Credit Reporting Remains a High Priority for the CFPB

The CFPB confirmed credit reporting remains a high priority for the agency by issuing a special Supervisory Highlights devoted to credit reporting earlier this month.  The report was generally complimentary of the strides that credit reporting agencies have made but indicated significant concerns with furnishers’ compliance with the FCRA and its accompanying regulation, Regulation V.  Here are the key take-aways concerning furnisher compliance:

·        Furnishers need to beef up their compliance management systems to ensure compliance with the FCRA.  The CFPB noted that at one or more furnishers there was:

o   Weak oversight by management and the Board of Directors;

o   No formal data governance program;

o   Inadequate training of employees who handled furnishing and disputes; and

o   Weak monitoring and corrective action, including testing of accounts;

·        Furnishers need to ensure they have policies and procedures in place regarding the accuracy and integrity of the information they provide to consumer reporting agencies (“CRAs”).  Specifically, the Report highlights the need for policies and procedures that:

o   Address handling and investigation of disputes;

o   Address the creation and retention of documentation to substantiate dispute decisions;

o   Prevent duplicative or mixed file reporting;

o   Instruct how to conduct reasonable investigations of consumer disputes;

o   Address vendor management; and

o   For those institutions that have deposit accounts, ensure adequate enterprise-wide FCRA policies are in place that specifically address consumer deposit accounts and deal with them consistently in compliance with the FCRA including its dispute investigation and reporting requirements.

·        Furnishers need to bone up on their date of first delinquency or “DOFD” reporting. The Report noted:

o   Compliance issues where information is absent on incoming loan servicing data transfers.  In those instances, the Bureau noted that policies and procedures were not in place to require follow up and obtain and accurately report the DOFD; and

o   One or more furnishers failed to accurately report DOFD when the consumer filed bankruptcy.  Specifically, the Report observed furnishers updating the DOFD to reflect the date of bankruptcy filing rather than continuing to indicate the date of delinquency as being the month and year that the account first went delinquent.

·        Furnishers need to invest in quality control measures.  The Report noted the following deficiencies during its examinations of furnishers:

o   Failure to perform quality checks on the data furnished to CRAs;

o   Failure to test for the accuracy of information after it is furnished;

o   Failure to conduct ongoing periodic evaluations or audits of furnishing practices or data furnished to consumer reporting agencies; and

o   Failure to conduct audits of dispute information to identify and correct root causes of any inaccurate furnishing.

·        Furnishers’ policies and procedures need to adequately insure data accuracy.  The Report indicates that in more than one examination, examiners found:

o   Furnishers furnishing information to consumer reporting agencies which did not accurately reflect the information in the furnishers’ system;

o   Furnishers failing to update information previously furnished after determining the consumer information was not complete or accurate; and

o   Furnishers failing to promptly update payment information for charged off accounts where consumers made payments under payment plans;

·        Furnishers need to ensure they are handling disputes in compliance with Regulation V.  Specifically, the Report notes that examiners found that:

o   Furnishers struggled with direct dispute procedures and practices.  Specifically,

§  Furnishers failed to provide proper notice to consumers after determining that a dispute was frivolous or irrelevant;

§  Furnishers failed to conduct timely investigations; and

§  Furnishers failed to respond to direct disputes with sufficient specificity;

o   Furnishers struggled with indirect dispute procedures.  Specifically, furnishers failed to complete their investigations in a timely manner.

The Report should be reviewed by furnishers of credit information across all product types as it reflects the Bureau's examinations priorities and is likely to foreshadow future enforcement actions.