It looks like the clad plating is flaking off. The 17 in the date is starting to show the same. Not sure if this was a mint error, from damage or induced by a bored person.
I didn't notice that date issue, But you're correct, Just under the 1 and 7 it appears there is some "flaking"!
I agree a folded rim burr. When a planchet is punched from stock, the metal can "smear". Many times this smearing is seen on the edge of clad coins when the copper core seems to be closer to one side instead of centered. Years ago, I used to get rolls of UNC state quarters from my bank to search, and would occasionally find coins that look like yours. Never bothered to save them.