Identity Theft Prevention: How to Catch a Thief

Jonathan Foxx, PhD, MBA

Chairman & Managing Director

Here are four scenarios involving identity theft that mortgage originators encounter from time to time. Read them and then keep them in mind as I discuss how to ask for additional information in order to prevent identity theft.

1.       A law enforcement report containing detailed information about the identity theft and the signature, badge number, or other identification information of the individual law enforcement official taking the report should be sufficient on face value to support a victim’s request.

Question: Without an identifiable concern, such as an indication that the report was fraudulent, would it be reasonable for an information furnisher or Consumer Reporting Agency (CRA) to request additional information or documentation?

Answer: It would not be reasonable.

2.       A consumer might provide a law enforcement report similar to the above report, but certain important information such as the consumer’s date of birth or Social Security number may be missing because the consumer chose not to provide it.

Question: The information furnisher or CRA could accept this report, but would it be reasonable to require that the consumer provide the missing information?

Answer: It would be reasonable.

3.       A consumer might provide a law enforcement report generated by an automated system with a simple allegation that an identity theft occurred to support a request for a tradeline block or cessation of information furnishing.

Question: Would it be reasonable for an information furnisher or CRA to ask that the consumer fill out and have notarized the Commission’s ID Theft Affidavit or a similar form and provide some form of identification documentation?

Answer: It would be reasonable.

4.       A consumer might provide a law enforcement report generated by an automated system with a simple allegation that an identity theft occurred to support a request for an extended fraud alert.

Question: Would it be reasonable for a consumer reporting agency to require additional documentation or information, such as a notarized affidavit?

Answer: It would not be reasonable.

In these scenarios, a financial institution should be responsive in accordance with certain guidelines. Specificity of action must be appropriate, reasonable and proportional to the challenge. However, total reliance on the CRA is inappropriate.

FTC: Seeks Comments on Revised Disclosures

On August 27, 2010, the Federal Trade Commission (FTC) published for public comment revised versions of three documents required by the Fair Credit Reporting Act (FCRA). The FCRA requires the FTC to prescribe the content of notices that consumer reporting agencies must provide to those who furnish information to them and to those who obtain consumer reports from them.

The proposed revisions incorporate changes in rights and obligations created by several new rules issued pursuant to the Fair and Accurate Credit Transactions Act of 2003 (FACTA).

Under the FCRA, consumer reporting agencies (CRAs) are required to include a summary of consumer rights with every consumer report they provide to a consumer, and the FTC is required to provide a model summary of rights to be used for this purpose.

Comments: by September 21, 2010

If you have any questions about this matter, please contact Jonathan Foxx.

Highlights

Revisions and Updates

GENERAL SUMMARY OF CONSUMER RIGHTS

"Your Rights Under the Fair Credit Reporting Act"

• Furnisher Direct Dispute Rule: which took effect on July 1, 2010, allows consumers to dispute the accuracy of information in their consumer report directly with the furnisher of that information as well as the CRA. The proposed revised Summary of Rights reflects this additional dispute right, and also directs consumers to the FTC's website for more information about disputing consumer report errors.

• Federal Agency Contacts: the current Summary of Rights incorporates a list of Federal agencies responsible for enforcing the FCRA. The proposed revised Summary of Rights makes this information available on its website in a separate document that lists the Federal agencies responsible for enforcing the FCRA, along with their addresses, phone numbers, and website addresses, which can be updated more easily.

• Format changes: include revisions to improve the clarity and readability of the document.

NOTICE OF FURNISHER RESPONSIBILITIES

"NOTICE TO FURNISHERS OF INFORMATION TO
CONSUMER REPORTING AGENCIES:
YOUR OBLIGATIONS UNDER THE FAIR CREDIT REPORTING ACT"

• Furnisher Direct Dispute Rule: reflects the new duties of furnishers provided in the Summary of Rights.

• Furnisher Accuracy Rule: new duties contained in the Furnisher Accuracy Rule, which became effective on July 1, 2010, are outlined.

• Format changes: include revisions to improve the clarity and readability of the document.

NOTICE OF USER RESPONSIBILITIES

"NOTICE TO USERS OF CONSUMER REPORTS:
YOUR OBLIGATIONS UNDER THE FAIR CREDIT REPORTING ACT"

• Risk-Base Pricing Rule: effective January 1, 2011, the Risk-Based Pricing Rule requires users of consumer reports to provide risk-based pricing notices in certain circumstances or permits such users to provide consumers who apply for credit with a free credit score and information about their credit score.
• Address Discrepancy Rule: effective on January 1, 2008, requires the user to implement reasonable procedures to verify that the consumer report relates to the correct consumer.
• Medical Information Rule: effective on April 1, 2006, prescribes the circumstances under which creditors may obtain, use, and share medical information.
• Format changes: include revisions to improve the clarity and readability of the document.

Visit Library for Issuance

Summary of Rights and Notices of Duties
Under the Fair Credit Reporting Act
Federal Register, Vol. 75, No. 166, p 52655
August 27, 2010

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OTS: Updates FCRA Compliance Exam

On August 31, 2010, the OTS updated Section 1300 of the OTS Handbook, which outlines FCRA compliance requirements reviewed in examinations. The OTS, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Federal Trade Commission implemented the FACT Act changes through final rules that were effective July 1, 2009.

Section 623 of the Fair Credit Reporting Act (FCRA) was amended by the Fair and Accurate Credit Transactions Act of 2003 (FACT Act) to improve the way that institutions furnish information to consumer reporting agencies (CRAs) and handle direct disputes from consumers.

Section 1300 of the OTS's Examination Handbook contains procedures used by OTS examiners to assess compliance with the FCRA. The module on financial institutions as being "furnishers of information" (Module 4) has been revised to include the requirements of the new rules.

Furnishing information to CRAs is voluntary. However, under the new rules, institutions that do so must have policies and procedures for furnishing information with accuracy and integrity.

The rules also lay out the duties of institutions that receive disputes directly from consumers. The attached examination procedures address both of these areas.

If you have any questions about this matter, please contact Jonathan Foxx.

Highlights

Summary of Key Regulatory Provisions

Policies and Procedures

In developing the required policies and procedures, furnishers must:

• consider the guidelines that are in Appendix E to the rule

• develop policies and procedures that fit the institution's activities

• provide for reasonable investigations of disputes

• use standard data reporting formats

• maintain records for enough time to respond to direct disputes

• review procedures upon transfers of accounts to prevent re-aging of information

• periodically review and update practices and procedures for investigating and correcting information

• review and update their procedures periodically

Direct Disputes

• When a consumer disputes information reported to a CRA directly with an institution, the institution must conduct a reasonable investigation of a direct dispute if it relates to consumer liability on the account, the terms of the account, the consumer's performance, or other information in a credit report regarding the account with the furnisher that bears on the consumer's creditworthiness and reputation.

• When an institution receives a direct dispute, it must review all relevant information that the consumer provided and report investigation results to the consumer.

• If the institution finds that it provided incorrect information to a CRA, it must provide the correct information to each affected CRA.

• An investigation is not required if the institution determines that the dispute is frivolous or irrelevant and sends the consumer a notice within five days of making that determination.

• The notice may be on a standard form and must include the reasons for the determination and identify information that the institution needs to investigate the dispute.

Visit Library for Issuances

• Furnishing Information to Consumer Reporting Agencies and Direct Disputes Regulation: FCRA Examination Procedures, OTS Letter 363 (8/31/10)

• Regulatory Bulletin, RB 37-60, Handbook: Examination, Subject: Fair Credit Reporting Act, Section 1300 (8/31/10)

• Final Rule/Guidelines on Furnishing Consumer Information to Credit Reporting Agencies and Direct Disputes; and Advance Notice of Proposed Rulemaking (ANPR) Seeking Comment on Additions to Guidelines, OTS Letter 313, (7/17/09) .

• Guidelines for Furnishers of Information to Consumer Reporting Agencies, Proposed rule, Federal Register, Vol. 74, No. 125, pp 31529-31533 (7/1/09)

• Procedures To Enhance the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies Under Section 312 of the Fair and Accurate Credit Transactions Act, Final rules, Federal Register, Vol. 74, No. 125, pp 31484-31528 (7/1/09)

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