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FTC Withdraws FCRA Commentary and Issues “Summary of Interpretations”
By Anne P. Fortney

On July 20, 2011, the Federal Trade Commission announced that it was withdrawing the agency’s 1990 Commentary on the Fair Credit Reporting Act. The Commission also published a report entitled “40 Years of Experience with the Fair Credit Reporting Act: An FTC Staff Report with Summary of Interpretations.” The Commission’s press release described the report as “a brief overview of the FTC’s role in enforcing and interpreting the FCRA and . . . a section-by-section summary of the agency’s interpretations of the Act.”

This action raises several questions: Why did the FTC do this? What is the effect of this action? And what the @#&% was the FTC thinking?

Why did the FTC take this action?

The timing explains, in part, the answer. The report was published the day before the Consumer Financial Protection Bureau limped into existence. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Bureau has the authority to “prescribe rules and issue orders and guidance, as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof.” Moreover, the amended FCRA now provides that only the CFPB has rulemaking authority under that Act. The FTC apparently concluded that because of the specific authority granted to the CFPB, it could no longer issue guidance under the FCRA. The FTC wanted to transfer its FCRA interpretations to the CFPB, but since the FTC had left its Commentary virtually untouched for over two decades, despite two major sets of amendments to the FCRA in the interim, the FTC recognized that parts of the Commentary were obsolete. Thus, the FTC wanted to give the CFPB an updated version of its interpretations under that Act.

What is the effect of the FTC’s action?

Not good. The FTC overlooked the fact that the Commentary consisted of the agency’s FCRA interpretations, which were first proposed and published in a Federal Register notice for comment. The final version of the Commentary reflected those public comments. Because the FTC was the agency with the most areas of enforcement responsibility (especially as to consumer reporting agencies) and the FTC followed this procedure, the Commentary was entitled to Chevron deference. The industry could rely on the Commentary, and the courts would defer to it. In contrast, the staff opinion letters that the FTC published between 1997 and 2001 were followed by the courts only when the letters were consistent with the statute (which at times they were not) and could be ignored when they were clearly wrong.

The legal effect of the Staff Report and Summary of Interpretations is unclear. The document was not published for notice and comment, and may not be entitled to deference. But unlike the staff opinion letters, which specifically stated that they were staff opinions only and “not binding on the Commission,” the Staff Report and Summary was published by the FTC (by a vote of 5-0). In fact, the FTC’s press release states that the Staff Report and Summary is “a section-by-section summary of the agency’s interpretations of the Act.” This is most likely sloppy writing in the FTC’s press office because a “staff” report is just that – an “agency” report implies that the Commissioners themselves have interpreted the Act, rather than just accepted the staff’s interpretations. Still, it may be more difficult to discount the interpretations in this Staff Report and Summary than it has been to disregard the old FTC staff opinion letters.

So, the FTC has deprived the industry of the ability to rely on the agency’s interpretations in the FCRA Commentary and has left behind the Staff Report and Summary.

If the Staff Report and Summary were a carefully drafted set of interpretations, drawing on 40 years of jurisprudence, consistent with the statutory language, it would be a valuable compliance tool. But, it is not.

The hundred pages of the Staff Report and Summary contain some useful interpretations, reflecting the statutory provisions and the non-obsolete portions of the old FCRA Commentary. But within those hundred pages are a number of errors, either based upon careless language or some of the notorious old staff opinion letters. If nothing else, the Staff Report and Summary demonstrate why courts should not defer to federal agency interpretations unless they have been published for, and reflect, public input.

Industry members subject to the FCRA may choose to disregard the FTC staff’s interpretations that compliance counsel identify as clearly wrong, such as those that are unsupported by, or inconsistent with, the FCRA’s statutory provisions. Still, those interpretations may continue to lurk, with the danger that they will be the basis for a federal agency enforcement action, a state attorney general lawsuit, or a class action brought by the plaintiffs’ bar. Ultimately, in those cases, a defendant should be able to establish that an FTC staff interpretation is erroneous, but only after retaining litigation counsel and incurring the costs of the defense.

What was the FTC thinking when it took this action?

It’s obvious that no one in a position of authority at the FTC thought this one through. I believe that no one outside the agency knew that the FTC was planning to do this until days before it published the Staff Report and Summary. I don’t believe that anyone at the CFPB asked for this action or saw the Summary before it was published. Everyone that I have discussed this with outside the FTC had the same initial reaction – Why?

We’ve seen the FTC’s explanation – it thought it no longer has the authority to issue guidance under the FCRA. I don’t think that is true. The FCRA never explicitly gave the FTC the authority to issue any guidance when it issued the Commentary; the FTC did so because it was aware that a number of informal staff opinions had been issued in response to questions it had received in the years since the Act’s adoption in 1970. Those opinions were not public, and some were inconsistent. The Commentary was intended to provide one central, public source for the FTC’s interpretations. In other words, the FTC thought the FCRA Commentary met a need.

That need did not disappear on July 21, 2011. The portions of the Commentary that have not been superseded should be as valid today as they were when they were issued. There was no reason to withdraw the Commentary. If the FTC had concerns about its authority to issue guidance after July 21, 2011, it should have simply issued a statement affirming the validity of the portions of the FCRA Commentary that were not rendered obsolete by subsequent amendments to the FCRA. The FTC did just that in December 2000.

Now we are left with about a hundred pages of FTC staff interpretations of dubious value. No one knows what, if anything, the CFPB will do with them. Until the CFPB takes some action in this area, the uncertainty created by the FTC’s action will remain problematic.

Anne P. Fortney is a partner in the Washington, D.C., office of Hudson Cook, LLP. Anne can be reached at 202-327-9709 or by email at

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