CREDIT CORNER

 

REPORTING AGENCIES PREPARE TO OFFER FREE REPORTS

 

-         Collections & Credit Risk, June 2004

 

 

The Federal Trade Commission is expected this month to issue a final ruling concerning when credit-reporting agencies must comply with the free credit report provision in the Fair and Accurate Credit Reporting Act of 2003.

 

The anticipation is making many in the industry nervous about how they’ll be able to handle the increased demand and the strain that will come with the new rule.  In April, the House Financial Services Committee submitted a letter to the FTC outlining doubts that the centralized source Congress wants to offer the reports will be able to accommodate the volume of requests.

 

The centralized source will allow consumers to order all three credit reports from the major bureaus though an Internet website, toll-free number, or postal address.  “A system that fails to afford consumers reliable and convenient access to their reports will quickly lose consumer’s confidence, undermining the very benefits that Congress sought to achieve …,” the House Committee said in the letter.

 

Many are concerned about surge protection.  If millions of people request a report on the same day, or even the same week, the system could be overwhelmed.  While the House acknowledged it’s difficult to predict the demand, they did say there is some data available to provide a helpful starting point.  The experience among the seven states that already have free credit report requirement is that demand for all types of file disclosures jumped around 2.5 times that of the average for the rest of the nation.

 

At this time, the FTC hadn’t issued final guidance to CRAs about how to comply with the new program.  In the proposed rule issued in March, the FTC planned to roll out the program regionally during a nine-month period beginning with western states on December 1, 2004 and completing the rollout by September 1, 2005.