Credit Work Group Recommendation

Transcription

1 Credit Wrk Grup Recmmendatin T: Credit Wrk Grup Frm: Mike Bixby (305) Paul Wills (770) Date: Octber 7, 2004 Re: FACT Act Implicatins and Recmmendatins THIS MISMO STANDARD INCLUDES THE END USER LICENSE AGREEMENT ATTACHED HERETO AT AND IS GOVERNED BY AND SUBJECT TO THE END USER LICENSE AGREEMENT. NO USER OF THIS STANDARD MAY REMOVE THIS REFERENCE TO AND STATEMENT REGARDING THE END USER LICENSE. ANY HARD COPY PUBLICATION OF THIS STANDARD MUST INCLUDE AND ATTACH A HARD COPY PRINT OUT OFTHE END USER LICENSE. ANY FURTHER ELECTRONIC DISTRIBUTION OF THIS STANDARD MUST INCLUDE A SPECIFIC REFERENCED LINK TO THE END USER LICENSE AGREEMENT OR OTHER MEANS OF ATTACHMENT OF THE END USER LICENSE AGREEMENT. I. Overview This Dcument The Fair and Accurate Credit Transactins Act f 2003 (the FACT Act r FACTA) was signed int law in December As an amendment t the Federal Fair Credit Reprting Act (FCRA), it cntains a number f prvisins which affect the reprting f credit data t the mrtgage lending cmmunity. This dcument serves three purpses: 1. It discusses the impact f the FACT Act n the credit reprting data that is defined by the MISMO Credit Reprting data standards, and 2. It prpses recmmendatins fr standardizing the syntax used in FACT Act Alert messages by the credit bureaus that use the existing MISMO v1.x, v2.x and X12 frmats. These recmmendatins will allw lenders t be able t detect the FACT Act messages prperly, and then take the apprpriate actins that are defined in the FACT Act. It is a guide t technlgy prfessinals t assist them in their prgramming effrts t supprt the FACT Act messages, and 3. It prpses enhancements t supprt FACT Act messages that will appear in a new MISMO v2.3.1 release f the credit respnse transactin. A cmplete list f prpsed FACT ACT related DTD changes are listed at the end f this dcument. (NOTE: The actual MISMO v2.3.1 Credit Respnse DTD culd vary frm what is published in this dcument.) 1

2 This dcument is nt meant t be a used as a recmmendatin n lender cmpliance with the FACT Act. Cmpliance with the FACT Act shuld be discussed with yur cmpany s management and legal cunsel. ONLY thse prvisins f the FACT Act, which will require changes t XML data, will be addressed. There are numerus ther prvisins f the Act that d nt impact XML r merged credit prviders r custmers. II. FACT Act Prvisins There are 4 FACT Act prvisins that directly affect the XML representatin. These are: 5 th reasn cde n Credit Risk scres Fraud Alerts Active Duty Alert Address Discrepancy Indicatr Each f these sectins will be discussed, and a sample MISMO Versin 2.x XML, MISMO 1.x XML, and X Transactin fragments will be prvided. A. 5 th Reasn Cde When Inquiries Affect Credit Scres Overview What the Law Says When a cnsumer reprting agency (a credit repsitry r a mrtgage reprting cmpany) prvides credit scres fr mrtgage purpses t mrtgage lenders r mrtgage arrangers/brkers, the cnsumer reprting agency must include a statement regarding the rle f inquiries in the scre if the number f inquiries adversely affected the scre even if the number f inquiries was nt ne f the tp fur reasn cdes. This infrmatin abut the rle f inquiries, cmmnly referred t as the 5 th reasn cde, enables mrtgage lenders and mrtgage arrangers t meet their FACT Act bligatin t disclse credit scres and infrmatin abut credit scres, including the 5 th reasn cde, t cnsumers. XML Implementatin The MISMO XML credit respnse frmat has always had a separate element fr alert messages. This message type indicates that there is smething in the credit file that the user f the credit file shuld take nte f and pssibly take sme type f actin. When the risk scre value has been adversely affected by credit inquiries in the credit file, this cnditin can be indicated by an alert message. The presence f this message will indicate that t the lender r brker that a disclsure t the cnsumer regarding the scre value may be needed under the FACT Act. All the text messages will begin with: FACTA: Risk Scre Value, t make identificatin f the message type easier. MISMO Versin 2.x Example <CREDIT_FILE CreditFileID="B-XP-01" BrrwerID="BOR01" CreditRepsitrySurceType="Experian"> <_ALERT_MESSAGE> <_Text>FACTA: Risk Scre Value - The Experian Fair Isaac Risk Scre Value was adversely affected by credit inquiries present in the credit file.</_text> 2

3 MISMO Versin Example Fr MISMO 2.3.1, the FACTA alert related t the Risk Scre Value is reprted bth as a Credit File Alert Message with a CategryType= FACTARiskScreValue attribute, and in the Credit Scre element as a FACTAInquiriesIndicatr= Y attribute. <CREDIT_RESPONSE> <CREDIT_FILE CreditFileID="B-XP-01" BrrwerID="BOR01" CreditRepsitrySurceType="Experian"> <_ALERT_MESSAGE _Cde="08" _CategryType="FACTARiskScreValue"> <_Text>FACTA: Risk Scre Value - The Experian Fair Isaac Risk Scre Value was adversely affected by credit inquiries present in the credit file.</_text> <CREDIT_SCORE CreditScreID="CRScr0000" BrrwerID="BOR01" CreditFileID="CB01" CreditReprtIdentifier="48AP76" CreditRepsitrySurceType="Equifax" _MdelNameType="EquifaxBeacn" _Value="685" FACTAInquiriesIndicatr="Y"> <_FACTOR _Cde="39" _Text="SERIOUS DELINQUENCY"/> <_FACTOR _Cde="18" _Text="NUMBER OF ACCOUNTS WITH DELINQUENCY"/> <_FACTOR _Cde="11" _Text="AMOUNT OWED ON REVOLVING ACCOUNTS IS TOO HIGH "/> <_FACTOR _Cde="2" _Text="LEVEL OF DELINQUENCY ON ACCOUNTS"/> </CREDIT_SCORE> </CREDT_RESPONSE> MISMO Versin 1.x Example <CREDITFILEALERTMESSAGE CREDITFILEALERTMESSAGEID= CFAMID001 > <Message>FACTA: Risk Scre Value - The Experian Fair Isaac Risk Scre Value was adversely affected by credit inquiries present in the credit file.</message> </CREDITFILEALERTMESSAGE> X VAR-NTE (2/710) Segment Example Here is an X example f a VAR-NTE (2/710) RISK SCORE VALUE ALERT Message Segment. NTE-01 is set t CRA Credit Reprt Alert. Text Length f NTE-02 cannt exceed 80 characters: NTE~CRA~FACTA: Risk Scre Value Credit Inquiries adversely affected the scre value. What Users Must D Users must prgram t generate the FACTA Risk Scre Value ALERT MESSAGE when they receive an indicatin frm the repsitry bureau fr the 5 th reasn cde. 3

4 B. FRAUD ALERTS OVERVIEW What the Law Says Initial Fraud Alerts: Upn the request f a cnsumer wh believes they have been r are abut t becme a victim f fraud, including identity theft, a credit repsitry (natinal cnsumer reprting agency) that maintains a file n the cnsumer and has received apprpriate prf f identity shall include a fraud alert in the file f that cnsumer, and prvide that alert alng with any credit scre generated in using that file, fr 90 days. If the cnsumer prvides their cntact infrmatin, the credit repsitry must prvide this infrmatin alng with the initial fraud alert t any credit reprt users. Extended Fraud Alerts: Upn the request f a cnsumer wh submits an identity theft reprt t a credit repsitry (natinal cnsumer reprting agency) that maintains a file n the cnsumer and has received apprpriate prf f identity shall include a fraud alert in the file f that cnsumer, and prvide that alert alng with any credit scre generated in using that file, fr 7 years. The cnsumer is als t prvide their cntact infrmatin and the credit repsitry must prvide it alng with the extended fraud alert t any credit reprt users. Summarizing, as f December 1, 2004, credit repsitries must maintain a status f: fraud t cnsumer credit files Includes initial 90-day fraud alert, extended 7-year fraud alert Additinal Cntact infrmatin (cnsumer cntact infrmatin) Mrtgage reprting cmpanies that receive the Initial Fraud Alerts and Extended Fraud Alerts frm credit repsitries must re-cnvey these alerts and the cnsumer cntact infrmatin t users f their mrtgage reprts. XML Implementatin Each credit repsitry is implementing these alert requirements a little differently. We recmmend passing the infrmatin in the _ALERT_MESSAGE cntainer f the CREDIT_FILE parent. The additinal cntact infrmatin culd be sent in CREDIT_COMMENT sectins f the reprt. See belw fr a sample. All the text messages will begin with: FACTA: Fraud Victim Initial, r FACTA: Fraud Victim Extended t make identificatin f the message type easier. 4

5 MISMO Versin 2.x Example NOTE: This particular ALERT MESSAGE element als cntains additinal _Text elements that may be used fr reprting the cnsumer cntact infrmatin. <CREDIT_FILE CreditFileID="B-EFX-01" BrrwerID="BOR01" CreditRepsitrySurceType="Equifax"> <_ALERT_MESSAGE _Cde= V > <_Text>FACTA: Fraud Victim Initial Cnsumer is a victim f fraudulent activity. VERIFY IDENTIFY OF CONSUMER BEFORE GRANTING CREDIT.</_Text> <_Text>Cnsumer Name: Je Cnsumer</Text> <_Text>Cnsumer Address: th ST, Atlanta, GA</Text> <_Text>Cnsumer Phne: </Text> MISMO Versin Example Fr MISMO 2.3.1, the FACTA Fraud Victim alert is reprted as a Credit File Alert Message with either a CategryType= FACTAFraudVictimInitial attribute r a CategryType= FACTAFraudVictimExtended attribute. <CREDIT_FILE CreditFileID="B-EFX-01" BrrwerID="BOR01" CreditRepsitrySurceType="Equifax"> <_ALERT_MESSAGE _Cde= V _CategryType= FACTAFraudVictimInitial > <_Text>FACTA: Fraud Victim Initial Cnsumer is a victim f fraudulent activity. VERIFY IDENTIFY OF CONSUMER BEFORE GRANTING CREDIT.</_Text> MISMO Versin 1.x Example <CREDITFILEALERTMESSAGE CREDITFILEALERTMESSAGEID= CFAMID001 > <Message>FACTA: Fraud Victim Initial Cnsumer is a victim f fraudulent activity. VERIFY IDENTIFY OF CONSUMER BEFORE GRANTING CREDIT.</Message> </CREDITFILEALERTMESSAGE> X VAR-NTE (2/710) Segment Example Here is an X example f a VAR-NTE (2/710) FRAUD VICTIM ALERT Message Segment. NTE-01 is set t CRA Credit Reprt Alert. Text Length f NTE-02 cannt exceed 80 characters: NTE~CRA~FACTA: Fraud Victim Initial Cnsumer is a victim f fraudulent activity. What Users Must D Begin prgramming Users f mrtgage credit reprts must prgram t receive and apprpriately handle each f the alerts that the credit repsitries will prvide and that mrtgage reprting cmpanies will re-cnvey. Users must prgram t receive and apprpriately handle cnsumer cntact infrmatin that is reprted. 5

6 Take nte f User Requirements fr Alerts and Cnsumer Cntact Infrmatin. Initial Fraud Alerts: N User f a cnsumer reprt r a mrtgage credit reprt that includes an initial fraud alert may establish a new credit plan r extensin f credit, ther than an pen-end credit plan, in the name f the cnsumer, r grant any increase in credit limit n existing accunt requested by a cnsumer, unless the User frms a reasnable belief that they knw the identity f the persn making the request. If the cnsumer has prvided a telephne number r ther cntact infrmatin, befre authrizing any new credit plan r extensin f credit described abve, the User shall cntact the cnsumer using that telephne number r take reasnable steps t verify the cnsumer s identity and cnfirm that the applicatin fr a new credit plan is nt the result f identity theft. Extended Fraud Alerts: N User f a cnsumer reprt r a mrtgage credit reprt that includes an extended fraud alert may establish a new credit plan r extensin f credit, ther than under an pen-end credit plan, in the name f the cnsumer, r any increase in credit limit n an existing credit accunt requested by a cnsumer, unless the User cntacts the cnsumer in persn r using the cntact infrmatin prvided with the reprt t cnfirm that the applicatin fr a new credit plan r increase in credit limit is nt the result f identity theft. 6

7 C. ACTIVE DUTY ALERTS Overview - What the Law Says Active Duty Alerts: Upn the request f an active duty military cnsumer a credit repsitry (natinal cnsumer reprting agency) that maintains a file n the cnsumer shall include an active duty alert in the cnsumer s file, and shall fr the next 12 mnths prvide that alert alng with any credit reprt r credit scre generated using that file. If the cnsumer prvides their cntact infrmatin the credit repsitry must prvide this infrmatin alng with the active duty alert t any credit reprt users. Summarizing, as f December 1, 2004, credit repsitries must maintain an additinal status f: Active Duty t cnsumer credit files Includes 12 mnth active duty alert Additinal Cntact infrmatin (cnsumer cntact infrmatin) Mrtgage reprting cmpanies that receive the active duty alerts frm credit repsitries must re-cnvey these alerts and any cnsumer cntact infrmatin that was prvided t users f their mrtgage reprts. XML Implementatin The active duty alerts are passed in the same place as the fraud alerts. active duty alert by itself des nt signify fraud r ptential fraud. Hwever, an All the text messages will begin with: FACTA: Active Duty, t make identificatin f the message type easier. MISMO Versin 2.x Example NOTE: This particular ALERT MESSAGE element als cntains additinal _Text elements that may be used fr reprting the cnsumer cntact infrmatin. <CREDIT_FILE CreditFileID="B-EFX-01" BrrwerID="BOR01" CreditRepsitrySurceType="Equifax"> <_ALERT_MESSAGE _Cde= N > <_Text>FACTA: Active Duty - Cnsumer is a member f the military n active duty. VERIFY IDENTIFY OF CONSUMER BEFORE GRANTING CREDIT.</_Text> <_Text>Cnsumer Name: Je Cnsumer</Text> <_Text>Cnsumer Address: th ST, Atlanta, GA</Text> <_Text>Cnsumer Phne: </Text> 7

8 MISMO Versin Example Fr MISMO 2.3.1, the FACTA Active Duty alert is reprted as a Credit File Alert Message with a CategryType= FACTAActiveDuty attribute. <CREDIT_FILE CreditFileID="B-EFX-01" BrrwerID="BOR01" CreditRepsitrySurceType="Equifax"> <_ALERT_MESSAGE _Cde= N _CategryType= FACTAActiveDuty > <_Text>FACTA: Active Duty - Cnsumer is a member f the military n active duty. VERIFY IDENTIFY OF CONSUMER BEFORE GRANTING CREDIT.</_Text> MISMO Versin 1.x <CREDITFILEALERTMESSAGE CREDITFILEALERTMESSAGEID= CFAMID001 > <Message>FACTA: Active Duty - Cnsumer is a member f the military n active duty. VERIFY IDENTIFY OF CONSUMER BEFORE GRANTING CREDIT.</Message> </CREDITFILEALERTMESSAGE> X VAR-NTE (2/710) Segment Example Here is an X example f a VAR-NTE (2/710) ACTIVE DUTY ALERT Message Segment. NTE-01 is set t CRA Credit Reprt Alert. Text Length f NTE-02 cannt exceed 80 characters: NTE~CRA~FACTA: Active Duty - Cnsumer is a member f the military n active duty. What Users Must D Begin prgramming Users f mrtgage credit reprts must prgram t receive and apprpriately handle active duty alerts that the credit repsitries will prvide. Users must prgram t receive and apprpriately handle cnsumer cntact infrmatin that is als reprted. Take nte f User Requirements fr Alerts and Cnsumer Cntact Infrmatin Active Duty Alerts: N User f a cnsumer reprt r a mrtgage credit reprt that includes an Active Duty Alert may establish a new credit plan r extensin f credit, ther than an pen-end credit plan, in the name f the cnsumer, r grant any increase in credit limit n existing accunt requested by a cnsumer, unless the User frms a reasnable belief that they knw the identity f the persn making the request. If the cnsumer has prvided a telephne number r ther cntact infrmatin, befre authrizing any new credit plan r extensin f credit described abve, the User shall cntact the cnsumer using that telephne number r take reasnable steps t verify the cnsumer s identity and cnfirm that the applicatin fr a new credit plan is nt the result f identity theft. 8

9 D. ADDRESS DISCREPANCY INDICATOR OVERVIEW What the Law Says If a persn has requested a cnsumer reprt relating t a cnsumer frm a credit repsitry (natinal cnsumer reprting agency), and the request includes an address fr the cnsumer that substantially differs frm the addresses in the credit file f the cnsumer, and the agency prvides a cnsumer reprt in respnse t the request, the cnsumer reprting agency shall ntify the requester f the existence f the address discrepancy. XML Implementatin The credit repsitries will send their wn alert cde when differences are fund between the address submitted in the inquiry and the address in the repsitry bureau s credit file All the text messages will begin with: FACTA: Address Discrepancy, t make identificatin f the message type easier. MISMO Versin 2.x Example <CREDIT_FILE CreditFileID="B-EFX-01" BrrwerID="BOR01" CreditRepsitrySurceType="Equifax"> <_ALERT_MESSAGE _Cde= Y > <_Text>FACTA: Address Discrepancy Substantial difference between the address submitted in the credit request and the address(es) in the credit file. VERIFY IDENTIFY OF CONSUMER BEFORE GRANTING CREDIT. </_Text> MISMO Versin Fr MISMO 2.3.1, the FACTA Active Duty alert is reprted as a Credit File Alert Message with a CategryType= FACTAAddressDiscrepancy attribute. <CREDIT_FILE CreditFileID="B-EFX-01" BrrwerID="BOR01" CreditRepsitrySurceType="Equifax"> <_ALERT_MESSAGE _Cde= Y _CategryType= FACTAAddressDiscrepancy > <_Text>FACTA: Address Discrepancy Substantial difference between the address submitted in the credit request and the address(es) in the credit file. VERIFY IDENTIFY OF CONSUMER BEFORE GRANTING CREDIT.</_Text> MISMO Versin 1.X Due t the structure f the 1.X transmissin, nly the text will be sent, in the Message element f the CREDITFILEALERTMESSAGE cntainer. Fr example: <CREDITFILEALERTMESSAGE CREDITFILEALERTMESSAGEID= CFAMID001 > <Message>FACTA: Address Discrepancy Substantial difference between the address submitted in the credit request and the address(es) in the credit file. VERIFY IDENTIFY OF CONSUMER BEFORE GRANTING CREDIT.</Message> </CREDITFILEALERTMESSAGE> 9

10 X VAR-NTE (2/710) Segment Example Here is an X example f a VAR-NTE (2/710) ADDRESS DISCREPANCY ALERT Message Segment. NTE-01 is set t CRA Credit Reprt Alert. Text Length f NTE-02 cannt exceed 80 characters: NTE~CRA~ FACTA: Address Discrepancy VERIFY IDENTIFY OF CONSUMER. What Users Must D Begin prgramming Users f mrtgage credit reprts must prgram t receive and apprpriately handle FACTA Address Discrepancy Indicatrs that the credit repsitries will prvide. Take nte f User Requirements fr Address Discrepancy Indicatrs Users wh receive an Address Discrepancy Indicatr cde indicating that an address difference ccurred must fllw the plicies and prcedures prescribed by federal agencies: 1. T frm a reasnable belief that the User knws the identity f the persn t whm the cnsumer reprt pertains; and 2. If the User establishes a cntinuing relatinship with the cnsumer, and the User regularly and in the rdinary curse f business furnishes infrmatin t ne f the credit repsitries, t recncile the address f the cnsumer with the credit repsitries by furnishing such address t the credit repsitries as part f infrmatin regularly furnished by the User fr the perid in which the relatinship is established. 10

11 III. Versin DTD Changes fr FACT Act In the previus sectin, several examples were presented shwing pssible implementatins f the FACT Act Alerts using additinal attributes r data values that culd be added in a Versin release. This sectin lists all f the additinal attributes and data values that are being cnsidered fr the CREDIT SCORE and CREDIT FILE / ALERT MESSAGE elements. A. CREDIT SCORE Element Enhancements One f the FACT Act prvisins requires that mrtgage lenders ntify cnsumers if their risk scre value was negatively affected by the presence f inquiries n the credit reprt, if it was nt already reprted as ne f the fur risk scre factrs. T make autmated identificatin f these risk scres easier, a new attribute is being added t the CREDIT_SCORE element f the Versin Credit Respnse. FACTAInquiriesIndicatr This Blean (Y/N) attribute describes the type f alert message related t the credit scre value. There are tw enumerated values: Y Inquiries have affected the credit scre value and cnsumer ntificatin may be required in cmpliance with the FACT Act. N The credit scre value was nt affected by inquiries. B. CREDIT FILE ALERT MESSAGE Element Enhancements The FACT Act prvisins may require cmpliance by users f the credit reprt data if any f several types f alert messages are present in the credit file. T make autmated identificatin f these alert messages easier, there are tw new attributes being prpsed fr additin t the CREDIT_FILE / _ALERT_MESSAGE element f the Versin Credit Respnse. _CategryType The existing _Type attribute lists specific repsitry bureau alert prduct names. Fr Versin a mre generic Categry Type attribute is prpsed t allw easier autmated reactin t specific alert message categries by sftware reading the credit respnse data. The prpsed Categry Type attribute values are shwn belw, and FACT ACT related values are highlighted. FACTAActiveDuty The alert message indicates that the brrwer is n active military duty. There may be FACT Act cmpliance requirements related t this status. FACTAAddressDiscrepancy The alert message indicates that there are significant differences frm the address submitted in the inquiry and the address in the brrwer s credit file. There may be FACT Act cmpliance requirements related t this status. 11

12 FACTAFraudVictimExtended The alert message is a Fraud Victim extended alert. There may be FACT Act cmpliance requirements related t this status. Extended alerts are maintained by the credit repsitries fr seven years. FACTAFraudVictimInitial The alert message is a Fraud Victim initial alert. There may be FACT Act cmpliance requirements related t this status. Initial alerts are maintained by the credit repsitries fr 90 days. FACTARiskScreValue The alert message indicates that the Risk Scre Value was negatively affected by the presence f inquiries n the credit reprt. There may be FACT Act cmpliance requirements related t this status. CreditFileSuppressed The file exists, but suppressed due t brrwer s request, r brrwer is a minr, r credit freeze in cmpliance with any state law. DeathClaim Death benefits have been filed thrugh SSN r ther surce, r death certificate is n file. DemgraphicsVerificatin Message related t ptentially fraudulent, missing r errneus request data brrwer name, address, etc. (i.e. Equifax SAFESCAN, Experian FACS Plus, Trans Unin HAWK Alert, etc.) FraudVictim The alert message indicates that the brrwer had been a victim f credit fraud r identity theft. This message may indicate cmpliance requirements in sme states. Other The credit scre value has been affected by sme ther value that will be listed in the _CategryTypeOtherDescriptin attribute. SSNVerificatin The message prvides additinal infrmatin related t the issue date, state f issue and ther data related t the brrwer s Scial Security Number. _CategryTypeOtherDescriptin When the _CategryType attribute value is set t Other, this attribute lists the value f the categry type. 12