July 23, 1999
Michael W. Meltzer
Dear Messrs. Meltzer and Wight:
On October 16, 1998, the Commission accepted for public comment the proposed order between the Commission and your client, First American Real Estate Solutions, LLC ("FARES"). On March 9, 1999, FARES submitted a document styled, "Motion to Withdraw Consent Order or to Reopen Proceedings to Amend Consent Order ("the Submission")." This letter responds to the Submission. Because the order was not served on your client before the Commission received the Submission, the Commission has not treated the Submission as a motion to modify the order under section 2.51 of the Commission's Rules of Practice. The Commission has, however, considered your client's views and concluded that the proposed order is appropriate, for the reasons explained below. The Commission has therefore decided to make the complaint and order final and has directed the Secretary to serve them on your client.
The primary issue presented in FARES's Submission is whether "resellers," those companies that purchase consumer report information from one or more of the three large consumer reporting agencies (Equifax, Experian, and Trans Union) and sell the information to mortgage lenders and other users, are required to comply with all of the provisions of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681-1681u, that apply to consumer reporting agencies. Resellers regularly assemble consumer credit information and sell the information to third parties in the form of consumer reports. They therefore fall within the FCRA's definition of "consumer reporting agency." Section 603(f), 15 U.S.C. § 1681a(f). This definition was not altered by the 1996 FCRA amendments, which went into effect on September 30, 1997. Thus, resellers continue to be "consumer reporting agencies" under the amended FCRA and must comply with the full panoply of FCRA provisions.
The basic duty of a consumer reporting agency to reinvestigate has been set forth in section 611 in both the pre-amendment FCRA and the amended FCRA. The key provision in pre-amendment section 611 was found in section 611(a), which required consumer reporting agencies, and thus resellers, to reinvestigate any disputed item in their files on a consumer if the consumer disputed the item directly to the consumer reporting agency. In the amended FCRA, Congress enumerated additional steps that consumer reporting agencies must take as part of their reinvestigations, such as the section 611(a)(2)(A) requirement that consumer reporting agencies send a notice of dispute to "any person who provided any item of information in dispute." Congress did not, however, remove the basic duty to reinvestigate; section 611(a)(1)(A) is essentially the same as pre-amendment section 611(a). Thus, resellers and other consumer reporting agencies must still reinvestigate any disputed item in their files on a consumer if the consumer disputes the item directly to the consumer reporting agency.
In its Submission, FARES argues that Wilson v. Rental Research Servs., Inc., 165 F.3d 642 (8th Cir. 1999), invalidates the basis for the Commission's complaint against respondent as well as the order based on the complaint. Motion at 2. Upon careful review of the Wilson opinion, and for reasons explained below, the Commission does not believe that Wilson provides a basis to change the proposed order.
In Wilson, the court held that Rental Research Services, Inc. ("Rental Research") was, like FARES, a "reseller" and a "consumer reporting agency" under the FCRA. Applying the pre-amendment version of section 611(a), however, the Wilson court determined that the FCRA did not require Rental Research to reinvestigate disputed items. 165 F.3d at 648. The Wilson holding appears to be contrary to the plain language of pre-amendment section 611(a). Moreover, the Wilson opinion reaches the opposite result with respect to the current section 611(a)(1)(A), which imposes essentially the same duty on consumer reporting agencies as the pre-amendment version of this provision. We see no reason for this inconsistency.
FARES also argues that, under Wilson, resellers need only comply with section 611(a)(2)(A) of the FCRA. Motion at 2. FARES's argument, however, is based on a misreading of Wilson. The Wilson court stated in dicta that, if the plaintiff had made her request after the FCRA amendments took effect in September 1997, Rental Research would have had to comply with section 611(a)(2)(A) by notifying the furnisher of the information. The court did not address whether Rental Research and other resellers are required to take any other actions required under section 611. If a reseller is the consumer reporting agency that must comply with section 611(a)(2)(A), however, it follows that the reseller also must comply with all other duties of consumer reporting agencies under section 611. Indeed, FARES appears to concede this point.(1)
Accordingly, the Commission has concluded that the proposed order is appropriate as it presently stands, and has determined to make the complaint and order final. At the direction of the Commission, this office will serve the complaint and order on your client.
Finally, the Commission wishes to use this opportunity to clarify its interpretation of section 623(b) of the FCRA. The Commission believes that section 623 requires that a creditor or other information provider that receives a notice of dispute from a reseller must investigate the item or items in dispute just as it must investigate a notice of dispute from one of the repositories. Therefore, creditors and other information providers should be investigating notices of disputes submitted by FARES.
By direction of the Commission.
Donald S. Clark
1. FARES states that it would not be inconsistent with Wilson to impose on resellers the section 611(a)(6) duty to notify consumers of reinvestigation results, and the section 611(d) duty to notify prior recipients of reports of deletions or consumer disputes. FARES's Memorandum of Law in Support of the Motion ("Memorandum") at 13.