June 3, 1999
Peter L. McCorkell, Esq.
Senior Vice President and General Counsel
Fair, Isaac and Company Inc.
120 North Redwood Drive
San Rafael, California 94903
Dear Mr. McCorkell:
This responds to your letter concerning the application of the Fair Credit Reporting Act ("FCRA") to an account that is reported to a consumer reporting agency ("CRA") by a creditor, when the account is discharged in bankruptcy and charged off by the creditor, either before or after the discharge. You note that a staff opinion letter (Lovern, 4/24/98) stated that a credit bureau would violate Section 607(b) of the FCRA if it reported a discharged item as a chargeoff when it was in fact not charged off. You state that (contrary to a comment attributed by Mr. Lovern to a Fair Isaac source in his letter to us) your risk scores assign the same number of points to a bankrupt tradeline regardless of whether that account is also reported as charged off.
Specifically, you ask if we concur in your view that "nothing in the FCRA (a) prohibits a creditor from 'charging off' an account, whether before or after the filing of a bankruptcy; (b) prohibits a creditor from reporting to a CRA that an account which has been discharged in bankruptcy has also been charged off so long as the credit grantor has in fact charged off the account; or (c) or prohibits a CRA from reporting an account which has been discharged in bankruptcy as also having been charged off if the creditor has so reported the account to the CRA and the CRA has no reason to believe otherwise." We agree that the FCRA prohibits none of those practices in the circumstances you describe.
The opinions set forth in this informal staff letter are not binding on the Commission.
Sincerely yours,
Clarke W. Brinckerhoff