A&B ABstract:
The Fall 2019 edition of the CFPB’s Supervisory Highlights focuses on credit reporting issues of interest.
Discussion
The Fall 2019 edition of Supervisory Highlights represents the second time the Consumer Financial Protection Bureau (“CFPB”) has focused entirely on credit reporting. With respect to furnishers, the Supervisory Highlights includes five categories of supervisory observations relating to compliance with the Fair Credit Reporting Act (“FCRA”) and its implementing Regulation V and associated compliance management system weaknesses.
Policies and Procedures
Under Regulation V, a furnisher must establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the consumer information it provides to consumer reporting companies (“CRCs”). Related examination findings by the CFPB include:
- Mortgage industry furnishers failed to have policies and procedures appropriate to the nature, size, complexity, and scope of their activities;
- The policies and procedures of auto loan furnishers failed to provide sufficient guidance on the conduct of “reasonable investigations of indirect disputes that contain allegations of identity theft”; and
- Debt collection furnishers failed to have policies and procedures that differentiated between FCRA disputes, disputes under the Fair Debt Collection Practices Act, and debt validation requests.
The CFPB also addressed examination findings for furnishers of deposit account information.
Reporting Information with Actual Knowledge of Errors
Under FCRA, a furnisher cannot furnish information relating to a consumer that it “knows or has reasonable cause to believe … is inaccurate,” unless the furnisher clearly and conspicuously discloses to the consumer an address to which the consumer can send notice that specific information is inaccurate.
The CFPB found that one or more furnishers violated this prohibition by reporting to CRCs accounts with derogatory status codes that were inaccurate because of coding errors, and that the furnishers knew or had reasonable cause to believe were inaccurate. Further, these furnishers failed: (1) in investigating disputes of such information to conduct a root-cause analysis that would have identified the source of the issue; and (2) to provide consumers with a clear and conspicuous disclosure of the address to which they could send notices of dispute.
Duty to Correct and Update Information
A furnisher must promptly notify a CRC if it determines that information provided to the CRC is incomplete or inaccurate, and must make any corrections or addition to the information to correct the issue. The CFPB identified examples of auto loan and deposit account furnishers who violated this duty.
Duty to Provide Notice of Delinquency of Accounts
FCRA imposes on furnishers a duty to report the date of first delinquency – defined as “the month and year of commencement of the delinquency on the account that immediately preceded the action” – to a CRC within 90 days. The CFPB identified instances of furnishers incorrectly reporting the date of delinquency
Obligations Upon Notice of Dispute
The final category of findings in connection with the activities of furnishers is obligations upon notice of dispute. If a consumer disputes the accuracy of information contained in a consumer report, FCRA and Regulation V require a furnisher to conduct a reasonable investigation of the dispute.
Among other issues, the CFPB noted that furnishers violated this duty by:
- Failing to conduct reasonable investigations of both direct and indirect disputes;
- Failing to timely complete dispute investigations within the timeframe established by Regulation V (generally 30 days); or
- Failing to notify consumers of a determination that a dispute is frivolous or irrelevant (and that, as a result, the furnisher will not undertake an investigation).
Takeaway
As the second edition dedicated to consumer reporting, these Supervisory Highlights puts furnishers and CRCs that this is an area of focus for the CFPB. Building on the credit reporting supervisory observations in the Summer 2019 edition, furnishers – banks, mortgage servicers, auto loan servicers, student loan servicers, and debt collectors – should take the opportunity to evaluate their own policies, procedures, and processes for compliance with FCRA and Regulation V.