Federal Trade Commission (FTC) (10)

Policy and Economic Research Council (PERC) (7)

Topics and Issues

Accuracy (12)

Disputes (6)

In May 2011, the Policy and Economic Research Council (PERC), a non-profit think tank focused on issues pertaining to financial inclusion and credit information, released the most comprehensive, independent review of credit report accuracy.  The report, U.S. Consumer Credit Reports: Measuring Accuracy and Dispute Impacts (May 2011) preceded an FTC report, Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003 (Dec. 2012).  PERC then followed-up its 2011 work with a new report, Comparing FTC and PERC Studies on Measuring the Accuracy of U.S. Consumer Credit Reports (April 2013).

The press release covering the FTC’s study said that study found just “five percent of consumers had errors on one of their three major credit reports that could lead to them paying more for products such as auto loans and insurance..”

In 2003, as part of the Fair and Accurate Credit Transactions Act (“FACT Act” or “FACTA”) amendments to the FCRA, Congress instructed the Federal Trade Commission (“FTC”) to conduct an 11-year study to examine the accuracy of credit reports.  Before undertaking its study, the FTC first conducted two pilot studies to evaluate methodologies as it moves toward conducting its large-scale study.  These pilot studies, launched in 2006 and 2008, were discussed in FTC reports to Congress.

In December 2004, the FTC announced its First Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2006.  As summarized in the Second Interim Report in 2006, the First Interim Report “(i) examined the history and current practices of the credit reporting industry; (ii) identified the key areas where errors in credit report data can occur; (iii) reviewed and evaluated studies conducted to date on credit report accuracy and  completeness; (iv) examined possible methodologies for conducting a more reliable and comprehensive study; and (v) described a pilot study to test a potential methodology for a nationwide survey.”  The design of that study and a summary of related public comments were provided in two respective Federal Register Notices (FRNs). 69 FR 61675 (October 20, 2004) and 70 FR 24583 (May 10, 2005).

In December 2006, the FTC announced its Second Interim Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2006.  As noted by the FTC in a press release covering the Third Interim Report (2008), the Second Interim Report “reviewed the results of an initial pilot study [from 2004] designed for testing a potential methodology for a nationwide survey, and it proposed a second pilot study to address certain problems uncovered in the first study. In both pilot studies, randomly selected consumers reviewed their credit reports with an expert to identify potential errors, and then disputed potential errors that the expert believed could have a material effect on their credit standing.”

In December 2008, the FTC announced its Third Interim Report to Congress Concerning the Accuracy of Information in Credit Reports. “The current report explains the methodological improvements tested in this second pilot study. As a next step, in 2009 FTC staff plans to submit a proposal, subject to approval by the Office of Management and Budget, for a nationwide study assessing credit report accuracy.”

In October 2009, the FTC published a Notice and Request for Comment on a submission to OMB about its ongoing accuracy study.

In December 2010, the FTC announced its Fourth Interim Federal Trade Commission Report to Congress Concerning the Accuracy of Information in Credit Reports.  The FTC noted that

the study will be the first to directly engage the three main groups in the credit reporting process: consumers, national consumer reporting agencies, and furnishers of information to the reporting agencies. Approximately 1,000 consumers, randomly selected throughout the nation, will review their credit reports from all three national credit bureaus with an expert, who will help identify potential errors on their reports. Participants will be encouraged to dispute errors that could affect their credit standing, and credit reports with alleged errors will be sent to Fair Isaac Corporation (FICO) for rescoring. The study will estimate the proportion of consumers who would find one or more material errors in their credit reports, and it will reveal the main types of errors, their frequency, and their impact on a consumer’s credit standing. Overall, the study will categorize errors by type and seriousness in terms of potential consumer harm.

The report indicates that the FTC study is currently underway; as of the date of the report, 295 consumers had begun participation in the study. The data collection phase of the study should be finished by October 2011, and the Commission’s next interim report to Congress – due in December 2012 – will provide a full analysis of the collected data.