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How to make sure you’re not the subject of the next FCRA complaint

May 04, 2022

In the Consumer Financial Protection Bureau’s (CFPB) consumer complaint database, the highest number of complaints submitted through the end of February 2022 have been around credit reporting, credit repair services or other personal consumer reports.

Diving into the compliant data

Of the 807,187 complaints filed through February 28, a whopping 798,729 complaints have been associated with a consumer’s credit reports. This number even exceeds the number of complaints about mortgages.

Between November 30, 2021, and January 31, 2022, there was a significant increase in the number of complaints filed with the CFPB regarding credit reporting. At the end of November, there were 23,652 complaints, and at the end of January, there were 36,718 complaints. That is roughly a 55% increase.

When you take the time to drill down further, you can see the top two complaints submitted are around incorrect information on the consumer’s report and the company’s investigation into an existing problem. These two complaints accounted for 582,403 of the 798,729 (73%) total issues submitted regarding credit reporting. Under these two complaints, the largest issue under incorrect information on the consumer’s report is with regards to information belonging to someone else. For the company’s investigation, the largest issue was the investigation did not fix an error on the report.

The Fair Credit Reporting Act (FCRA), which became effective in April of 1971, is legislation that was designed to promote the accuracy, fairness and privacy of consumer information contained in the files of the consumer reporting agencies. Section 623 of FCRA outlines the responsibilities of furnishers of information to consumer reporting agencies and is the section that touches on the two issues discussed above and the responsibilities of financial institutions to ensure compliance.

Duties of financial institutions under the Fair Credit Reporting Act

Section 623(a)(1) outlines the duty of furnishers of information to provide accurate information. A furnisher is prohibited from reporting information that it knows or has reasonable cause to believe is inaccurate and cannot furnish information to a credit reporting agency if notification was provided by the consumer, at the address specified by the person for such notices, that the information is inaccurate and is, in fact, inaccurate.

Section 623(a)(8) is the section that provides guidance with respect to consumer disputes. Consumers can submit dispute with regards to the accuracy of information, provided the notice identifies the specific information that is being disputed, explains the basis for the dispute and includes all supporting documentation required by the furnisher to substantiate the basis of the dispute. Once the financial institution receives the consumer’s dispute, the financial institution is to begin the investigation. The investigation should review all the relevant information provided to the institution by the consumer and is to be completed within 30 days of receipt of the consumer’s notice under FCRA.

If upon completion of the investigation, the financial institution finds the information was inaccurate, the institution is to promptly notify each consumer reporting agency they report to with the corrected information.

Avoiding an FCRA complaint: Make sure to review your policies and procedures

Financial institutions are to have written policies and procedures regarding the accuracy and integrity of the information relating to consumers that it furnishes to a consumer reporting agency. Appendix E of regulation 1022 provides financial institutions with guidelines to consider when developing such policies and procedures.

Given the critical role a credit report plays in the livelihoods of consumers and their ability to obtain credit products, and the increase in complaints to the CFPB, it may be a good time to review your current policies and procedures with respect to reporting information to the credit reporting agencies.

You could even take it a step further and perform an occasional review of the data being sent to the reporting agencies. Sample the data on the report to your core system to ensure the right data for the right person is being submitted. This extra little step could help you get ahead of any system issues and make any necessary corrections to avoid any complaints.

One recent issue noted by the CFPB is the credit reporting agencies’ tendency to dismiss without investigation complaints received from what appear to be credit repair companies. This conclusion is often automated by the bureaus based on certain words within template letters and third parties’ involvement. The CFPB has recently taken issue with this automated approach, as consumers also have access to these template letters.

To avoid making the same mistake, review your process for determining whether direct disputes are frivolous, and insure all legitimate disputes are handled in accordance with the requirements.

In addition, review your procedures with the team responsible for handling disputes. Make sure they are comfortable and aware of the regulations and the financial institutions procedures to ensure compliance is being met.

How Wipfli can help you with FCRA compliance

Wipfli advisors can assist you in reviewing your policies and procedures with respect to FCRA and duties of furnishers, looking for areas of weakness and offering solutions. Contact us to learn more or get started.

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Teresa L Rowe, CRCM
Senior Consultant
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