June 4, 1999
Mr. Jeff Kosmerl
949 Ormewood Terrace
Atlanta, Georgia 30316
Dear Mr. Kosmerl:
This responds to your request for our views concerning the calculation of the period for which a consumer reporting agency ("CRA") is permitted to report accounts that have been charged off or placed for collection, under the amended Fair Credit Reporting Act ("FCRA").
Section 623(a)(5) requires a party that "furnishes information to a (CRA) regarding a delinquent account being placed for collection, charged to profit or loss, or subject to any similar action" to notify the agency (within 90 days of reporting the account) of "the month and year of the commencement of the delinquency that immediately preceded" the creditor's action. Section 605(a)(4) provides that the CRA may report the information for seven years, in most cases.(1) Section 605(c)(1) provides that the seven year period begins 180 days from the "commencement of the delinquency" date. Section 605(c)(2) provides that the section applies "only to items of information added to the file of a consumer on or after the date that is 455 days after the date of enactment of the Consumer Credit Reporting Reform Act ."
Specifically, you ask (1) how the date is determined if there are multiple obsolescence dates where "you have several delinquencies preceding a collection or charge off (8/91 60+, 9/91 60+, 10/91 30+, 11/91 account closed by creditor)" and (2) if "adverse information listed on a report prior to 9/30/97 is exempt from" the procedure set forth in Section 605(c)(1) .
1. As explained in the enclosed letter (Johnson, 8/31/98), it was Congress' intent in enacting Sections 605(c)(1) and 623(a)(5) to establish a single date -- the start of the delinquency -- to begin the obsolescence period on these accounts. This avoids the "multiple date" problem that arguably existed prior to the 1996 amendments. In the case you described, the date of the "commencement of the delinquency" that led to the creditor's chargeoff or collection action would be July 1991 or earlier (depending on how long the account was continuously delinquent before that). The seven year period would start no later than January 1992 (180 days later), with the result that the chargeoff or collection could no longer be reported in most cases beyond January 1999.
2. Section 605(c)(2) states that the section "shall apply only to items of information added to the (CRA) file of a consumer on or after" 455 days after the enactment of those amendments, or December 29, 1997.(2) We read this language to mean that a CRA is not required to use the commencement-of-delinquency date mandated by Section 605(c)(1) on an account where the chargeoff or collection ("item of information") was first reported to the CRA ("added to the ... file") prior to that date. Thus, adverse information such as collections or chargeoffs reported before December 29, 1997, are not subject to the new "commencement of the delinquency" provision.
The views set forth in this informal staff letter are not binding on the Commission.
Clarke W. Brinckerhoff
1. Section 605(b)(1) exempts credit transactions involving a principal amount of $150,000 or more.
2. Public Law 104-208, the legislation adding the FCRA provisions discussed in this letter, was signed into law on September 30, 1996. Section 605(c)(1) became effective 455 days after that date, as provided by Section 605(c)(2). Most of the provisions became effective 365 days after enactment.