errors. In all of the proposed activities, the contractor will
again use procedures that avoid identification of study participants to CRAs and data furnishers.

4

(...continued)
that have furnished disputed items of information to a CRA, after receiving notice of a dispute
from the CRA. The FCRA dispute resolution process thus involves the review of disputed items
by data furnishers and CRAs, and the process 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 FCRA
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). The CRAs track these possible actions by using
a form called “Online Solution for Complete and Accurate Reporting” (e-OSCAR). 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. The report is available at
http://www.ftc.gov/reports/index.htm#2006.
5

In making this comparison, the contractor will not just obtain a new credit report
and score from the relevant CRAs after items have been corrected (although such 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, thereby re-scoring the
consumer’s “frozen file.” This method addresses the concern that changes in credit scores
retrieved from CRAs could be the result of the addition of new items rather than corrected items.
Dated: February 2007

5
As was further true of the initial study, the proposed follow-up pilot study will not
employ a specific definition of accuracy and completeness and no decision has been made on the
definition of these terms for a nationwide survey.6 Instead, both the initial and follow-up pilot
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.
Finally, the follow-up pilot study will list an array of possible outcomes for items
reviewed on the participants’ credit reports. FTC staff anticipates this list will include the
following categories (the contractor may supply additional categories as warranted by matters
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 or modify the item;”
“disputed by consumer and data furnisher disagrees, maintaining the item to be correct;”
“item not disputed by consumer;” or
“item not present on the report.”7
As discussed in the December 2006 Report (at 7), which recognizes that the results of the dispute
process do not establish the “accuracy” of credit reports in an absolute sense, it is still anticipated
that these categories will be useful in designing a nationwide survey regardless of how
“accuracy” and “completeness” may be delineated for such a survey.
3.

Use of Information Technology

6

See also December 2004 Report at 5 n.10, which discusses different definitions of
completeness, and at 16-18, which discusses FCRA accuracy and completeness requirements.
7

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
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.
Dated: February 2007

6
The study participant’s credit reports will be obtained via the internet. Additional use of
electronic methods pursuant to the Government Paperwork Elimination Act, Pub. L. No. 105277, Title XVII, 112 Stat. 2681-749, would be impractical. The contractor will review reports
with participants by telephone. Study participants will likely feel more comfortable discussing
their credit reports over the phone instead of by electronic mail.
4.

Efforts to Identify Duplication/Availability of Similar Information

FTC staff has reviewed all prior studies of credit report accuracy and conducted a roundtable on June 30, 2004.8 Roundtable participants included various consumer-interest groups,
industry representatives, academic researchers, and participants from other government agencies.
All of the principal parties involved in the prior studies were at the roundtable. The FTC’s
December 2004 Report (at 21-31) reviews the prior studies used to solicit information on credit
report accuracy. In its December 2004 Report, the Commission (at iii) concluded that, although
the prior approaches provide some useful information about credit report accuracy and
completeness, none provides a comprehensive view. Indeed, none of the existing studies relied
on the participation of all three of the key stake-holders in the credit reporting process:
consumers, data furnishers, and the CRAs.
In order to test an appropriate study methodology, the FTC undertook the initial pilot
study referenced above from October 2005 through June 2006. Some of the contractor’s key
findings in the initial study include: (i) participants were successfully engaged in conducting a
thorough and effective review of their credit report information over the telephone; (ii) effective
mechanisms to protect consumers= personal information can be employed, and (iii) sufficient
information was provided for a subsequent analysis of the accuracy of items placed in CRA files
and presented in credit reports.
The contractor for the initial pilot study also identified two matters that would need to be
addressed further: additional procedures to help consumers follow through with the entirety of
the study, and additional ways of identifying and recruiting consumers to become participants in
the study. There is no currently available information that addresses theses concerns and, as
discussed below in section 6, failure to obtain this additional information would jeopardize a
proper design for a nationwide survey.
5.

Efforts to Minimize Small Organization Burden

Not applicable. The study participants are individual consumers.

8

A transcript of the proceedings, agenda, list of participants, and summary of the
discussions are available at http://www.ftc.gov/be/workshops/methodologiesaacc/index.htm.
Dated: February 2007

7
6.

Consequences to Federal Program and Policy Activities/Obstacles to Reducing
Burden

If this follow-up pilot study is not undertaken, the FTC will lack critical information on
potential improvements in designing a comprehensive study of the accuracy and completeness of
credit reports. As discussed above, the contractor for the initial pilot study identified two matters
that would need to be addressed further: additional procedures to help consumers follow through
with the entirety of the study, and additional ways of identifying and recruiting consumers to
become participants in the study. The majority of participants who alleged errors on their credit
reports and indicated that they would file a formal dispute did not follow through with their
intention to file. Considering that this was also true for those who alleged material errors in the
expert opinion of the research term, the need to explore how to best follow-up with consumers
who indicate they will file a dispute is clear. Further, the outcome of the study suggests that
people who did not have Internet access or experience may have been less willing to participate.
Although the contractor would have offered to provide Internet access to otherwise qualified
participants, all who ultimately became participants in the study had Internet access.9 In
consideration of these and other matters, the FTC plans to conduct a follow-up pilot study.
7.

Circumstances Requiring Collection Inconsistent with Guidelines

The collection of information in the proposed survey is consistent with all applicable
guidelines contained in 5 C.F.R. § 1320.5(d)(2).
8.

Public Comments Sought/Consultation Outside the Agency

As discussed above, the FTC conducted a roundtable on June 30, 2004 regarding the
proposal for an initial pilot study and a potential nationwide survey. Roundtable participants
included various consumer-interest groups, industry representatives, academic researchers, and
participants from other government agencies. In addition, the FTC published two notices seeking
public comment on the initial pilot study. See 69 FR 61675 (October 20, 2004); 70 FR 24583
(May 10, 2005).
As required by 5 C.F.R. § 1320.8(d), the FTC published a notice seeking public comment
on the proposed follow-up pilot study. 71 FR 61776 (October 19, 2006). The comments
received by the FTC on the proposed information collection request are discussed below.
Pursuant to the OMB regulations that implement the PRA (5 CFR Part 1320), the FTC is

9

A broad spectrum of credit scores was attained in the study group, but the
distribution tended toward relatively higher credit scores. The contractor compared participants’
credit scores to the national distribution, and the study data revealed that low scores were underrepresented in the sample, while high scores were over-represented.
Dated: February 2007

8
providing a second opportunity for public comment while seeking OMB approval for the
proposed follow-up pilot study.
In response to its October 19, 2006 notice, the FTC received three comments: one from
ACA International (“ACA”), another from the Consumer Data Industry Association (“CDIA”),
and a third from TransUnion, LLC (“TransUnion”).10 The comments from each of these organizations are addressed below.
(a)

ACA Comment

ACA supports the goal of both the initial and proposed follow-up pilot study (ACA at 5),
while it also expresses concerns. ACA (at 5-7) views it as a shortcoming that the pilot study
design does not include definitions of the terms “accuracy,” “completeness,” or “dispute,” and
does not categorize the types of data furnishers who may be addressed by a dispute.
The terms “accuracy” and “completeness” do not require specific definition at this time
for the following reason: the pilot studies are not used to draw any conclusions, statistical or
otherwise, about accuracy or completeness but are formulated solely as vehicles for assessing the
feasibility of a certain study methodology (i.e., an assessment of a consumer survey approach that
directly involves consumers in a review of information in their credit reports for the purpose of
identifying alleged materials errors and attempting to resolve disputed items through the FCRA
dispute resolution process). As discussed above, it is anticipated that the related categories
outlined in this notice will be useful in designing a nationwide survey regardless of how the
terms accuracy and completeness may be delineated for such a survey.
Regarding ACA’s question about the term “dispute” and a classification for “data
furnisher,” staff uses these terms – expressly for the purpose of the pilot studies – in the
following way: in regard to items on a credit report, a “disputed item” is a consumer alleged error
that is communicated by the consumer, either in writing or electronically, to a CRA or to a data
furnisher; a “data furnisher” is simply a party who provides to a CRA any of the items that
appear on a credit report.11 In giving this description, staff sees no need to classify, at this stage,
the types of data furnishers who may be involved with consumer disputed items.12
10

The comments are available on the FTC’s website at
http://www.ftc.gov/os/comments/FACTA-accuracystudy-2/index.htm.
11

In offering this description, staff is not proposing any legal determination of duties
or actions that may be required of a CRA or a data furnisher under the FCRA.
12

In preparation for the Commission’s stated goal of classifying credit report errors
by type and seriousness in terms of potential consumer harm (see, December 2006 Report at 2),
it is expected that the studies will rank categories of credit report information according to the
(continued...)
Dated: February 2007

9
(b)

CDIA Comment

The CDIA expresses support for the FTC’s plan to continue testing a methodology for a
prospective nationwide study (CDIA at 1), and it also gives comment on a number of related
matters. For purposes of staff’s response, we summarize CDIA’s concerns as follows: (1)
specific concerns and advice pertaining to the design of a nationwide survey, (2) concerns with
the contractor’s report on the completed pilot study in relation to the proposed follow-up pilot
study, and (3) concerns that some of the activities of the study may fall outside the scope of the
mandate given to the FTC by Section 319 of the FACT Act. FTC staff addresses each of these
areas in turn.
Regarding the design of a nationwide survey, CDIA (at 2-4) raises many matters,
including the selection of sample participants and institutions that may be involved in helping to
identify potential participants, appropriate sample size for a national survey, potential sample
bias, and the need to ensure that the sample of credit reports utilized in a national survey have a
distribution of credit scores representative of the national distribution. In connection with all of
these matters, CDIA’s overriding request appears to be (CDIA at 2) that the FTC present a
national survey design for public comment. FTC staff has no disagreement with CDIA regarding
these stated concerns but believes that a staff response would presently be premature. The design
for a nationwide study depends in part on what the proposed follow-up pilot study reveals. More
generally, staff affirms that a proposed design for a nationwide survey will be made publicly
available.13
Regarding the work-product contained in the contractor’s report, CDIA objects to some
of the ways in which data were presented, and it disagrees with certain views and recommendations of the contractor (CDIA at 4-6). Before responding to these matters, staff notes that in
order to have a transparent study process in connection with Section 319 of the FACT Act, the
FTC made public the entirety of the contractor’s report on the initial pilot study (appendix to the
FTC’s December 2006 Report to Congress). In the same report to Congress (at 2!4), the FTC
brought forward those salient features in the contractor’s report that were used in proposing a
follow-up pilot study. Overall, staff believes that CDIA raises two or three matters that relate to

12

(...continued)
frequency of consumer disputes and determined errors. This type of ranking may be expected to
render, concurrently, some categorization of corresponding data furnishers.
13

Staff anticipates that upon completion of the follow-up pilot study, a subsequent
design for a nationwide survey will be submitted for OMB clearance. As is also true of the
present matter, the clearance process involves two Federal Register Notices which set forth the
design elements of the study. Each notice provides opportunity for public scrutiny and comment.
Dated: February 2007

10
both the work-product of the contractor and the FTC’s formulation of a follow-up pilot study;
these are discussed below.14
As described in section 2(e) above, when conducting the proposed follow-up pilot study,
the FTC anticipates that the contractor will help participants to locate any material differences or
discrepancies among their three credit reports and to check whether these differences indicate
inaccuracies. In regard to this proposed study design element, CDIA (at 6-7) strongly objects to
using a “cross-file analysis...publishing score range differences...” for the initial study or for the
proposed follow-up pilot study. Staff agrees with CDIA that differences in credit scores across a
consumer’s credit reports (including very substantial differences) need not indicate errors. Given
the voluntary basis on which information is reported to a CRA, (see note 7 above), there may be
various explanations for differences in credit report information. Nonetheless, a score difference
is relevant to the study if this score difference should be based on informational differences or
discrepancies arising from some error in a consumer’s credit files. (Staff anticipates that certain
credit score ranges will be used to categorize the impact of determined errors; see discussion
below.)
A second matter raised by CDIA that pertains to both the work-product of the contractor
and the formulation of a follow-up pilot study involves the meaning of the term material and
score ranges used for assessing materiality. CDIA (at 5) notes that certain credit score ranges
were used by the contractor in assessing potential materiality.15 For the follow-up pilot study,
FTC staff anticipates that disputed information will likely be categorized, incrementally, in terms
of 10 point movements in score changes derived from a re-scoring of frozen files.16
14

The December 2006 Report (at 1) noted that the work-product and opinions of the
contractor are not necessarily findings or opinions of the FTC. Staff sees no fruitful purpose to
respond to matters in the contractor’s report that were not used to formulate the follow-up study.
15

Based upon staff discussion with the contractor, the contractor viewed an alleged
error as material if a re-scoring of the frozen file in regard to the challenged item yielded a
change of approximately 30 points (deeming the later score range to be a commonly accepted
estimate of normal variation in credit scores across a consumer’s three credit reports). However,
any consumer who wanted to dispute an item, regardless of anticipated impact, could do so and
would be instructed on how to file. The contractor would summarize the results for all disputed
items, as categorized by a re-scoring of frozen files to obtain the materiality of alleged errors.
But the paucity of filed disputes that occurred in the initial pilot study rendered the procedures
for assessing and reporting the materiality of disputed items as largely moot.
16

We distinguish between disputed items and determined errors. The categorization
of disputed items would start with items having an expected impact of 10 points or more, then 20
points, 30 points, and so forth. The various outcomes of the dispute process would also be
summarized in terms of these same categories, including any actual changes in credit scores that
(continued...)
Dated: February 2007

11
The CDIA (at 5) also inquires how the study will address items that remain unresolved
after the dispute process is complete; i.e., items for which a data furnisher maintains the
information to be accurate but the consumer maintains that it is not. Staff does not intend that
the pilot study would resolve such items and further anticipates that the study will simply identify
certain items (in terms of both the categories of credit report information and their frequency)
that remain unresolved. As noted in the FTC’s December 2006 Report (at 7), knowing the
results of the dispute process does not establish the accuracy of credit reports in an absolute
sense. Yet, a study using the dispute process appears to be the only feasible way of performing a
study of credit report accuracy, in view of the enormous difficulty and cost of attempting to
ascertain the ultimate accuracy regarding alleged errors.
The CDIA also comments on the mandate given by Section 319 of the FACT Act and
maintains that such matters as comparing scores across credit bureaus (as discussed above),
attempting to ascertain why consumers do not dispute alleged inaccuracies, and engaging nonEnglish speaking consumers in a review of their credit reports, all fall outside the scope of the
Act (CDIA at 7). FTC staff disagrees. Staff believes that all of the design elements set forth
regarding the follow-up pilot study (section 2 above) fall within the two-prong scope of the
mandate: to study the accuracy and completeness of credit report information and to study
methods for improving the accuracy and completeness of such information.
(c)

TransUnion Comment

Beyond the support expressed for CDIA’s comments, TransUnion’s comment letter
conveys critical concern and advice in four main areas: (1) disappointment that the FTC has not
defined the terms accuracy and completeness in the context of the present studies, (2) concern
that the FTC’s scope in executing the mandate of Section 319 of the FACT Act appears to be
limited to the three nationwide credit bureaus (Equifax, Experian, and TransUnion), (3) advice
that, since Fair Isaac has recently developed a subsidiary that acts as a consumer reporting
agency, Fair Isaac should not play a part in any follow-up study, and (4) a request that any person
who has disputed credit report information in the past be excluded from the follow-up study.
In the above discussion of ACA’s concerns, staff has explained why the terms “accuracy”
and “completeness” do not require definitions in the context of these pilot studies; the same
response serves as a reply to TransUnion’s comment on this matter.

16

(...continued)
arise from determined errors (those alleged inaccuracies that the dispute process confirms as
being errors). As noted above in section 2(g), actual changes in scores retrieved from CRAs
could be the result of the addition of new items rather than corrected items, so that actual score
changes need not correctly convey the impact of an error in a credit report. Hence, we categorize
outcomes by credit score ranges that refer to a re-scoring of frozen files.
Dated: February 2007

12
Regarding TransUnion’s question (at 2) about the scope of the study on the variety of
consumer reporting agencies encompassed under section 319 of the FACT Act, staff notes that
the proposed pilot study does indeed involve credit reports and scores from Equifax, Experian,
and TransUnion. We recognize there are many consumer reporting agencies, but credit reports
from the three nationwide CRAs are the most widely used in making credit, insurance, and
employment decisions. Staff has not foreclosed the possibility of recommending that additional
consumer reporting agencies may be included in a broader survey. As noted above, any design
for a nationwide study will, in due course, be made available for public comment.
TransUnion also requests (at 2) that Fair Isaac not be part of the contracting team for any
follow-up study. The background for TransUnion’s request appears to be that Fair Isaac has
recently developed a new credit score (an “Expansion Score”) in regard to which a subsidiary of
Fair Isaac acts as a consumer reporting agency. As described by the company, 17 this score has
been developed for credit grantors in connection with consumers who have insufficient credit
histories to render the traditional FICO-based scores that are used by the nationwide CRAs.
Staff has considered this matter and does not think TransUnion’s stated concern would
justify excluding Fair Isaac from the bidding process for a follow-up pilot study.18 In the initial
study, all participants had credit histories that were evaluated by traditional FICO-based scores,
and Fair Isaac’s role was limited to using its expert knowledge of these scores in connection with
a re-scoring of participants’ frozen files for consumer alleged errors.19 In evaluating the
proposals for the extended pilot from various contractors, staff will consider how susceptible a
proposal may be to possible bias in the data collection process.
Finally, TransUnion (at 2) requests that anyone who has disputed any credit report item in
the past be excluded from the follow-up study, further adding that individuals who have already
alleged an error at an earlier time should not be allowed to use the study as a means to recast their
issues or complaints. Staff has several observations here. If it should be that some items may be
“re-disputed” (as TransUnion suggests), the outcome for such disputes would follow from
whatever normal procedures may be employed. For example, if a CRA has a reasonable basis for
deeming a dispute frivolous, it can advise the consumer so and decline to act further. Or, if a
17

Description obtained from Fair Isaac’s website at www.fairisaac.com.

18

Presently, no determination has been made about a contract award. FTC staff
anticipates that a contract will be let out for competitive bidding during the spring of 2007.
19

See, 70 FR 24583 (May 10, 2005) on the design of the initial pilot study on this
mater. The follow-up pilot study has the same design element (i.e., element 2(g), note 5 above).
Staff further notes that prospective participants are screened to 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 (design element 2(a) above). Typically,
such consumers have credit histories capable of evaluation by traditional credit bureau scores.
Dated: February 2007

13
CRA can identify the dispute as being a “re-dispute” of an already considered matter, it can again
advise the consumer accordingly. Such responses would be part of the outcome of the study. On
the other hand, should a CRA not have a readily available way of identifying “re-disputed” items,
then neither would the contractor.
More generally, staff sees no basis for restricting the study to the reports of consumers
who have never disputed any item prior to the study. It is possible that the accuracy of credit
reports may differ based on items that have, or have not been, disputed. In light of this, staff
plans to include a question in the study about whether consumers have disputed any item in one
of their credit reports at an earlier time, and if so, to briefly indicate when and what. But a
currently alleged error need not be related to a prior dispute, and we do not see any justification
for excluding all consumers who have disputed some item(s) in the past. Staff adds that an
important element of both the initial and proposed pilot study is that any contractor must have the
expertise to evaluate alleged errors and to assess whether a dispute would be material to
creditworthiness. In this context, it is very unlikely that frivolous or immaterial disputes would
go forward.
9.

Payments or Gifts to Respondents

In the initial pilot study the contractor discovered that a sufficient number of consumers
joined the study without the need for financial inducement (contractor’s report at 5), although
certain compensation to participants was authorized. Possibly, the same may hold true for a
follow-up study. The contractor will budget funds to be able to compensate some respondents
for their participation (some may be offered $50, others $100). The maximum payment of $100
is in accordance with the reasonable and customary procedures of the contractor. The purpose of
the varying amount of the honorarium is to obtain a preliminary indication of the level of
monetary compensation, if any, that would affect a consumer’s decision to participate in a survey
that involves their personal financial matters and approximately 5 hours of their time. In addition,
participants will receive (free of charge) their three credit reports and credit scores.
10. & 11.

Assurances of Confidentiality/Matters of a Sensitive Nature

The contractor is required to obtain the permission of participants before viewing their
credit reports. Although the contractor will obtain the names, telephone numbers, and credit
reports of the participants, such information will not be externally disclosed. If the results of the
study should be made publicly available (see section 16 below), the FTC will not include any
personal information about individual respondents.

Dated: February 2007

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In a comment received regarding the initial pilot study, and equally applicable to this pilot
study, Privacy Rights Clearing House asked20 whether participants’ credit reports will be treated
as agency records subject to the Privacy Act, 5 U.S.C. 552a, and, if so, whether participants will
receive any notice required by that Act. To the extent, if any, that the Act applies, the reports
would be part of the agency’s existing system for legal, investigational and other records,21 and,
whether or not the Act applies, the FTC will include a notice consistent with the Act on any
information collection forms (e.g., the letter sent by the FTC to potential study participants).
Further, the letter to potential participants will inform them that the contractor is permitted to
collect the data only for the purpose of the pilot study, and that other uses have been prohibited.
12.

Estimated Hours Burden

Consumer participation in the follow-up pilot study would involve an initial screening
and any subsequent time spent by participants to understand, review, and if deemed necessary, to
dispute information in their credit reports. The FTC staff estimates that up to 800 consumers
may need to be screened through telephone interviews to obtain 120 participants, and that a
screening interview may last up to 10 minutes, yielding a total of approximately 133 hours (800
screening interviews 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 disputed,
the participant must submit a dispute form, identify the nature of the problem, present
verification from the consumer’s own records to the extent possible, and perhaps submit further
information. As was true of the initial study, FTC staff again estimates the participants’ time for
reviewing their credit reports at an average of 5 hours per participant, resulting in a total of 600
hours (5 hours x 120 participants).22 Total consumer burden hours are thus approximately 750
hours (derived as 133 screening hours plus 600 participant hours, further rounding upwards to the
nearest 50 hours).

20

See 70 FR 24583 (May 10, 2005).

21

See http://www.ftc.gov/foia/sysnot/i-1.pdf

22

This estimate is given for the purpose of calculating burden under the PRA.
Information contained in the contractor’s report regarding the initial pilot study may indicate a
somewhat lower estimate for the average time spent by the 30 participants, but it would not
result in a noticeably different outcome for the overall consumer burden. In an effort not to
underestimate the time spent by additional study participants, FTC staff has retained the estimate
used for the initial study.
Dated: February 2007

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13.

Estimated Cost Burden

The cost per participant should be negligible. Participation is voluntary, and will not
require any start-up, capital, or labor expenditures by study participants . As with the initial
study, participants will not pay for their credit reports or credit scores.
14.

Estimated Cost to Federal Government

The FTC has not yet selected a contractor for the follow-up study and plans to let out the
contract under competitive bidding during the spring of 2007. The contract award is thus to be
determined.23 In addition, the aggregate of FTC staff time and costs already expended to design
the study and to further identify a subsequent contractor plus time that will be expended to assist
a contractor in completing his duties and to analyze the data will sum to approximately 500 hours
of economist and research analyst time, rendering a monetary total of $30,000. The cost of FTC
staff time is necessarily an estimate because factors in this calculation may vary, including the
number of staff members involved and the amount of time required of each. These estimates
include clerical and other support services.
15.

Program Changes or Adjustments

The burden estimate for the proposed follow-up pilot study survey represents an increase of
550 hours from the estimate for the initial pilot study.

16.

Plans for Tabulation and Publication

The FTC has not determined whether the results will be made public.24
17 & 18.

Display of Expiration Date for OMB Approval/Exceptions to Certification

23

For the initial pilot study, the contractor was a consortium comprised of the Credit
Research Center from Georgetown University, the University of Missouri via its Center for
Business and Industrial Studies, and the Fair Isaac Corporation. FTC staff anticipates that the
contractor for the initial study will be one of the parties submitting a bid on the follow-up study.
Staff has its own estimate of the likely contract cost of the study, but is reluctant to publish such
a figure in advance of competitive biding.
24

Staff believes that the results may be made public in the same manner that the
initial study was made public; specifically, a copy of the contractor’s report may be attached as
an appendix to a future FTC report to Congress under the FACT Act.
Dated: February 2007

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The FTC will display the expiration date alongside the assigned OMB control number on
the front pages of any documentation given to the participants of the study. There are no
exceptions to certification.
B.

COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS

Not applicable. The proposed follow-up pilot study is not a statistical study and no
statistical conclusions will be drawn.

Dated: February 2007