Monday, May 30, 2016

Furnisher Duties for Collection Agencies-Creating a Good Compliance Management System

Recent FTC consent orders, as well as the continued focus by the CFPB on credit reporting serve as a good reminder to collection agencies and creditors to carefully scrutinize their FCRA policies and procedures to insure they are in compliance with the FCRA’s Furnisher Rule and the guidelines set forth in 12 CFR 1022, Appendix E.

The Furnisher Rule requires data furnishers to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the consumer information they furnish to a consumer reporting agency.   It’s not enough to simply establish policies and procedures, furnishers should remain nimble reassessing their policies and procedures to insure they remain relevant and reasonably tailored to address potential weaknesses and deficiencies. 

Here are the keys to an effective and compliant policy:
  • A robust policy will be tailored to the nature, size and complexity of the furnisher. Furnishers need to make sure their policies match the nature, size, complexity, and scope of their business practice.  We suggest considering the following questions and allow the answers to shape or revise your present policies and procedures:
    •  What type of information do you provide?
    • What is your role – are you an original creditor? A servicer? A debt buyer? Third party debt collector?
    • How often do you furnish information?
    • How do you provide the information (i.e. what technology platform is used)?
  • A robust policy accomplishes the following:
    • Insures information provided is accurate. Your policies and procedures should be designed to insure that your furnishing of information:
      • Accurately identifies the consumer;
      • Accurately identifies relationships to the account;
      • Accurately reflects the  account terms and liabilities;
      • Accurately reflects consumer performance/conduct regarding the account;
      • Is validated by your records (or your client’s) at the time it is furnished;
      • Is reported in a format that minimizes inaccuracies. This can be done by including consumer identification information, relevant dates, and, if applicable, credit limits for accounts.
    • Promotes reasonable investigation procedures and appropriate actions based on investigation outcomes, including accurately updating information about the current status of the account. A robust policy:
      • Provides adequate training to employees who are responsible for investigating and resolving indirect disputes.
      • Provides adequate training to employees regarding direct disputes from the consumer;
      • Requires documenting the actions taken to process, respond or investigate FCRA disputes;
      • To the extent the furnisher is a servicer or third party vendor includes procedures and policies concerning communications to the creditor regarding the dispute;
      • Provides for document retention for a reasonable period of time to allow for effective training and auditing
      • Provides for review of all relevant information provided by the consumer;
      • Insures a timely and adequate response to the consumer; and
      • Provides for correction, deleting and updated of all disputed information.
    • Provides for updating information as necessary to accurately reflect the current status of the account or any changes in relationships (i.e., a sale or transfer of the account).
    • Prevents re-aging, duplicative reporting, or other problems that affect the accuracy or integrity of information furnished by having an appropriate system to communicate with CRAs.
    • Provides for regular and robust auditing of accounts to help identify and resolve any systemic weaknesses or trends.
      • Furnishers should verify random samples of information furnished; and
      • Furnishers should randomly and regularly audit random disputes.
    • Provides for a regular and periodic evaluation of:
      • Its own practices;
      • Enforcement trends;
      • Consumer reporting agency practices; and
      • Any other factors which may impact the integrity of information being furnished.
    • Requires the use of standard data reporting  formats and procedures; and
    • Establishes and implements internal controls regarding the accuracy and integrity of furnished information

The key to any robust compliance management system is to remain flexible and adjust policies and procedures in a timely fashion to address environmental changes as they occur.

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