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Informational Memorandum
Subject:Credit Bureau Reporting
Date of Memorandum:08/10/1999
Expiration Date:
Signed By:Smith, Roland
FCA Contact Person:Glenn, Thomas
Contact Phone:703-883-4412
List of Attachments:none


August 10, 1999

To: The Chief Executive Officer
All Farm Credit System Institutions

From: Roland E. Smith, Director /s/
Office of Examination

Subject: Credit Bureau Reporting

The purpose of this Informational Memorandum is to raise awareness regarding an issue that may have safety and soundness implications for Farm Credit System (FCS) institutions that utilize credit bureaus in their lending programs.

Recent news articles reported that some commercial banks have been engaged in the practice of only partially reporting borrower information to credit bureaus. The intent of the partial reporting was to prevent competing lenders from identifying attractive prospective customers and attempting to lure them away. Subsequent to the news articles, financial regulators conducted surveys of financial institutions and found that the practice of partial reporting was not uncommon. Several financial institutions and credit card companies had purposely omitted disclosure of their borrowers’ high outstanding credit balance or total credit line.

While not explicitly endorsing their use, the Office of Examination recognizes that credit bureaus can provide lenders a certain degree of useful information on applicants. But to optimize this benefit, each user (financial institutions, retail stores, credit card companies, etc.) must be willing to fully report applicant information requested by credit bureaus. Partial reporting skews the credit scores upon which lenders may depend to evaluate creditworthiness.

FCS institutions have increasingly employed minimum credit documentation and scorecard lending programs to meet customer needs. Such programs typically depend heavily on information received from credit bureaus. But these lending programs may have additional, undetected risk if the applicant information is incomplete or otherwise less than fully reliable.

FCS institutions should be aware of the quality of information received from credit bureaus with whom they do business. Therefore, the procedures employed for evaluating applicants’ credit worthiness should be adjusted as determined appropriate.

If you have any questions regarding this memorandum, please call Thomas M. Glenn at (703) 883-4412, or correspond on the Internet at e-mail address