Credit Reporting Requirements

of Creditors Under the FCRA.

06/05/2000

As you are probably aware, in 1996 the Fair Credit Reporting Act (FCRA), which governs the activities surrounding the use of credit reports (consumer reports) was substantially amended. The driving force behind the changes was congress=s desire to relieve consumers of the eternal burden of having negative or erroneous credit information reflected on their report. To accomplish this objective, Congress placed into the Act new duties, responsibilities, and liabilities not only on consumer reporting agencies (CRA) and users of consumer reports, but also on those furnishing data to CRAs.

In addition to being obligated to furnish correct and accurate information; reporting closure of accounts; and notifying the consumer reporting agency of any disputes received by the consumer; the Act also mandates that data furnishers provide the CRA with the correct "date of delinquency". Congress intended for there to be one consistent date used to determine the period of time that negative information may remain on the consumer's consumer report. Unfortunately, the language of the statute concerning the date delinquency is vague and does not lend itself to easy interpretation.

Section 605(a)(4) of the FCRA provides that CRAs may not provide information to users of consumer reports, if such reports contain

"accounts placed for collection or charged to profit and loss which antedate the report by more than seven years."

Additionally, Section 605(c)(1) states that,

"The 7-year period . . . shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180 day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action."

Finally, Section 623(a)(5) requires that,

"a person who furnishes information to a consumer reporting agency regarding a delinquent account being placed for collection, charged to profit or loss, or subjected to any similar action shall, not later than 90 days after furnishing the information, notify the agency of the month and year of the commencement of the delinquency that immediately preceded the action."

Thus, the FCRA places an affirmative duty upon CRAs to remove from the consumer reports information that is more than 7-years plus 180 days past the "date of delinquency". The Act also places an affirmative duty on data furnishers to provide the "date of delinquency" within 90 days after originally reporting the information to the CRA. However, CRAs often require the "date of delinquency" be provided with the initial information.

Again, the calculation of the "date of delinquency" is the month and year that immediately preceded the account being placed for collections (internally or externally), charged to profit or loss, or subjected to similar action. Because this date frequently occurs prior to the day the account is placed with a third party debt collector and in order for the third party debt collector to accurately report the date of delinquency, the creditor must furnish this date to the third party. The third party debt collector has no way to determine the date of delinquency. More importantly, it would be outside the scope of the authorized duties of a collection agency to advise a creditor on the issue. The onus is on the individual creditor. Further complicating things, many CRAs will not accept information from third party debt collectors when the date of delinquency and the date placed with the debt collector occur in the same month or are less than 30 days apart. Thus, in order for the third party debt collector to report the account to the CRA, and to remain in compliance with the law, the creditor must provide to the debt collector, with each account, the accurate date of delinquency to the collection agency. Without this date, the third party debt collector is unable to report the information.

Reprinted with the permission of ACA, American Collectors Association, Inc. All rights reserved.