Complying With FTC Regs

Question: In a recent issue you wrote about two interpretations of FCRA issued by the Federal Trade Commission staff. These interpretations present us with some real compliance challenges, so before trying to change things in the bank, I'd like to know just how the FTC letters apply to banks. We aren't regulated by the FTC. Are these letters something we need to comply with?

Answer: The short answer is yes - banks do need to comply with these letters. Here's why (the long answer). When Congress passes a law, such as the Truth in Lending Act or the Fair Credit Reporting Act, Congress also designs an enforcement scheme - a way for the law to become a reality.

In the case of many consumer credit protection laws, such as Truth in Lending, Congress assigned responsibility to a lead agency - in this case the Board of governors of the Federal Reserve System, to issue regulations that would clarify the law, provide additional detail, and guidance for compliance. Most of the consumer protection regulations have been assigned to the Federal Reserve. However, the Fair Credit Reporting Act is not among them.

Congress assigned FCRA to the Federal Trade Commission, not the Federal Reserve. This makes some sense as the biggest part of FCRA regulates credit reporting bureaus rather than creditors. But FCRA went as a whole to the Federal Trade Commission, making FTC the lead interpretive agency. As a result, the FTC's interpretations of the FCRA apply to creditors as well as to credit bureaus.

In fact, an FTC interpretation of the FCRA is binding on the bank regulatory agencies as well as on creditors. Now that the banking agencies have some authority to establish examination policies and procedures under FCRA, we can expect some guidance from the banking agencies on how to comply with these FTC staff letters. But don't look to the banking agencies to overturn the interpretations.

Copyright © 2000 Compliance Action. Originally appeared in Compliance Action, Vol. 5, No. 12, 11/00