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Federal Reserve Bank of Dallas
2200 N. PEARL ST.
DALLAS, TX 75201-2272

April 20, 2004

Notice 04-20
TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District

SUBJECT
Proposed Amendments to Regulation V
(Fair Credit Reporting)
DETAILS

The Board of Governors has requested public comment on a proposal to amend
Regulation V (Fair Credit Reporting). The amendment would add a model form to Regulation V
that financial institutions may use to comply with the notice requirement relating to furnishing
negative information contained in section 217 of the Fair and Accurate Credit Transactions Act of
2003 (FACT Act).
Section 217 of the FACT Act amends the Fair Credit Reporting Act to provide that if
any financial institution (1) extends credit and regularly and in the ordinary course of business
furnishes information to a nationwide consumer reporting agency, and (2) furnishes negative
information to such an agency regarding credit extended to a customer, the institution must
provide a clear and conspicuous notice about furnishing negative information, in writing, to the
customer. The Board’s model form could be used by all financial institutions, as defined by
section 217.
The Board must receive comments by May 9, 2004. Please address comments to
Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street
and Constitution Avenue, N.W., Washington, DC 20551. Also, you may mail comments electronically to regs.comments@federalreserve.gov. All comments should refer to Docket No.
R-1187.

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

-2The public can also view and submit comments on proposals by the Board and other
federal agencies from the www.regulations.gov web site.
ATTACHMENT
A copy of the Board’s notice as it appears on pages 19123–25, Vol. 69, No. 70 of the
Federal Register dated April 12, 2004, is attached.
MORE INFORMATION
For more information, please contact Eugene Coy at (214) 922-6201 or Diane van
Gelder at (214) 922-6282, Banking Supervision Department. Paper copies of this notice or
previous Federal Reserve Bank notices can be printed from our web site at www.dallasfed.org/
banking/notices/index.html.

Federal Register / Vol. 69, No. 70 / Monday, April 12, 2004 / Proposed Rules

19123

FEDERAL RESERVE SYSTEM
12 CFR Part 222
[Regulation V; Docket No. R–1187]

Fair Credit Reporting
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
AGENCY:

SUMMARY: The Board is proposing to
amend Regulation V that implements
the Fair Credit Reporting Act (FCRA or
Act), 15 U.S.C. 1681 et seq. The Board
would add a model form to Regulation
V that financial institutions may use to
comply with the notice requirement
relating to furnishing negative
information contained in section 217 of
the Fair and Accurate Credit
Transactions Act of 2003 (FACT Act).
Section 217 of the FACT Act amends
the FCRA to provide that if any
financial institution (1) extends credit
and regularly and in the ordinary course
of business furnishes information to a
nationwide consumer reporting agency,
and (2) furnishes negative information
to such an agency regarding credit

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19124

Federal Register / Vol. 69, No. 70 / Monday, April 12, 2004 / Proposed Rules

extended to a customer, the institution
must provide a clear and conspicuous
notice about furnishing negative
information, in writing, to the customer.
Section 217 defines the term ‘‘financial
institution’’ to have the same meaning
as in the Gramm-Leach-Bliley Act (GLB
Act), 15 U.S.C. 6801 et seq., which
generally is ‘‘any institution the
business of which is engaging in
financial activities as described in
section 4(k) of the Bank Holding
Company Act of 1956.’’ 15 U.S.C.
6809(3). The Board’s model form could
be used by all financial institutions, as
defined by section 217.
DATES: Comments must be received by
May 9, 2004.
ADDRESSES: Comments should refer to
Docket No. R–1187 and may be mailed
to Jennifer J. Johnson, Secretary, Board
of Governors of the Federal Reserve
System, 20th Street and Constitution
Avenue, NW., Washington, DC 20551.
Please consider submitting your
comments through the Board’s Web site
at www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm, by e-mail to
regs.comments@federalreserve.gov, or
by fax to the Office of the Secretary at
202/452–3819 or 202/452–3102. Rules
proposed by the Board and other
Federal agencies may also be viewed
and commented on at
www.regulations.gov.
All public comments are available
from the Board’s Web site at
www.federalreserve.gov/generalinfo/
foia/ProposedRegs.cfm as submitted,
except as necessary for technical
reasons. Accordingly, your comments
will not be edited to remove any
identifying or contact information.
Public comments may also be viewed
electronically or in paper in Room MP–
500 of the Board’s Martin Building (20th
and C Streets, NW.) between 9 a.m. and
5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT:
Krista P. DeLargy, Senior Attorney;
David A. Stein, Counsel; Minh-Duc T.
Le or Ky Tran-Trong, Senior Attorneys;
Division of Consumer and Community
Affairs, (202) 452–3667 or (202) 452–
2412; Thomas E. Scanlon, Counsel,
Legal Division, (202) 452–3594, Board of
Governors of the Federal Reserve
System, 20th and C Streets, NW.,
Washington, DC 20551.
SUPPLEMENTARY INFORMATION:
I. Background
On December 4, 2003, the President
signed into law the FACT Act, which
amends the FCRA. Pub. L. 108–159, 117
Stat. 1952. In general, the FACT Act
enhances the ability of consumers to
combat identity theft, increases the

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accuracy of consumer reports, and
allows consumers to exercise greater
control regarding the type and amount
of marketing solicitations they receive.
The FACT Act also restricts the use and
disclosure of sensitive medical
information. To bolster efforts to
improve financial literacy among
consumers, the FACT Act creates a new
Financial Literacy and Education
Commission empowered to take
appropriate actions to improve the
financial literacy and education
programs, grants, and materials of the
Federal government. Lastly, the FACT
Act establishes uniform national
standards in key areas of regulation
regarding consumer report information.
Section 217 of the FACT Act requires
that if any financial institution (1)
extends credit and regularly and in the
ordinary course of business furnishes
information to a nationwide consumer
reporting agency, and (2) furnishes
negative information to such an agency
regarding credit extended to a customer,
the institution must provide a clear and
conspicuous notice about furnishing
negative information, in writing, to the
customer. Section 217 defines the term
‘‘negative information’’ to mean
information concerning a customer’s
delinquencies, late payments,
insolvency, or any form of default.
Section 217 specifies that an
institution must provide the required
notice to the customer prior to, or no
later than 30 days after, furnishing the
negative information to a nationwide
consumer reporting agency. After
providing the notice, the institution may
submit additional negative information
to a nationwide consumer reporting
agency with respect to the same
transaction, extension of credit, account,
or customer without providing
additional notice to the customer. If a
financial institution has provided a
customer with a notice prior to the
furnishing of negative information, the
institution is not required to furnish
negative information about the customer
to a nationwide consumer reporting
agency. A financial institution generally
may provide the notice about furnishing
negative information on or with any
notice of default, any billing statement,
or any other materials provided to the
customer, so long as the notice is clear
and conspicuous. Section 217
specifically provides, however, that the
notice may not be included in the initial
disclosures provided under section
127(a) of the Truth in Lending Act (15
U.S.C. 1637(a)). Section 217 also
provides certain safe harbors for
institutions concerning their efforts to
comply with the notice requirement.

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Section 217 requires the Board to
publish, after notice and comment, a
concise model form not to exceed 30
words in length that financial
institutions may, but are not required to,
use to comply with the notice
requirement. The model form must be
issued in final form within 6 months of
the date of enactment of the FACT Act,
or June 4, 2004. In addition, section 217
provides that a financial institution
shall not be liable for failure to perform
the duties required by this section if, at
the time of the failure, the institution
maintained reasonable policies and
procedures to comply with the section
or the institution reasonably believed
that the institution was prohibited by
law from contacting the customer.
Under section 217, the term ‘‘financial
institution’’ is defined broadly to have
the same meaning as in section 509 of
the GLB Act, which generally defines
financial institution to mean ‘‘any
institution the business of which is
engaging in financial activities as
described in section 4(k) of the Bank
Holding Company Act of 1956,’’
whether or not affiliated with a bank. 15
U.S.C. 6809(3). Thus, the term
‘‘financial institution’’ includes not only
institutions regulated by the Board and
other federal banking agencies, but also
includes other financial entities, such as
merchant creditors and debt collectors
that extend credit and report negative
information. 16 CFR 313.3(k), 65 FR
33646, 33655 (May 24, 2000).
In this rulemaking, the Board is
proposing a model form that financial
institutions may use to comply with the
notice requirement under section 217.
In addition, the Board proposes to
amend Regulation V to specify that
although the regulation generally
applies only to the financial institutions
that the Board regulates, the model form
relating to furnishing negative
information may be used by all financial
institutions, as that term is defined by
section 217.
II. Section by Section
Section 222.1 Purpose, Scope, and
Effective Dates
Proposed paragraph 222.1(b)(2)
describes the scope of the Board’s
Regulation V, which implements the
FCRA. Generally, the Board’s Regulation
V covers the institutions under the
Board’s jurisdiction. 15 U.S.C. 1681s(e).
Nonetheless, the Board’s proposed
paragraph (b)(2) specifies that the
Board’s proposed model form in
Appendix B relating to furnishing of
negative information may be used by all
financial institutions (as that term is
defined in section 509 of the GLB Act)

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Federal Register / Vol. 69, No. 70 / Monday, April 12, 2004 / Proposed Rules
to comply with the notice requirement
contained in section 217 of the FACT
Act.
Appendix B—Model Notice of
Furnishing Negative Information
The Board is proposing in Appendix
B a model form that financial
institutions may use to comply with the
requirement to provide notice about
furnishing negative information to a
consumer reporting agency under
section 217 of the FACT Act. Because a
financial institution is allowed to send
the notice relating to furnishing negative
information prior to, or within 30 days
after, it furnishes negative information,
the proposed model form contains
alternative language that a financial
institution may use, depending on when
the notice is given.
III. Solicitation of Comments Regarding
the Use of ‘‘Plain Language’’
Section 722 of the GLB Act requires
the Board to use ‘‘plain language’’ in all
proposed and final rules published after
January 1, 2000. The Board invites
comments on whether the proposed
rules are clearly stated and effectively
organized, and how the Board might
make the proposed text easier to
understand.
IV. Initial Regulatory Flexibility
Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the proposed amendments
to Regulation V. The proposed
amendments are not expected to have
any significant impact on small entities.
A final regulatory flexibility analysis
will be prepared and will consider
comments received during the public
comment period.
V. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR part 1320, Appendix A.1), the
Board reviewed the proposed rule under
the authority delegated to the Board by
the Office of Management and Budget
(OMB). The Federal Reserve may not
conduct or sponsor, and an organization
is not required to respond to, this
information collection unless it displays
a currently valid OMB control number.
The control number will be obtained
from OMB after the public comment
period has ended.
The collection of information that is
proposed by this rulemaking is found in
section 217 of the FACT Act, Pub. L.
108–159, 117 Stat. 1952. This
information is mandatory for financial
institutions. The respondents are
financial institutions as defined as in

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the privacy provisions of the GLB Act.
The term ‘‘financial institution’’
includes not only institutions regulated
by the Board and other federal banking
agencies, but also includes other
financial entities, such as merchant
creditors and debt collectors that extend
credit and report negative information.
The proposed revisions to the FCRA
would provide financial institutions
with a general model form (provided in
Appendix B) that they may use to
comply with the notice requirement
under section 217 of the FACT Act
relating to furnishing negative
information. It is expected that
providing a notice to consumers would
not significantly burden the financial
institutions; the standardized, machinegenerated notice is generally mailed to
consumers. Financial institutions would
face a one-time burden to reprogram and
update systems to include the new
notice requirement. With respect to
financial institutions, approximately
30,000 furnish information to consumer
reporting agencies. The estimated time
to update systems is approximately 8
hours (one business day); therefore, the
total annual burden is estimated to be
240,000 hours. This total annual burden
represents approximately 5 percent of
the total Federal Reserve System
paperwork burden.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality arises under the
Freedom of Information Act.
Comments are invited on: a. whether
the proposed collection of information
is necessary for the proper performance
of the Federal Reserve’s functions;
including whether the information has
practical utility; b. the accuracy of the
Federal Reserve’s estimate of the burden
of the proposed information collection,
including the cost of compliance; c.
ways to enhance the quality, utility, and
clarity of the information to be
collected; and d. ways to minimize the
burden of information collection on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Comments on the collection of
information should be sent to Michelle
Long, Acting Federal Reserve Board
Clearance Officer, Division of Research
and Statistics, Mail Stop 41, Board of
Governors of the Federal Reserve
System, Washington, DC 20551, with
copies of such comments sent to the
Office of Management and Budget,
Paperwork Reduction Project (7100—to
be obtained), Washington, DC 20503.

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19125

List of Subjects in 12 CFR Part 222
Banks, banking, Holding companies,
state member banks.
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation V, 12 CFR part 222, as set
forth below:
PART 222—FAIR CREDIT REPORTING
(REGULATION V)
1. The authority citation for part 222
is revised to read as follows:
Authority: 15 U.S.C. 1681s; Secs. 3 and
217, Pub. L. 108–159; 117 Stat. 1953, 1986–
88.

2. Section 222.1 is revised by adding
a new paragraph (b) to read as follows:
Subpart A—General Provisions
§ 222.1
dates.

Purpose, scope, and effective

*

*
*
*
*
(b) Scope.
(1) [Reserved]
(2) Institutions covered.
(i) Except as otherwise provided in
paragraph (b)(2), these regulations apply
to banks that are members of the Federal
Reserve System (other than national
banks), branches and Agencies of
foreign banks (other than Federal
branches, Federal Agencies, and insured
State branches of foreign banks),
commercial lending companies owned
or controlled by foreign banks,
organizations operating under section
25 or 25A of the Federal Reserve Act (12
U.S.C. 601 et seq., and 611 et seq.), and
bank holding companies and affiliates of
such holding companies.
(ii) Financial institutions, as that term
is defined in section 509 of the GrammLeach-Bliley Act (12 U.S.C. 6809), may
use the model form in Appendix B of
this part to comply with the notice
requirement in section 623(a)(7) of the
Fair Credit Reporting Act (15 U.S.C.
1681s–2(a)(7)).
*
*
*
*
*
3. Part 222 is revised by adding a new
Appendix B to read as follows:
Appendix A—[Reserved]
Appendix B—Model Notice of
Furnishing Negative Information
We [may provide]/[have provided]
information to credit bureaus about an
insolvency, delinquency, late payment, or
default on your account to include in your
credit report.
By order of the Board of Governors of the
Federal Reserve System, April 6, 2004.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 04–8194 Filed 4–9–04; 8:45 am]
BILLING CODE 6210–01–P

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Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102