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FDIC Federal Register Citations

BB&T Corporation

May 19, 2006

Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW.
Washington, DC 20429  (via Comments@FDIC.gov)

RE: RIN 3064-AC99

BB&T Corporation (“BB&T”) appreciates the opportunity to comment on the Interagency proposed rulemaking: Procedures to Enhance the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies under section 312 of the Fair and Accurate Credit Transaction Act (FACT Act). BB&T is a regional financial holding company with three state-chartered banks that have branches in twelve states as well as multiple non-bank subsidiaries.

Our comments in response to the OCC, Board, FDIC, OTS, NCUA, and FTC (the Agencies) request are as follows:

Accuracy and Integrity Guidelines and Regulations:

Financial institutions have a vested interest in the accuracy and completeness of the information reported to the consumer reporting agencies (CRAs). The obvious reason for the desire for correct information is the impact on our customers. As financial institutions compete for growth in loans, deposits, etc., the perception the customer has of being treated fairly is of great importance in obtaining new relationships as well as maintaining and growing current relationships. Therefore, the accuracy of the data reported by financial institutions can play an important role in how the financial institution is perceived by consumers.

Another reason that financial institutions strive for complete and accurate information reported to the CRAs is that same information, in many cases, is used by the financial institutions to make future lending and/or account decisions. The activity found in the tradelines as well as the credit scores built on this information are key factors in determining the credit worthiness of potential borrowers. The same CRA information relied on by the customer is the same information the financial institution uses to make the lending decision. In order to make sound, rational lending decisions that are priced appropriately for risk, the information on which that decision is based must be accurate and complete. Each party that relies on consumer report information desires accurate information.

The difficulty in setting guidelines and regulations is in the definition of accuracy. Consumers often have a different perspective on what is considered accurate, thus may dispute information that is technically accurate. An example is a joint loan obtained when a couple was married but now they are divorcing. A court may rule that, between the spouses, Spouse A is responsible for payments on that account. As a result Spouse B believes that he should no longer be tied to that account for credit reporting purposes. In fact, the contract is still in effect for both parties unless specifically released by the lender, therefore, accurate reporting would require including both borrowers.

There are also timing issues that can occur that could affect the perceived accuracy of the information. Many financial institutions report credit information monthly. Changes, such as balances and addresses, that occur between reporting periods are not individually reported as they occur. Consumers then may dispute information that will be updated automatically at the end of the cycle.

A difficulty often faced by financial institutions that furnish information (data furnisher) to a CRA is the difference in the processing methods by the various CRAs. Financial institutions that provide the same data to multiple bureaus in an industry-accepted format, such as Metro 2, may see different data after the CRAs have processed. Each CRA has its own edits, quality control methods and standards that result in differences on the credit file. In addition to being difficult for data furnishers, this is very confusing for the consumer. To assist data furnishers in the process of reporting their consumer credit data to the CRAs, the CRAs adopted a standard electronic reporting format called the Metro 2 format.

What data furnishers would like to see implemented into the Metro 2 format is the ability to report an account that has been deleted in error or the ability to report an open account with an automated consumer dispute that the CRA’s software has deleted. As a result, data furnishers are unable to provide accurate and complete data to the CRAs. Addressing these issues would assist data furnishers to provide the CRAs with the most accurate reflection of a consumer’s tradeline.

Historically, large data furnishers have reported data using tape cartridges. With increased concerns regarding security, the trend recently has been towards electronic transmission of the data using FTP or Connect Direct, for example. Electronic means, rather than hinder the process for the consumer, should actually help by providing information more quickly to the CRAs as there is no mail time delay. Updated data actually reaches the CRAs in a matter of minutes or hours depending on the size of the portfolio.

(B) Direct Dispute Regulations:

A data furnisher should not be required to investigate a dispute concerning the accuracy of information when the same consumer repeatedly disputes the same information. Once the data furnisher has investigated the accuracy of the data twice and confirmed the accuracy, further re-investigation is a waste of time. The goal of the consumer is to dispute and hope that the time frame in which the furnisher has to respond could expire causing the negative, but accurate, information to be deleted. Ensuring a process is in place that encourages accurate reporting while discourages abuse is advantageous to all parties involved and the Agencies should address this issue in their regulations.

A consumer report is the product of a CRA and any investigation of the information contained in a consumer report should begin with the CRA which compiled the information and provided it to the consumer. Data furnishers, on the other hand, merge, change names, move, etc. and it is more difficult, frustrating, time-consuming and costly for the consumer to determine where to send a dispute letter or find a contact point.

Beginning the investigation with the CRA benefits consumers in several ways. For example, by contacting the CRA, the consumer needs to make only one inquiry to one party. Two examples illustrate this point. First, if the consumer alleges multiple errors on the report, the consumer need only contact the CRA and the CRA will coordinate the investigation among multiple data furnishers as necessary. Once the investigation is complete, the CRA will inform the consumer of the results. In this way the consumer does not need to draft several different letters and monitor the progress of several different data furnishers’ investigations. Second, if the consumer contacts the data furnisher, and the information provided by the data furnisher was accurate, the consumer would most likely need to make a second inquiry to the CRA to determine whether the error was the CRA’s. At times, CRAs make errors in processing data and update credit files with the wrong information, i.e. mix different consumers’ information. In both of these examples, beginning the reinvestigation with the CRA would be more efficient for the consumer.

Initiating the investigation with the CRA is also more efficient for the consumer reporting system. Only the CRA can determine whether the alleged error was its own or another party’s. If the error was the CRA’s, the error can be corrected without any communication between the CRA and the data furnisher and system exist to accomplish this. However, if the investigation begins with the data furnisher and the data furnisher’s information was inaccurate, it will obviously make the correction and report it to the CRA using e-OSCAR. If the data furnisher’s information was accurate, however, the data furnisher has no provision to note this in e-OSCAR. Although the data furnisher’s records show it as being accurate, the e-OSCAR system would not have a record of this dispute. The customer would have to then contact the CRA to file another dispute because the credit report is still showing as inaccurate, which in turn would be sent via the e-OSCAR system and the research would be duplicated by the data furnisher. No system exists to notify the CRA and this creates a bureaucracy that is easily solved by having the customer go to the source of the information first. No financial institution would ever turn a customer away, regardless of the outcome of the proposal, but we feel the Agency needs to stress that the customer should go to the CRA first before going directly to the data furnisher.

If consumers were required to dispute directly with the data furnisher rather than the CRA, data furnishers would need to set up contact points. Where possible, data furnishers would set up centralized contact points including call centers and mailing addresses. The cost of this could be great but would depend on the size of the organization. The cost across all data furnishers, although not easily quantified, would be significant. The cost would be even more for data furnishers due to disparate systems, geographic or other reasons that they could not centralize the contact points. Multiple contact points within an organization would create more confusion for the consumers as well. The CRAs already have the infrastructure in place to handle these disputes so encouraging consumers to use the established process will keep the total industry cost down and maintain a simpler process for the consumers.

The CRAs also developed an online solution for processing automated credit disputes referred to as e-OSCAR. The CRAs maintain the procedures and the e-OSCAR system which allows the CRA to communicate the dispute to the data furnishers. The dispute and response are also sent to the other CRAs, thereby keeping all of the information sent by the data furnisher in sync. In addition, this procedure provides an audit trail to monitor the dispute. Disputing with the CRA allows the consumer to have a singular touch point in which to enter multiple disputes, if necessary, rather than dispute each item with each separate data furnisher.

Also, any regulation written by the Agencies needs to consider limitations placed on data furnishers by the CRA systems such as Metro2 and e-OSCAR that are being used in the dispute process. In many financial institutions, the data furnisher’s procedures were written by the CRAs as they wrote the procedures to Metro2 and e-OSCAR. For example, one limiting factor with the e-OSCAR system is the clarity of the disputed information. CRAs sometimes provide limited information to the data furnisher regarding the specifics of the dispute. To alleviate this issue, more specific codes are needed in this system to identify the specific reason for the dispute. Data furnishers may place an inquiry on a consumer’s credit file in error and should be afforded the opportunity to request to have it removed using e-OSCAR system. Once the request has been submitted, it would be very beneficial for the consumer to receive a disclaimer from the CRA, stating the types of requests that will affect his or her credit score and a notice as to when an inquiry will be placed on a consumer's file.

Likewise, a notification should be sent to the data furnisher when a consumer’s tradeline is not reported due to the spelling of the consumer's name or at the discretion of the CRA. For example, a consumer with the first name of "Candy" would not be reported by the CRA because this word would not be considered to be a valid name by CRA criteria, therefore, causing the consumer's tradeline to not be reported.

Also very beneficial would be consistent training overseeing the quality of work produced by the CRA's. Data furnishers continuously receive e-OSCAR requests that have pertinent dispute descriptions omitted or the dispute reason and the FCRA relevant information are in direct conflict. For example, if a dispute is received with an account status 13 ( Paid /Closed Account/ Zero Balance), there should also be a payment rating associated with this account.

The Agencies must recognize that data furnishers would incur significant costs to build the necessary infrastructure if they are required by regulation to expand their handling of direct disputes under the FCRA. Only a small portion of our disputes come directly from consumers today. We suspect that the volume of disputes received by data furnishers would increase significantly if government-mandated disclosures suggested that they should contact the furnisher.

Although we welcome the opportunity to address customer disputes, there are disputes that are clearly generated by “credit repair” organizations or web sites. Of the disputes initiated directly by consumers, many of them are obviously form letters making dubious allegations. For example, the letter may request that the data furnisher affirm the existence of the debt or challenge the legal obligation to repay any loan. These types of letters can be found on the Internet, among other places. It is clear that the allegations made in the letters are frivolous, but many data furnishers will review the consumer’s account in an attempt to make sure that a consumer did not fall for a ruse when all the consumer wanted to do was challenge a legitimate error. Again, once the data furnisher has investigated the accuracy of the data twice and confirmed the accuracy, further re-investigation is not needed.

Thank you for the opportunity to provide these comments. We understand the difficulty of promulgating a regulation that is mandated by law yet appropriate to protect legitimate business needs with respect to furnishers establishing policies and procedures. We commend you for considering the needs of all.

Sincerely,

Mark D. Vaughn, CRCM
Branch Banking and Trust Co.
Senior Vice President and Senior Corporate Compliance Mgr.

 


Last Updated 05/22/2006 Regs@fdic.gov

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