facta1004_qanda - BOL Learning Connect

2004 

New Notices and Responsibilities 

Under the Fact Act 

Part 2 of a Three-part Series 

Questions and Answers 

by 

Mary Beth Guard 

and 

Jack Holzknecht 

Question: What are suggested approaches for monitoring correct reporting to 

CRAs and confirmation of authorized change requests (in addition to the annual 

audit by the audit dept) 

Answer: The agencies are required, by the FACT Act, to develop guidelines for 

assuring the accuracy of reporting. Those guidelines will become your 

procedures. 

Question: Do we know whether these new notices will require the applicant's 

acknowledgement of receipt (signature) and whether a copy must be retained in 

the loan file for documentation 

Answer: The law does not require a signature, not does it establish record 

keeping requirements. However, you must establish some method for 

documenting receipt of the disclosure. Obtaining a signature is but one way of 

accomplishing this objective. If you maintain a copy of the disclosure as part of 

your effort to document receipt, you should establish a standard for retaining the 

record. 

Question: Does the FACT Act apply to Commercial or Business customers 

Answer: The FACT Act definitely applies to consumers, but also applies when a 

consumer report is used in a commercial transaction. For example, it appears 

Copyright, 2004, Glia Group, Inc. (BOL Learning Connect); Pegasus Educational Services, LLC; 

Mary Beth Guard and Jack Holzknecht. 

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that a pricing notice is needed when a consumer report is used to set pricing on a 

business loan. On the other hand, the provisions regarding disclosure of credit 

scores specifically state that they only apply to loans that have a consumer 

purpose. 

Question: Is the bank required to have a written FACT ACT Policy that is 

approved by the Board of Directors 

Answer: No. Most boards of directors do approve a policy that declares their 

intent to comply with each law. Generally the policy states the board’s intent to 

comply, delegates responsibility to a party to assure compliance, and establishes 

auditing and training requirements. 

Question: Regarding the alerts that you discussed in the last seminar. Our bank 

does not pull a credit report for every new loan request or card request, etc. 

what are reasonable practices the bank can use instead of pulling a credit report 

to see if there is an alert 

Answer: There is nothing in the Act that requires a lender to pull a credit report. 

If you pull a report and it contains an alert, you must have procedures to deal 

with the alert. 

Question: Is board approval actually required 

Answer: No. Examiners expect policies and procedures to guide compliance. It 

would be unusual see have polices and procedures that were not approved by 

the board. 

Question: Is it mandatory that a formal FACT Act policy be created and 

approved by the board We don't traditionally have a policy for every regulation. 

We do have a broader compliance policy that spells out compliance 

responsibilities. 

Answer: The FACT Act does not require board- approved policies and 

procedures. Clearly your existing policies will not be broad enough to cover the 

new FACT Act requirements. Examiners expect to see procedures to implement 

the requirements. 

Question: What suggestions or recommendations can you provide for dormant 

HELOCs, where the customer has the HELOC 'checks' in hand and does not 

draw on the account for 3 or more years. 

Answer: I am not sure what this has to do with the FACT Act, but you need to 

review your contract for the account to see what, if any provision has been made 

for closing accounts. 



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Question: Our approvals are not communicated directly to the applicants; they 

are sent to the Wholesale brokers. Will we be required to send the pricing notice 

directly to the applicant 

Answer: When a pricing notice is needed, someone will have to deliver it. The 

law doesn’t address this issue, but the regulations may. Unless contrary 

guidance is given, we suggest that the notice either be given directly to the 

applicant or have the broker do it on your behalf. 

Question: Does the FACT Act Cover other CRAs such as ChexSystems that is 

used to check for retail indicators when opening a new DEPOSIT account or 

reporting chargeoffs on the deposit-side 

Answer: As discussed during the program, the law is not clear on this point. 

The law references the Equal Credit Opportunity Act for guidance on what 

constitutes credit. Under ECOA, overdrafts are credit for some provisions, but not 

for other. So maybe deposit accounts are covered, maybe they are not. The 

model forms for notifying the customer of the reporting of negative information do 

not appear to contemplate use with deposit accounts. Hopefully the regulations 

will provide some clarification. 

Question: How/where do we specify the address where the consumer must 

notify the furnisher/us of inaccuracy 

Answer: The law does not specify a particular location. Adding it to your note 

form would work. Or, using a separate notice would also be effective. 

Question: If we send an applicant a notice of action taken for a counteroffer 

including the adverse action reasons and CRA information and the counteroffer 

affects pricing due to negative credit information, do we need to give the pricing 

notice If the counteroffer is not accepted, we do not give another denial as we 

provided the reasons on the counteroffer 

Answer: The law states that the pricing notice is not required when an adverse 

action notice is provided. Since you are providing an adverse action notice, then 

presumably no pricing notice is needed. If you applicant accepts the terms of the 

counteroffer, then there is no denial. If the loan is made on “less favorable” 

terms, the pricing notice may be needed. Stayed tuned for regulations. 

Question: In your material entitled "topics to address in policies and procedures" 

you mention sharing information with affiliates - hasn't this been addressed 

sufficiently with our Privacy Policy statements 

Answer: Sharing with affiliates will be covered during the November 10 th 

installment of this series. The paragraph in your Privacy Disclosure may need 

revision once the FACT Act affiliate sharing provisions are effective. 



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Question: If a consumer continues to make the same dispute claim, and the 

furnisher has already provided a Notice of Frivolous claim, are additional 

frivolous notices required to be sent to the consumer 

Answer: That appears to be the case. 

Question: We are a small business bank. We do not report to the credit bureaus. 

Will you highlight the issues of this regulation we will need to focus on 

Answer: 

Fraud and active duty alerts; 

Red flag guidelines; 

Handling notice of identity theft; 

Truncation of the last 5 digits of a debit or credit card; 

Sharing information with affiliates; 

Providing an oral, written, or electronic less favorable terms notice: 

The required notice and credit scores that mortgage lenders must provide; 

Notice regarding negative information; 

The actions that a user of a consumer report should employ when such user 

has received a notice of discrepancy in a consumer’s address; 

Disposal of consumer report information; and 

Protection of medical information in the financial system 

Question: Do the dispute requirements apply to information provided to Chex 

Systems or is it just loan information 

Answer: The Act appears to apply to both loan and deposit account information 

reported to any type of CRA. 

Question: Where does E-Oscar fit into this 

Answer: E-OSCAR is a web-based automated system that enables furnishers 

and CRAs to create and respond to consumer credit history disputes. The 

system tracks and manages disputes initiated by a CRA on behalf of a consumer 

and routes it to the appropriate furnisher. The furnisher replies to the initiating 

CRA and supplies updated information (if any). Copies of the corrected 

information are sent to the other CRAs. E-Oscar is a fee-based service provided 

by the Consumer Data Industry Association. Currently approximately 400 

institutions utilize the service. Participation in E-Oscar does not eliminate or 

change any responsibilities that the FACT Act places on your institution. 

Presumably the E-Oscar system will be modified to accommodate your increased 

responsibilities under the FACT Act. 



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Question: You stated that the credit report provider could recv the 

complaint/dispute...now you state that we can ignore a complaint unless it is sent 

in a certain format and to a certain address 

Answer: Previously the only recourse for a consumer disputing data, was direct 

contact with the CRA. The FACT Act now allows the consumer to make disputes 

directly to the furnisher of the information. If a dispute by a consumer is 

delivered, in proper form (including address), to the furnisher – then the furnisher 

must attempt to resolve the dispute. 

Question: If a consumer applies for a loan directly through our alternative 

mortgage division, would a notice be required Its already a 'given' that an 

alternative mortgage is going to have a rate less favorable than a standard 

mortgage, and most applicants already know that they have credit problems that 

make an alternative mortgage the only option. 

Answer: Generally a notice is not required if the consumer applied for specific 

material terms and was granted those terms. The fact that the loan is originated 

by your mortgage division has no impact on the answer. 

Question: Pg 15 - Furnisher's Response to Notice of Dispute --------Is it 30 

calendar days or business days 

Answer: The law states 30 days. Generally that would be calendar days. 

Congress tends to specifically state business days when that is their intention. 

Question: Does Bankers Online have any sample forms 

Answer: Not at this time. Keep watching the Banker Tools section. That’s 

where they would be placed. 

Question: Are all CRA's currently required to provide 1 free credit report per 

year. and how are they obtained 

Answer: A detailed description of the process for obtaining a free report was 

included in the materials for Part 1 of this three-part series. Please review the 

program material or review the program in the BOL archive. You may also wish 

to review this article on BOL: 

http://www.bankersonline.com/compliance/ci-regv.html 

or the pertinent rule: 

http://www.ftc.gov/os/2004/06/040624factafreeannualfrn.pdf 

Question: On page 19 did you mean there should be a Complaint Resolution 

Form on error resolutions in the past Or would this be going forward we begin 

the resolution forms 



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Answer: The Complaint Resolution form is not a required form. It is a sample 

form developed as part of the sample procedures. All disputes should be 

documented in some fashion to assure appropriate resolution and to provide a 

basis for tracking problems over time. 

Question: What is a banks responsibility when a consumer that has never been 

a customer contacts us with a dispute i.e. credit bureau shows them having a 

loan with us but they never have 

Answer: You need to follow the dispute resolution procedures established in the 

FCRA. 

Question: If our existing contracts do not contain language which address how 

and where a dispute should be addressed. Would you recommend that we send 

a blanket notice to our existing borrowers with that information 

Answer: Yes. Having all disputes directed to one address for resolution is the 

best method of assuring proper resolution. 

Question: Notice of action - page 11 does this notice apply to business loans 

when individual consumer reports are used. 

Answer: This section of the FACT Act does not state the loan types covered by 

the requirement, coverage is triggered when a consumer report is used in 

connection with the application. 

Question: Is action required for by a credit bureau when submitted by a credit 

repair organization 

Answer: The exclusion for credit repair organizations applies only to direct 

disputes from the consumer to the furnisher. 

Question: Indirect lending - if you are buying dealer loans at different levels, 

based on credit score, can you group these loans without doing a notice 

Answer: We’re really not sure what you are asking here. When you say 

“different levels,” do you mean price levels Is the notice you are referring to the 

pricing notice Please send an email to mbguard@bankersonline.com to clarify 

your question. We apologize for the inconvenience. 

Question: Notice of negative information - Are co-signers and guarantors 

covered by this notice requirement 

Answer: The notice must be provided to “customers” as defined in the Gramm- 

Leach-Bliley Act. The term would include co-signers, but not guarantors. 



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Question: With regards to the Risk Based Pricing Notice . . . Will this 

requirement be applicable to the Indirect Lending world . . . the nature of indirect 

lending (automobile financing) a customer does not go into a dealer and apply to 

any particular bank - the application is sent to various lenders. 

Also you may have 2 customers that receive the same rate from the bank but the 

dealer marks them up differently . . . will the notice be required to those 

customers 

Answer: The FACT Act does not exclude such transactions, but watch for the 

regulation, which may create some exceptions. 

Question: Does the credit score notification to mortgage applicants apply to 

interim construction loans (both with and without loan commitments by an outside 

mortgage company) 

Answer: The provision applies to any person who makes or arranges 

loans and who uses a consumer credit score in connection with an 

application initiated or sought by a consumer for a closed end loan or the 

establishment of an open end loan for a consumer purpose that is secured 

by 1 to 4 units of residential real property. There is no exclusion for 

construction loans. 

Question: Disclosing credit scores -- when more than one bureau is used, more 

than one borrower/co-signer/guarantor, etc. and rights of privacy - who gets what 

info 

Answer: The exclusions provide that only one disclosure is required per 

transaction. That leaves the dilemma of determining which applicant will receive 

credit score information. If information were obtained from more than one CRA, 

the individual would be entitled to receive all of the information. 

Question: My question relates to HR notices/responsibilities. I just read in a 

discussion thread that a CBI can be pulled on an employee w/o getting a 

consent. I just want to confirm that I am not misunderstanding this (because I 

missed it!) and that what Bear Collector responded is accurate: for an employee 

investigation, employers no longer have to (1) notify the accused of the 

investigation, (2) seek consent from the accused, (3) provide the accused with a 

copy of the report, or (4) wait a "reasonable" amount of time between giving the 

accused a copy of the report and taking adverse action. 

Answer: Under an FTC staff opinion known as the “Vail” opinion, which was 

issued in 1999, if an employer was going to utilize a third party to do an 

investigation of an employee, Bear Collector is correct that FACTA effectively 

legislatively reverses the Vail opinion and, as a result, employers no longer have 

to (1) notify the accused of the investigation, (2) seek consent from the accused, 



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(3) provide the accused with a copy of the report, or (4) wait a "reasonable" 

amount of time between giving the accused a copy of the report and taking 

adverse action. For full details about the conditions under which a consumer 

report may be pulled in connection with employment purposes, see Section 604 

of the amended FCRA, as shown on pages 12-15 of this pdf document: 

http://www.ftc.gov/os/statutes/031224fcra.pdf 

Question: What do we do in the instance when we use multiple bureaus to 

make our final decision . . . which score do we use Do we disclose all bureau 

scores used 

Answer: The consumer is entitled to the credit score information. Since the 

score differs from source to source, it appears that the consumer is entitled to all 

of the information. 

Question: We use a judgmental system for approving loans. Our credit reports 

do contain a credit score, but it is not used. Does this eliminate our need for the 

Credit Score disclosure 

Answer: The law states that the notice is required when the credit score is 

“used.” If the credit report contains adverse information and a low score and the 

credit is denied because of the credit history – How do you prove that you did not 

use the score Our advice is to give the notice and the score information if you 

“get” a score. If you don’t use the score, have the CRA remove it from the report. 

Question: What are the record retention requirements of the FACT Act 

We have combined the FACT & FCRA policy into one policy. Our FCRA policy 

already addresses record retention (2-years). Is that adequate 

Answer: Neither the FCRA nor the FACT Act establishes record retention 

requirements. Therefore, your current policy is more than adequate. 

Question: With respect to the Active Duty Alert, do data furnishers have any 

responsibility with respect to either reporting these alerts to the national credit 

repositories or responding to these alerts 

Answer: A detailed description of the process for handling active duty alerts 

was included in the materials for Part 1 of this three-part series. Please review 

the program material or review the program in the BOL archive or review Section 

112 of FACTA. 

http://www.bankersonline.com/idtheft/FACTAct.pdf 



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Question: Why didn’t Congress simply place the burden of these alerts on the 

Department of Defense, similar to the DOD web site for SSCRA verification at 

https://www.dmdc.osd.mil/udpdri/owa/sscra.page 

Answer: Don’t frustrate yourself by trying to apply logic to actions taken by 

Congress. 

Question: The emphasis on Part 1 of the FACT Act Webinars (Identity Theft 

Provisions) was for brick and mortar banks (i.e. have a customer provide certain 

type of ID in person). We are an internet bank, no branches. Issues should be 

addressed to both virtual and brick and mortar banks. 

Answer: The FACT Act does not distinguish between types of banks. The 

requirements that apply to “brick and mortar” banks also apply to internet banks. 

Question: Regarding notice of action taken regarding pricing: 

a. Does this notice apply to commercial individuals if the loan is business 

purpose if a consumer report is used and the terms are materially less favorable 

because of the information in the consumer report 

b. Who must receive the notice: only one applicant, all applicants, 

guarantors 

c. If, after a review of the consumer report, it is determined that the applicant 

cannot qualify for the standard product applied for, but can qualify for a different 

product (which has materially less favorable terms: rate is higher term is 

shorter), would this qualify for the notice 

d. Is it correct that if a FCRA adverse action notice is sent, we do not have to 

give this disclosure 

Answer: 

a. Yes. 

b. The notice must be given to a consumer. If multiple consumers are 

involved, the notice is apparently given to those whose credit scores were 

used, however, we will not know for sure until there is a final rule on the 

subject. 

c. This scenario appears to be exactly the type of situation covered by the 

requirement. 

d. Yes. 

Question: Disclosure of credit scores: 

a. If more than one applicant, must each get his/her own disclosure of his/her 

own credit score 

b. If we receive a credit score from more than one bureau, do we have 

disclose each one that we receive 



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credit score information. If information were obtained from more than one CRA, 

the individual would be entitled to receive all of the information. 

Question: Notice of Negative information - this applies to "customers" as that 

term is defined in section 509 Public law 106 - 102, which I believe refers to the 

Privacy rules: 

a. Does this notice apply to commercial customers (Privacy does not.) 

b. Does this notice apply to guarantors (Privacy does.) 

c. Must each customer receive a separate notice (Privacy I believe permits 

one notice to all at one address - FACT doesn't say that.) 

Answer: 

a. Apparently not. 

b. I believe that for Privacy purposes, the term “customer” does not include 

guarantors, unless you are a credit union. The same would hold true for 

FACT Act purposes. 

c. The FACT Act notice must be provided to the consumer to whom the 

negative information relates. 

Question: How do we handle training by Dec 1 with so many unknown issues 

still in the FACT act It will be hard enough to get everyone in one time. 

Answer: The effective dates for the various sections of the FACT Act are set 

either by law or by regulation. The regulatory agencies don’t have the ability to 

change all of the effective dates. The agencies have thoroughly boxed you into a 

corner. Hopefully they will present a solution to this dilemma. If the agencies 

don’t act, and act soon, you will have to make a good faith effort to comply. 

Question: Could the notice regarding pricing be included in the loan application 

Could this notice also be standard on the adverse action notice 

Answer: The FACT Act specifies that the notice can be given at application. 

Including it on the application appears sufficient. The pricing notice is not needed 

when an adverse action notice is given. 

Question: Shouldn't the requirement to investigate inaccurate reporting extend 

to those individuals who have been reported to ChexSystems if that information 

is deemed by the consumer to be inaccurate 

Answer: Yes. 

Question: Credit score disclosures - Can we implement this prior to 12/1 or do 

we have to wait 



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Answer: If the credit bureau provides you with all of the information needed to 

comply, then you do not have to wait until 12/1. 

Question: We have an in-house customized credit score program. How does 

this impact us if the customer requests the credit score 

Answer: You must either give the credit score information from your system or 

the credit score information from a CRA. 

Question: Does the special rule for mortgage loans disclosure apply to 

secondary market loans where the bank does not make the credit decision 

Answer: The rule applies to “any person who makes or arranges loans and who 

uses a consumer credit score…” It applies to either or both parties if the party 

uses a credit score. 

Question: Is the credit score disclosure required only upon request by the 

consumer as is the practice for CRA, or on all consumer purposes loans secured 

by 1-4 family mortgages 

Answer: The disclosure must be made on all loans as soon as reasonably 

practicable. 

Question: Do the credit score and key factors have to be provided in writing or 

can the lender send the required notice and tell the applicant that they can 

receive the credit score information if they contact us and ask us for it 

Answer: All of the information must be disclosed as soon as reasonably 

practicable. 

Question: If you get a bureau that has several variations and different scores, 

which do you suggest be disclosed 

Answer: All of them. 

Question: Do we provide the credit scores only upon request, or do we routinely 

provide it to all loans that apply 

Answer: Routinely provide. 

Question: Are you to provide one disclosure per mortgage loan application or 

one to each applicant 



credit score information. 



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Question: Is it okay to provide a copy of the credit report used along with the 

notice in lieu of typing in the specific score information on the notice 

Answer: For several years, the FCRA has allowed users of consumer reports to 

disclosure the contents of a report to a denied borrower. For other borrowers, the 

information should be transcribed to a separate form. 

Question: I have spoken with our Mortgage Credit Service Companies and they 

will be providing the Credit Score Disclosures at no charge - we simply print two 

copies of it with the credit report. We would then obtain the borrower's signature. 

Answer: We are hoping that all providers may this process this simple. 

Question: If you have an existing loan and your processing an assumption. Do 

you need to disclose the credit score when the new credit report is run 

Answer: Assumptions are not addressed in the FACT Act. We do not have 

regulations yet. The safe answer is to provide the disclosure when needed on 

such transactions. 

Question: CBC and MCS will both provide the credit score disclosures for the 

lender. 

Answer: More good news. 

Question: Am I correct in understanding that the notice can be provided to only 

one applicant but the credit scores must be provided to each applicant 



credit score information. 

Question: Rather than creating a form, would it be possible to just send a copy 

of the credit report to the customer 

Answer: For several years, the FCRA has allowed users of consumer reports 

to disclosure the contents of a report to a denied borrower. For other borrowers, 

the information should be transcribed to a separate form. 

Question: In the case where a bank would use a credit bureau score as well as 

a Fair Isaac score. Does the bank have to provide two (2) Credit Score Notices 

Answer: No. You may use either. 



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Question: Can we disclose this on the final Truth and Lending disclosure Also, 

how important is it that we use the exact wording of the model notice Our 

application has a statement that basically covers the required information. 

Answer: The credit score information must be provided as soon as reasonably 

practicable. That does not appear to allow waiting until a final TIL is delivered. 

The only information that may appear on a TIL disclosure is required TIL 

disclosures and information deemed to be directly related to the TIL disclosures. 

The credit score information does not meet the requirements. We encourage you 

to use the exact wording of the model notice. 

Question: If you use multiple CRA's, how would you be able to give the notice at 

the time of application, since you will not be able to supply the name & info for 

the CRA until AFTER you have obtained the report 

Answer: The notice can be given at application and the credit score information 

can be delivered once the credit score information is obtained. 

Question: Are we to comply with this requirement by 12/1/04 or is the 

compliance date pending final regulation 

Answer: The established effective date is December 1, 2004. 

Question: Are we required to disclose the credit score on a home loan, or only 

upon request by the consumer 

Answer: The credit score information must be provided as soon as reasonably 

practicable. 

Question: Does the negative notice apply to Bounce Protection 

Answer: As discussed during the program, this is an open question. We advise 

you to assume that deposit accounts will be covered and to plan accordingly. The 

regulation will establish final coverage rules. 

Question: Are we required to send a notice of negative information to customers 

concerning charge off loans or foreclosure procedures 

Answer: Section 217 defines the term “negative information” to mean 

information concerning a customer’s delinquencies, late payments, insolvency, or 

any form of default. 

Question: In your opinion is it acceptable to provide the notice of negative 

information in your application form, provided it is separate from Reg Z initial or 

early disclosures, but given at the same time 



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Answer: The law states that the notice may be sent prior to reporting the 

negative information, but does not clarify how early such notice may be provided. 

Providing the notice at application is clearly prior to reporting negative 

information. Reportedly, the FTC is lobbying that the notice be given in 

conjunction with the negative event (i.e.; on the late notice). 

Question: We pull a credit report to qualify a customer for a debit card and 

deposit accounts. Would we have to provide our customers the credit score 

notice in those instances 

Answer: Credit score information only has to be provided by mortgage lenders. 

Question: Do you need to send the notice of negative information to dormant or 

charged off accounts 

Answer: There is no such exception in the law. 

Question: Can the Notice to the Home Loan Applicant (on page 25 of 

presentation) and the Credit Score Notice (on page 28 of the presentation) be 

combined into one disclosure 

Answer: Probably. Both the required notice and the credit score information 

have to be delivered as soon as reasonably practicable. The notice could be 

delivered at the time of a face-to-face application, but the credit score information 

cannot be provided until it is obtained from the CRA. Hopefully the regulations 

will resolve this dilemma. 

Question: FACT says the notice of negative information may not be 'included in 

the initial disclosures' under 127(a) of TILA. Do you think you could include it 

'with' these initial disclosures, as a separate notice, on a separate piece of 

paper 



Providing the notice with the early TIL disclosures is clearly prior to reporting 

negative information. Reportedly, the FTC is lobbying that the notice be given in 


Question: A) Do financial institutions have to provide the credit scores only if the 

consumer asks 

B) What if your institution used a tri-merge report that contains all three scores 

Answer: The credit score information must be provided whether or not the 

consumer requests the information. 



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The safe answer on the tri-merge is to disclose all three scores. 

Question: Neg. Info - Could this notice be included in the loan application or 

deposit signature card If so, what are the drawbacks 



Providing the notice at application or on a signature card is clearly prior to 

reporting negative information. Reportedly, the FTC is lobbying that the notice be 

given in conjunction with the negative event (i.e.; on the late notice). 

Question: Can we include the notice of negative information in our Privacy 

Notice 



Providing the notice with your privacy notice is clearly prior to reporting negative 

information. Reportedly, the FTC is lobbying that the notice be given in 


Question: If we provide the negative information notice on late notices, some 

loan customers will receive it whose loans are not reported to the credit bureau 

(business/ag). Is this a problem that they receive the notice too 

Answer: The law states that providing the B-1 model form does not then require 

you to report negative information. On the other hand, why send a notice that 

does not apply. At a minimum the practice will generate a lot of questions. 

Question: Since the CIP is based on a credit report and the 'original borrower' 

received a copy of that credit report, then how can you determine who is the 'real' 

customer. 

Answer: We don’t understand this question. Could you clarify it and email the 

clarified question to mbguard@bankersonline.com Thank you. 

Question: How does the mandatory use of E-Oscar as of 10/1/04 figure into the 

reconciling address discrepancies 

Answer: Address discrepancies must be resolved whether you subscribe to E- 

Oscar or not. Hopefully E-Oscar will make the process easier. 

Question: Disposal of credit information - Consumer information includes 

information 'derived from a consumer report.' Would this including lending 

memorandum, write-ups detailing a person's debt, etc 



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Answer: We will know for sure when the regulations on disposal are finalized. 

Until then, we think not, because the proposal defines the term to mean “any 

record about an individual, whether in paper, electronic, or other form, that is a 

consumer report or is derived from a consumer report and that is maintained or 

otherwise possessed by or on behalf of the [institution] for a business purpose.” 

It also includes a compilation of such records. Unless the internal lending 

memorandum or other documents included information drawn from a consumer 

report, it would not appear to be governed by this new requirement; however, it 

would still be governed under an institution’s general information security 

program. 

Question: Does this rule require modification of contracts with outside vendors 

who obtain, in connection with whatever service they render to the bank, 

'consumer information', or do you just need to look at your contracts with 

companies that dispose of consumer information 

Answer: This rule will require a modification of financial institution information 

security programs to specifically address disposal of consumer information. The 

Interagency Guidelines for Safeguarding Customer Information already require 

financial institutions to have contracts with service providers who, in the course of 

providing services to the institution have access to customer financial 

information. The contract that has been required since 2001 requires the service 

providers to implement and maintain an information security program designed to 

meet the objectives of the information security guidelines. Now, under the 

proposed information disposal rule, the contract would need to go further, and 

financial institutions would need to contractually require their service providers to 

develop appropriate measures for the proper disposal of consumer information 

and, where warranted, monitor service providers to confirm them have done so. 

Under the proposal, there would be a reasonable period of time after the final 

regs are issued for the contract amendments to be made. (Expect a year after 

the rules become final to be the timeframe.) 

Question: The law specifically states residential real estate 1-4 properties, does 

that mean that mobile homes are excluded 

Answer: It appears that a loan secured by a mobile home and the land is 

covered and needs the credit score information. 

Question: Are we to give this disclosure to guarantors on whom a credit report 

was obtained 


transaction. That leaves the dilemma of determining whether a guarantor will 

receive credit score information. 



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Question: Instead of using the sample Credit Score Notice in your material, 

could we provide the model notice and then give the applicant a copy of the 

credit report (which will contain the credit scores, range of scores, factors 

affecting the scores, etc.) 

Answer: For several years, the FCRA has allowed users of consumer reports 

to disclosure the contents of a report to a denied borrower. For other borrowers, 

the information should be transcribed to a separate form. 

Question: For Lenders who use a customized credit score model, does the 

credit score disclosure still apply 

Answer: Yes. You may give your customized score or the score generated by a 

CRA. 

Question: Where is the best place to get a list of which parts of the Act will 

definitely go into effect on 12/1 

Answer: 

http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040205/attachmen 

t.pdf 

Question: Can the Negative Information B-1 be given separate from, but at the 

same time such as loan closing, as the TILA disclosures 



Providing the notice with the early TIL disclosures is clearly prior to reporting 

negative information. Reportedly, the FTC is lobbying that the notice be given in 


Question: Is Chex Systems/EFunds considered a CRA under the FACT ACT If 

we report DDA accounts to this agency only, do we have to give the negative 

notice 

Answer: Yes, such companies are CRAs. As discussed during the program, it 

is not yet clear whether a negative notice is needed for activity on such accounts. 

Question: Do you have a list of all items/sections that are final now that could be 

used for training 

Answer: Section 151 of the FACT Act, which covers providing information to 

victims of identity theft, took effect June 4, 2004. It is the only section that is fully 

effective at present. 



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Question: Besides the Negative Information Notice, what other requirements 

have actually taken effect 

Answer: The forms for providing notice of negative information are final, but the 

you do not have to begin complying until December 1, 2004. Section 151 of the 

FACT Act, which covers providing information to victims of identity theft, took 

effect June 4, 2004. It is the only section that is fully effective at present. 

Question: Page 26 of the materials states that no one is required to provide 

more than one disclosure PER LOAN TRANSACTION. Therefore, lenders are 

NOT required to notify EACH applicant of his/her credit score. 

Answer: That appears to be the case. The dilemma then is determining which 

applicant, in the case of multiple applicants, gets the notice. 

Question: If a credit report is obtained as part of collection efforts, will a notice 

need to be provided to the borrower 

Answer: No. 

Question: Do you advise sending the negative information notice to current loan 

customers 

Answer: The answer depends on the method chosen for implementing 

compliance. If you are placing the notice on each late notice, then there is no 

need to mail it to existing customers. If you are going to provide the notice at 

application or closing, rather than in conjunction with the negative event, then 

you will need some form of notice to existing customers. 

Question: A list of the portions of the act that are and are not final would be 

helpful. 

Answer: Section 151 of the FACT Act, which covers providing information to 

victims of identity theft, took effect June 4, 2004. It is the only section that is fully 

effective at present. 

Question: If a key factor that adversely affects the credit score consists of the 

number of inquiries--is that factor one of the 4 factors, or a 5th factor 

Information from one of the credit bureaus suggests that they will be sending it to 

us as a 5th factor. 

Answer: You are supposed to limit the factors to four, and when the number of 

inquires is one of the factors that adversely affected the score, it is supposed to 

be one of the four. 



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Question: If a borrower calls us because of a problem on their credit report, can 

we refer them to the CRAs This would only be if we have a problem with 

inaccurate information with only one CRA and our system is already reporting the 

loan correctly. In the past this has been the best way to resolve an error that 

may have originated at the CRA. 

Answer: You must conduct an investigation and correct any inaccuracies. If the 

problem is with the CRA, then the CRA will have to fix it. 



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