FACTA 312 Supplemental SS for Final Rule_mtd

Supplemental Supporting Statement for Information Collection
Furnisher Rules under the
Fair and Accurate Credit Transactions Act of 2003
16 CFR Part 660
(OMB Control # 3084-NEW)
In connection with the related, preceding notice of proposed rulemaking (“NPRM”),1 the
Federal Trade Commission (“FTC” or “Commission”) and participating sister agencies
submitted the information collection requirements in the proposed rules to OMB for review
under the Paperwork Reduction Act (“PRA”). In response, OMB filed comments with the
agencies in accordance with 5 CFR 1320.11(c), and instructed them to describe how they have
maximized the practical utility of the rule’s information collection requirements and minimized
associated PRA burden. The Agencies addressed this in the final rule preamble. See 74 Fed.
Reg. 31484 (July 1. 2009). The FTC additionally elaborates on its final rules PRA analysis in
this supplemental Supporting Statement.
1. & 2.

Necessity for and Use of the Information Collected

The instant joint rulemaking implements section 312 of the Fair and Accurate Credit
Transactions Act of 2003 (“FACT Act”), Pub. L. No. 108-159 (2003). As described, below,
portions of the FACT Act amend the Fair Credit Reporting Act of 1970 (“FCRA”), 15 U.S.C.
1681 et seq., to require the Federal Trade Commission (“FTC” or “Commission”), Office of the
Comptroller of the Currency (Treasury), Board of Governors of the Federal Reserve System,
Federal Deposit Insurance Corporation, Office of Thrift Supervision (Treasury), and National
Credit Union Administration (collectively, “Agencies”) to issue guidelines for use by furnishers
regarding the accuracy and integrity of the information about consumers that they furnish to
consumer reporting agencies (“CRAs”) and to prescribe regulations requiring furnishers to
establish reasonable policies and procedures for implementing the guidelines. These final rules
also implement the requirement that the Agencies issue regulations identifying the circumstances
under which a furnisher must reinvestigate disputes about the accuracy of information contained
in a consumer report based on a direct request from a consumer. The Commission has placed
the final regulations and guidelines in the part of its regulations that implement the FCRA,
specifically, 16 CFR Part 660.
FACT Act Section 312(a) (implemented within 16 C.F.R. 660.3)
Section 312(a) of the FACT Act adds a new section 623(e) to the FCRA, 15 U.S.C.
1681s-2(e), to require the Agencies to, in consultation and coordination:
Establish and maintain guidelines for use by furnishers of information to CRAs regarding
the accuracy and integrity of the information relating to consumers that such entities
furnish to CRAs and update such guidelines as often as necessary. In developing the
guidelines, the Agencies should: (1) identify patterns, practices, and specific forms of
activity that can compromise the accuracy and integrity of furnished information; (2)
1

72 Fed. Reg. 70944 (Dec. 13, 2007).

review the methods (including technological means) used to furnish information to
CRAs; (3) determine whether furnishers maintain and enforce policies to assure the
accuracy and integrity of information furnished to CRAs; and (4) examine the policies
and procedures that furnishers employ to conduct investigations and correct inaccurate
information that has been furnished to CRAs.
Prescribe regulations requiring furnishers to establish reasonable policies and procedures
for implementing the guidelines.
FACT Act Section 312(c) (implemented within 16 C.F.R. 660.4)
Section 312(c) of the FACT Act adds a new section 623(a)(8) to the FCRA, 15 U.S.C.
1681s-2(a)(8), to require the Agencies to jointly:
Prescribe regulations that identify the circumstances under which a furnisher must
investigate a dispute concerning the accuracy of information contained in a consumer
report, in response to a direct request from the consumer to whom the report relates. In
prescribing these regulations, the Agencies must weigh: (1) the benefits to consumers
and the costs to furnishers and the credit reporting system; (2) the impact of any
requirements imposed by the rule on the overall accuracy and integrity of consumer
reports; (3) whether permitting consumers to contact furnishers directly to dispute the
accuracy of consumer report information will likely result in the most expeditious
resolution of such disputes; and (4) the potential impact on the credit reporting process if
“credit repair organizations,” as defined in the Credit Repair Organization Act, are able
to submit notices of dispute directly to furnishers on behalf of consumers.
The information collections in the regulations implementing section 312(c) require each
furnisher to amend their procedures to ensure that disputes received directly from consumers are
handled the same way as disputes received from CRAs. The regulations also require each
furnisher to notify consumers by mail or other means (if authorized by the consumer) within five
business days after making a determination that a dispute is frivolous or irrelevant.
3.

Consideration of Using Improved Information Technology to Reduce Burden

Consistent with the aims of the Government Paperwork Elimination Act, 44 U.S.C. §
3504 note, the Furnisher Regulations permit furnishers latitude in using new technologies to
reduce compliance costs. Indeed, the Agencies attempted to draft the regulations in a flexible,
technology-neutral manner. For example, the regulations do not prevent furnishers from
continuing to use automated, electronic, mechanical, or other technological means to provide
information about consumers to CRAs. In addition, as noted in #2 above, furnishers are
permitted to use means other than postal mail (if authorized by the consumer) to notify
consumers after making a determination that a dispute is frivolous or irrelevant.

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4.

Efforts to Identify Duplication/Availability of Similar Information

FTC staff has not identified any other federal or state statutes, rules, or policies that
duplicate, overlap, or conflict with these regulations. Section 625(b)(1)(F) of the FCRA
preempts states from enacting any law concerning furnisher obligations included in section 623
of the FCRA, including the requirements contained in the instant regulations.
5.

Efforts to Minimize Burdens on Small Businesses

The collection applies to any entity, other than an individual consumer, that furnishes
information relating to consumers to one or more CRAs, regardless of size. The standards in the
regulations are flexible and designed to take into account a covered entity’s size and
sophistication to minimize burdens on small businesses.
6.

Consequences of Conducting Collection Less Frequently

The burden associated with this rulemaking is in part attributable to the written policies
and procedures that a respondent must establish to implement the guidelines. Once they are
developed, these policies and procedures will only need to be adjusted if they become
ineffective. The burden associated with this rulemaking is also in part attributable to the
requirement that a furnisher must investigate disputes received directly from consumers and
notify consumers after making a determination that a dispute is frivolous or irrelevant.
Furnishers will only need to amend their procedures once to ensure that disputes received
directly from consumers are handled the same way as complaints from CRAs, and will need to
notify consumers after making a determination that a dispute is frivolous or irrelevant only when
such a determination is made.
7.

Circumstances Requiring Disclosures Inconsistent with Guidelines

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

Consultation Outside the Agency

The Agencies collaborated to draft these regulations. In conjunction with this PRA
clearance request, the Agencies sought and obtained public comment in its NPRM regarding the
proposed regulations as a whole and with particular respect to their disclosure requirements. The
final version of these regulations incorporate public feedback regarding the prior proposals.
Comment Summary
Of the comments received in response to the NPRM, four industry commenters
specifically addressed PRA burden and an additional five industry commenters generally
addressed burden issues. Some commenters noted that if the final rule would require furnishers
to engage in certain activities in response to a direct consumer dispute, the number of disputes
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received from consumers would likely increase significantly. Commenters also noted that the
Summary of Rights under the FCRA (currently provided to consumers) instructs consumers to
direct their disputes to the CRA that provided them with a copy of their file, which may explain
why most disputes are directed to CRAs. It is reasonable to assume that changes to the
disclosures made by CRAs to consumers (due to the changes the FTC will make to the Summary
of Rights to include information about consumers’ section 312 direct dispute rights) will likely
increase the number of disputes furnishers receive directly from consumers.
Accuracy of Estimates
One industry commenter questioned the Agencies’ estimates. The commenter stated that,
until furnishers begin implementing the proposal, it will be impossible to determine whether the
Agencies’ estimates to implement the final rule are understated. In addition, the commenter
stated that, until a final rule is published, it is impossible to estimate the time required to comply
with its requirements. The commenter further stated that it is “probably” unreasonable to
estimate that it will take only 5 minutes to prepare and send a notice since it is likely to take
much longer to review and investigate a dispute. The Agencies acknowledge that furnishers are
likely to spend more than 5 minutes reviewing and investigating disputes received directly from
consumers. The estimated PRA disclosure burden per notice published in the NPRM
represented strictly the 5 minutes it would take a furnisher to prepare and distribute each notice;
but it did not include the time required to review and investigate a dispute. However, given that
each notice will be consumer specific, and that the amount of automation used to send each
notice will vary based on each dispute, the Agencies have decided to re-estimate the average
time furnishers will devote to preparing and sending notices. The Agencies have increased the
estimated burden for preparing and sending each notice from 5 minutes to an average of 14
minutes per dispute to prepare and send a notice to a consumer. Our estimate of 14 minutes per
dispute is based upon an estimate of the average time required to respond to three different types
or categories of frivolous or irrelevant disputes. For purposes of estimating paperwork burden,
we assume that disputes based on form letters from credit repair organizations will make up 25
percent of all frivolous or irrelevant disputes and, on average, furnishers will devote 8 minutes to
each notice. We assume that duplicate credit reporting agency disputes will make up 60 percent
of frivolous or irrelevant disputes, and we estimate this category will require an average of 15
minutes for each notice. Disputes that are frivolous or irrelevant for other reasons are assumed
to make up 15 percent of frivolous or irrelevant disputes, and we estimate these other categories
of disputes will require an average of 20 minutes each.
Another commenter stated that, while most furnishers would only make minor
modifications, if any, to their existing practices to develop and implement the accuracy and
integrity program, even these minor modifications will require significantly more than 21 hours,
especially for furnishers of significant amounts of data from a wide range of business lines.
Review of Furnishing Practices
Two commenters expressed concern that furnishers would be required to audit their
furnishing practice. One of them stated that it could take several days for furnishers to design an
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audit of their furnishing practices and additional time to perform it and provide an audit report.
The commenter urged the Agencies to consider the impact of the requirements, keeping in mind
accumulating burden and cost. The commenter stated that it is critical that the Agencies
regulating financial institutions convey clearly and publicly to their respective examiners their
expectations of the implementation process, given the Agencies’ stated view that the final rule
will not impose significant burden or cost upon furnishers.
Another commenter opined that the suggested actions a furnisher should take to establish
and maintain a compliance program should be reduced or eliminated. The commenter stated it
was unclear how the suggested actions could be considered and documented, let alone designed
and implemented, in 21 hours, even for small furnishers. The commenter expressed the concern
that examiners of financial institutions will treat suggestions - such as the one that furnishers
audit their existing furnishing activities - as requirements, and added that it is unclear whether
any furnisher needs to audit its existing program to comply with the final rules. The commenter
additionally observed that the Agencies’ burden estimate of 21 hours to comply with the final
rule would be inconsistent with additionally having to conduct such audits. The commenter
asserted that it would require more than 21 hours simply to conduct an audit of a mid-sized
furnisher, and additional time beyond that to evaluate the audit results before drafting a
compliance program. Finally, the commenter predicted that the costs of an audit may lead some
institutions not to furnish information. Based on the comments received, the Agencies have
decided to increase the burden associated with this requirement from 21 hours to 24 hours (three
business days). In doing so, however, we note that, as stated earlier in the Supplementary
Information section, the requirement for a furnisher to periodically review policies and
procedures and update them as necessary is not an audit requirement. The final rule does not
impose an audit requirement on a furnisher to conduct an official examination and verification of
consumer accounts and records regarding its policies and procedures. In fact, the Agencies
believe that an audit would impose undue burden on furnishers, especially small furnishers, and
result in less information being provided into the credit reporting system.
Impact on Small Institutions
One commenter stated that the impact of the proposal on small institutions’ current
resources would be severe and that they would have to use significant resources to comply with
the proposed requirements. The commenter added that its member companies spend about one
hour verifying each dispute, and it expects a substantial increase in direct disputes once the rule
is implemented. The commenter anticipates that consumers will choose to use direct disputes
over contacting CRAs.
The Agencies recognize that a “one-size-fits-all” approach for implementing the
guidelines is inappropriate. The final rule specifies that a furnisher’s policies and procedures
must be appropriate to the nature, size, complexity, and scope of the furnisher’s activities. The
Agencies expect that the written policies and procedures for a small retail entity will differ
substantially from, and be significantly less complex than, those of a multi-billion dollar
financial services company. The Agencies have also addressed furnishers’ implementation
burden for § _.43 of the final rule by permitting furnishers to specify a direct dispute address for
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receiving such disputes. The address may be provided to consumers either by a CRA setting
forth the address, which is provided by the furnisher, on a consumer report or by other means to
consumers in writing or electronically (if the consumer has agreed to the electronic delivery of
information from the furnisher).
9.

Payments/Gifts to Respondents
Not applicable.

10. & 11.

Assurances of Confidentiality/Matters of a Sensitive Nature

No assurance of confidentiality is necessary because the regulations do not require
furnishers to register or file any documents with the Agencies. Moreover, the regulations do not
contain recordkeeping requirements.
12.

Estimated Hours Burden
95,000 total burden hours, rounded to the nearest thousand (57,000 hours for 16
C.F.R. 660.3 + 38,000 hours for 16 C.F.R. 660.4)
Number of respondents: 6,133
Number of frivolous or irrelevant dispute notices: 21,720
Estimated burden per respondent:
(a) 24 hours in the first year of the rule’s existence to implement written policies and
procedures and training associated with the written policies and procedures; (b) 8 hours
in the first year to amend procedures for handling complaints received directly from
consumers; (c) 8 hours to implement the new dispute notice requirement; and (d) 14
minutes per notice for preparation and distribution.2 Recurring burden, if any, in
subsequent years are further detailed below.
Estimated Hours Burden:
Section 660.3

As discussed above, the final rule requires furnishers to establish and implement
reasonable written policies and procedures regarding the accuracy and integrity of the

2

Preceding public comment feedback on the NPRM, FTC estimate were: (a) 21 hours in the first
year of the rule’s existence to implement written policies and procedures and training associated with the
written policies and procedures, (b) 4 hours in the first year to amend procedures to handle complaints
received directly from consumers; (c) 4 hours to implement the new dispute notice requirement; and (d) 5
minutes per notice for preparation and distribution.

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information relating to consumers that it furnishes to a CRA. The final rule defines “furnisher”
to mean an entity that furnishes information relating to consumers to one or more CRAs for
inclusion in a consumer report, but provides that an entity is not a furnisher when it: provides
information to a CRA solely to obtain a consumer report for a permissible purpose under the
FCRA3; is acting as a CRA as defined in section 603(f) of the FCRA; is an individual consumer
to whom the furnished information pertains; or is a neighbor, friend, or associate of the
consumer, or another individual with whom the consumer is acquainted or who may have
knowledge about the consumer’s character, general reputation, personal characteristics, or mode
of living in response to a specific request from a CRA.
Given the broad scope of furnishers, it is difficult to determine precisely the number of
furnishers that are subject to the FTC’s jurisdiction. Nonetheless, FTC staff estimates that the
final regulations in § 660.3 will affect approximately 6,133 furnishers subject to the FTC’s
jurisdiction.4 As detailed below, FTC staff estimates that the average annual information
collection burden during the three-year period for which OMB clearance is sought will be 57,000
hours (rounded to the nearest thousand).
The final rule is drafted in a flexible manner that allows entities to establish and
implement different types of written policies and procedures based upon the nature, size,
complexity, and scope of their activities. A furnisher may include any of its existing policies
and procedures in place to ensure the accuracy of information. The FTC believes that many
entities have already implemented a significant portion of the policies and procedures required
by the final rule. Entities have had an ongoing requirement under section 623 of the FCRA to
provide accurate information when they choose to furnish data to CRAs. The written policies
and procedures in the rule formalize the processes and controls necessary for accurate reporting.
Accordingly, FTC staff estimates that entities will require 24 hours to establish and implement
written policies and procedures, including the incremental time to train staff to implement these
policies and procedures, with an annual recurring burden of 2 hours; thus, as annualized over a
3-year clearance period, 9.33 hours (28 hours ÷ 3).
Accordingly, cumulative annualized burden for 6,133 furnishers subject to the FTC’s
jurisdiction to establish and implement written policies and procedures is 57,000 hours (rounded
to the nearest thousand).

3

15 U.S.C. 1681b(a).

4

This estimate derives from the number of furnishers reporting to the three nationwide CRAs
(approximately 18,000), minus the number of entities subject to jurisdiction of the federal financial agencies
and the NCUA (14,167 combined), and adding the number of furnishers to medical information bureaus
(approximately 500) and the number of insurance companies furnishing information to other types of CRAs
(approximately 1,800).

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Section 660.4
The final regulations will also require entities that furnish information about consumers
to respond to direct disputes from consumers. FTC staff estimates that the final regulations in §
660.4 will also affect approximately 6,133 furnishers subject to the FTC’s jurisdiction. As
detailed below, FTC staff estimates that the average annual information collection burden during
the three-year period for which OMB clearance is sought will cumulatively be 38,000 hours
(rounded to the nearest thousand).
In response to public comments and in concurrence with the Agencies’ modified estimate
noted above, the FTC now estimates that it will take furnishers eight hours to amend their
procedures to ensure that disputes received directly from consumers are handled the same way as
complaints from CRAs. FTC staff believes that furnishers of information to CRAs will have
automated the process of responding to direct disputes in the first year of the clearance,
therefore, there will be no annual recurring burden. Accordingly, the associated annualized
burden hours over a projected three-year OMB clearance would be approximately 2.67 hours.
Similarly, FTC staff also estimates that it will take furnishers eight hours in the first year to
implement the requirement to notify a consumer by mail or other means (if authorized by the
consumer) within five business days after making a determination that a dispute is frivolous or
irrelevant. FTC staff believes that furnishers will also automate this process in the first year of
clearance, so there will be no annual recurring burden. Likewise, annualized burden hours
would be approximately 2.67 hours.
In response to public comments and in concurrence with the Agencies’ modified estimate
noted above, the FTC now estimates that to prepare and distribute a notice to a consumer after a
furnisher determines that a dispute is frivolous or irrelevant will require approximately 14
minutes per notice. FTC staff does not know the current extent to which furnishers are already
directly receiving disputes and sending related notices to consumers. Nevertheless, FTC staff
assumes that 50 percent of all disputes will be filed directly with the furnisher after the rule is in
effect. As a result of these factors, FTC staff projects that furnishers under its jurisdiction would
directly receive 21,720 frivolous or irrelevant disputes requiring a notice each year.5 Thus, FTC
staff estimates it will take furnishers 5,068 hours, cumulatively, for each of the three years for
which OMB clearance is sought to prepare and distribute these notices.
Associated Labor Cost:
Section 660.3
The FTC staff derived labor costs by applying appropriate estimated hourly cost figures

5

This number derives from an estimate of disputes per year that relate to information provided by an
entity under the FTC’s jurisdiction (108,600), an estimated 50% of which will be received directly by
furnishers, and the Agencies’ estimated 40% increase of the number of written notices that furnishers will
provide to consumers in response to direct disputes that are frivolous or irrelevant.

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to the burden hours described above. It is difficult to calculate with precision the labor costs
associated with the final regulations, as they entail varying compensation levels of management
and/or professional technical staff among companies of different sizes. In calculating the cost
figures, staff assumes that managerial and/or professional technical personnel will draft the
written policies and procedures and train staff. In the NPRM analysis, FTC staff estimated labor
cost for such employees to be $38.93, based on 2006 BLS data for management occupations.
However, based on more current available BLS data, the FTC revised upward this prior estimate
to $41 for the July 1, 2009 published final rules.6
Based on the above estimates and assumptions, the total annual labor costs for all
categories of covered entities under the final regulations in § 660.3 are $2,337,000 (rounded to
the nearest thousand) [(57,000 hours x $41)].
Section 660.4
As with its PRA analysis for § 660.3, the FTC staff derived labor costs by applying
appropriate estimated hourly cost figures to the burden hours described above. Again, it is
difficult to calculate with precision the labor costs associated with the final regulations, as they
entail varying compensation levels of different types of support staff among companies of
different sizes. Nonetheless, in calculating the cost figures, staff assumes managerial and/or
professional technical personnel will amend procedures to ensure that disputes received directly
from consumers are handled the same way as complaints from CRAs and will implement the
requirement to notify a consumer by mail or other means, after making a determination that a
dispute is frivolous or irrelevant, at an hourly rate of $41.7 Staff now assumes that skilled
administrative support personnel will provide the required notices to consumers, and revised
upward the estimated hourly rate from $13.50 to $18.50.8
Based on the above estimates and assumptions, the total average annual labor costs for all
categories of covered entities under the final regulations in section 660.4 are $1,437,000
(rounded to the nearest thousand) [((2.67 hours) x 6,133 x $41) + ((2.67 hours) x 6,133 x $41) +
(5,073 hours x $18.50) (for preparing and distributing frivolous or irrelevant dispute notices)].

6

This revised hourly wage rate is based on http://www.bls.gov/ncs/ncswage2007.htm (last visited
March 3, 2009) (National Compensation Survey: Occupational Earnings in the United States 2007, US
Department of Labor released August 2008, Bulletin 2704, Table 3 (“Full-time civilian workers,” mean and
median hourly wages) for management occupations.
7

See supra note 6 regarding labor cost estimates under § 660.3 for management occupations.

8

See http://www.bls.gov/ncs/ncswage2007.htm (last visited March 3, 2009) (National Compensation
Survey: Occupational Earnings in the United States 2007, US Department of Labor released August 2008,
Bulletin 2704, Table 3 (“Full-time civilian workers,” mean and median hourly wages). This estimate is based
on rates appearing therein for a combination of potentially analogous employee types (e.g., first-line
supervisors of office support, accounting and auditing clerks, brokerage clerks, eligibility reviewers of
government programs).

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13.

Estimated Capital and Other Non-Labor Costs

The FTC staff believes that the regulations impose negligible capital or other non-labor
costs, as the affected entities are already likely to have the necessary supplies and/or equipment
(e.g., offices and computers) for the information collections described herein.
14.

Estimated Cost to the Federal Government

FTC staff estimates that a representative year’s cost to the FTC of administering the
regulations requirements during the 3-year clearance period sought will be approximately
$15,750. This represents one tenth of an attorney work year, and includes employee benefits.
15.

Program Changes or Adjustments

This is a new rulemaking. The difference, however, between the FTC’s burden hour
estimate for the proposed and final rules is an increase of 27,000 for the final rules, which
incorporates public comment input. Broken down by relevant FCRA sections, the initial and
revised estimates are as follows:
Section 312(a): 51,000 hours increases to 57,000 hours
Section 312(c): 17,000 hours increases to 38,000 hours
Estimated labor costs rise accordingly, and have also increased on account of updated
BLS data to estimate hourly wages. Further differences in the component estimates are detailed
in footnote 1 and the accompanying text of this Supporting Statement.
16.

Publishing Results of the Collection of Information
There are no plans to publish any information for statistical use.

17.

Display of Expiration Date for OMB Approval
Not applicable.

18.

Exceptions to the Certifications for PRA Submissions
Not applicable.

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