CFPB’s Bulletins Revisited: Representations Concerning Credit Reporting

From time to time, the CFPB issues Bulletins which reflect the CFPB’s expectations regarding covered institutions and covered business products.  When these are issued, they grab our attention for a time but then our focus changes to the next new thing.  We are now five years into the CFPB’s existence and as they say, hind sight is 20/20 vision.  Looking back, we can see the impetus these Bulletins have had on enforcement actions.  I thought it would be fun to revisit some of these Bulletins over the next few several weeks and see how they have been applied. 

In July 2013, the CFPB issued two Bulletins on Debt Collection, suggesting their expansive approach to debt collection.  CFPB Bulletin 2013-08 provides guidance to creditors, debt buyers, and third party collectors regarding their compliance with the FDCPA and the Dodd Frank prohibition on unfair practices when making representations about the impact on payment of debts on credit reports and credit scores.  The Bulletin makes clear that the supervised entities and service providers will be held responsible for deceptive representations made concerning the impact payment of debts may have on credit reports and scores.

The Bulletin set forth a number of nonexclusive missteps:

• Effects on Credit Reports: The CFPB has cautioned those involved with collecting debts from making representations concerning the effect of payments on credit reporting. The CFPB points out that -
   
  • It is potentially deceptive to make representations that payment of an obsolete debt (a debt that is more than seven years old) will impact a credit report.  As pointed out by the CFPB, obsolete debts are not reported and therefore information concerning payment of that debt will not likely appear on a credit report;
  • It is also potentially deceptive to make representations that payment of non-obsolete debts will change credit reports if the debt owner or collector does not furnish payment information to credit reporting agencies.
     
• Effects on Credit Scores:  The CFPB also issued a warning regarding making representations on the impact payment may have on credit scoring.  The CFPB Bulletin points out the many factors which may influence a credit score and the uncertainty that a payment may impact on the score.
   
• Effects on Creditworthiness: The CFPB finally issued a warning regarding representations on the impact payment may have on a consumer’s ability to receive subsequent credit from a lender.  Again, the CFPB issued caution, pointing to the number of factors that may impact credit worthiness.
   

The CFPB did not begin conducting supervisory examinations of larger participants in debt collection under 2013.  Since then, misrepresentations concerning credit reporting and credit scoring have been brought to light in a number of examinations and the CFPB continues to highlight the issue.  For example, in its Winter 2015 Supervisory Highlights the CFPB noted issues with collection agents overstating the benefits a student loan rehabilitation program may have on a consumer credit reports and credit scores. Winter 2015 Supervisory Highlights, p. 6-7.  Entities collecting debt should be hyper aware of scripts and letters which may purport to reference the impact payment may have on credit reporting and scoring and refrain from making any qualitative representations regarding the same.