On February 28, 2017, the CFPB issued its monthly complaint report spotlighting credit reporting complaints (the Spotlight). Two days later, the Bureau issued a Special Edition of its Supervisory Highlights Report, which also focused on credit reporting (the Report), and Director Cordray delivered prepared remarks on the topic the same day. Taken together, these show that the CFPB will likely increase its focus on identified credit reporting problems—the Report states that the CFPB considers the issue “a high priority”—and may herald enforcement actions relating to credit reporting issues in the coming months.
According to the Spotlight, 76% of credit reporting-related complaints received by the CFPB concern the accuracy of information in consumers’ credit reports. Although the Spotlight focuses on complaints relating to the credit bureaus—possibly because the bureaus are the primary point of contact for many consumers—the Report makes clear that the CFPB’s efforts to address credit reporting problems also extend to three other types of entities:
(1) furnishers of credit reporting information (Furnishers);
(2) consumer reporting companies, including entities that collect and sell credit reporting information (Consumer Reporting Companies); and
(3) entities that use credit reporting information to make credit decisions, such as whether to approve credit applications or extend offers of employment.
Although Director Cordray made it clear that the CFPB’s efforts to date have succeeded in “moving the needle” to address identified credit reporting problems, he indicated that the CFPB also believes that there is still work remaining to be done.
Of the three types of entities identified by the Report, the Report focuses on Furnishers and Credit Reporting Companies. With respect to Furnishers, the Report stresses the importance of policies and procedures, emphasizing that Furnishers’ recordkeeping policies should be sufficient to ensure accurate credit reporting in the first place. The Report also underscores the importance of a thorough dispute resolution process, and states that Furnishers must maintain high-level managerial oversight throughout credit-reporting process. Additionally, the Report focuses on Furnisher quality control, encouraging Furnishers to regularly update their policies and procedures, maintain continuous employee training, and institute oversight over third-party service providers. Finally, the Report makes it clear that the CFPB expects Furnishers to comply with the dispute resolution process and timeline that is explicitly spelled out in the Fair Credit Reporting Act (FCRA).
With respect to Consumer Reporting Companies, the Report highlights the importance of vetting credit reporting data received from Furnishers. For example, the CFPB expects Consumer Reporting Companies to institute quality control programs to review the accuracy of data received by Furnishers, with the aim of detecting errors soon after receiving information from Furnishers. The Report also emphasizes that Credit Reporting Companies should have a thorough dispute resolution process, stating that companies should independently investigate consumer disputes, rather than simply relying on data by provided by Furnishers in response to consumer disputes. Finally, the Report encourages Consumer Reporting Companies to follow the dispute resolution process outlined by the FCRA to the letter. Specifically, as with Furnishers, the CFPB expects Consumer Reporting Companies to adhere to the timeline for resolving consumer disputes outlined by the FCRA, and to provide notices clearly describing the outcome of each investigation.
Financial institutions and other entities that deal with consumer credit information may be well-served to give their policies a second look in view of the CFPB’s recent attention to the topic. While the FCRA places some limitations on credit reporting-related private rights of action, the CFPB’s enforcement powers are much broader and could be used to enforce compliance with the FCRA’s entire statutory regime, as opposed to taking issue with only the handful of requirements a private litigant might raise. And, to the extent that a CFPB enforcement action leads to follow-on lawsuits by potentially aggrieved consumers, it can be an expensive proposition: in the event that a FCRA violation is determined to be “willful,” the FCRA permits consumers to recover (among other things) attorney’s fees, costs, and punitive damages.
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