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FACTA Rulemaking Hits speed Bump - Maybe

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It is not known yet whether the latest news out of Washington regarding FACTA will delay the release of the final Disposal Rule, but it may. The reason for the uncertainty is that apparently the Disposal Rule itself is not the issue holding up the release.

Here is a paraphrased excerpt of the notice of the delay:

The Dec. 1 effective date for many of the new obligations created under the Fair and Accurate Credit Transactions Act (FACTA Act) will be delayed as federal agencies struggle to write rules that resolve the thorny implementation issues that have emerged, Federal Reserve Board Managing Counsel Jane Jensen Gell said Sept. 21.

Lenders and other businesses to which the law applies do not have to comply with it until the rules are issued, Gell told an audience at the America's Community Bankers 2004 National Compliance and Attorneys Conference in Philadelphia. Even then, she said, "we'll make sure you have adequate lead-in time" to get compliance procedures in place before the final rules take effect.

The FACT Act, which was enacted in December 2003, revised the Fair Credit Reporting Act to help consumers deal with identity theft, improve the accuracy of consumer credit information and give consumers greater access to it, require the destruction of discarded consumer information and limit the use of medical information about consumers to make credit eligibility decisions, among other provisions.

Lenders already are required under FCRA to notify consumers who are denied credit based on adverse information in a credit report. The FACT Act extended the notice requirement to situations in which credit is approved, but on terms that are less favorable because the loan has been priced to reflect negative information in a credit report. The logistics of "notice of less favorable terms" penalties seems to be the hold up.

The Fed is involved in nine separate rulemakings under the act, most of which are being done jointly or in coordination with other banking and thrift agencies and, in some cases, with the Federal Trade Commission and the Securities and Exchange Commission as well, said Gell.