Wednesday, November 4, 2015

CFPB’s Fall Supervisory Highlights Reveal a Focus on Credit Reporting (Part 1)

The CFPB published its Fall Supervisory Highlights this week, highlighting examinations across various financial products that were conducted between May 2015 and August 2015.  The Report highlights key findings made by the CFPB and provides insight into the current focus of the examiners.  The current edition of Highlights reveals a heavy focus on credit reporting, and particularly the duties of furnishers of information under the Fair Credit Reporting Act. Today’s post will focus on the credit reporting findings with future posts to focus on the findings with respect to debt collection, student lending, mortgage servicing and fair credit.

With regard to credit reporting, examinations across all products focused on the obligations of furnishers and their struggle to maintain effective compliance management systems. Examiners are still concerned with the adequacy of the policies and procedures adopted by furnishers to insure the accuracy and integrity of the information there are furnishing.  The Report highlights specific concerns particularly with the furnishing of information on deposit accounts, debt collection and student loans.

Key takeaways from the May through August examinations:

  • Furnishers are not periodically reviewing and updating their policies and procedures as necessary.  The Report reminds covered entities of their obligations under Regulation V to conduct periodic evaluations of their own practices, consumer reporting agency practices of which they are aware, investigations of disputed information, corrections of inaccurate information, means of communications and other factors that may affect the accuracy or integrity of information furnished.

  • The Report notes that examinations revealed issues with depository institutions who furnish information on deposit accounts, noting that while they had policies and procedures in place to insure accuracy of their reporting on credit accounts, many did not have similar policies and procedures in place to address furnishing information on deposit accounts.

  • The Report indicates that furnishers are struggling with Regulation V’s requirements that consumers be provided with the notice of results of investigations of direct disputes.

  • The Report indicates that furnishers are failing to correctly notify consumers of adverse action based in whole or in part on information contained in a consumer report.  Most notably, the Report indicates that furnishers are not providing the name, address and telephone number of the credit reporting agency that provided the information relied upon.

  • Over multiple products the CFPB identified issues with the processes, policies and procedures for ensuring the proper handling of disputes. 

    • Particularly, with respect to deposit information, the CFPB noted that entities were not always distinguishing between FCRA disputes (either direct or indirect disputes as to credit reporting) and other complaints they receive.

    • The Report also noted that debt collectors were also struggling in this area and again emphasized that debt collectors are obligated to investigate disputes instead of simply, deleting the trade line.

    • As to debt collection, the Report also noted that examined entities were struggling with adopting adequate policies and procedures that distinguish between credit reporting disputes and disputes made under the FDCPA and the respective obligations required by each.

  • The CFPB Report was perhaps harshest in the area of credit reporting when examining student loan servicers, noting a number of deficiencies with policies and procedures, and particularly:

    • Insufficient policies and procedures as to handle consumer dispute investigations

    • A lack of policies and procedures addressing internal controls regarding the accuracy and integrity of information reported and particularly,

      • a failure to implement procedures for verifying random samples of information provided to consumer reporting agencies; and

      • a failure to implement periodic reviews of certain practices, including investigations of disputed information and corrections of inaccurate information.

 The Report should be a wakeup call to depository institutions furnishing information to consumer reporting agencies concerning deposit accounts.  According to the Report, this may be an area that has not been a focal point for compliance officers previously but should be reviewed in light of the Report.   The Report also makes clear that all furnishers need to establish meaningful internal controls to continue to test the accuracy of the data furnished and its handling of disputes to insure they are being handled within the perimeters of Regulation V and its Interagency Guidelines regarding the accuracy and integrity of information furnished.  Additionally, furnishers should revisit their dispute policies and insure they are distinguishing between credit report disputes and other disputes and then implementing proper procedures for addressing each.

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